Oct. 26, 2012 Court of Appeals Minutes Re: workers comp subrogation claim not timely filed; Unfair Claims Settlement Practices Act and punitives; quantum meruit; breach of warranty; revival and substitution during pendency of action

Published and Unpublished Decisions from the Kentucky Court of Appeals:

Oct. 26, 2012 Court of Appeals Minutes
Nos. 960-1000 (41 decisions;  3 To Be Published)

The Tort Report
This special extract of cases is designed for the Kentucky accident and injury lawyers, to include car collision lawyers, personal injury attorneys, etc.

The Court of Appeals addressed torts, insurance and civil procedure:

BRIDGEFIELD CAS. INS. CO. VS. YAMAHA (COA, PUB):
COA affirmed trial courts granting of summary judgment dismissing workers compensation carrier’s subrogation claim against manufacture for products liability for failure to timely file complaint within one year statute of limitations.  Also did not apply the discovery rule.

REPUBLIC WESTERN INS. CO. V. WEST (COA, NPO):
COA affirmed compensatory damages but reversed award of punitive damages.  Also held the trial court’s determination of post-judgement interest rate of 12% (and rejecting argument of economics of times in recessionary climate) was not an abuse of discretion.  Punitive damages award was reversed as premised on violation of Kentucky Unfair Claims Settlement Practices Act and the first element of such a claim must be a contractual relationship with the claimant and such breach of contract claim against the insurer for the u-hall rental was dismissed.

ISAACS VS. FORSYTH (COA, NPO):
Quantum meruit is addressed by COA.

KEMPER VS. ALVEN (COA, NPO):
Affirmed the dismissal of a pro se claimant’s claim for lack of prosecution.

STELLUTI KERR LLC VS. BASTIAN MATERIAL (COA, NPO):
Affirmed award of attorney’s fees.

KAMBER V. ABRAMS (COA, NPO):
Affirmed the award of attorney’s fees but that the trial court erred in its calculation of those fees.

CHANEY VS. ROBINSON-HILL (COA, NPO):
Determined there was no final and favorable termination of the proceedings giving calls to the malicious prosecution claim but reversed and remanded for further proceedings consistent with the opinion.

EST. OF VIRGINIA LAMB VS. WEHERMAN & WEHRMAN (COA, NPO):
Affirmed trial court’s dismissal of the estate’s claim for professional service malpractice for failure to timely file on a statue limitations  based on the date the estate became aware that the tax returns had not been timely filed.

HANSEN VS. SMITHA (COA, NPO):
Affirmed The trial court’s dismissal. The motion to revive was timely filed within one year of the party’s death under KRS  395.278, but the estate never asked for a substitution as prescribed by CR 25.01.

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Published Cases of Kentucky Court of Appeals 10/26/2012:
The “hot link” for each case is to the full-text of the decision.

972. STATUTE OF LIMITATIONS.  WORKERS COMPENSATION SUBROGATION FOR PRODUCT LIABILITY CLAIM AGAINST MANUFACTURE OF MOTORCYCLE.  FINAL AND APPEALABLE ORDERS. ALSO ADDRESSED PRIVITY OF CONTRACT ON SUBROGATION CLAIM AGAINST MANUFACTURER.
BRIDGEFIELD CASUALTY INSURANCE COMPANY, INC.
VS.
YAMAHA MOTOR MANUFACTURING CORPORATION OF AMERICA
OPINION AFFIRMING
VANMETER (PRESIDING JUDGE)
LAMBERT (CONCURS) AND THOMPSON (CONCURS)
2011-CA-000684-MR
TO BE PUBLISHED
KNOX

VANMETER, JUDGE: Bridgefield Casualty Insurance Company, Inc. (“Bridgefield”) appeals from the Knox Circuit Court’s order granting summary judgment in favor of Yamaha Motor Manufacturing Corporation of America (“Yamaha”). For the following reasons, we affirm.

Bridgefield is the workers’ compensation insurer for Myers Chevrolet- Oldsmobile-Cadillac, Inc. (“Myers”), a car dealership in Barbourville, Kentucky. On April 28, 2006, Myers’ employee, William Helton, was injured on the job while riding as a passenger in a Yamaha 660 Rhino. As a result of the incident, Bridgefield paid workers’ compensation benefits to Helton.

On August 20, 2008, Bridgefield filed the underlying action against Yamaha, seeking statutory and common law subrogation based on product liability theories of negligent design, negligent manufacturing, and breach of express and implied warranties arising from Yamaha’s distribution of the allegedly defective Rhino. Yamaha filed a motion for summary judgment, arguing that Bridgefield’s product defect claims were barred by the one-year statute of limitations provided for in KRS1 413.140 and Bridgefield’s breach of warranty claims must fail for lack of privity of contract. Bridgefield did not respond to Yamaha’s motion. The trial court entered an order on August 17, 2010 granting Yamaha’s motion for summary judgment on the basis that Bridgefield’s claims were barred by the statute of limitations under KRS 413.140.

Reaching the merits of Bridgefield’s arguments, Bridgefield first asserts that the trial court erred by granting Yamaha’s motion for summary judgment on statute of limitations grounds. We disagree.

Bridgefield’s rights, as subrogee to Helton, are strictly derivative of any claims Helton may pursue against Yamaha. Zurich Am. Ins. Co. v. Haile, 882 S.W.2d 681, 685 (Ky. 1994). As a result, Bridgefield’s subrogation action is subject to the same statute of limitations as a direct action by Helton against Yamaha. Am. Premier Ins. Co. v. McBride, 159 S.W.3d 342, 351 (Ky.App. 2004). See also Waters v. Transit Auth. of River City, 799 S.W.2d 56, 58 (Ky.App. 1990).

A direct action by Helton must have been filed within one year after the cause of action accrued, the date of Helton’s injury on April 28, 2006. KRS 413.140(1)(a). See also Preston v. Preston, 289 Ky. 552, 553, 159 S.W.2d 414 (1942) (personal injury action accrues on date of injury). In Manies v. Croan, 977 S.W.2d 22, 23-24 (Ky.App.1998), this court held that the one-year limitations period set forth in KRS 413.140 governs personal injury actions arising from use of an all-terrain vehicle (“ATV”). Because Bridgefield failed to file its subrogation claim against Yamaha within one year of Helton’s date of injury, the trial court correctly held that its claims were barred by the statute of limitations.

In the alternative, Bridgefield argues that if the one-year statute of limitations applies, its claims were timely filed by operation of the discovery rule and the doctrine of equitable estoppel. We disagree.

The discovery rule allows for an action to accrue when the plaintiff discovers (or in the exercise of reasonable diligence should have discovered) the injury. Fluke Corp. v. LeMaster, 306 S.W.3d 55, 60 (Ky. 2010). Additionally, a defendant may be equitably estopped from relying on the statute of limitations as a defense. Id. at 62. In Kentucky, “equitable estoppel requires both a material misrepresentation by one party and reliance by the other party[.]” Id. In Fluke, the Kentucky Supreme Court made clear that

delaying the accrual of the cause of action or tolling the running of the statute of limitations by operation of the discovery rule or the equitable estoppel doctrine is reserved for truly exceptional circumstances, such as where the injury itself is not immediately discoverable or the product’s potential role in causing an accident is actively obscured by the defendant’s concealment or false representations.

Id. at 67. The Court in Fluke held that “the discovery rule is available only in cases where the fact of injury or offending instrumentality is not immediately evident or discoverable with the exercise of reasonable diligence, such as in cases of medical malpractice or latent injuries or illnesses.” Id. at 60 (footnote omitted).

In the present case, Helton’s injuries and the Rhino’s potential role in causing the accident were immediately evident from the accident itself. Under Kentucky law, Bridgefield had a duty to exercise reasonable diligence to discover its cause of action within the time prescribed by the statute of limitations. Its failure to do so does not lend to application of the discovery rule or the equitable estoppel doctrine to toll the statute of limitations in this instance. Therefore, Bridgefield’s product liability claims remain barred by the one-year statute of limitations.

981.  CRIMINAL LAW.  DUI LAW AND CONTACTING ATTORNEY.
COMMONWEALTH OF KENTUCKY
VS.
BEDWAY (JAMES)
OPINION AFFIRMING
DIXON (PRESIDING JUDGE)
CAPERTON (CONCURS) AND STUMBO (CONCURS)
2011-CA-001235-DG
TO BE PUBLISHED
JEFFERSON

DIXON, JUDGE: The Commonwealth has sought discretionary review of an opinion of the Jefferson Circuit Court holding that Appellee, James Bedway, was deprived of his statutory right under KRS 189A.105(3) “to attempt to contact and communicate with an attorney” after being arrested for driving under the influence, and that such deprivation mandated the exclusion of Bedway’s breathalyzer test.

After reviewing the record and applicable law, we uphold the decision of the circuit court.

999. FAMILY LAW.  PATERNITY.
C. (J. D.)
VS.
CABINET FOR HEALTH AND FAMILY SERVICES, ET AL.
OPINION REVERSING AND REMANDING
LAMBERT (PRESIDING JUDGE)
CAPERTON (CONCURS) AND VANMETER (CONCURS)
2012-CA-000670-ME
TO BE PUBLISHED
BARREN

LAMBERT, JUDGE: J.D.C. appeals from a judgment of paternity entered by the Barren Circuit Court adjudging him to be the biological father of S.E.D. After careful review, we reverse and remand.

TORT REPORT  FOR NONPUBLISHED DECISIONS (MINUS WORKERS COMP) – torts, insurance, civil procedure: 

960.  PUNITIVE DAMAGES REVERSED IN UNFAIR CLAIMS PRACTICE ACT CLAIM.  AWARD OF 12% POST-JUDGMENT INTEREST IN RECESSIONARY CLIMATE WAS NOT AN ABUSE OF DISCRETION BY TRIAL COURT.
REPUBLIC WESTERN INSURANCE COMPANY, ET AL.
VS.
WEST (JOSEPH ANTHONY), ET AL.
OPINION AFFIRMING IN PART, REVERSING AND VACATING IN PART
STUMBO (PRESIDING JUDGE)
NICKELL (CONCURS) AND LAMBERT (DISSENTS AND FILES SEPARATE OPINION)
2008-CA-001690-MR
2008-CA-001691-MR
NOT TO BE PUBLISHED
PULASKI

STUMBO, JUDGE: Republic Western Insurance Company, U-Haul International, Inc., and Doug Sewell, d/b/a Sewell Rentals (hereinafter collectively referred to as Appellants) appeal from a jury verdict and order denying their motions to alter, amend, or vacate the judgment.2 In a trial by jury, Joseph and Mary Ann West were awarded $90,000 in compensatory damages against the Appellants and $1.7 million in punitive damages against Republic Western individually. The punitive award was later reduced to $729,000. Appellants appeal the verdict with a variety of arguments. We find that one of Republic Western’s arguments has merit and therefore reverse and vacate the punitive damages award. The Judgment is in all other respects affirmed.

As a matter of law, Republic Western could not have violated the UCSPA. Republic Western did not act in bad faith when dealing with a contractual obligation. We therefore reverse the jury’s finding as such. We also vacate the punitive damages award, the award of attorney’s fees, and the prejudgment interest. These awards were premised on the violation of the UCSPA. Absent a UCSPA violation, these awards cannot stand.

For the foregoing reasons, we affirm the finding that Appellants were liable for negligent misrepresentation. We also find that there was no error in the compensatory damages award or the post-judgment interest rate. Finally, we find that Republic Western could not have violated the UCSPA as a matter of law. We therefore reverse the judgment in part and vacate the award of punitive damages, attorney’s fees, and prejudgment interest.

NICKELL, JUDGE, CONCURS.

LAMBERT, SENIOR JUDGE, DISSENTS AND FILES SEPARATE OPINION.

LAMBERT, SENIOR JUDGE, DISSENTS: Respectfully, I dissent from that portion of the majority opinion by which the punitive damage award is reversed.

The flaw I see in the majority opinion is in its failure to recognize that Mr. Sewell was an agent of Republic Western as well as an agent of U-Haul. The majority has properly recognized that Sewell’s false and misleading statements to the Wests were sufficient to impose liability on U-Haul. It follows that those same statements were sufficient to trigger application of the UCSPA.

I have not overlooked the Whittmer v. Jones quotation contained in the majority opinion. Slip op. pp. 9-10. However, as Republic Western’s agent, Sewell effectively modified the policy and imposed on Republic Western an obligation to “pay the claim under the terms of the policy [as modified by Sewell].”

When an insurance agent orally modifies a policy by misrepresenting its terms to a proposed insured, it follows that the insurer is bound by those terms and is thereby subject to the provisions of the UCSPA. In my view, the question of punitive damages was properly submitted to the jury and properly addressed by the trial court. I would affirm in all respects.

962.  DAMAGES. QUATUM MERUIT.
ISAAC (CELIA)
VS.
FORSYTH, III (JOHN D.)
OPINION REVERSING
LAMBERT (PRESIDING JUDGE)
ACREE (CONCURS) AND STUMBO (CONCURS)
2010-CA-000951-MR
NOT TO BE PUBLISHED
PIKE

965.  DISMISSAL FOR LACK OF PROSECUTION OF PRO SE CLAIMANT NOT ABUSE OF DISCRETION.
KEMPER, JR. (ROBERT LEE)
VS.
ALVEY (EDWARD L.), ET AL.
OPINION AFFIRMING
TAYLOR (PRESIDING JUDGE)
ACREE (CONCURS) AND CAPERTON (CONCURS)
2010-CA-001990-MR
NOT TO BE PUBLISHED
JEFFERSON

975.  BREACH OF CONTRACT, ETC. CLAIMS.
STELLUTI KERR, LLC
VS.
BASTIAN MATERIAL HANDLING, LLC
OPINION AFFIRMING
STUMBO (PRESIDING JUDGE)
CAPERTON (CONCURS) AND DIXON (CONCURS)
2011-CA-000794-MR
NOT TO BE PUBLISHED
JEFFERSON

STUMBO, JUDGE: Stelluti Kerr, LLC (“SK”) appeals from Amended Findings of Fact, Conclusions of Law and Judgment of the Jefferson Circuit Court in its action seeking damages from Bastian Material Handling, LLC (“BMH”) for breach of contract and breach of the covenants of good faith and fair dealing. SK argues that the circuit court improperly concluded that BMH was obligated to pay a 15% commission to SK only for a single project with third party buyer Continental Mills and not on all sales to Continental Mills in perpetuity. SK maintains that the circuit court erred in ruling that the contract at issue was terminable, that BMH terminated the contract within a reasonable time and that the court erred in finding that BMH did not breach its covenants of good faith and fair dealing. SK also contends that the court misconstrued the scope of the agreement, improperly considered the unilateral course of performance of BMH, and erred in ruling that SK was not entitled to recover attorney fees. We find no error, and accordingly affirm the Judgment on appeal.

978.  ATTORNEYS FEES. EXCESSIVE.
KAMBER (TONY), ET AL.
VS.
ABRAMS (FRANK), ET AL.
OPINION AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
STUMBO (PRESIDING JUDGE)
COMBS (CONCURS) AND LAMBERT (CONCURS)
2011-CA-000988-MR
NOT TO BE PUBLISHED
JEFFERSON

STUMBO, JUDGE: Tony Kamber appeals from a decision of the Jefferson Circuit

Court awarding attorney fees to his former counsel, Scott Stout, pursuant to Kentucky Revised Statute(s) (KRS) 376.460, Kentucky’s attorney lien statute. Kamber argues that the lien was invalid, that Stout should not have been awarded the fees, and that the trial court awarded Stout an excessive amount in fees. We find that the trial court erred in its calculation of fees, but affirm in all other respects.

983.  MALICIOUS PROSECUTION.  NO FINAL AND FAVORABLE DETERMINATION FOUND.
CHANEY (JERRY)
VS.
ROBINSON-HILL (ALISIA)
OPINION REVERSING AND REMANDING
CLAYTON (PRESIDING JUDGE)
LAMBERT (CONCURS) AND STUMBO (CONCURS)
2011-CA-001485-MR
NOT TO BE PUBLISHED
MADISON

CLAYTON, JUDGE: The Appellant, Jerry Chaney (“Chaney”), appeals a decision of the Madison Circuit Court granting summary judgment in favor of the Appellee, Alisia Robinson-Hill (“Alisia”) and dismissing Chaney’s malicious prosecution claim. The circuit court determined that there was no final and favorable termination of the proceedings which gave rise to his claim. As a result, theessential elements of a cause of action for malicious prosecution could not be established. However, because material issues of fact exist, we reverse and remand for further proceedings consistent with this opinion.

986.  STATUTE OF LIMITATIONS ON PROFESSIONAL CLAIM
THE ESTATE OF VIRGINIA M. LAMB
VS.
WEHRMAN & WEHRMAN,CHARTERED, ET AL.
OPINION AFFIRMING
STUMBO (PRESIDING JUDGE)
CLAYTON (CONCURS) AND LAMBERT (CONCURS)
2011-CA-001566-MR
NOT TO BE PUBLISHED
CAMPBELL

STUMBO, JUDGE: The Estate of Virginia M. Lamb, by and through Eileen Anne Niedt, Adminstratrix, appeals from an Order of the Campbell Circuit Court sustaining the motion of Wehrman & Wehrman, Chartered and D. Anthony Brinker to dismiss or alternatively for summary judgment. The Estate argues thatthe trial court erred in ruling that the Statute of Limitations in her professional service malpractice action against Wehrman & Wehrman and Brinker commenced at the latest on March 18, 2009, when the Estate became aware that tax returns had not been timely filed. Rather, it maintains that the statutory period for bringing the action commenced at a later date when the amount of damages became fixed and certain. The Estate argues that the court erred in dismissing the action as time- barred. For the reasons stated below, we affirm the Order on appeal.

989.  REVIVAL OF CAUSE OF ACTION UPON DEATH OF CLAIMANT MUST INCLUDE  SUBSTITUTED PARTY.
HANSEN (MICHAEL), ET AL.
VS.
SMITHA (SCOTT), ET AL.
OPINION AFFIRMING
COMBS (PRESIDING JUDGE)
CLAYTON (CONCURS) AND THOMPSON (CONCURS)
2011-CA-001624-MR
NOT TO BE PUBLISHED
JEFFERSON

COMBS, JUDGE: Michael Hansen and Cathleen Wright, as Administratrix of the Estate of Michael Hansen (the Estate), appeal the orders of the Jefferson Circuit Court that granted the appellees’ motion to dismiss and that denied the Estate’s amended motion to revive. Following our review, we affirm.

Kentucky Revised Statute[s] (KRS) 395.278 allows an action to be revived within one year of a party’s death in the name of the representative or successor of a plaintiff. It is construed in conjunction with Kentucky Civil Rule[s] of Procedure (CR) 25.01, which provides in pertinent part that:

if a party dies during the pendency of an action and the claim is not thereby extinguished, the court, within the period allowed by law, may order substitution of the proper parties. If substitution is not so made the action may be dismissed as to the deceased party. The motion for substitution may be made by the successors or representatives of the deceased party or by any party, and together with the notice of hearing, shall be served on the parties as provided in Rule 5[.]”

The Estate first argues that the original motion to revive, which was properly made pursuant to KRS 395.278, also satisfied the elements of CR 25.01. However, the court found that the Estate had never asked for substitution as prescribed by CR 25.01. We agree.

KRS 395.278 mandates that the motion to revive must be “in the name of the representative or successor of a plaintiff.” Deceased parties do not have standing to litigate. Commonwealth v. Maynard, 294 S.W.3d 43, 46 (Ky. App. 2009). Historically, lawsuits die with the plaintiff. Daniel v. Fourth & Market, Inc., 445 S.W.2d 699, 701 (Ky. 1968). The revival laws permit a lawsuit to remain “only as a placeholder for the revived suit in the name of the personal representative of the estate.” Hardin County v. Wilkerson, 255 S.W.3d 923, 926 (Ky. 2008). Furthermore, the personal representative does not automatically inherit the lawsuit; he or she must “raise it from limbo and become a party to it.” Id. at 927 (quoting Daniel, supra).

Wright’s motion to revive was made in the name of the Estate of Michael Hansen. The motion recites that Wright had been appointed Administratrix of Hansen’s estate; however, it did not ask that Wright be substituted for Hansen in the lawsuit. Furthermore, there is no evidence that Wright complied with the notice requirement of CR 25.01. This Court has spoken clearly about the subject – in order to keep a deceased plaintiff’s action alive, the action “must be revived and the administrator must be substituted as the real party in interest.” Synder v. Snyder, 769 S.W.2d 70, 72 (Ky. App. 1989). (Emphasis added). Although she properly moved for revival of the lawsuit, Wright did not meet the second requirement of asking to be substituted as the real party in interest. Therefore, the trial court did not err when it dismissed the lawsuit as permitted by CR 25.01.

The Estate next argues that the amended motion to revive was improperly denied. This contention is based on CR 15.03, which allows amended pleadings to relate back to original pleadings. Pleadings are defined by CR 7.01 as complaints, counterclaims, and answers to complaints or counterclaims. However, a revival motion under KRS 395.278 is not a pleading. Mitchell v. Money, 602 S.W.2d 687, 688 (Ky. App. 1980). Therefore, CR 15.03 is not applicable.

Nonetheless, the Estate urges us to apply Preece v. Adams, 616 S.W.2d 787 (Ky. App. 1980), in which we held that a motion for revival in an erroneous jurisdiction tolled the statute of limitations for a revival motion in the proper jurisdiction. The court analogized the relation-back principles of CR 15.03 applied. However, we do not believe that Preece is applicable to the case before us. In Preece, there was no question that the original motions both for revival and for substitution were timely and effective. They were simply made in the wrong court. The determination of jurisdiction was a matter that had to be determined by the court, and when the proper jurisdiction was ascertained, the properly filed case was transferred accordingly.

In Preece, the filings were complete. Both revival and substitution were properly sought, a fact that allowed for the doctrine of relation-back to apply. However, the doctrine of relation-back cannot supply a deficiency in a pleading or a required procedural step (i.e., the motion for substitution) after the fact. It serves merely to turn back the clock for an action that has been properly litigated otherwise.

We have carefully studied the estate’s reliance on Preece. Though not perfectly congruent factually to the case before us, Preece would surely seem to militate in favor of saving a revival case where all parties had notice de facto (if not de jure) according to CR 25.01. However, we note that Preece dates from 1980. It has been superseded at least temporally by Snyder, supra, in 1989 and more recently by Frank v. Estate of Enderle, 253 S.W.3d 570, 574 (Ky. App. 2008), both of which strongly reiterate and reinforce the mandatory notice of filing a CR 25.01 motion in conjunction with a KRS 395.278 motion:

CR 25.01 must be read in tandem with KRS 395.278 which directs the “application to revive an action . . . shall be made within one (1) year after the death of a deceased party.” Because KRS 395.278 is “a statute of limitation, rather than a statute relating to pleading, practice or procedure, and the time limit within this section is mandatory and not discretionary,” neither a court nor a party may extend the one year statute of limitations. Snyder v. Snyder, 769 S.W.2d 70, 72 (Ky. App. 1989). Thus, if within one year of a litigant’s death an action is not revived against the administrator of a decedent’s estate and the administrator substituted as the real party in interest, then the suit must be dismissed. Id.

Frank v. Estate of Enderle, 253 S.W.3d at 575. (Emphases added.)

Furthermore, the order dismissing the original complaint was a final order.

CR 54.01 defines a final order as one that disposes of all the issues in an action. A motion to dismiss leaves no outstanding issues. Therefore, the proper motion would have been one to amend, alter, or vacate the order pursuant to CR 59.05. We cannot conclude that the trial court erred in denying the untimely amended motion.

We are compelled to affirm the Jefferson Circuit Court.

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