INSURANCE & STATUTE OF LIMITATIONS: Second Panel of COA holds statute of limitations for UIM underinsured motorist benefits ACCRUES from date insurer denies the claim and not based upon date of accident of last PIP payment (Hensley v. State Farm, COA Published 8/15/2014)

Court of Appeals has now held in a second published decision that  the statute of limitations on a UIM claim begins to run when the insurer denies a claim for UIM coverage.  I have addressed this issue of accrual multiple times over the years in this blog and my earlier blog the Kentucky Law Review, all to no avail.  Click here for my most recent commentary which addresses some additional practical reasons in support of the decisions in Riggs and Hensley below.

When applying the statute of limitations to a contract action sounding in tort you are presented with a hybrid  of analytical frameworks, neither of which seem to look at it from the insured’s perspective – eg. tort law for car collisions (2 years from date of accident or date of last pip payment, whichever is later) vs. contract (written contracts are 15  years) coupled with the fuzzy standard that an insurance company can unilaterally shorten the period if it is reasonable and not a violation of public policy.  We  now have the Court of Appeals taking a look at the rules and conditions behind the statute of limitations and applying both common sense and legal analysis.

Supreme Court Justice John Marshall Harlan, born in Boyle County.  Marker outside of court house in Danville, Kentucky.

Supreme Court Justice John Marshall Harlan, born in Boyle County. Marker outside of court house in Danville, Kentucky.

In order to be time barred, you need a start date and and end date.  The end date is clear – suit filed, yes or no?  Start date until now has been applied illogically since the start date for a tort action is not the same as a contractual action, especially a contractual action premised upon an accrual date that has no reasonable relationship with the underlying tort.

Two panels and four Court of Appeals judges get it.  The first panel held  that the the contractual provisions of an insurance policy requiring any action for UIM benefits must be brought within 2 years of accident or last PIP payment paid was unreasonable (see, Riggs v. State Farm Mut. Ins. Co. , COA Published 7/19/2014 (Judges Acree writing the majority joined by Judge Taylor, with Judge Vanmeter dissenting), pending discretionary review 2013-SC-000555).  Counsel for Mr. Riggs is Louisville personal injury attorney Timothy McCarthy; counsel for State Farm at the Supreme Court is David Klapheke.

INSURANCE (UM): UM Policies. Do they follow the car or the named insured, and are they primary or subject to excess and pro rata provisions? Well, let the Supreme Court decide! (Countryway vs. United Financial Cas. Co., COA 1/24/2014 pending discretionary review)

A heretofore sacred cow rule for uninsured motorist benefits that the uninsured motorist benefits (UM) follows the car  was re-examined with a new rule emanating from the Kentucky Court of Appeals in Countryway Ins. Co. v. United Financial Casualty Co..  However, this decision is not final and is up at the Supreme Court.

The following fact pattern comes across the desk of Kentucky personal injury attorneys frequently on a question of both underinsured and uninsured motorist benefits.

The scenario:  two car collision with the at fault car having no liability insurance leaving injured parties in the other car looking to uninsured motorist benefits for compensation.  Sometimes the car of the driver that was not at fault has UM benefits, sometimes it does not; sometimes the driver is not the owner  and/or a passenger in the car has therir own policy of UM benefits.    But what happens when there is a UM policy covering the vehicle with the non-owner driver or passenger all having UM coverages.  That’s when “other insurance” clauses come into play.  Until today, the UM “followed” the car and/or looked at the “other insurance” clauses which in Countryway resulted in the trial judge pro-rating the policies.  However, the Countryway decision reversed the Warren Circuit Court decision pro-rating the UIM policies and held  the UM policy covering the injured person (eg., UM is first-party coverage) will be deemed primary as a matter of public policy and judicial economy.  Well, don’t go jumping the UM adjusters on this issue just yet,  because the Supreme Court granted discretionary review, and all the insurance lawyers and companies as well as the automobile injury lawyers a little concerned which way the Supreme Court will go on this.

Some practical considerations beyond the legal analysis is that the insured owner of the car who paid for the UM coverage now has claim against his or her policy which may or may not affect underwriting and the insured owner’s  future premiums; and this arises from a collision when she did nothing wrong!   Next, imagine the complications under the follow the car rule and “other insurance” clauses when the coverages are different and the adjuster’s damages assessment also different.  How many adjusters does it take to make a claim go on forever and encourage suit and not settlement?  Any number greater than one.

Cary Grant looking a little perplexed in the movie, Gunga Din.

Cary Grant looking a little perplexed too in the movie, Gunga Din.

Many UM carriers use the “excess” language in their policies which means if two UM policies are deemed  “excess” then you go to pro-rata. Then add the “step down” language to minimum UM limits for second class insureds that Shelter uses, then the math gets a little complicated for some.  Although the Countryway decision does have some logic to it – “you bought it, you got it”, some fail to appreciate that UM and UIM coverages are nothing more than liability insurance purchased to protect yourself and your passengers against the possibility that the negligent vehicle has no or not enough liability insurance.  Thus, if you cut the labels of UM and UIM, you already have another car’s liability insurance being primary which works easily for UIM coverage but breaks down for UM coverage and which runs afoul of the number of cases that attempts treating UIM and UM benefits no differently. [if you can connect those dots in your head and follow my reasoning, then “You’re a better man than I am, Gunga Din!” from Rudyard’ Kipling’s poem Gunga Din.]

I like the “bought it, got it” rule since it’s easy to apply, only one adjuster at a time, and makes sense to the owner of the car who is not crazy about all those people making claims under his/her policy.

Again, the Supreme Court has this one.  Click here for the case information and status of the case at the Kentucky Supreme Court.

Uninsured motorist benefits and priority between two policies
Countryway Ins. Co. v. United FinancialCountryway Ins. Co. v. United Financial Casualty Co. 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.

While we agree with Countryway that Shelter’s underlying logic in favor of a bright-line rule should be adopted with respect to UM coverage, we do not agree that Shelter compels us to follow the same order of priority when dealing with UM coverage as when dealing with general liability coverage. After a review of the applicable statutes and relevant case law dealing with UM coverage, we conclude that because UM coverage is first-party coverage, it should follow the person, not the vehicle, as a matter of priority.

In conclusion, we hold that under Shelter the repugnancy rule and apportionment are no longer applicable where two excess/other insurance UM provisions clash. Instead, the UM policy covering the injured person, in this case, Countryway’s policy, will be deemed primary as a matter of public policy and judicial economy.


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.


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

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.


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)