STEPHENSON V. AMERICAN FAMILY MUT. INS. CO.
INSURANCE:  ESTOPPEL APPLIED TO DENIAL OF NO-FAULT BENEFITS BY OUT OF STATE INSURER (NOT DOING BUSINESS IN KY)
2005-CA-001199
PUBLISHED: AFFIRMING IN PART, VACATING AND REMANDING IN PART (VANMETER)
DATE RENDERED: 3/2/2007

 

Stephenson was an IN resident involved in an auto accident in KY in November 1998. Stephenson was insured by American Family, a Wisconsin company licensed to do business in IN but not KY. Stephenson retained KY counsel who contacted American Family to inquire whether it would provide no-fault benefits to her, which was affirmed in February 1999. From that time to March 2003, American Family paid $1,255 of Stephenson’s medical expenses pursuant to this agreement before it suddenly refused to pay another $130 medical bill and advised her attorney that since it was not licensed to do business in KY, it did not owe Stephenson any no-fault benefits under KY law. Stephenson then filed this lawsuit claiming that American Family was estopped from denying payment for the additional no-fault benefits, and also made a claim against the KY Assigned Claims Bureau that went to State Farm. The TC granted Summary Judgment to both Defendants, and Stephenson appealed.

The COA started by noting the well-established rule that out-of-state insurance companies that are not licensed to do business in KY are not required to comply with KY no-fault insurance requirements for insureds who are not KY residents. See State Farm Ins. Co. v. Tennessee Farmers Mut. Ins. Co., 785 S.W.2d 520 (Ky. App. 1990). American Family argued that this case alone dictates judgment being entered in its favor. The COA, however, felt that Stephenson could rightfully invoke promissory estoppel in this case since she reasonably relied on American Family’s initial statement that it would pay no-fault benefits and materially changed her position in reliance on that statement (that being her forgoing making a claim through the Unassigned Claims Plan). The COA thereby concluded American Family was estopped from denying no-fault benefits to Stephenson, and vacated the TC’s entry of Summary Judgment in its favor while affirming same in favor of State Farm.

Digested by Chad Kessinger