UNINSURED MOTORIST BENEFITS: DYER V. PROVIDIAN AUTO & HOME INS. CO. (COA 4/6/2007)

DYER V. PROVIDIAN AUTO & HOME INS. CO.
INSURANCE:  Uninsured motorist benefits – acceptance of settlement from tortfeasor’s insurer precludes UM recovery 
2005-CA-002236
PUBLISHED: AFFIRMING (STUMBO)
DATE RENDERED: 4/6/2007

The CA affirms grant of summary judgment to Providian Auto & Home Insurance in this uninsured motorist (UM) claim.

Appellants’ decedent was struck and killed by an intoxicated employee of B&H Coal who was driving a company vehicle for personal use. He had no personal auto liability insurance. B&H was insured by Hartford. Appellants sued the driver, B&H, its directors and officers, and several insurance companies in state court. Hartford filed a dec action in federal court on whether the driver was a permissive – and therefore insured – user. The state action was settled with a lump sum and payments over a number of years. The settlement agreement expressly excluded the waiver of any claims against Providian. Hartfords action was dismissed.

Appellants then sued Providian in federal court alleging a bad faith failure to pay UM benefits arising from the driver’s status as an uninsured driver. That action was dismissed and appellants filed the instant action in state court with the same allegations. The state court granted SJ to Providian, holding that appellants were “ultimately fruitful in ascertaining the existence of a liability policy applicable to the offending vehicle.”

On appeal, appellants argue that the receipt of a collateral payment (i.e., the settlement payout) is irrelevant for purposes of ascertaining their entitlement to UM benefits under Providian’s policy. The question for the CA is: does the acceptance of the settlement payout from Hartford preclude her recovery under Providian’s UM policy, notwithstanding Hartford’s continued denial of coverage? In this case of first impression, CA holds “yes.” This holding reasonably achieves the underlying purpose of KRS Chapter 304 by triggering UM coverage only when the tortfeasor’s liability insurer (if any) cannot or will not provide coverage. “Coverage characterized as a settlement is coverage nonetheless.”

Digest by John Hamlet

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