Kentucky Supreme Court
Insurance – Escape Clauses
Kentucky Farm Bureau Mutual Insurance Company v Shelter Mutual Insurance Company, 326 S.W.3d 803 (Ky. November 18, 2010)

It no longer matters what the policies say about primary and excess coverage. Most policies contain a provision describing the effect of other insurance, and call for pro rata coverage unless determined to be excess. In this case the excess portions cancelled themselves out, so under the policy language and longstanding Kentucky law, the two policies should have shared primary liability on a pro rata basis. In this case, the Court sought to, in its view, simplify the determination of which policy is primary in the liability context. It simply decided to ignore the other insurance policy language and ruled that, as a matter of law, the policy that covers the vehicle is primary, and presumably any others are excess. The opinion attempts to rationalize the result in a number of ways, none of which really support the holding. In fact, one could argue that the Court violated the separation of powers provisions of the state constitution since the legislature has delegated the power to the Commissioner of Insurance to determine what terms and conditions a policy may contain. But, since the high court does not have to justify its rulings and they will not be reviewed, all that really matters is how this opinion will impact future cases. First, the ruling should be limited to automobile liability cases since the opinion is at least part premised on the no-fault act. The Court referred to the fact that it is the owner of the vehcile that is required to provide security, but ignored the well settled fact that finacnial reponsibility statutes are not amterial to disoutes between insurers. Second, while the opinion refers to the insurance covering the owner and the insurance covering the vehicle as the same thing, it should be assumed that the primary carrier is the one that lists the automobile in question as a covered auto. (An owner can be covered by more than one policy). Third, the ruling should be limited to liability insurance based on the language used by the court but one can only stay tuned to find out.

Kentucky Supreme Court
Insurance – UM/UIM - Workers’ Compensation Exclusive Remedy
State Farm Mutual Automobile Insurance Company v. Slusher, 325 S.W.3d 318 (Ky. November 18, 2010)

Slusher was injured by the negligence of a co-worker, and received workers’ compensation benefits. Slusher then asserted a claim against his personal automobile policy for uninsured motorist benefits or underinsured motorist benefits. The Court held that since the tortfeasor could not be liable for the injuries because of the exclusive remedy, these coverages could not be applicable. The Court found that, in this context anyway, the phrase “legally entitled to collect” was unambiguous.

Kentucky Court of Appeals - Unpublished
Insurance – Property – Innocent Spouse/Domestic Violence
Chism v. Nationwide Mutual Fire Insurance Company, 2010 WL 3360575 (Ky.App. November 12, 2010)

While in the process of divorce Mr. Chism set the house on fire. A few days later, Ms. Chism filed for an emergency protective order. Ms. Chism filed a claim on the homeowners’ policy. The policy contained an intentional act exclusion, which made an exception in the case of “an insured who is the victim of domestic abuse or domestic violence and claims loss to covered property which is damaged as a result of an act of domestic abuse or domestic violence . . . .” It also provided for subrogation against the offending insured. The holding of the court was that the record did not support a finding that the exception applied as a matter of law. Mr. Chism claimed that the fire was attempted suicide, not domestic abuse, and the family record of the protective order was not entirely clear. What is interesting is why the case was framed so narrowly. The innocent spouse doctrine would have supported the holding whether the intent was suicide or injury to the spouse, and the carrier would have been subrogated.

Kentucky Court of Appeals
Insurance - UIM - Vehicle Owned or Furnished to Family Member
Burton v Kentucky Farm Bureau Mutual Insurance Company, 326 S.W.3d 474, Ky.App. November 5, 2010)

The plaintiff was injured while a passenger in a vehicle operated by her husband. The vehicle was insured by KFB, and the liability limits were paid under that policy. Plaintiff then asserted a claim for UIM benefits under a second policy issued by KFB on another family vehicle. The policy contained the standard definition of underinsured motor vehicle, which excludes a vehicle owned by or furnished of a family member. The court rejected the plaintiff’s attempt to frame the issue as a stacking question, and upheld the provision, therefore denying plaintiff the right to recover UIM benefits.

United States District Court
Aviation - General Aviation Revitalization Act of 1994
Crouch v. Honeywell International, Inc., 682 F. Supp. 2d 788, 2010 WL 4449222 (W.D.Ky November 1, 2010), affirmed May 14, 2013. Sixth Circuit Report

This case arose out of engine failure which caused the pilot to crash-land his Piper aircraft. The engine had been manufactured by the predecessor of the defendant AVCO in 1978, which implicated the 18 year statute of limitation in GARA. The plaintiffs claimed that the manual which had been used to overhaul the engine in 2005 had been negligently written. The Court had previously ruled that AVCO was not sued in its capacity of a manufacturer. In this opinion, the Court reversed itself after additional briefing. The Court observed that the creation of such a manual was an essential part of the FAA certification process, and that this fact rendered the production of the manual a part of the engine manufacturing process. Accordingly, the claim was barred by the GARA statute of limitation.