The article goes in depth to identify the most common misuse or overuse mistakes that businesses make and how they attempt to avoid liability by misusing and overusing yellow caution signs.  It is a very interesting read and something every customer should keep in mind when they visit a business or commercial venue.  It is important to remember that the obligation businesses owe their customers extends beyond slapping a yellow caution sign up on the property in hopes to avoid injury.  Kentucky Accident Information explains the extent of that obligation and the steps customers can take to protect not only themselves but other customers as well.

Houchens contended that the only “medical review expressly sanctioned by Kentucky’s MVRA is contained in KRS 304.39-270 and requires court oversight.  GEICO, on the other hand, argues that the statutory language is purely permissive in nature, and that it has the discretion whether to utilize the statutory procedure or to seek its own paper review of an insured’s medical records.”

After discussing the policy behind the MVRA as it pertains to BRB’s, the Court cited the IME statute.  It noted; KRS 304.39-270(1), the statutory provision at issue herein, states as follows:

If the mental or physical condition is material to a claim for past or future basic added reparations benefits, the reparation obligor may petition the circuit court for an
order directing the person to submit to a mental or physical examination by a physician. Upon notice to the person to be examined and all persons having an interest, the court may make the order for good cause shown. The order shall specify the time place, manner, conditions, scope of the examinations, and the physician by whom it is to be made.

In discussing this part of the statute, the Court noted that, “The trial court below agreed with GEICO that the phrase “may petition the court” means that a reparations obligor may, but is not required, to seek a court order for an independent medical exam (“IME”) prior to terminating or denying benefits. We disagree and conclude that such interpretation violates both the intent and spirit of Kentucky’s MVRA.”

After discussing the lack of established case law in Kentucky on this particular issue, the Court looked at those cases where an IME was actually sought from the court and the courts were required to determine whether the good cause requirement was met.  In doing so, it specifically identified, White v. Allstate Ins. Co., a case relied upon by the trial court in reaching its determination.

The Court held;

We are of the opinion that the trial court misconstrued the White decision as
supporting GEICO’s position. We discern a distinct difference between the use of a medical records review by a reparations obligor for the purpose of establishing good cause for a court-ordered IME and the use of a medical records review by that obligor for the purpose of unilaterally denying or terminating an insured’s benefits. Clearly, as is evidenced by the case law discussed herein, our legislature enacted KRS 304.29-270(1) as a safeguard against the misuse of IME’s. Not only must the obligor demonstrate good cause for the IME, but the court is then required to set the time, place, manner, conditions, scope of the examination, and the physician by whom it is to be made. It is beyond reason that the legislature would require court oversight of an IME of an insured yet would condone that insured’s benefits being terminated or denied solely based upon a unilateral paper review of his or her medical records. We must agree with Appellants that the position asserted by GEICO would essentially make it the judge, jury and executioner. We are of the opinion that such violates the intent and purpose of Kentucky’s MVRA.

The Court concluded; “We are of the opinion that KRS 304.39-270(1) means exactly what it says – a reparations obligor who questions the veracity of an insured’s medical bills may
petition the court for an IME. The obligor also has the prior option of requesting that the insured voluntarily undergo an IME, which the insured may or may not agree to. However, if the obligor chooses to do neither, it must pay the claim, as medical bills are statutorily presumed to be reasonable and the burden is on the obligor to prove otherwise.”  The Court reversed and remanded the case back to the trial court.

It is highly doubtful that the legislature included such a comprehensive statute regarding the use of IME’s to determine the continued payment of BRB’s only to allow an insurer the unilateral ability to deny payments based on a paper medical records review.  The use of the word “may” doesn’t mean the insurer “may” use the IME statute if it wants but doesn’t have to in order to deny benefits.  It means that if the insurer wishes to challenge the insured’s medical payments as unrelated or unnecessary it “may” seek an IME from the Court to do so.  It doesn’t have to seek such an examination; however, if it doesn’t then it can’t deny the benefits as unrelated or unnecessary.

Most often the insurer will only seek to deny benefits after some time has passed and the insured has continued to incur medical expenses.  Often, by the time benefits are denied after a paper review, the insured is left with a substantial unpaid balance.  This allows the insurer to thwart the statutes purpose of prompt payment for claims made by the insured.  Furthermore, the real issue is not so much legitimate concerns regarding the type of injuries and treatment, but merely a concern over the cost of medical treatment to date.  Included in this evaluation is usually a determination whether the insurer will recover from the at fault party.  If it is unlikely to recover because it’s insured is at fault, the more often the insurer will use these reviews to deny payments.  At least that has been my experience.

Also, a concern noted by the court was the use of a third party medical company to conduct the reviews.  In this case, the court noted that of the 200 medical reviews by this company, 0 were found to require further treatment.  I recognize the company as being involved in at least three such cases I currently have with another insurer.  Word apparently spread to other insurers that if you want to deny benefits, this company is a good bet.

The fact remains that petitions for IME are expensive and time consuming and the ability to show good cause is a much higher burden than the mere suspicion needed to conduct a paper review.  Furthermore, the use of paper reviews allows an insurer to select the company of its choosing to perform the review and is more likely to use companies that issue favorable reports, as was seen here.

The insurer may seek an IME from the court with good cause shown.  However, it doesn’t have to seek any examination at all.  It can request its insured submit to an IME, but the insured does not have to comply.  If it does neither, it must continue to pay benefits because they are presumed reasonable.  That being said, nothing prohibits the insurer from seeking a paper review to establish the good cause requirement for an IME.

UPDATE:

The Kentucky Supreme Court has accepted discretionary review of this decision.  We will keep you updated on any opinion.  However, this typically means that the Court takes an issue with the conclusion reached by the Appellate Court in overturning the trial court.

The Kentucky Court of Appeals recently published two cases dealing with apportionment involving third-party defendants that are of interest.

In the case of Memorial Sports Complex, LLC vs. McCormick, et al, the Court was required to determine whether the dismissal, but subsequent allowance of apportionment, of the third-party defendants was appropriate.  Memorial was sued after a minor (Mowery) suffered personal injury running into one of its fences during a baseball game.  Memorial filed a third-party complaint, seeking contribution, indemnity, and apportionment against McCormick, (Mowery’s Coach), Mowery’s father (Dale), and Geddes Fence Company (Geddes).

The trial court granted McCormick’s and Dale’s respective motions and dismissed Memorial’s third-party claims against them with prejudice in identical judgments, stating “Due to the applicability of apportionment of fault, as required in [Kentucky Revised Statutes] KRS 411.182, there is no right to contribution” and “indemnity is not appropriate as the kind of fault alleged by Plaintiff Mowery against Memorial Sports Complex, LLC is that it created and/or maintained the hazard that was the alleged cause of Mr. Mowery’s claimed injuries.”  The final judgments contained language that; “This dismissal will not prevent Third-Party Plaintiff [Memorial] from seeking an apportionment instruction relevant to the claims against it to the extent that any fault can be proved against the now
dismissed Third-Party Defendant[s][.]”  Geddes moved for summary judgment which was granted by the trial court, dismissing Memorial’s claims “with prejudice, as a matter of law, subject to apportionment in Plaintiff’s [Mowery’s] claim against Memorial.”  Memorial appealed both rulings.

After discussing Kentucky law regarding indemnification in the third-party context, the Court stated: “As a matter of law, even if the third-party defendants and Memorial are both at fault, Memorial is “the primary and efficient cause of the injury” over the third-party defendants, although Mowery may also share blame for his actions. Under such circumstances, while indemnification does not apply, Memorial will only be responsible for its own negligence under Kentucky’s comparative fault principles.”

As to contribution, the Court stated: “We agree with the trial court’s assessment that contribution is not available against third-party defendants because apportionment is required. While the trial court properly dismissed the third-party defendants because they did not owe any duty to Memorial, we disagree with Memorial that this action deprived it of any right to apportionment. Despite the trial court’s dismissal of the third-party defendants, the trial court ruled that Memorial was entitled to an apportionment instruction limiting its liability to its own negligence. We believe this result was a proper interpretation of our statutes and case law.”

In the case of the Transportation Cabinet vs. Watson, et al., Watson claimed  that the Cabinet was liable for the damages and injuries he suffered in a car wreck because they allegedly failed to maintain the traffic light at the intersection where the traffic incident occurred.  The Cabinet filed a motion to dismiss the Complaint, alleging it was
entitled to sovereign immunity. The trial court issued an order summarily denying the motion. The Cabinet appealed.

The Court stated; “The issue before us is whether the Cabinet is entitled to immunity from Watson’s suit in the McCreary Circuit Court pursuant to the sovereign immunity doctrine. Appellee Watson argues that the Cabinet is not protected by sovereign immunity.  Appellees Williams and La-Z-Boy Logistics, Inc. join with Watson’s claim, and, alternatively claim that if the Cabinet is entitled to dismissal based on immunity that Williams and La-Z-Boy Logistics, receive an apportionment instruction at trial.”

The Court concluded; “[I]n the present case, the action against the Cabinet claiming
negligence for failing to perform a ministerial function should be brought before
the Board of Claims… The Complaint filed in the McCreary Circuit Court
should be dismissed inasmuch as the Cabinet is immune from suit under the
doctrine of sovereign immunity. Accordingly, we find the trial court erred by
denying the Cabinet’s motion to dismiss on grounds of sovereign immunity.”

As to the apportionment issue, the Court noted the defendants’ reliance on two unpublished federal district court cases that discussed allowing apportionment against the Commonwealth’s agencies based on what they perceived as a grant of limited waiver of that immunity based on a plaintiff’s ability to sue in the Kentucky Board of Claims.

It stated; “[T]he district court cases erroneously interpret KRS 411.182,2 the apportionment statute, as permitting apportionment against all current and former
parties to the litigation. The Kentucky Supreme Court has held that once a party is dismissed from the lawsuit, the party is no longer subject to apportionment under the statute.”

It went on to note; “The [Supreme] Court made no distinction between absolute immunity and a partial waiver of absolute immunity, and we can find no justifiable reason for a distinction. In fact, the policy reasons announced in Smolcic remain valid even for
acts by agencies that the General Assembly has partially waived the sovereign immunity defense. The waiver and the means for suit therefrom remains the General Assembly’s prerogative. It has chosen to permit recompense for damages for negligence in ministerial acts solely through the Board of Claims. To permit this limited waiver of sovereign immunity to open the Cabinet up to third-party apportionment in cases outside of the Board of Claims would violate the same policy concerns in Smolcic… The Cabinet should not be subject to apportionment in the instant case as it is being dismissed on sovereign immunity grounds.”  (Citations omitted).

These cases will go a long way to clear up the continued confusion that arises regarding apportionment.  If a defendant files third-party claims against other defendants, but the plaintiff does not assert a claim against them, then those defendants would never be required to pay any judgment that the plaintiff recovered.  Therefore, they are not necessary as parties to the action and should be dismissed.  However, the original defendant is still allowed an apportionment instruction against those dismissed third-party defendants if it is later shown that they bear some percentage of the fault.    This is the procedure that should be employed, unless the original defendant is actually entitled to indemnity, but those cases are very rare.

The Commonwealth is cloaked in sovereign immunity and may never be sued in Circuit Court.  That’s the end of discussion.  The appropriate venue for such a claim is the Board of Claims.  Any such claim in the Circuit Court should be dismissed.  Once an agency with sovereign immunity is dismissed from such a Circuit Court action, no apportionment is allowed, because the agency with sovereign immunity was never really a party anyway.

The Kentucky Supreme Court recently issued an opinion regarding which of two insurance policies provided primary insurance for purposes of uninsured motorists (UM) benefits provided to a passenger.

The car in which the passenger was riding was struck by a car later found to be uninsured. The driver of the car maintained an insurance policy that provided coverage for UM benefits.  The passenger also owned a car of her own, which likewise provided UM benefits in the event she was injured by an uninsured car.

An argument arose between the two insurance companies regarding which insurance company was responsible to provide primary coverage to the passenger or whether they were both responsible for providing coverage under their respective “other insurance” clauses that provided coverage on a pro rata basis.

The Court identified two issues for determination.  First, should the competing insurance companies “other insurance” clauses apply so that they were mutually repugnant and therefore pro rata apportionment was necessary or should they be deemed in violation of the Motor Vehicle Reparations Act (MVRA), and second, who bears the primary responsibility for providing UM coverage the vehicle’s insurance company or the passengers?

With respect to the first question the Court found that the “other insurance” clauses should be disregarded entirely in the UM context.  It stated:

This case illustrates the importance of that point, and makes clear that our reasons in Shelter for “declin[ing] . . . to further embroil Kentucky courts in unduly complicated two-step insurance policy interpretations of continually emerging and changing insurance avoidance clauses,” apply just as much to priority disputes between vehicle and passenger insurers in UM cases as to similar disputes between vehicle and permissive-driver insurers in liability cases. We agree with the Court of Appeals, accordingly, that between such insurers, “[a]bolishing the rule of apportionment for UM coverage is a logical and natural extension of Shelter.” (Citations omitted).

With respect to the second question the Court found that the car in which the injured passenger is riding owes primary coverage for UM benefits.  It stated:

As we indicated in Shelter, however, given the increasing demise of the “general rule” as an industry standard, and given the proliferation of “other insurance” clauses and
the inevitable litigation they spawn, any contrary result runs directly counter to the MVRA’s basic purposes of minimizing insurance litigation and “encourag[ing] . . . prompt payment of needed medical care and rehabilitation” to accident victims.  As in Shelter, therefore, we find in the stated purposes of the MVRA a legislative intent to the effect that in instances where both the vehicle owner and a non-owner passenger are separately insured with UM coverage, the vehicle owner’s coverage shall be primary.  (Citations omitted).

This case closely mirrored the problems that the Supreme Court was concerned about with these types of clauses and issues.  Two insurance companies arguing over who is supposed to provide UM coverage to an injured passenger that both companies agree she should receive.  It took four years, however, before either insurance company paid any benefits to the passenger.  As such, the Court found that allowing competing insurance clauses did nothing more than give the insurance companies a reason to argue with each other and delay payment to the insured in violation of the MVRA’s specific purpose of prompt payment of claims.  It also noted the inherent difficulty in finding the insurer for a passenger as opposed to a car, which was readily identifiable and required.

A very thorough and well-reasoned opinion that should bring the different coverages available into agreement with one another.  Frankly, I have on several occasions had this issue come up in the UM and UIM context and have never had an insurance company for the car in which my client was riding try to deny its primary role in providing coverage.  This opinion effectively renders these two issues resolved in Kentucky as to all types of insurance coverage.

You can read the entire opinion, Countryway-vs.-United Financial Casualty.

I will be speaking at a seminar hosted by National Business Institute titled; “Litigating Bad Faith Insurance Claims in Kentucky.”  The seminar will take place on Friday, September 23, 2016, at the Holiday Inn Louisville East-Hurstbourne.  Here is the program description:

Gain the Practical Skills You Need to Handle Bad Faith Claims

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The class qualifies for 6.0 Kentucky CLE credits. You can click the following link for the complete details on how to register, costs, and program and course content.

Considering the facts most favorably to Jackson under an expansive interpretation of the State Farm policy, we conclude the trial court erred by determining as a matter of law that Jackson was not “occupying” Doyle’s vehicle:  (1) there was a causal relationship or connection between where Jackson was located when he received his injury and the use of the insured vehicle; Hayes’s action of calling to Jackson, Doyle’s action of stopping his vehicle behind Jones’s vehicle, and Jackson conversing with Hayes through the open passenger window with his back to Jones’s vehicle put him in a vulnerable position behind her vehicle and the impact of the two vehicles resulted in his injuries from being pinned
between them and hitting his head on Doyle’s vehicle; (2) Jackson was in reasonably close geographic proximity to Doyle’s vehicle because he was in actual physical contact with it when he was hit by Jones’s vehicle; (3) Jackson was vehicle oriented because he had his hands on the vehicle and was talking to Hayes through the window; and (4) Jackson was arranging a ride which was an essential transaction to enable him to use the vehicle as a passenger and, although paused, the vehicle was still being driven which is also an essential use of the vehicle. Therefore, the trial court erred in granting summary judgment to State Farm.

The Court also determined that regardless of the four factor test, Jackson qualified as “occupying” the car under State Farm’s own policy, regardless of the four part test.  The Court did not believe that Jackson’s receipt of Basic Reparations Benefits from GEICO as a “pedestrian” was significant, since Jackson qualified for those benefits under State Farm’s definition of “occupying” and he could have applied for the benefits from State Farm.  Finally, the purpose of the Motor Vehicle Reparations Act (MVRA) is to expand coverage, not to limit it and the four part test should not be used to limit the application of coverage, but to expand it.

A very well reasoned and fact specific application of the four part test set forth in Kentucky Farm Bureau v. McKinney, 831 S.W.2d 164 (Ky. 1992).  The fact specific nature of the four part test makes it doubtful that this case will have broad application with the exception of the discussion regarding expansiveness.  In the summary judgment context both the policy of insurance and the MVRA’s purpose are to be viewed as expanding coverage to persons injured in car accidents, not in limiting it.  This is keeping with the summary judgment standard of “viewing the facts in the light most favorable to the non-moving party” and the MVRA’s purpose in providing a “source of recovery for injured persons.”

This is a decision that was actually rendered in May by the Kentucky Supreme Court.  However, it has serious implications as the most recent opinion the Court has issued on punitive damages and it’s worth your time.

Saint Joseph Hospital appealed from an opinion of the Court of Appeals that affirmed a Fayette Circuit Court judgment awarding $1,450,000.00 in punitive damages to the Estate of James Milford Gray. The award was based upon a jury verdict finding that the Hospital had engaged in gross negligence in its treatment of Gray following two visits to the Hospital’s emergency room after which he ultimately died.

The Hospital raised the following arguments for relief: (1) the trial court erred in failing to grant a directed verdict on the Estate’s claim for punitive damages; (2) the evidence failed to establish that the Hospital ratified its staffs misconduct so as to authorize an award of punitive damages against it pursuant to KRS 411.184(3); (3) the jury instructions provided for the Hospital’s liability based upon tortious conduct of the independent contractor
physicians engaged to provide emergency room services; (4) the punitive damage award was excessive and violated the Due Process provisions of the Fourteenth Amendment; and (5) the trial court’s failure to dismiss a sleeping juror deprived the Hospital of a fair trial.

This case endured a tortuous course through the courts. The verdict now under review was the second jury verdict awarding punitive damages against the Hospital. In the initial verdict, all the other defendants settled and the case went to trial on the claims against the Hospital and its employees. The jury returned a verdict in favor of the Estate, assessing compensatory damages in the sum of $25,000.00. The jury allocated 15% of the fault to the Hospital for a compensatory award was $3,750.00. The jury also assessed $1,500,000.00 in punitive damages entirely against the Hospital.

The verdict was appealed. The Court of Appeals affirmed the award of compensatory damages, but set aside the punitive damages as excessive and remanded the case for a new trial on punitive damages. On retrial, the jury again awarded punitive damages, this time
in the amount $1,450,000.00. The Court of Appeals affirmed the award.

The Supreme Court affirmed the ruling by the Court of Appeals.  It found that the evidence was sufficient to support an award of punitive damages, that sufficient evidence was presented that the hospital ratified the conduct of its emergency room staff, that the jury was properly instructed regarding the hospital’s statutory liability for the conduct of its emergency room physicians, that the punitive damages award did not violate the due process clause of the 14th amendment, and that the trial court did not abuse its discretion in failing to remove an alleged sleeping juror.

This case is extremely interesting for a variety of reasons but most importantly for the factual pattern it involved and the Court’s discussion of the challenge to the award based on Due Process.  The fact pattern cited some of the most egregious and callous actions I have ever read in a case and more than warranted the award of punitive damages in my opinion.  I encourage you to read the facts.  I am almost sure you will find them worthy of the punitive damages award.  Obviously, two separate juries found them so warranted.  Second, I encourage you to read the part regarding the Due Process argument, because it is not only very comprehensive, but the most recent decision by the Kentucky Supreme Court based on a recent case by the United States Supreme Court that upheld an even more disproportionate punitive damages award.

Why the hospital tried this case and even tried the punitive damages portion twice is beyond me.  They clearly believed that the low compensatory damages award could never warrant such a finding of punitive damages under federal Due Process cases.  While they can certainly appeal the result to the federal level, I’m not sure they will have much success.  Frankly, in my opinion they shouldn’t.

Kentucky Tort Journal was my first attempt at blogging.  Starting in 2004, my goal was to find a platform where I could express my thoughts about events, articles, cases and decisions that dealt with my area of practice.  I also wanted to explore the new medium and had great hopes for its use among lawyers.  Many of my contemporaries have also faded into the blogosphere, leaving behind remnants in time of their thoughts about whatever topic they chose to write.  Perhaps that is the fate of the KTJ.  It is somewhat interesting to know that while the journal is no more, my thoughts and opinions will linger like graffiti on an old wall in an old town.  Passed rarely, if ever, but there nonetheless, its true impact forever lost to its time and those who lived it, one day to be replaced by something else, something new.

While I am officially signing off, I will keep publishing the blog, at least for the time being, as a kind of archive.  There is simply too much information, too many hours, to much hard work and thought to simply turn out the lights.  Perhaps one day, but for now I’ll just leave the light on and shut the door.

I still have great hopes for blogs and the bloggers who blog them. Whle I am wrapping up this chapter, I am readily involved in opening another.  I encourage each of you to view my new blog; Kentucky Accident Information at http://kyaccidentinfo.com.  Look around and check back.  While something quite different than the KTJ, I think it’s truly the next frontier for blogs in the legal field.

I want to end by thanking each of you who supported me throughout the past four years.  I am always amazed at the number of attorneys who read my stuff and the good things they had to say.  I can’t begin to say enough about the good friends I met through this blog, so I won’t.  I’ll just say thank you to them too.

So, thank you all.  God Bless.  Good night and good luck.

Ed

The case of Rudolph v. Shelter Insurance Companies, the Court of Appeals dealt with the issue of a misrepresentation in a fire policy and whether summary judgment was proper for Shelter.  Rudolph applied for fire insurance policy with Shelter Insurance Company.  After his house burned to the ground it was revealed that he was convicted of a felony (manufacturing methamphetamine).  The application asked if anyone applying for insurance had been convicted of a felony.  Rudolph’s application denied any such convictions.  After Shelter found out about the misrepresentation they rescinded the policy, claiming it was material to the risk and had it known it would not have issued the policy.  The trial court granted summary judgment.

Rudolph claimed that he did not fill out the answers to the application, was not asked the question by the agent, and was not aware that the answer was false.  He alleged that he only signed the application in a perfunctory manner.  The court of appeals believed that an issue of fact existed whether Rudolph should be held responsible for a misrepresentation on an application when there was an issue as to whether he actually made the misrepresentation or whether the agent ever asked him the question.  The court of appeals noted that Kentucky law differentiates between those cases when the applicant in a fire policy fills out the application and signs it, and those when the agent fills out the information and the application is signed only as a formality.  It reversed the summary judgment.