United States Supreme Court
Product Liability – Middleman Statute
J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. ___, 131 S.Ct. 2780, 2012 WL 2518811 (U.S. June 27, 2011)

In Kentucky, a middleman reseller can escape liability, where he is not independently negligent, if the manufacturer is subject to the jurisdiction of the Kentucky Courts KRS 411.340 In this case, the Supreme Court seriously limited the “stream of commerce” theory of jurisdiction. The mere fact that a manufacturer puts a product in commerce does not satisfy the ultimate requirement that the defendant purposefully avail himself of the laws of that state. A London manufacturer was held not subject to the jurisdiction of New Jersey even though its product allegedly caused an injury in that state where it sold through a distributor not based in New Jersey, and it did no promotion in New Jersey. This case will seriously limit the role of the middleman statute where the manufacturer is foreign, and increasingly frequent fact these days. Thus a retailer or wholesaler can be liable as though it was a manufacturer even though it has no control over the manufacturing or design process. The sole recourse would be to seek indemnity in a state where the manufacturer has some type of relationship, perhaps where the distributer resides, and it is not clear that this alone would be sufficient to obtain jurisdiction in that state.

Kentucky Court of Appeals
Premises Liability – Open and Obvious Conditions
Shelton v Kentucky Easter Seals Society, Inc., 2011 WL 2496182 (Ky.App. June 24, 2011), motion for discretionary review granted December 14, 2011.

This case was remanded by the Supreme Court for further consideration in light of the decision in Kentucky River Medical Center v McIntosh. The defendant is a rehabilitation hospital and plaintiff was visiting her husband, who was a patient. Before her husband’s admission, plaintiff had been warned about the numerous wires by the beds at the hospital. After one visit, plaintiff’s daughter complained to the staff about the wires. Plaintiff admitted that she always tried to avoid the wires. After one visit, plaintiff’s foot became entangled in the wires as she approached the bed to kiss her husband goodbye, and was injured. The Court of Appeals rejected the argument that McIntosh abrogated the open and obvious rule. The panel distinguished McIntosh on the grounds that the paramedics in that case were operating under a stressful and time sensitive environment, while there were no similar circumstances in this case.

Kentucky Court of Appeals
Premises Liability – Open and Obvious Conditions
Turner v. Nelson, 343 S.W.3d 341, 2012 WL 2508193 (Ky.App. June 24, 2011)

This case was remanded by the Supreme Court for further consideration in light of the decision in Kentucky River Medical Center v McIntosh. The plaintiff went to Gateway with a friend to sign forms that would allow the friend to pick up her grandchildren from Head Start. The parking lot was graveled while portions close to the building were paved. As Lucas was leaving she fell on a piece of “crumbling gravel” where the paving ended and the gravel began. The Court discusses three categories of what it calls premises liability categories which may be helpful to some but are not really relevant to legal theory. The Court then states that in McIntosh, the Supreme Court modified the open and obvious rule to be more consistent with comparative fault. (Of course, duty has nothing to do with comparative fault, but this kind of erroneous thinking drives some of the decisions being made these days, perhaps including McIntosh). The Court of Appeals panel distinguished McIntosh, however, since Lucas had admitted that she was familiar with the condition of the premises from earlier visits. The opinion suggested that the result might be different if the proof showed that Lucas had been distracted. This is not correct. The issue is not whether the invitee is distracted, but whether it is foreseeable to the land possessor that a reasonable person would be distracted in such a way that the condition would not be obvious. The Court reached the correct conclusion, but the reasoning demonstrates how the muddy language used in McIntosh is likely to lead to great confusion in the area of a land possessor’s duty.

Kentucky Court of Appeals
Insurance - Pollution Exclusion
Certain Underwriters at Lloyd’s, London v. Abundance Coal, Inc., 352 S.W.3d 594, 2011 WL 2496203 (Ky.App. June 24, 2011)

This was a declaratory judgment action which for some reason was filed in Knott Circuit Court. The trial Court summarily found coverage. The claim against the insured was that its operations had caused coal dust to enter and damage the claimant’s property. A Sixth Circuit case had held that coal dust was pollution within the meaning of the policy, but the Court of Appeals declined to follow it. While the Court agreed that the exclusion was not on its face ambiguous, it also held that it could be ambiguous in the factual circumstances of this case. The Court held that the trial Court should have determined whether the injury claimed was the type contemplated for coverage under the policy, which could not be done based on the pleadings. The Court determined that the coal dust is not a pollutant unless it is alleged to have caused irritation, contamination, negative health or environmental effects as opposed to property damage.

Kentucky Court of Appeals
Defamation – Legislative Privilege
D.F. Bailey, Inc. v. GRW Engineers, Inc., 350 S.W.3d 818, 2011 WL 2496216 (Ky.App. June 24, 2011)

GRW was engaged by the City of Liberty to assess the bids submitted by various contractors, and GRW reported to the city council with negative comments about Bailey’s performance on other projects and recommending that the project be awarded to the next highest bidder. GRW claimed that since its speech was in conjunction with the city council that it was protected by the absolute privilege afforded to legislative bodies. The Court rejected this contention, holding that the legislative privilege did not extend to contractors who worked or assisted the legislative body with its work.

Kentucky Court of Appeals - Unpublished
Punitive Damages - Clear and Convincing Standard
The Medical Protective Company v. Wiles, 2011 WL 2420011 (Ky.App. June 17, 2011), motion for discretionary review denied and opinion ordered de-published August 15, 2012.

This case discusses but does not resolve a conflict in Supreme Court cases on the question whether the jury should be instructed as to the clear and convincing standard applicable to claims for punitive damages. The Supreme Court held that the jury should be so instructed in Hardin v. Savageau, 906 S.W.2d 356, 357 (Ky. 1995), but in Farmland Mutual Insurance Co. v.Johnson, 36 S.W.3d 368 (Ky. 2000) held that it need not be included in the instructions. The Court of Appeals applied Farmland because it was also a “bad faith” case, but the Supreme Court is going to have to resolve this one. One thing is clear – a separate rule for “bad faith” cases makes no more sense than calling a breach of an insurance contract a tort in the first instance, especially where the complaining party is not a party to the contract.

Kentucky Court of Appeals - Unpublished
Insurance - Unfair Claims Settlement Practices Act
The Medical Protective Company v. Wiles, 2011 WL 2420011 (Ky.App. June 17, 2011), motion for discretionary review denied and opinion ordered de-published August 15, 2012.

This is a third party claim primarily based on a twenty-seven month “delay” in making an initial offer. During this time the claim was investigated, and the plaintiff made an initial demand and refused to negotiate (and was awarded less than the demand). It is possible the opinion fails to disclose the facts which justify the claim, but those recited are peripheral and would not support a negligence claim. According to the opinion, “the Wileses contend that Duechle’s investigation was inadequate and was geared toward saving money from the company’s indemnity budget. They further point to the financial performance objectives evident in Medical Protective’s employee reviews, which they argue created an atmosphere promoting delayed payment of claims. The late setting of a $1 million reserve, which occurred the day Medical Protective closed its books for the year 2002, arguably established its manipulation of the situation to appear more profitable.” It cannot be bad faith to try to save money, and reserves have nothing to do with this claim. This is classic nitpicking and the Court needs to make it clear that this sort of legal mischief is not to be permitted. The Supreme Court has made it clear on numerous occasions, and the lower courts as often as not ignore it. Perhaps it is time for the Court to admit that its power grab from the executive branch was ill advised, that judges are not the best persons to regulate insurance, and cede the Unfair Claim Settlement Practices Act back to the Commissioner of Insurance where the legislature intended it to be. It would be surprising if this case does not at least get reviewed.

Kentucky Court of Appeals - Unpublished
Insurance - Bad Faith - Use of Experts
The Medical Protective Company v. Wiles, 2011 WL 2420011 (Ky.App. June 17, 2011), motion for discretionary review denied and opinion ordered de-published August 15, 2012.

Both sides offered experts who were lawyers, judges or mediators, none of which had ever adjusted a claim (one had been adjuster in the 1960s, which is the same as never having adjusted a claim in today’s context). The Court affirmed the exclusion of all of them, and this case may be a vehicle for the high Court to define the use of experts in these cases once and for all.

Kentucky Court of Appeals - Unpublished
Insurance – KRS 304.12-235
The Medical Protective Company v. Wiles, 2011 WL 2420011 (Ky.App. June 17, 2011), motion for discretionary review denied and opinion ordered de-published August 15, 2012.

This statute which provides for penalty interest and attorney fees in the case of unreasonable delay applies only to named insureds and health providers. As obvious as this is, plaintiffs keep arguing that it applies to third party claimants.

Kentucky Supreme Court
Product Liability – Economic Loss Doctrine
Giddings & Lewis, Inc. v. Industrial Risk Insurers, 348 S.W.3d 729 (Ky. June 16, 2011)

The Supreme Court has now clearly recognized the so-called economic loss doctrine. The fact that this rule is considered a doctrine shows just how close we have come to the total absorption of contract law into tort law. A student of the law of torts should wonder how the bench and bar have become so confused. Where the relationship between the parties is contractual, a suit for damages arising from that contract should generally be in contract. The exception, of course, should be where the interest protected by a tort is at issue. The tort of negligence protects the interest one has in person and property to be free of unreasonable risk. The mere fact that performance may be measured by the word “negligence” or “standard of care” does not mean that the action is in tort. That is why most professional negligence cases lie in contract, excepting of course suits in which personal injury is alleged. The bench and bar appear to be unclear in that respect as well, and perhaps this case portends some clarification in those cases as well. The Court also rejected an exception for “calamitous” loss, and defined the product as the product that was sold by the seller, declining to permit a buyer from breaking down the product into its component parts. Of course, these ancillary rulings are likewise consistent with the traditional difference between tort and contract, but it's not clear that the Court found that difference to be the controlling point.

Kentucky Supreme Court
Schools – Report of Abuse and Supervision – Qualified Immunity
Turner v. Nelson, 342 S.W.3d 866 (Ky. June 16, 2011)

At the outset, the Court held that the mandatory reporting requirement of KRS 620.030 did not apply to conduct between two minor students where no parent, guardian, or other person exercising custodial control or supervision of the child was involved. See KRS 620.020(1). However, had it applied, the Court nonetheless determined that the decision not to report would have been discretionary where the nature of the conduct was subject to investigation and interpretation. As to the more generally duty to supervise, the Court distinguished situations where a specific rule was not enforced or there was a failure to supervise at all, and emphasized the need for latitude and discretion in the supervision of students.