Case Note.
Auto-Owners Insurance Company v. Spalding
Opinion by Judge Dixon; Judges Combs and Taylor concurred.
Appellee was allegedly told by her insurance agent that she had no underinsured motorist (UIM) coverage after she had been injured in an accident. However, after appellee settled her claim with the other driver’s insurance company, she learned that UIM coverage did exist. Because appellee was unaware of the UIM coverage, no notice of settlement was given to appellant, her UIM insurer, as required by Coots v. Allstate Ins. Co., 853 S.W.2d 895 (Ky. 1993) and KRS 304.39-320(3). As a result, appellant filed a declaratory judgment action seeking a ruling that it did not owe appellee UIM coverage. The circuit court ultimately entered summary judgment in favor of appellee, ruling that: (1) the inquiry made to the agent regarding whether appellee had UIM coverage was a simple question of fact rather than law; (2) the agent’s erroneous answer constituted non-feasance; (3) the agent was acting on behalf of appellant when she made the misstatement; (4) the non-feasance was attributable to appellant; and (5) the non-feasance was sufficient to trigger a waiver and estoppel of the requirements of KRS 304.39-320(3) and Coots. The Court of Appeals reversed and remanded on grounds that a material issue of fact existed as to whether the conversation in which appellee was allegedly told that she did not have UIM coverage had actually occurred. However, the Court then held – agreeing with the circuit court – that where an insurer has initially denied coverage, whether the denial is based upon an erroneous coverage determination or, as in this case, a misrepresentation that a policy providing coverage even exists, the insurer cannot be allowed to subsequently assert a defense to liability based upon a provision requiring the insured to notify it prior to settlement, regardless of whether that provision is statutory or contractual.
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