Kentucky Court of Appeals
Professional Liability – Realtors – Fraud
Waldridge v. Homeservices of Kentucky, Inc., ___ S.W.3d ___, 2011 WL 1598738 (Ky.App. April 29, 2011), motion for discretionary review filed September 23, 2011 (2011-SC-000586-D), withdrawn August 17, 2012

Factually, this is an interesting case that presents issues that need to be addressed by the Court. Unfortunately, the opinion sheds little light on the issues raised. This case features the classic home that is subject to frequent flooding. As occurs often in smaller towns, the same real estate firm had handled the property on numerous occasions, although by different agents. In 2004, the firm represented the seller through one of its agents, and the seller only listed a sump pump failure on its disclosure. The agent, however, was informed of the flooding history by neighbors. After the listing expired, the home was relisted by a different agent of the same real estate firm. The flooding history was again omitted, and after the Waldridges purchased the home the neighbors informed them about the flooding history. The Court held that the realtor could be held liable only for fraud, and that the facts presented a factual question. But what generates the question of fact? It seems clear that the defendant/agent did not have actual knowledge of the flooding history. Is the court saying that constructive knowledge is sufficient to support a claim for fraud?

The opinion says the Court is not imposing liability for negligence. But the only fact that actually relates to the defendant/agent is that an unidentified caller informed her that the property flooded in the past, and she did not attempt to track the source of the call. Wouldn’t that be negligence? Furthermore, her client, the seller, was disclosing flooding due to a sump pump failure.

The claim against the firm is even more interesting. There is no question but that various agents employed by the firm had actual knowledge of the flooding history. Is the court saying that this knowledge is imputed to the firm, and that this can support a claim for fraud? Again, this would be inconsistent with the holding that a negligence claim would not lie. Or is the court saying that the firm changed agents because the first learned about the flooding history, and made a concerted effort to keep an agent on the account that had plausible deniability? This would be a viable theory, but the opinion doesn’t recite evidence that would support such a claim. Stayed tuned for the Supreme Court version.

Kentucky Court of Appeals - Unpublished
Insurance - Claims Made Trigger
Baldwin v Lawyers Mutual Insurance Company of Kentucky, 2011 WL 1598743 (Ky.App. April 29, 2011), motion for discretionary review denied March 14, 2012

This is a 2-1 opinion which reached the correct result but misses the issue in both opinions. An attorney, who was insured by the Appellee, filed a nursing home case in North Carolina, and failed to identify experts as required by a scheduling order. On September 28, 2005 the Court granted the defendant’s motion to strike the plaintiff’s experts and imposed sanctions. On December 18, 2006, the attorney wrote to the insurer asking whether the sanctions were covered, explaining the reason for the sanctions, and advising that a malpractice claim might be forthcoming. On January 29, 2007, the case was dismissed. After appellate options were gone, the attorney again wrote to the insurer advising of the possibility of a malpractice claim. In the same letter, dated August 2, 2007, the attorney asked for an increase in limits, and her policy was endorsed with higher limits for new claims made on or after July 25, 2007. A malpractice suit was filed on September 9, 2007. The issue was whether the attorney was entitled to the original or the higher limits, which raises the question of when the claim was made. The majority opinion bases its analysis on when the attorney made a claim on the insurer. But the policy language defines a claim as a demand received by the insured. In other words, the majority opinion actually analyzes notice to the insurer instead of when a claim was made. The dissent is even more off base, and seems to think that the plaintiff in the medical malpractice suit was the insured.

Kentucky Court of Appeals - Unpublished
Landlord - Dog Bite
Bell v. Kruse, 2011 WL 1515417 (Ky.App. April 22, 2011)

This case holds that a landlord who allows pets is an owner for purposes of strict liability under KRS 258.235(4). The Supreme Court later adopted this view in Benningfield v Zinsmeister

Kentucky Supreme Court
Defamation - Absolute Privilege
Morgan & Pottinger, Attorneys, PSC v. Botts, 348 S.W.3d 599, 2011 WL 1620591 (Ky. April 21, 2011)

The Court held that any statement made preliminary to, in the institution of, or during the course of an attorney disciplinary proceeding will be privileged so long as it is material, pertinent, and relevant to such proceeding. This would include statements contained in the ethics complaint. The complaint triggers the investigative and disciplinary functions of the KBA and, therefore, is always material, pertinent, and relevant to attorney discipline proceedings.

Kentucky Supreme Court
Malicious Prosecution - Bar Complaint
Morgan & Pottinger, Attorneys, PSC v. Botts, 348 S.W.3d 599, 2011 WL 1620591 (Ky. April 21, 2011)

The Court held that no civil action may be based on the filing of a complaint against an attorney with the Bar Association. This new rule applies to all process related torts.

Kentucky Supreme Court
Sovereign Immunity - Board of Claims
Nelson County Board of Education v. Forte, 337 S.W.3d 617, 2011 WL 1620592 (Ky. April 21, 2011)

While the Court stops slightly short of mandating it, a claim against a state agency should be first filed in Circuit Court. The Court held that the jurisdiction to determine the question of immunity is vested in the Circuit Court, and only where immunity exists can the Board of Claims exercise jurisdiction. If the one year statute of limitations applicable to the Board of Claims has expired or is less than 90 days from expiring, the plaintiff has 90 days from the date of dismissal (or finality of the order) to file in the Board of Claims.

Kentucky Supreme Court
Schools - Real Party in Interest
Nelson County Board of Education v. Forte, 337 S.W.3d 617, 2011 WL 1620592 (Ky. April 21, 2011)

The Board of Education is the proper entity to sue, and the school district is insufficient for purposes of the trial court under Rule 19 and on appeal under Rule 73.03. Of course the failure to name the proper party on appeal is fatal, but at the trial level a subsequent amendment may relate back for statute of limitations purposes.

Kentucky Court of Appeals
Settlement - Mary Carter Agreements
Goodin v. White , 342 S.W.3d 282, 2011 WL 1434670 (Ky.App. April 15, 2011)

White filed a medical malpractice suit against her physician Gooden who in turn filed a third party complaint against Bluegrass Family Health. White presented to Gooden with complaints of abdominal pain and nausea, and he ordered a CT scan and ultrasound. Bluegrass denied coverage for the scan, and it was not done. Gooden’s appeal of the decision concerning the scan was appealed and when the scan was done, it showed a ruptured appendix. Apparently the suit was to recover for the worsening of White’s condition caused by the delay. White settled with Bluegrass, although the opinion gives no clue as to why since a plaintiff has no claim against a third party defendant. Perhaps White amended to assert a claim. The settlement agreement provided that 1) Bluegrass liability would be governed by a maximum and minimum, 2) Bluegrass received a lien on any award against Gooden up to a certain amount, 3) Bluegrass would participate at trial, and 4) the terms are confidential. The trial court did not permit Gooden to introduce the agreement as evidence of bias, but indicated that if something comes up to indicate bias the court might reconsider. Ultimately, the opinion concludes that no such thing came up and in any event any error was not preserved, so the majority of the decision is dictum.

Unfortunately, the first time a Kentucky court reviewed one of these agreements we get little foresight into whether they are valid or not. The opinion does contain an interesting discussion of Mary Carter agreements, and the discussion suggests that they will not be favored. The opinion, however, turns on the fact that the third party complaint had not been dismissed, and therefore there was a legitimate reason for Bluegrass to participate at trial. But then the court writes that the jury had been informed that White and Bluegrass had settled. So, apparently the jury was told of the settlement, but was not informed of the terms. Accordingly, the case really has little to do with Mary Carter agreements.

Kentucky Court of Appeals
Insurance - UIM - Choice of Law
Hodgkiss-Warrick v. State Farm Mutual Automobile Insurance Company, 2011 WL 1327644 (Ky.App. April 8, 2011), motion for discretionary review granted December 14, 2011 (2011-SC-266-D)

The Court held here that the household exclusion in an underinsured motorist policy violated public policy and was therefore unenforceable. The reader would be forgiven if the first thought was “what public policy, UIM is not a mandated coverage”. However, this opinion can be viewed as a logical extension of the Supreme Court opinion in State Farm Mutual Insurance Company v. Marley, 151 S.W.3d 33 (Ky. 2004). It is in Marley that Kentucky insurance jurisprudence on this subject went off the tracks, and this case presents a chance to either rectify Marley or firmly establish that public policy is just another word for judicial whim. The original line of cases in which this and other exclusions were held to be violative of public policy were premised on the public policy as expressed in financial responsibility laws. Marley extended this line of cases to an umbrella policy not governed by financial responsibility laws. So what is the source of this public policy? Marley makes it clear that the majority of the court simply didn’t like the exclusion. There is no legislatively determined public policy to support this case or Marley, and it could be reasonably argued that in these cases the Court has invaded the province of the legislature and executive branches to regulate insurance. Of course, this wouldn’t be the first time.

Kentucky Court of Appeals
Arbitration - Authority to Execute Agreement
Kindred Nursing Centers Limited v. Brown, ___ S.W.3d ___, 2011 WL 1196760 (Ky.App. April 1, 2011), discretionary review denied August 17, 2011

This case involved alleged personal injury sustained by an incapacitated adult in a nursing home. The patient’s mother signed and arbitration agreement upon admission, but was not a legal guardian at that time. The trial Court held that the arbitration agreement was not binding because the mother did not have authority to sign on behalf of the patient at that time. While the opinion tends to make the issue more complicated than it needed to be, at the heart of the ruling was that the parent made no representation of any authority and signed the agreement in her own name. There is an aspect of the opinion that might warrant further review. The nursing home argued that that the parent, after she was appointed legal guardian, ratified the agreement. The opinion dismisses this argument on the ground that the act of an agent must be ratified by the act of the principal. But the opinion does not deal with the question of whether ratification by the legal guardian is different since a different capacity is involved.

Kentucky Court of Appeals
Procedure - Venue
O'Bannon v. Allen, 337 S.W.3d 662, 2011 WL 1196852 (Ky.App. April 1, 2011)

This was a medical malpractice action in which plaintiff claimed wrongful death as a result of alleged over-prescription of medication. The patient overdosed and died in Muhlenberg county. The physician’s practice was located in Ohio county and the treatment in question was provided there. Plaintiffs filed suit in Muhlenberg Circuit Court, where it was dismissed for improper venue. The legal question distilled down to where the injury “was done”. The Court held that where the injury is done is not the same as where the damage is suffered. The injury is done where the duty arose and was breached, in this case in Ohio county. If this opinion stands, then the cause of action need not fully accrue in the county where venue is proper. It does appear that this opinion, in addition to being well reasoned, serves the purpose of the venue statute as well.

Kentucky Court of Appeals - Unpublished
Professional Liability - Medical - Need for Expert
Morgan v. Glazer, 2011 WL 1217173 (Ky.App. April 1, 2011)

On November 19, 2004, Dr. Glazer removed an ovarian cyst from plaintiff’s right ovary. A couple of years later plaintiff underwent a procedure relating to her left ovary and it was noted that the right ovary was absent. The Court concluded that under these facts expert testimony was necessary. However, the opinion notes that defendant’s motion for summary judgment was supported by expert proof that there were other possible explanations for the loss of the ovary besides inappropriate removal. Accordingly, it not at all clear that the opinion really supports the idea that expert proof was necessary. Instead, the opinion as a whole may suggest that any inference which may have been created by res ipsa loquitor was destroyed by affirmative expert proof that introduced alternative possibilities, thereby making res ipsa loquitor inapplicable. The questions remains whether under these facts, with no expert testimony of record, would summary judgment have been appropriate.