SC: August 21, 2014 Supreme Court of Ky Decisions (Minutes 113-144): federal plea agreements with waivers of ineffective assistance of counsel fatal for conflicts of interest; preserving argument for appeal with offers of proof under KRE 103; SC takes a bite out of Patient Safety and Quality Improvement Act of 2005 (“PSQIA”) privilege; estate recovers for death of confidential informant when state police use him knowing his cover was blown

The  Supreme Court of Kentucky announced a  32 decisions on August 21, 2014, with 14 of the Kentucky Supreme Court cases designated for publication addressing:  federal plea agreements with waivers of ineffective assistance of counsel fatal for conflicts of interest; preserving argument for appeal with offers of proof under KRE 103;  SC takes a bite out of Patient Safety and Quality Improvement Act of 2005 (“PSQIA”) privilege; estate recovers for death of confidential informant when state police use him knowing his cover was blown.

2014.08.Boyle.View of Circle of Firsts and Court House.IMG_9934

View of the Boyle County Court House and the circle of stones announcing the “firsts” of Danville. Diane and I enjoyed our walk through the history and beauty of this lovely college town, architecture, the people and the sites.

Each of the cases, whether published and not to be published, can be found in the official “minutes” below organized by number, parties, county, and links to the full text of each (with the published decisions’ issue noted as “questions presented.”   I have highlighted in yellow those cases of interest to Kentucky and Louisville injury attorneys. 

Click here for links to all the archived Supreme Court of Kentucky minutes.

“Continue reading” for the Tort Report and a complete copy of this week’s minutes of ALL decisions with links to their full text.

The Tort Report – Selected decisions this week on tort, insurance and civil law.

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.


DEFENSES: Qualified Official Immunity, Ministerial vs. Discretionary, County Roads, Fiscal Court & Road Forman, & Design, repairs and maintenance. Estate of Megan Morris vs. Tony Smith (COA,Published 5/9/2014)

A detailed analysis was undertaken by the Court of Appeals addressing responsibilities and duties of the fiscal court and county road official for the operation and maintenance of county roads within the context of official immunity and individual liability with a focus on discretionary acts (immune) and ministerial acts (not so immune).

421.  Official Immunity.  Ministerial acts vs. discretionary acts.
Estate of Megan Morris vs. Tony Smith
Published, COA, 5/9/2014 from Graves County

ACREE, CHIEF JUDGE: The Estate of Megan Morris, by and through her personal representative, Diane Mobley (the Estate), and Diane Mobley, individually, appeal the August 15, 2012 order of the Graves Circuit Court granting summary judgment to each member of the Graves County Fiscal Court, including the county judge executive, individually, and Danny Travis, the road foreman, individually. The circuit court concluded the Appellees are each cloaked with, and protected by, official immunity. We agree and affirm.

* * *

in June 2007, Megan was one of seven teenagers riding in a car. She was a passenger. It was dark and raining, and the driver failed to negotiate a sharp curve on Dooms Chapel Road. The car struck a tree; Megan died from her injuries. Her estate sued alleging Graves County, the Graves County Fiscal Court, and the Graves County officials listed above were negligent in not providing warning signs at the curve, thus causing Megan’s death,

* * *

 “‘Official immunity’ is immunity from tort liability afforded to public officers and employees for acts performed in the exercise of their discretionary functions[.]” Yanero, 65 S.W.3d at 521. If a public officer “is acting in a discretionary manner, in good faith, and within the scope of his employment,” then he or she is entitled to the protections of qualified official immunity. Nelson Co. Bd. of Educ. v. Forte, 337 S.W.3d 617, 621 (Ky. 2011).

[W]hen an officer or employee of the state or county (or one of its agencies) is sued in his or her individual capacity, that officer or employee enjoys qualified official immunity, which affords protections from damages liability for good faith judgment calls made in a legally uncertain environment. Application of the defense, therefore, rests not on the status or the title of the officer or employee, but on the [act or] function performed.

Haney v. Monsky, 311 S.W.3d 235, 240 (Ky. 2010) (alteration in original) (citations omitted).

Because “qualified official immunity applies only where the act performed by the official or employee” is in its nature discretionary, we must first classify “the particular acts or functions in question” as either discretionary or ministerial. Id. Discretionary acts involve “the exercise of discretion and judgment, or personal deliberation, decision, and judgment.” Yanero, 65 S.W.3d at 522. These acts “require the exercise of reason in the adaptation of means to an end, and discretion in determining how or whether the act shall be done or the course pursued.” Haney, 311 S.W.3d at 240.

Conversely, “ministerial acts or functions – for which there are no immunity – are those that require ‘only obedience to the orders of others, or when the officer’s duty is absolute, certain, and imperative, involving merely execution of a specific act arising from fixed and designated facts.’” Id. (citing Yanero, 65 S.W.3d at 522). The official’s burden to ascertain those fixed and designated facts does not convert a ministerial act into a discretionary one. Upchurch v. Clinton County, 330 S.W.2d 428, 430 (Ky. 1959). Classifying an act or function as discretionary or ministerial is an inherently fact-intensive inquiry necessitating a “probing analysis[.]” Haney, 311 S.W.3d at 240. It must not be made in haste for “few acts are ever purely discretionary or purely ministerial.” Id. Indeed, in carrying out his or her daily tasks, an official often engages in numerous acts, any of which may be classified as ministerial or discretionary depending on “the dominant nature of the act” or function in question. Id. (emphasis in original). With these standards as our guide, we turn to the specific case before us.

* * *

Kentucky law is clear that a fiscal court’s acts regarding improvement of county roads are discretionary. Madison Fiscal Court v. Edester, 301 Ky. 1,  190 S.W.2d 695, 696 (1945) (“[I]t is within the discretion of the fiscal court to determine the road or roads which shall be improved and the time and method of such improvements.”); see KRS 67.080(2)(b)(“[F]iscal court shall . . . , [a]s needed, cause the construction, operation, and maintenance of all county . . . structures, grounds, roads and other property.” (emphasis added)).

* * *

Judicial reasoning cannot turn a blind eye to the practicalities of a fiscal court’s decision-making. There is a cost attributable to the installation of signs and guardrails; discretion in the allocation of taxpayer/road-fund dollars is imperative. Kentucky has long recognized this:

The fiscal court of every county is, in effect, a legislative board, invested with the power by law of making appropriations in cases where the needs of the county require it; and while they may neglect their duties, or omit to improve the roads, or to make other appropriations necessary for that purpose, it is beyond the power of a judicial tribunal to interfere and determine what improvements should be made, and the extent of the expenditure necessary for that purpose. Madison Fiscal Court v. Edester, 301 Ky. 1, 190 S.W.2d at 696 (quoting Highbaught v. Hardin County, 99 Ky. 16, 34 S.W. 706, 707 (Ky. 1896)).

If we adopted the Estate’s argument, we would be fashioning a rule whereby every fiscal court or governing authority in Kentucky would have to conduct an engineering study and implement an engineering judgment as to every curve on every mile of every road in every county in the Commonwealth. And, if the engineering study or judgment found the placement of a warning sign warranted, the fiscal court would have no choice but to comply with that recommendation, regardless of policy considerations, fiscal concerns, and alternate safeguards. Such cannot possibly be the intent of the Department of Highways when it issued 603 KAR 5:050 directing the MUTCD be the guiding standard for the placement and maintenance of traffic control devices in Kentucky.

Again, a ministerial rule “must, at least, be sufficiently specific to restrict significant discretion in its enforcement. That cannot be said here.” Haney, 311 S.W.3d at 243. We are firmly convinced that the act of placing or not placing signs or a guardrail on county roads is a discretionary act on the part of the fiscal court, not a ministerial one.

Such discretion, of course, is not without limitation. One “qualification” of qualified immunity is that the discretionary act be one within the official’s authority. Forte, 337 S.W.3d at 621 (official must be acting “within the scope of his employment” to be entitled to official immunity). The Estate has never made an issue of the Fiscal Court’s authority; in fact, the Estate conceded it. The only other qualification is that the official will not be immune from prosecution if he fails to act in good faith, including his willful failure to act at all. “Once the officer or employee has shown prima facie that the act was performed within the scope of his/her discretionary authority, the burden shifts to the plaintiff to establish by direct or circumstantial evidence that the discretionary act was not performed in good faith.” Yanero, 65 S.W.3d at 523. The Estate has not met that burden.

The term “good faith” “is somewhat of a misnomer, as the proof is really of ‘bad faith.’ In fact, in most cases, ‘good faith’ is just a presumption that exists absent evidence of ‘bad faith.’” Sloas, 201 S.W.3d at 475. Bad faith encompasses both an objective and subjective component, and can be shown in one of two ways: (1) that the official “willfully or maliciously intended to harm the plaintiff or acted with a corrupt motive, which requires a subjective analysis[,]” or (2) upon proof that a clearly-established right of the plaintiff was violated, which requires an objective analysis. Bryant v. Pulaski County Detention Center, 330 S.W.3d 461, 466 (Ky. 2011) (quoting Yanero, 65 S.W.3d at 523).

Standard of Review: Rule 11 Sanctions Imposed by Trial Court

Persels & Associates LLC v. Capital One Bank
OA PUB 2/14/2014 (Presiding Judge Clayton)
Daviess County, Trial Judge Joseph Castlen, III

CLAYTON, JUDGE: Persels & Associates, LLC appeal the Daviess Circuit Court’s findings and imposition of sanctions based on the trial court’s determination that the respondents violated Kentucky Rules of Civil Procedure (CR) 11. After careful consideration, we affirm.

Appellate review of a trial court’s actions related to CR 11 requires a multi-standard approach, that is, a clearly erroneous standard to the trial court’s findings in support of sanctions, a de novo review of the legal conclusion that a violation occurred, and an abuse of discretion standard on the type and/or amount of sanctions imposed. Clark Equipment Co., Inc. v. Bowman, 762 S.W.2d 417, 421 (Ky. App. 1988). 

The next issue consists of a de novo review of the legal issues involved in the determination that a violation has occurred under CR 11. We begin by observing that CR 11 does not provide substantive rights to litigants but is a procedural rule designed to curb abusive conduct in the litigation process. Lexington Inv. Co. v. Willeroy, 396 S.W.3d 309, 312 (Ky. App. 2013).

The legal questions are answered by CR 11 itself. The rule provides:

Every pleading, motion and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. A party who is not represented by an attorney shall sign his pleading, motion, or other paper and state his address. . . . The signature of an attorney or party constitutes a certification by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

The plain meaning of the rule is that pleadings must be signed by the attorney that prepares them.

Persels’ practice of providing limited representation to its clients does not abrogate this obligation under the Kentucky Rules of Civil Procedure nor did Persels offer any legal authority from Kentucky or otherwise to support its position that limited representation changes the effect of this civil rule or any other. Moreover, because the clients entered into a contract that specified Persels attorneys would not sign pleadings or make an appearance, it is not sufficient to change the requirements under CR 11. It is indisputable that a court cannot enforce an illegal contract. S.J.L.S. v. T.L.S., 265 S.W.3d 804, 821 (Ky. App. 2008). Any contract that ignores or changes the application of the civil rules is not legal. Thus, in contravention to Persels’ position, we hold that pursuant to CR 11, the attorneys who prepared the pleadings must sign them.

Rule 11 Sanctions: Local counsel must sign pleadings!

You write it!  You sign it.

In this decision, local counsel was sanctioned when hired to assist national collections law firm in a Kentucky court case.  Their “agreement” was no need to sign or appear, but the Court of Appeals thought differently.  The sanction was only $1.00, but it was a sanction; and it’s on the record and official.

Rule 11 sanctions against local counsel for not signing pleadings they prepared.
Persels & Associates LLC v. Capital One Bank
OA PUB 2/14/2014 (Presiding Judge Clayton)
Daviess County, Trial Judge Joseph Castlen, III
COA affirmed trial court’s granting of Rule 11 sanctions against defendants arising from debt collection case. Persels was a national law firm and hired local counsel, and trial judge ordered local counsel to show cause why they should not be held in contempt for failure sign pleading and enter an appearance (limited retention of local counsel per agreement did not require them to sign pleading, enter an appearance or attend a court hearing).  The $1.00 sanction was not considered onerous.

Cause of Action: Discrimination Based Upon National Origin

John Charalambakis v. Asbury College
COA PUB 2/7/2014

THOMPSON, JUDGE: John Charalambakis, a former professor at Asbury College, sued for employment discrimination, breach of contract and defamation. Charalambakis appeals from summary judgment on his discrimination and retaliation claims, dismissal of his defamation claim, the jury verdict on breach of contract claim and the final judgment awarding costs. 

Charalambakis ‘ first claim is the trial court erred in granting summary judgment on his claim of discrimination on the basis of national origin. Under the KCRA it is unlawful for an employer to discharge, discriminate against or adversely affect an individual’s status as an employee because of that individual’s national origin. KRS 344.040(1)(a), (b). Kentucky interprets the KCRA consistently with Title VII of the Federal Civil Rights Act. American General Life & Acc. Ins. Co. v. Hall, 74 S.W.3d 688, 691 (Ky. 2002). To establish a prima facie case of discrimination, “[a] plaintiff must show that: (1) he is a member of a protected class; (2) he was terminated; (3) he was qualified for the position; and (4) he was replaced by a person outside a protected class or was treated differently than a similarly situated, non-protected employee.” Abdulnour v. Campbell Soup Supply Co., LLC, 502 F.3d 496, 501 (6th Cir. 2007). A prima facie case of national origin discrimination can be established through direct evidence of discrimination or by establishing a circumstantial case raising an inference of discrimination pursuant to the burden-shifting framework set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).

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.