Kentucky Court of Appeals
Sovereign Immunity - Sanitation Districts
Coppage Construction Company, Inc. v. Sanitation District No. 1, ___ S.W.3d ___, 2013 WL 276019 (Ky.App. January 25, 2013), motion for discretionary review filed February 25, 2013 (2013-SC-122-D)

The Sanitation District No. 1 of Northern Kentucky is sanitation district organized by three counties under KRS 220.010 et. seq. SD1 had engaged a contractor to build a sewer project, which had in turn contracted with Coppage. The trial court dismissed the claims against SD1 based on sovereign immunity, and the Court of Appeals affirmed. The Court of Appeals decided the case under its view of the Supreme Court decision in Comair, Inc. v. Lexington-Fayette Urban County Airport Corp., 295 S.W.3d 91 (Ky. 2009). The Court of Appeals read Comair to have created a two prong test to determine if an entity is entitled to sovereign immunity.

First, the entity's status is tied to the status of its creator(s) or parent. The Court determined that SD1 had been created by three counties, and thus its "parentage" was an entity that itself was entitled to sovereign immunity. Thus, the Court held that the first prong had been satisfied by SD1.

Second, the entity must perform an integral state function. In Calvert Investments, Inc. v. Louisville & Jefferson County Metro. Sewer District, 805 S.W.2d 133 (Ky. 1991), the Supreme Court held that a sanitary sewer service district did not perform an integral state function. The Court of Appeals held that Calvert did not apply. The Court found significance in the fact that the district in Calvert was organized under KRS 76.005 et. seq., which applies to municipal corporations. This distinction reflects the parentage issue, but does not itself address the integral state function issue. The Court opines that the Chapter 220 has an added responsibility of storm water management under the federal Clean Water Act. City sewer systems, however, fall within the purview of such federal regulations, even if not expressed by the state statute. Where one draws the line on whether the function of a quasi-public entity performs an integral state function remains in the air, and somewhat arbitrary.

Kentucky Court of Appeals - Unpublished
Insurance - Business Risk Exclusions
Monticello Insurance Company v. One Beacon Insurance Company, 2013 WL 275587 (Ky.App. January 25, 2013), motion for discretionary review denied November 13, 2013 (2013-SC-121-D)

The insured of One Beacon, Ryan, had contracted to assemble and stack the components of a broadcast tower. Monticello insured a subcontractor, Broadcast Development, to perform the stacking of the components, and this included the duty to secure the sections with guy wires each night at the close of business. One night a portion of the tower collapsed. One Beacon paid the loss under an all-risk policy, and obtained a judgment against Broadcast Development for 25% of the loss. Monticello denied coverage based on the business risk exclusions in its CGL policy.

The Court had little difficulty in finding that the J6 exclusion applied, and reversed a trial Court order finding coverage. The Court observed that securing the tower sections was Broadcast Development's job, and thus the cost of repairing or replacing the tower caused by the failure to perform that job was within the scope of the exclusion.

Kentucky Court of Appeals - Unpublished
Insurance - Direct Actions
Monticello Insurance Company v. One Beacon Insurance Company, 2013 WL 275587 (Ky.App. January 25, 2013), motion for discretionary review filed February 5, 2013 (2013-SC-121-D)

While reaffirming the general rule that a third party cannot bring an direct action against the liability insurer of a putative tortfeasor, the Court recognized an exception to the rule where the insured is insolvent or bankrupt. Since there was already a judgment against the insured, it is not clear why a garnishment was not filed to avoid this issue.

Kentucky Court of Appeals - Unpublished
Insurance - Duty to Defend - Reservation of Rights
Monticello Insurance Company v. One Beacon Insurance Company, 2013 WL 275587 (Ky.App. January 25, 2013), motion for discretionary review filed February 5, 2013 (2013-SC-121-D)

An insurer of a contractor issued a reservation of rights letter twenty-six days after the potential loss occurred. The letter advising that it was accepting the claim subject to several exclusions, and set out those exclusions. Of course the Court found that there was no waiver, and in fact it is hard to imagine what reasonable argument could have been made to challenge the reservation. The opinion only says the reservation was challenged.

Kentucky Court of Appeals - Unpublished
Legal Process - Malicious Prosecution
Oakley v. Ballard County, 2013 WL 275641 (Ky.App. January 25, 2013)

The plaintiff was arrested in connection with a domestic complaint, but charges were later dismissed at the request of the wife. While the domestic violence was well established, one of the charges was clearly missing an essential element. Therefore, lack of probably cause was established, leaving the question of malice as dispositive. It is often said that malice may be inferred from the lack of probable cause, and when asked in discovery the basis for his allegation of malice, Oakley responded that it was based on the lack of probably cause. The Court said the lack of probable cause was not sufficient to create an issue.

So does lack of probable cause support an inference of malice? Or only when is does not? The Court says that this inference cannot be drawn where all the facts disclosed lead to a different result. The Court does not advise just what facts lead to the different conclusion, so what rule has been announced here? Perhaps malice cannot be inferred from the lack of probable cause as to one of several charges? The result seems sound, as the officer clearly just overcharged. But seeming right is not a legal principle, and it is on legal principles that rule of law is based.

Kentucky Court of Appeals
HIPAA - Private Cause of Action Under State Law
Yeager v. Dickerson, ___ S.W.3d ___, 2013 WL 135718 (Ky.App. January 11, 2013)

This was a suit against attorneys who used medical information to impeach the wife in a custody proceeding. The medical records were obtained from their client, the husband, and demonstrated a serious drug abuse problem. The claim ran contrary to two principles which are beyond dispute. First, federal law does not recognize a private cause of action for a HIPAA violation. Second, a federal statute will not support a cause of action based on KRS 446.070. The plaintiff argued that since HIPAA preempted KRS 422.305 and KRS 422.315, and since those statutes would support a private cause of action under KRS 446.070, then it would also support a claim under the preempting statute. On the surface one might be tempted to think of this as creative, but would be a disservice to the word. The Court easily concluded that there was no basis for a private HIPAA claim under this theory.

Kentucky Court of Appeals - Unpublished
Insurance - UIM - Choice of Law
Bandy v. Bevins, 2013 WL 44027 (Ky.App. January 4, 2013), motion for discretionary review denied September 18, 2013 (2013-SC-90-D)

This UIM claim was brought by a college student from Virginia who was attending school in Kentucky. Her parents resided in Virginia, and the policy was issued there. Her automobile was registered in Virginia, and she was listed as a driver but not a named insured. The Court held that Virginia law applied to the claim on the policy, which in this case had dramatic consequences.

In Kentucky, the Courts have required that UIM coverage be in addition to the limits provided by the tortfeasor's policy. Many states allow the tortfeasor's limits to be offset against the UIM limits. In effect, the UIM coverage guarantees a certain amount of coverage for the accident, while in Kentucky it acts like an excess policy. The Court held that Virginia law, which allows such an offset, applied. The surprising thing is that the Court did not deem this to be an issue of public policy and thus refuse to apply Virginia law altogether.

Kentucky Court of Appeals
Consumer Protection Act - Product Sold "As Is"
Roberts v. Lanigan Auto Sales, 406 S.W.3d 882, 2013 WL 44020 (Ky.App. January 4, 2013), motion for discretionary review denied September 18, 2013 (2013-SC-79-D)

The plaintiff purchased a car that was sold "as is" with no warranties. After the purchase, it was determined that the car had been wrecked. A claim was brought alleging a violation of the Consumer Protection Act. The Court looked to the UCC, KRS 355.2-316(3)(a) and the official comment thereto, which makes it clear that "as is" means the buyer makes his own assessment and assumes the risk that the product is not what he thought it was.

The opinion notes that the dealer had testified that no representations had been made about prior accidents. When the motion to dismiss was filed the plaintiff sought but was denied leave to amend to allege that actual misrepresentations were made. The opinion is silent on the significance of such a fact, but could be read to say that any reliance on such a misrepresentation is unreasonable.

Kentucky Court of Appeals
Immunity - Schools - Duty to Maintain Premises
Hurt v. Parker, ___ S.W.3d ___, 2013 WL 50261 (Ky.App. January 4, 2013), motion for discretionary review filed February 5, 2013 (2013-SC-86-D)

Hurt was a principal of a high school which contracted with an unrelated football league to use the school's facilities. The plaintiff tripped on some cracked and uneven concrete on her way to the parking lot. The claims against Hurt in his official capacity were dismissed, but the claims against him in his individual capacity were allowed to proceed. The Court of Appeals affirmed.

As a principal, Hurt's job description was very broad and the Court concluded that he was responsible for all facets of operations at the school. The Court also noted that by statute the school was to be a safe environment. From this the Court concluded that the general duty to maintain the sidewalks on school property were ministerial. While this rationale may make sense when considering the person whose specific job it is to maintain the property, its application to one with mere supervisory responsibility should require a more serious analysis than this opinion provides, and it will be interesting to see if the Supreme Court reviews this case.