INSURANCE (UM): “Other insurance”, excess insurance and priority of UM coverage with vehicle in collision and personal policy (Countryway vs. United Financial Cas. Co., COA PUB 1/24/2014)

Uninsured motorist benefits and priority between two policies; “other insurance”
Countryway Ins. Co. v. United Financial Casualty Co.
Warren Cir. Ct., Judge John R. Grise
COA, PUB 1/24/2014, Presiding Judge Allison Jones

The Warren Circuit Court determined that the policies contained mutually repugnant excess coverage provisions and, therefore, damages should be prorated between the two policies. On appeal, Countryway asserts that the trial court should have deemed United’s policy primary because it covered the vehicle involved in the accident. For the reasons more fully explained below, we hold that the policy covering the injured person should be deemed primary to the policy covering the vehicle. Accordingly, we reverse the Warren Circuit Court’s order prorating the coverage. 

DEFENSES: No bad faith when no underlying insurance policy (Murphy vs. Travelers, COA NPO 1/17/2014)

Insurance. Torts. Unfair Claims Settlement Practices Act. 
Murphy  vs. Travelers Cas. and Surety Co.
COA, NPO 1/17/2014
Here the COA stated the obvious and affirmed the dismissal of a claim of violation of the Unfair Claims Settlement Practices Act because the underlying insurance policy had lapsed and was not in force at the time of the alleged conduct.  Or as stated much better than I

The courts of this Commonwealth have continually held that absent a contractual obligation, i.e., an insurance policy, there can be no bad faith cause of action and no violation of the UCSPA. See Davidson v. American Freightways, Inc., 25 S.W.3d 94 (Ky. 2000); Wittmer v. Jones, 864 S.W.2d 885 (Ky. 1993); Kentucky Nat. Ins. Co. v. Shaffer, 155 S.W.3d 738 (Ky. App. 2004). We are bound by those decisions.

DEFENSES / INSURANCE: Estoppel to deny coverage by failure to timely raise reservation of rights (Ohio Cas. Co. vs. Wellington Place Council, COA NPO 1/20/2014)

Insurance.  Estoppel to deny coverage.
Ohio Ca. Ins. Co. vs. Wellington Place Council of Co-Owners Homeowners Association
COA NPO 1/10/2014
The COA affirmed the trial court’s determination that the insurance company was estopped from denying coverage by defending without advising insured of a reservation of rights.  Lesson learned here is that counsel retained by an insurance company to defend should be quiet on a reservation of rights issue and not push it.  Should they force the issue rather than allow the passage of time to set up an estoppel, would that a. raise a claim of legal negligence; b. conflict of interest; and/or c. result in an estoppel any way since the retained counsel breached his/her fiduciary duty and potentially saved money for the carrier paying his legal bill.  This would sorely test the three-legged stool (aka tri-partite relationship) of client-lawyer-insurance company.  A discovery can of worms could provide a reason for re-examining this time-honored rule and remember the duties are owed to the insured client and no one else.

Wilma Jean Shelton vs. Kentucky Easter Seals Society, Inc., 2011-SC-000554-DG, SC, Published 11/22/2013 – Open and Obvious Doctrine Buried

slipandfallA 4-3 decision announced this past week and authored by Chief Justice Minton should end nearly three years of parsing and quibbling over their earlier decision in Kentucky River Medical Center v. McIntosh,  319 S.W.3d 385 (Ky. 2010) which by many accounts marked the demise of the “open and obvious” doctrine in premises liability cases.  Well, “open and obvious” is gone, gone, gone, and its eulogy recognized in Justice Scott’s dissent in the following case.

The Supreme Court’s decision in Wilma Jean Shelton vs. Kentucky Easter Seals Society, Inc.2011-SC-000554-DG, should serve as a landmark in Kentucky jurisprudence not only on the limited issue presented in premises liability law but on the  historical power of the common law of the Commonwealth as a bulwark in the protection of the public’s right to be secure and safe and the duty of care owed to others and to  yourself. More importantly (and I may well be alone on this), but I see this decision also as a Magna Carta moment for Chief Justice Minton and the current court on our historical and constitutional right to a civil jury trial – a right that seems to have eroded in the wake of summary judgment expansion and the convenience of the courts to handle a docket of cases growing in complexity and number.

Let us not forget the judiciary is a separate and equal branch of our government.  And that the common law and the right to a jury trial in civil cases are part and parcel of the judiciary’s power.  The right to an independent jury goes back to the Trial of William Penn (aka Bushell’s Case) in 1670 and was echoed in the Trial of John Peter Zenger, and the authority of the common law stood as a check on the Crown.

 

As Chief Justice Minton noted in the last paragraph of his opinion:

We reverse the Court of Appeals and remand the case for further proceedings because Cardinal Hill had a duty to Shelton and there remains a question of material fact whether that duty was breached or not. The approach we embrace in this opinion brings Kentucky even further into the modern era of tort law and takes one more step in our journey toward a fairer system less burdened by vestiges of contributory negligence. We may walk slowly in the law, but we should never walk backward. 65 Perpetuating the confusion engendered by the open-and-obvious doctrine would be a step backward. 

Although I applaud this decision for looking forward and not retrenching from Justice Noble’s opinion written in McIntosh, I cannot help but feel sorrow for those claimants who  met the “resistance” and ultimately were denied compensation or at least a chance to be heard on their claims following the remand of their cases the post-McIntosh remands but before Shelton.

Here is a brief summary of Wilma Jean Shelton vs. Kentucky Easter Seals Society, Inc.:

Of UIM, a Coots Advance, Subrogation, and Identification of the Parties (Psihountakis vs. Courtney Moore and Auto-Owners Insurance Company COA, Not To Be Published, 6/21/2013)

The Wizard of Oz and Removing the Curtain

The  Insurance Wizard of Oz Plays With the Rules

From “Behind the Green Curtain in the Land of Oz”

  • The Lion – “I’m afraid to look!.”
  • Toto – “Woof, Woof”
  • Dorothy – “Oh my.  Do you really think there is insurance?”
  • Scare Crow – ” I think there is.  There has to be.  It’s elementary.”
  • Tin Man – “I haven’t the heart to look.”
  • Insurance Wizard – “You can’t look!”
  • Toto –  “Woof.  Woof.”
  • Dorothy – “Oh my!  There is insurance!”
  • The Lion – “Don’t look.  And don’t act like you know.”
  • Scare Crow – “That would be stupid.  Everyone knows you got to have insurance!”
  • Insurance Wizard – “Yes.  But.  Let us leave it alone.  And shut the darn curtain.  Will ya?”
  • Dorothy – “And what will they do about the lie on appeal.”
  • Toto – “Woof.  Woof.”

===================================================

The following not to be published decision by the Court of Appeals is a good read for two reasons.  First, it contains a succinct summary of the law on identification of the parties in a motor vehicle collision case in which the underinsured motorist carrier (Auto Owners) protected its subrogation rights by advancing the liability limits tendered on behalf of the at-fault driver; and second, it reveals some of the practical issues involved when trying such a case, from addressing the parties in the style of the case, motions in limine regarding what can be said and used in the trial, etc.

Another interesting point is the twist of party identification that occurred.  Typically, the UIM carrier advances to protect its subrogation rights which keeps the defendant driver in as a party as well as the UIM carrier which after Earle v. Cobb was a major shift toward common sense pleading and practice and  a rejection of the fiction and an embrace of honesty.  No more games since a juror knows about mandatory insurance law presumably would not be shocked to discover insurance was an issue in the trial.  However, the Plaintiff did not want the the tort feasor in the mix.  This approach is the flip side and is/was obviously rejected.  To have done otherwise would have been unfair to tortfeasor who had the right to be in the trial, protect his interests, and defend him/herself against the plaintiff’s direct claim for damages AND the subrogation claim of the UIM carrier.

This was not the Wonderful World of Oz, and the jury was entitled to see behind the curtain.

Psihountakis vs. Courtney Moore and Auto-Owners Insurance Company
COA, Not To Be Published, 6/21/2013
Boone Cir. Ct., Judge James R. Schrand, II

THOMPSON, JUDGE: The issue in this appeal concerns whether an underinsured motorists (UIM) carrier was sufficiently identified at trial and whether the participation of the UIM carrier and the alleged tortfeasor at trial was so prejudicial that a new trial is required. We affirm.

The liability insurance carrier for Moore tendered its liability limits in settlement of the remaining claims against her. On March 16, 2010, Auto-Owners substituted those liability limits pursuant to Kentucky Revised Statutes (KRS) 304.39-320 and preserved its subrogation rights against Moore.

Prior to trial, the trial court restyled the case caption as “George and Linda Psihountakis, Plaintiffs v. Auto-Owners Insurance Company, the underinsured motorist carrier of George and Linda Psihountakis and Courtney Moore, Defendants.” However, except for general voir dire questions regarding insurance, the Court ruled that evidence or argument pertaining to UIM coverage would not be permitted. A jury trial was commenced and the court identified Auto-Owners as the UIM carrier and as a defendant. Further, in voir dire, the Psihountakis’ counsel informed the jury that damages where sought against Auto-Owners when he stated: This is going to be a lawsuit in which George is suing his own insurance company, Auto-Owners. Do any of you for any reason have some feeling one way or the other about whether or not somebody should be able to collect on their insurance policies?

Despite the trial court’s ruling, in opening statement, the Psihountakis’ counsel, stated: We believe that when you have heard all the evidence, we believe you’ll believe as we do that the Defendant Auto-Owners is simply trying to deny George the compensation he deserves.1 In addition to the above references to Auto-Owners, Auto-Owners’s attorney stated in voir dire and opening statement that he represented Auto-Owners and he actively participated in the trial.

The Psihountakis contend that Moore should not have been permitted to participate in the trial because the participation of Moore and Auto-Owners unfairly denied them a fair trial. This argument strikes this Court as disingenuous in light of the Psihountakis’ withdrawal of their motion to dismiss Moore as a party. Moreover, we can find no authority that would preclude Moore, a defendant and responsible to pay Auto-Owners in subrogation if the jury found against her, from participating in the trial.

SOME BLACK LETTER LAW

Std. of Review: Summary Judgment on Appeal and Opposing Party Presenting Some Affirmative Evidence

WinterPhotoOfOffice
902.  Summary Judgment Reversed on Appeal; Torts. Slip and Fall, Premises Liability, Ice and Natural Hazards
Ollie Barker vs. John D. Northcutt
Rowan County, Judge William Evans Lane
Not to be Published, 9/20/2013

Here is the summary judgment portion of the opinion detailing the standard and the opposing party’s burden:

At the outset we note that the applicable standard of review on appeal of a summary judgment is, “whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). Summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Kentucky Rules of Civil Procedure (CR) 56.03. The trial court must view theecord “in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor.” Steelvest v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Summary judgment is proper only “where the movant shows that the adverse party could not prevail under any circumstances.” Id. However, “a party opposing a properly supported summary judgment motion cannot defeat that motion without presenting at least some affirmative evidence demonstrating that there is a genuine issue of material fact requiring trial.” Hubble v. Johnson, 841 S.W.2d 169, 171 (Ky. 1992), citing Steelvest, supra. See also O’Bryan v. Cave, 202 S.W.3d 585, 587 (Ky. 2006); Hallahan v. The Courier Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).

Since summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court’s decision and will review the issue de novo. Lewis v. B & R Corporation, 56 S.W.3d 432, 436 (Ky. App. 2001). With this in mind we now turn to the issues raised by the parties.

CAPERTON, JUDGE: Ollie Barker appeals from the grant of summary judgment in favor of John D. Northcutt and Northcutt & Son Home For Funerals, Inc. (hereinafter “Northcutt”). After our review of the parties’ arguments, the record, and the applicable law, we agree with Barker that a genuine issue as to a material fact exists precluding summary judgment. Thus, we reverse and remand this matter for further proceedings.

The facts of this case revolve around a slip and fall outside of Northcutt’s Home for Funerals.

On appeal, Barker argues that the trial court erred in granting summary judgment. Northcutt argues: (1) based on longstanding Kentucky law regarding naturally occurring outdoor hazards, the grant of summary judgment was correct; and (2) Barker’s interpretation of Kentucky River Medical Center v. McIntosh, 319 S.W.3d 385 (Ky. 2010) is misplaced.1 With these arguments in mind we turn to our jurisprudence.

In Kentucky, a danger is “obvious” when “both the condition and the risk are apparent to and would be recognized by a reasonable man in the position of the visitor exercising ordinary perception, intelligence, and judgment.” Bonn v. Sears, Roebuck & Co., 440 S.W.2d 526, 529 (Ky. 1969) (citations omitted). “Whether a natural hazard like ice or snow is obvious depends upon the unique facts of each case.” Schreiner v. Humana, Inc., 625 S.W.2d 580, 581 (Ky. 1981).

Barker was aware of the inclement weather.  Contrary to the arguments of Northcutt this awareness by itself does not mandate summary judgment. Unlike the plaintiff in Green, it was not until after he fell that Barker could see that ice was present, that it had mounded2 up and that it was plainly visible. We believe that under these facts summary judgment was premature because there is an issue regarding the obviousness of the hazard prior to Barker’s falling. As such, we reverse and remand this matter for further proceedings.

Of UIM, Statutes of Limitation and Gordian Knots. Riggs v. State Farm Holds Contractual limitation for Underinsured Motorist Claim Matching Up with Tort Claim is Unreasonable.

Alexander Cuts the Gordian Knot

Alexander Cuts the Gordian Knot

Court of Appeals held that State Farm’s contractual limitation in the automobile insurance policy requiring any action for underinsured motorist (UIM) benefits be brought within two years of the date of the injury or the last reparation benefits paid, whichever is later,  was unreasonable.  Thus, the contractual limitation period fell back to fifteen years.

This is an interesting decision, and a must read for all personal injury lawyers.  It highlights a problem I have noted for years that inherent nature of underinsured claims being married to the underlying tort claim not only creates a hybrid cause of action, but worse produces an unfair and unreasonable result.

The key problem for me is the accrual date of the cause of action.  This applies with equal logic to claims for uninsured motorist benefits.

The underlying tort’s statute of limitations based upon two years from MVA or last PIP payment, whichever is later, is already an artificial condition if the purpose of a limitations of action bar is to let tortfeasors know when they are no longer subject to being hauled into court.  The statute of limitations removes this dark cloud.  However, when the statute of limitations is placed under the microscope in car accident cases which ties the accrual date to date of the collision which the tortfeasor would/should know, but then has the plan B move of hitching it to the last pip payment, then the tortfeasor has no clue when it’s over.

Worse  yet, the injured person has no clue either for several reasons.

One – they clearly do not know the limitation under the no fault act.

Two – figuring out the last pip payment is now becoming a journey into Dante’s inferno with each circle never ending, never stopping, never starting.

Three – reading the PIP ledger or explanation of benefits is difficult for those who know.  Imagine for those who are not legally inclined?  Plus, getting the PIP ledger is proving a difficult task where some carriers require you to go on-line, mix the payments up between med-pay and PIP.  Add the burden that many PIP carriers do not provide logs but just an endless stream of  EOB’s (explanation of benefits) with payments, dates, and reasons for payment or nonpayment obscuring the critical information.

Now, flip it over for the tortfeasor who does not even have access to the injured claimant’s PIP information.

The statute of limitations in car accident cases is truly a mystery wrapped up in an enigma hidden in plain sight by those who have no incentive to update their insured.  In fact, the PIP carrier has an incentive to keep it buried since the same statute of limitations period applies to the PIP claims!  Remember, a closed file is a happy file, or so says many of the adjusters I have dealt with over the years.

The above rambling discourse should highlight the difficulties encountered in calculating the statute of limitations for just the tort claim.

Now, multiply that by ten for the underinsured motorist claim.

The key to any statute of limitations is the bright line start date.  Well, this does not work for UIM claims.

First.  The tort claim is in tort, and the UIM claim is in contract.  Just because you are hurt in a collision and have a rather clear starting point for filing an action against the tortfeasor even when  you don’t know the last PIP payment, that date has no applicability for when you know or have reason to know of your UIM claim.

Second.  When do you know or should know you have a UIM claim?  a.  The liability insurer resists telling the injured person the policy limits which is by most reckoning a condition precedent for knowing the tortfeasor’s liability limits are inadequate.  b.  When do you know your injuries and damages exceed those liability limits even when you are told of those limits?  It’s not unusual for the true understanding of the value of the claim is not revealed but for the passage of time, treatment, and temperment.

Now, I will share something with you that you might find irritating.  I read the ruling in this decision, but have not read anything after that holding.  My analysis above reflects views I have had for years.

A UIM claim is a hybrid.  Ditto for the uninsured claim.  It is one thing to measure the damages based upon the underlying tort case as it follows negligence, liability, causation, and winds up at damages.  And since an underinsured motorist claim does not accrue until there is reason to believe your damages exceed the heretofore unknown liability limits, then there is absolutely no reason to permit a contractual limitation on this claim since any artificial limitation for filing an action is inherently unreasonable.

Of course, the uninsured motorist claim has an entirely different condition precedent for kicking in the UM claim.  Not damages, but an uninsured motorist.  However, the complexity of this situation is evident in the fact of owners versus operators with potentially different liability policies in play;  business owners and scope of employment issues;  coverage questions; lapsed policies; new policies; incomplete information on the police report; and the list goes on and one.

The UIM claim does have a potential detour, to wit: liability settlement and the Coots procedures.  However, this is no saving grace for UM policies.

The UIM and UM statute of limitations is an insurance Gordian knot, and the legislature or the courts with their inherent common law powers and the application of jural rights serving as Alexander’s sword cutting through this knotty situation and providing a clear ruling.  Methinks, we have found our Alexander in guise of Court of Appeals Judge Acree.

Now might be a good time to parse this ruling with three opinions.

BTW.  This is my first draft, no re-read, and it’s late;  but, I think you can follow my points through all this meandering.

Download (PDF, 143KB)

UPDATE: REVISED 2/18/2014!! No Fault: DOI Bulletin 2013-04, dtd 10/4/2013 Addresses PIP Carriers Who UNILATERALLY reduce Provider Bills

Update!   The DOI Bulletin previously addressed inthis post back on Oct. 10, 2013 was revised Feb. 18, 2014 and no longer provides the protection previously afforded the insured.   Their guidelines are more akin to “ask, but don’t yell” which means if the provider says no, then the no fault insurer can unilaterally pay a reduced amount and the provider balance bill the insured.

Pardon me for posting an update by simply adding the revision and reposting the old post to a new date, but I wanted you to see the analysis, have the statute, and compare the revised bulletin with the old bulletin.  I have posted the comment from a reader who brought this change to my attention, and if I had his or her full name and link to his or her web site, I would include that as well because without the assistance of my readers, this blog would be a lot less than what it is.

And here is the first of the two “gut bustin'” revisions disguised as clarifications.  Shame on the DOI, and a warning to the citizens of this state that the insurance lobby is alive, well and kickin’ guts and buts.  To throw this back into the courts is a cowardly way to resolve the problem and an abandonment of the Department of Insurance’s statutory and regulatory responsibilities.

Q: What is the purpose of Bulletin 2013-4?
A: The Kentucky Department of Insurance issued the bulletin to explain its position that under the Kentucky Insurance Code (KRS 304.39-245), if the insurer reduces a provider billing in reference to Kentucky No-Fault benefits, then the insurer must demonstrate to the Department that a negotiation with the provider has been attempted. The Department does not require that the
negotiation be successful, only that it has been attempted, and the attempt has been documented. If an insurer and a provider do not reach an agreement on a reduction of charges, the dispute over a provider’s charges becomes a matter for the courts.

By throwing it back into the “courts”, the DOI has basically thrown it back to the insured who did not have his or her health insurance bill paid with no obligation on the no fault carrier other than making the attempt and documenting the attempt.  The result is that the no fault carrier was obligated to pay, did not pay, and does not promise to indemnify or hold harmless it’s insured for non-payment when sued over the bill by the provider who did not reduce the bill.  Take a look at Neurodiagnostics vs. KFBM where the SCOKY held there is no direct action by a provider against the no-fault insurer for nonpayment of the charges.

I stand by my earlier analysis regarding the need for negotiation reductions and adding muscle to the statute, but if the reparations obligor fails in its attempt to reach a negotiated amount and does not pay the charge, then the reparations obligor should hold their insured harmless should the provider sue the insured.  Not leave them at the mercy and expense of the legal system, bad credit, and questions over continued treatment for injuries.  Not all insureds are represented by legal counsel for their personal injury claim since the payments for reparation benefits proceed without fault and/or the representation may have ended with settlement with the tortfeasor but continuing to treat.

ORIGINAL POST FOLLOWS WITHOUT CHANGES.

The following bulletin from the Kentucky Department of Insurance addresses a recurring problem when a reparations obligor (aka PIP carrier) decides to reduce a doctor or medical provider’s statement of services without obtaining an agreement.  Although negotiated reductions seem reasonable and is a normal practice in the medical/insurance arena, it needs to be done the correct way.

The underlying premise is that medical providers charge different amounts for the same service, depending on the patient or his/her insurance.  For example, each health insurer had a payment schedule for approved amounts which affect the write-off, co-pay deductible, or prohibition against balance billing; other insurers or agencies have approved payment schedules, eg., Medicare, Medicaid, Passport, Workers Compensation, Federal Government Plans which are controlled by statute; and automobile insurance to name a few.

Unfortunately, the approved rate of payment for the service seems to follow  the bargaining power of the person paying, with an uninsured patient at the bottom of the totem pole of payments, only (for some unexplained reason) the no fault car insurance not far behind.  Large health insurers and government provided insurance rules the roost on their payment schedules.

The net result is the person least able to afford it (the uninsured) pays the most, and in effect subsidizes everyone else, to include other uninsureds who do not pay.

Now what about no-fault (PIP)?  With mandatory PIP coverages, this means the ONLY insurance to pay medical bills for those with no health insurance who are hurt in a car accident is no fault.  Thus, these individuals need to be good stewards of their limited insurance funds for medical and wage loss.  If their no fault carrier permits the provider to charge more than it charges everyone else, then guess who gets screwed?  Yes, the person at the bottom

I can only assume this is the reason behind the legislative change – provide some parity and muscle for those who need the help the most.

To that end, some no fault carriers do step up to the plate and are participants in groups which have reduced payments or actually request and obtain a negotiated reduction. This works fine.

Others take the next step and conduct peer reviews of the providers medical or chiropractic services and may then disallow the amount, in whole or in part, based upon reasonableness and necessity of the service provided.  Now this raises a whole new area of concern about the propriety of the no fault carrier’s actions which I will address another day.

Personal injury lawyers can also help maximize their client’s no fault insurance benefits by reserving or designating payments among elements of loss or even attempting to restrict the PIP benefits to cover the client’s out of pocket medicals after using their health insurance to pay first and obtain the benefits of the reduced payments per the payment schedules will encounter the stiff arm of the health insurer who will refuse to coordinate the benefits and shift the loss to their insured.  And, the personal injury lawyer’s attempts to protect their client then can come under the threat of a bar complaint when the provider has obtained an assignment against their patient’s personal injury settlement recovery.

It is hard to bargain from strength when the ethical rules for lawyers in Kentucky convert a legal professional representing the interests of their injured client into a “bill collector” for the provider based upon a piece of paper.  In due time, I will address this issue too.

The purpose of the above is to first thank the Department of Insurance for their efforts to add some muscle behind the statute (KRS 304.39-245) on negotiated reductions, but also to share my concerns about the hazards, risks and unfairness of the system.

Based upon the statute and the DOI Bulletin, I would like anyone’s comments on the liability of a no fault insurer not complying with Section 245 or other provisions regarding the payment of medical bills since the no fault act prescribes the procedures for honoring a PIP claim?

With that said, thanks for the help, and I hope and expect the automobile insurers will not capitulate and ignore their opportunity to address the inequitable billing rates and thus pursue a rule of convenience and pay the stated amounts and close the file.

One avenue of attack for the health insurer would be to obtain the payment schedule from a government agency and based upon the CPT billing codes etc. seek a reduction accordingly.  If the provider refuses, then coordinate with the Department of Insurance and the Attorney General’s Office to address the disparate billing rates using the insurance and consumer protection code as their slingshot and stone against Goliath.

Bulletin AND KRS 304.390-245 are below:

Download (PDF, Unknown)

 

Download (PDF, Unknown)

Here is the revision which essentially “guts” the insured’s protections previously recognized.

Download (PDF, 240KB)

CAUSE OF ACTION: PARENTAL LIABILITY, SOCIAL HOST (MARTIN V. ELKINS, COA, PUB., 8/31/2012)

784.  TORTS.  PARENTAL DUTY/LIABILITY FOR MINOR HOSTING PARTY AND ALCOHOL INVOLVED.
MARTIN (CODY)
VS.
ELKINS (KEITH)
OPINION AFFIRMING
LAMBERT (PRESIDING JUDGE)
STUMBO (CONCURS) AND COMBS (CONCURS)
2011-CA-000862-MR
TO BE PUBLISHED
JEFFERSON

LAMBERT, SENIOR JUDGE: Cody Martin appeals from a summary judgment of the Jefferson Circuit Court holding that Keith Elkins breached no duty under Kentucky law by allowing his son to host a party at his residence where alcoholwas consumed by teenagers. On appeal, Martin argues that the Jefferson Circuit Court erred in its decision.

Thus, the trial court was correct in granting summary judgment. As has oft been stated, the proper purpose of a summary judgment “is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor[.]” Id. at 503.

Accordingly, we affirm the Jefferson Circuit Court.

CAUSE OF ACTION.  SOCIAL HOST.

The question presented here is whether a social host owes a duty to underage guests who consume alcoholic beverages on the host’s property. This presents an issue of first impression as prior cases involving the Dram Shop Act are inapplicable to a social host serving (or allowing guests to consume) liquor in his own home.2 See, e.g., Grayson Fraternal Order of Eagles, Aerie No. 3738, Inc. v. Claywell, 736 S.W.2d 328, 335 (Ky. 1987); Estate of Vosnick v. RRJC, Inc., 225 F. Supp. 2d 737, 740 (E.D. Ky. 2002). Further, no cases in Kentucky discuss this particular issue with respect to minors. Wilkerson v. Williams, 336 S.W.3d 919 (Ky. App. 2011). We review this question of law de novo. Blevins v. Moran, 12 S.W.3d 698, 700 (Ky. App. 2000).

Social host liability is a fledgling area of the law in this jurisdiction. To date, there is only one state law case which addresses it (outside of the Dram Shop context). In 2002, the Sixth Circuit noted Kentucky’s lack of case law on social host liability, stating as follows:

Kentucky law on social host liability is nonexistent. The parties do not cite and the Court is unable to find a Kentucky case addressing the liability of social hosts to third parties for the negligent acts of intoxicated guests. To be clear, the Court is faced with a total dearth of precedent[.]

2 Despite Martin’s arguments to the contrary, KRS 244.085(3) is inapplicable to the present case as Elkins neither served nor assisted minors in obtaining alcohol. As stated above, the minors themselves brought alcohol to the party with them.

Given the vacuum of precedential authority, the Court is faced with the task of predicting how the Kentucky courts would rule. The Court is aided in this enterprise by a review of the law in other jurisdictions[.]

Judging from the academic scholarship, other jurisdictions handle the question of social host liability in one of three ways. First, a minority have refused to impose social host liability altogether. Examples include Minnesota, Mississippi, Ohio, Pennsylvania, and Vermont. Second, some have imposed liability by statute. Examples include Georgia and Oregon. Finally, the majority have imposed liability based on common law negligence principles. This final set is further subdivided into two groups—those that extend social host liability for the provision of alcohol to both minors and adults, and those that limit social host liability to the provision of alcohol to minors only. Among the former group are California, Indiana, Iowa, Massachusetts, and New Jersey. Among the latter group are Michigan, North Carolina, and Wisconsin.

Estate of Vosnick, 225 F. Supp. 2d at 740-41 (E.D. Ky. 2002) (internal citation and footnote omitted).

This Court was presented with the opportunity to address social host liability in 2011 in Wilkerson, 336 S.W.3d 919. In Wilkerson, we stated that,

[As a general rule,] “an actor whose own conduct has not created a risk of harm has no duty to control the conduct of a third person to prevent him from causing harm to another.” Carneyhan, 169 S.W.3d at 849. . . . [However,] a duty could arise to exercise reasonable care to prevent harm by controlling a third person’s conduct where “(a) a special relation exists between the actor and the third person which imposes a duty upon the actor to control the third person’s conduct[.]”

… .

[Nonetheless,] “[t]he foreseeability of the injury defines the scope and character of a defendant’s duty.” Norris v. Corrections Corp. of America, 521 F. Supp. 2d 586, 588 (W.D. Ky. 2007). “The most important factor in determining whether a duty exists is foreseeability.” Pathways, Inc. v. Hammons, 113 S.W.3d 85, 89 (Ky. 2003) (citation omitted). “[C]ourts have held that, except under extraordinary circumstances, individuals are generally entitled to assume that third parties will not commit intentional criminal acts.” James v. Meow Media, Inc., 300 F.3d 683, 693 (6th Cir. 2002).

Id. at 923. Unfortunately, Wilkerson is not directly on point, as it involved a tortfeasor of the age of majority.

Nevertheless, we noted in Wilkerson, that “[t]he foreseeability of the injury defines the scope and character of a defendant’s duty.” Id., quoting Norris, 521 F. Supp.2d at 588. In the present case, Elkins, an adult landowner who was aware that minors were imbibing in alcohol on his property, had a special relationship with those minors. Where minors and alcohol are concerned, the scope of foreseeability is expanded. Many ugly outcomes may be foreseeable when minors consume alcohol, including alcohol poisoning, drunk driving accidents, drowning, and other non-intentional torts.

However, the alleged tortious conduct in this case was an assault by Byrd on Martin, an act which occurred at another location and due to an automobile fender bender. This conduct was beyond the scope of reasonable foreseeability by Elkins. Wilkerson, 336 S.W.3d at 923. As previously stated, persons are generally entitled to assume that third parties will not commit intentional criminal acts. Id. Indeed, even the Dram Shop statutes, which are intended to be more stringent as they apply to businesses rather than individual social hosts, place the primary liability for injuries to third parties upon the intoxicated person rather than the business establishment. KRS 413.241(3); Isaacs v. Smith, 5 S.W.3d 500 (Ky. 1999).

In Wilkerson, this Court held that a social host could not foresee that a drunken party guest would punch another guest in the face. Wilkerson, 336 S.W.3d at 923. In Isaacs, the Supreme Court stated that, in the dram shop context, a night club owner could not foresee that a bar patron who got into a shouting match with another patron would later in the evening draw a weapon and shoot the other patron. Isaacs, 5 S.W.3d at 503. The law is clear that intentional torts against third parties, such as bar fights, assaults, and shootings, are not foreseeable to social hosts or bar owners. Thus, viewing the evidence in a light most favorable to Martin, Elkins is entitled to judgment as a matter of law. As the Supreme Court noted in Isaacs, although proximate cause is typically a question for the jury, “a duty applies only if the injury is foreseeable.” 5 S.W. 3d at 502. Without a duty, there can be no breach or causation.

Thus, the trial court was correct in granting summary judgment. As has oft been stated, the proper purpose of a summary judgment “is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor[.]” Id. at 503.

Accordingly, we affirm the Jefferson Circuit Court.

Cause of Action: Dram Shop (Carruthers v. Edwards, COA, Pub. 8/10/2012)

In this published decision from the COA, not only is the Dram Shop Act addressed as a normal cause of action for bar’s liability for serving too much alcohol to a patron, but the constitutionality of the act is affirmed AND some creative drafting to pursue claim against the property owner under the dram shop, common law negligence, and landlord liability.

 

ACREE, CHIEF JUDGE: Appellant Monica Carruthers was injured when Lucas Watson, a patron of Foolish Heart, Inc., d/b/a/ Froggy’s Sports Bar, purportedly drove his vehicle while intoxicated, striking Carruthers in Foolish Heart’s parking lot. Carruthers filed suit against several individuals, including Appellees Max and Lois Ann Edwards, the owners of the premises on which Foolish Heart is located. The issue in the case before us may be summarized as this: what liability can be imputed to an owner of real property, on which a bar or similar establishment is operated by a tenant, when a patron of that bar consumes alcohol and, thereafter, drives a motor vehicle causing injury or death to a third party? Following a careful review, we affirm the McCracken Circuit Court’s July 28, 2011 order granting the Appellees’ motion to dismiss Carruthers’ complaint for failing to state a claim upon which relief may be granted.

DRAM SHOP:

We first address whether Carruthers’ complaint stated a valid claim under the Dram Shop Act against the Appellees. Kentucky’s Dram Shop Act, KRS 413.241, provides, in pertinent part:

(1) The General Assembly finds and declares that the consumption of intoxicating beverages, rather than the serving, furnishing, or sale of such beverages, is the proximate cause of any injury, including death and property damage, inflicted by an intoxicated person upon himself or another person.

(2) [N]o person holding a permit under KRS 243.030, 243.040, 243.050, nor any agent, servant, or employee of the person, who sells or serves intoxicating beverages to a person over the age for the lawful purchase thereof, shall be liable to that person or to any other person . . . for any injury suffered off the premises . . . because of the intoxication of the person to whom the intoxicating beverages were sold or served, unless a reasonable person under the same or similar circumstances should know that the person served is already intoxicated at the time of serving.

The parties first dispute the continuing validity of the Dram Shop Act following this Court’s recent opinion Taylor v. King, 345 S.W.3d 237 (Ky. App. 2010). In Taylor, this Court declared unconstitutional KRS 413.241’s provision governing proximate cause “to the extent it would prevent a fact-finder from determining whether an injury was a foreseeable consequence of a dram shop’s improper service of alcohol.” Id. at 244. In so doing, we explained “the legislative finding regarding proximate causation in KRS 413.241(1) intrudes upon the fact- finding role of the courts[.]” Id. at 243. Accordingly, in light of Taylor, KRS 431.241(1)’s presumption or imputation of proximate cause no longer exists. Id.

The relevant sections of KRS 413.241 “imposing liability upon a dram shop or its creation of a priority of liability between the dram shop and the intoxicated tortfeasor[,]” however, remain unchanged. Id. at 244. KRS 413.241 still imposes a duty upon a dram shop and its employees, before selling or serving alcohol to a person, to use their powers of observation to perceive readily visible warning signs that a person is intoxicated, and to refrain from serving or selling alcohol to that patron. KRS 413.241(2). If the dram shop or its employees fail to perceive, or simply ignore, those warning signs, the dram shop may be held liable pursuant to KRS 413.241 provided the dram shop’s negligent conduct is also the proximate cause of the plaintiff’s injuries. Id.; Taylor, 345 S.W.3d at 244.

In sum, while Taylor struck down as unconstitutional the presumption of proximate cause codified in KRS 423.241(1), it neither addressed nor held the remainder of KRS 413.241 unconstitutional. 345 S.W.3d at 244. Dram shop liability – under specifically delineated circumstances – still exists in this Commonwealth, as does the statutory limitation on liability. See KRS 413.241(2).

Carruthers next argues that if the circuit court based its order dismissing her complaint on the Dram Shop Act, the order is erroneous as a matter of law and must be reversed because, in Carruthers’ view, she asserted a valid Dram Shop Act claim against the Appellees. We disagree because Carruthers’ complaint cannot be read as asserting such a claim under the Dram Shop Act against these Appellees.

The statute addresses two types of persons: a dram shop (and its servers) who serve alcohol to an intoxicated person, and the intoxicated person the dram shop serves. KRS 423.241(2). It does not create or comment upon the liability of a third-party who fits neither description. Although Appellees run their own dram shop, they served no alcohol to Watson. We conclude that no purpose intended by our Legislature’s passage of the Dram Shop Act would be served by imposing liability upon a lessor who simply holds title to property on which his properly licensed lessee engages in the regulated sale of intoxicating liquors. See Robinson v. Walker, 211 N.E.2d 488, 491 (Ill. App. 1965). Therefore, the complaint failed to state a claim based upon the Dram Shop Act.