DATE RENDERED: 8/10/2007

The COA held that a release and indemnification agreement settling a personal injury claim from a car accident against a self-insured employer and its employee which included the plaintiff indemnifying the defendant-employer for any medical expenses it paid was valid and enforceable in spite of the purpose of the Kentucky Motor Vehicle Reparations Act.

In this car accident, Coleman was hit and injured by Huff, an employee of Bee Line and while in the course of his employment by Bee Line. Coleman’s vehicle
suffered property damage which was settled between Coleman and Bee Line without the aid of counsel.

Bee-Line and Coleman settled the injury claim for $6,500. Coleman had received PIP benefits from Nationwide his auto insurance company for $5,737 who later submitted it’s subrogation claim directly to the self-insured Bee-Line who then requested Coleman to indemnify it pursuant to the agreement. When Coleman refused, Bee Line negotiated a settlement in the amount of $4,737 (after deducting the "intercompany" offset), which it paid to Nationwide. Bee Line sought indemnification from Coleman, relying on the language set out above in the Release signed by Coleman. Coleman refused and Bee Line filed suit for indemnity. Coleman counterclaimed alleging violation of the Fair Claims Settlement Practice Act, infliction of emotional distress and tortious bad faith.

Issues were raised on discovery and the taking of evidence prior to the grant of summary judgment by the trial judge whoexplained that because an AOC-280 form had been filed and because nearly five months had passed since that notice was filed, she believed discovery for those issues had been completed. Further, she explained the filing of an AOC-280 form triggered an inquiry from the Administrative Office of the Courts (“AOC”) as to why there had not been a decision after ninety days.

Bee Line argues that the Release signed by Coleman clearly provides that she must indemnify Bee Line against any third party, including the reparations obligor for PIP benefits. Coleman defended against the suit, claiming it was never the intention of the parties that she should be responsible for any reimbursement claims for PIP benefits made by her insurance carrier, Nationwide.

The COA’s analysis turned on the interpretation of the language in the Release – “The undersigned agrees to hold the released parties harmless and indemnify them from any claims asserted by any third parties or lien holders, including but not limited to, all medical providers and any other insurance carriers against the proceeds of this settlement.”

A reparations obligor has no claim against the adverse driver but a subrogation claim against the liability insurer or, in this case, the self-insurer Bee Line. Nationwide, as a reparation obligor, has a separate right of recovery for PIP amounts expended on behalf of Coleman and may intervene in Coleman’s tort action against the tortfeasor, Bee Line, in order to assert a direct claim against the tortfeasor’s insurer, which is again, Bee Line. It is well established that a policy of insurance cannot abrogate a mandatory provision of the Motor Vehicle Reparations Act. State Farm Mutual Automobile Insurance Co. v. Mattox, 862 S.W.2d 325 (Ky. 1993).

The release/indemnification agreement signed by Coleman does not compromise Nationwide’s right to assert a basic reparation benefit subrogation claim against the tortfeasor or its insurer. Rather, it shifts the responsibility for paying the claim from Bee Line to Coleman. The court found while Coleman had no statutory obligation to reimburse Nationwide for its PIP payments, she did have a contractual obligation to reimburse Bee Line for the amounts it was forced to expend to settle Nationwide’s claim.

Contrary to Coleman’s argument, nothing in the Release would suggest indemnification is limited to health care providers, Medicare or Medicaid. The Release was the contract, whereas the faxed letters were the negotiations between the parties. It was incumbent upon Coleman and her counsel to reject the Release if it did not accurately portray the terms of their agreement. She was free to refuse to sign the Release and the parties could have proceeded with the lawsuit.

Bee Line agreed to pay Coleman $6,500 and Coleman agreed to indemnify and hold harmless Bee Line against any third party claims. Those terms in the Release are clear and unambiguous. Under the peculiar facts of this case, COA concluded summary judgment in favor of Bee Line should have been granted. Because the trial court properly granted Bee Line’s motion for summary judgment, it is not necessary to address Coleman’s motion for summary judgment or her motion to dismiss the counterclaims. The order denying Coleman’s motion to reconsider as entered by the Jefferson Circuit Court are affirmed.

By Michael Stevens

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