Kentucky Court of Appeals
Statute of Limitations – Automobile – Medical Payments
Stull v Steffen, 374 S.W.3d 355, 2012 WL 3047130 (Ky.App. July 27, 2012)

Stull was a passenger in an automobile when she sustained injuries arising from an accident. The policy covering the vehicle she occupied provided both basic reparation benefits and medical payments coverage [med pay]. The insurer paid $9,986.31 in no-fault benefits, a combination of medical expenses and wage loss. Subsequent medical expense was paid under the medical payment coverage. Stull argued that the payments under the med pay coverage also served to toll the two year limitations period set out in KRS 304.39-230(6).

The Court held that until the limits of no-fault benefits were paid, further payments would be considered no-fault payments even if the insurer designated them as med pay. However, this re-designation only applies to the amount necessary to consume the no-fault limits. In this case, only the first $13.69 of the first med pay payment was considered no-fault, and this occurred more than two years before suit was filed, leaving the claim time barred.

The opinion raises an interesting question for future decision. What if the claimant had designated her no-fault benefits to wage loss, which would be her right? Under those circumstances, the rationale of this decision would not apply since the medical expense portion of no-fault would have been effectively paid, kicking in the excess med pay coverage.

Kentucky Court of Appeals
Ecclesiastical Abstention Doctrine
Kant v Lexington Theological Seminary , ___ S.W.3d ___, 2012 WL 3046472 (Ky.App. July 27, 2012), motion for discretionary granted February 13, 2013 (2012-SC-502-DG)
Kirby v Lexington Theological Seminary , ___ S.W.3d ___, 2012 WL 3046352 (Ky.App. July 27, 2012), motion for discretionary review granted February 13, 2013 (2012-SC-519-DG)

These two cases are breach of contract cases brought by tenured professors employed by a seminary. Kirby also asserted race discrimination clams. Both were dismissed following a financial emergency, which resulted in a narrowing of the courses to be offered. In both cases, the majority determined that the court lacked jurisdiction to hear the claims under the ecclesiastical abstention doctrine. Both panels opined that the claims could not be decided without also considering the seminary’s internal affairs in determining what was required by their religious mission. But, on this issue, the panels were sharply split, and in fact the Kirby opinion is in the minority on this point.

The real issue in determining whether the Court had jurisdiction was whether the contract claims could be decided without involving the Court in religious matters. It is not entirely clear what precise theological issues the Court was concerned with, but the most apparent would be the decisions of what programs to dispense with. But this is not really relevant to the contract claims. Why a contract is breached is not relevant to whether it was breached (unless the defendant is an insurance company). These cases will likely be reviewed by the Supreme Court, and all of the opinions, regardless of result, are thoughtful and required reading for those that insure or represent religious institutions.

Kentucky Court of Appeals
Employment – Ministerial Exception
Kant v Lexington Theological Seminary , ___ S.W.3d ___, 2012 WL 3046472 (Ky.App. July 27, 2012)
Kirby v Lexington Theological Seminary , ___ S.W.3d ___, 2012 WL 3046352 (Ky.App. July 27, 2012)

These two cases involved the termination of two tenured professors by a seminary established by the Disciples of Christ Church. The ministerial exception precludes court review of employment decisions where the employee serves a ministerial function. Neither were ministers in the strictest sense of the word, but the two panels concluded that there work constituted a ministerial function. Factually, this case is likely on the cusp of the line between reviewable and non-reviewable employment decisions, and ultimately the Supreme Court will need to decide where that line will be drawn.

Kentucky Court of Appeals - Unpublished
Insurance – Casualty - Occurrence
Ryan v Acuity , 2012 WL 3047198 (Ky.App. July 27, 2012)

This was a construction defect case. The owner claimed that the building lot was negligently graded, which in turn caused excessive pressure on the foundation of the residence and a lateral displacement of the driveway, all in violation of the building code. The owner further claimed that as a result, cracks formed in the foundation allowing excessive water to enter the residence.

Of course the case was decided against the backdrop of Cincinnati Insurance Company v. Motorist Mutual Insurance Company, 306 S.W.3d 69 (Ky. 2010). Ryan sought to distinguish Cincinnati by asserting that the faulty workmanship in grading the lot caused property damage to the house. The Court rejected this argument, noting that the insured had contracted to build the entire house, the grading being a portion of the overall project. The Court declined to consider whether for this purpose the project could be broken down into component parts due to a failure to preserve the argument.

Kentucky Court of Appeals - Unpublished
Multiple Tortfeasors - Indemnity
Greenwell v Lowe’s Home Centers, Inc., 2012 WL 3046417 (Ky.App. July 27, 2012), motion for discretionary denied March 13, 2013.

While this case does not really plow new ground, and it is surprising that a party would waste its resources on an appeal that it was sure to lose, the opinion is worth noting here because people do have difficulty with issues involving multiple tortfeasors.

In the original claim, the plaintiff alleged that Greenwell ran a red light and caused the accident. This occurred at an intersection that accessed Lowe’s parking lot. Greenwell filed a third party complaint alleging negligence in the construction of the intersection signal head. Greenwell indemnity, contribution, apportionment and attorney fees. Lowes sought and obtained a dismissal of the claim for indemnity.

Factually, this is not close to an indemnity situation. In fact, it may turn out not to be an appropriate apportionment situation either. If, as Greenwell suggests, he could not see the red light because the signal head was not properly tethered, then perhaps he was not negligent at all. If he should have seen it but didn’t, then the issue is whether the negligence of third parties contributed to the accident. Either way, if Greenwell was negligent, it was not because Greenwell failed to discover and remedy a risk created by Lowes, which is the foundation of the active/passive version of indemnity.

Kentucky Court of Appeals
Employment – Police & Firefighters
Cherry v City of Bowling Green, 2012 WL 2946084 (Ky.App. July 20, 2012), motion for discretionary review denied March 13, 2013, opinion ordered de-published.

This case is interesting on several levels although it avoids deciding any significant legal issue. The plaintiff was Deputy Fire Chief, and had a significant problem with alcohol. While in any normal universe he would have been fired, the Chief placed some restrictions on his duties, and Cherry filed suit claiming that he was entitled to a hearing under KRS 95.450. The first legal question presented was whether this statute gives rise to a state cause of action for damages at all. The second was whether the meaning of the statute could be submitted to a jury, as the trial Court had done. Because the jury found for the city, the Court did not decide this important issue, but it makes no sense for a jury to determine on a case by case basis, ex post, when a policeman or firefighter is entitled to a hearing. Someone should at least de-publish this one as it is otherwise destined to be the source of considerable confusion in the future.

Kentucky Court of Appeals-Unpublished
Sovereign Immunity – Waiver Under KRS 70.040
Simpson v Thompson, 2012 WL 2946217 (Ky.App. July 20, 2012)

The immunity of a sheriff for the torts or negligence of his deputies is waived by the legislature in KRS 70.040. The Court held that this waiver did not apply to the qualified immunities applicable to the sheriff in his personal capacity. This makes sense, since individual liability is not necessary to accomplish the purpose of the statute – the office of the sheriff provides a source of compensation if warranted.

Sixth Circuit Court of Appeals
Procedure – Appeals - Sanctions
Waeschle v Dragovic , ___ F.3d ___, 2012 WL 2877579 (6th Cir. July 16, 2012)

The plaintiff brought a 1983 action seeking damages on the ground that her deceased mother’s body was returned sans the brain, which she alleged violated her due process rights. The Michigan Supreme Court had held that under these circumstances the family did not have a property interest in the brain. Based on that ruling, the trial court granted summary judgment. The appeal was filed, and plaintiff argued that the Court should follow a prior Sixth Circuit case in which the Court had held a brain was property under Michigan law.

Apparently, the plaintiff in her brief and argument not only failed to distinguish or otherwise discuss the subsequent Michigan ruling, but ignored it altogether. The Court noted that counsel could not claim to have been unaware of the ruling since he was counsel in the case. Counsel has an ethical duty to bring adverse precedent to the Court’s attention, and even if no duty existed it is hard to believe that the court in this case would not discover it. The Court acknowledged that one had the right to file an appeal in an effort to change the law, but in doing so at least had a duty to advise the Court of the adverse precedent and offer some argument as to why it should not be followed. The Court declined to impose sanctions in this case, but offered an admonition that future failures to acknowledge clear precedent may result in the imposition of sanctions.

Court of Appeals
Multiple Tortfeasors – Criminal Acts
Peoples Bank of Northern Kentucky, Inc. v Crowe Horwath, 390 S.W.3d 830, 2012 WL 2892352 (Ky.App. July 13, 2012), motion for discretionary review denied February 13, 2013

This was an action for professional negligence brought by a defunct bank against the accountant who served as a financial auditor. The gravamen of the claim against the accountant was that he was aware of a relationship between a bank customer and certain bank officers, and should have disclosed that relationship to the bank. It was not shown that the accountant knew that at the core of the relationship was an embezzlement scheme. In any event, the accountant had filed a third party complaint against the parties engaged in the embezzlement, primarily for apportionment purposes.

The bank complained that the trial court erred when it instructed the jury that the embezzlers had breached their duties to the bank and that said breaches caused losses to the bank. The bank argued that this was error because, in its view, an apportionment instruction was improper. The Court of Appeals held that the instruction was appropriate whether or not the facts gave rise to apportionment. What is interesting, but not referenced in the opinion, is that such an instruction was actually helpful to the bank. If its theory of liability was that the accountant should have disclosed its knowledge of a relationship between bank officers and customers, bank would have been required to also proof that the participants in that relationship committed a tort which in turn caused damage. Otherwise, the failure to disclose the relationship did not cause a loss. The other interesting aspect of this opinion is that it leaves unclear how far this ruling goes. In other words, would an instruction have been given if it was not clear that the embezzlers were at fault?

While the court did not address the question of whether an apportionment instruction was appropriate, it is worth noting that the bank's position was based on an erroneous interpretation of a prior case. It is true, as the bank intended, that an apportionment instruction will not be given where one party is only technically or constructively responsible for the fault of another. This concept applies to situations such as an employer's responsibility for the negligence of an employee. It does not apply where both parties are charged with independent torts. In this case, the embezzlers committed several torts, including conversion and perhaps breach of fiduciary duty, while the accountant was charged with a separate claim of negligence. It may very well have been true that the accountant would have been entitled to common law indemnity from the embezzlers, but the availability of indemnity by itself does not preclude apportionment. The reason apportionment does not apply in the employer-employee situation is that the employer is not at fault and accordingly there is nothing to apportion.

Court of Appeals
Professional Liability - Attorneys - Equitable Estoppel
Benton v Boyd & Boyd, PLLC, 387 S.W.3d 341, 2012 WL 2620545 (Ky.App. July 6, 2012), petition for rehearing denied November 19, 2012

This legal malpractice case stars the favorite of all litigation attorneys and claims professionals, the client from hell. The underlying case was a hotly contested divorce matter. Before the defendant firm was engaged, the plaintiff had entered into a settlement agreement by which plaintiff was to pay a substantial amount of money and the contents of her 401(k) account to her husband in exchange for his conveyance of all real property to her. The plaintiff filed a motion to set aside the settlement agreement as unconscionable, which was overruled. A decree of dissolution was entered, incorporating the settlement agreement.

After the time to appeal expired, plaintiff hired the defendant firm as appellate counsel. The defendant commenced negotiations with the ex-husband and his attorney. During the negotiations, plaintiff advised defendant and adverse counsel that she had liquidated the 401(k) and had spent the money. A motion was filed for contempt, and the plaintiff repeated the representation in an affidavit. A hearing was held and the plaintiff was found to be in contempt. The incarceration penalty was suspended for thirty days to allow plainitiff to purge the contempt. Shortly after the hearing, plaintiff fired the defendant firm.

In a subsequent hearing, the court learned that plaintiff had lied about the 401(k) funds. This led to a due process hearing, which in turn led to an order finding that plaintiff had the ability to pay $75,000 to her ex-husband and gave her thirty days to do so coupled with incarceration. Due to her delay in complying she was actually incarcerated for some period of time. She was released when she paid most of the money due.

Plaintiff filed suit on February 16, 2010, and summary judgment was granted on November 4, 2010. Plaintiff argued on appeal that she had not had an adequate opportunity to conduct discovery. Given the phobia the Kentucky court has towards summary judgments, this argument would usually be sustained regardless of whether the case appeared to have any merit. In this case, the court felt that given the detailed divorce record the facts were sufficiently developed. The trial Court held, and the Court of Appeals agreed, that the plaintiff was equitably estopped from asserted negligent advice in connection with the 401(k) monies and the misrepresentations to the court. While the status of the 401(k) monies was being discussed in court, plaintiff stood by silently, even though she was very verbal on other matters. She also admitted that she had filed two false affidavits. In other words, if a client lies to his lawyer (and the court), she can't then complain about advice given by the lawyer without the benefit of the truth.

Court of Appeals
Insurance-Underinsured Motorist-Contractual Limitations
Hill v State Farm Insurance Company, 390 S.W.3d 153, 2012 WL 2604857 (Ky.App. July 6, 2012), motion for discretionary review denied February 13, 2013

The State Farm policy required that an action for underinsured motorist coverage be brought within two years of the last payment of no-fault benefits. The claim involved an accident which occurred on December 7, 2006, but the last no-fault payment was made on September 25, 2007. Thus a claim for underinsured benefits coverage had to be brought on or before September 25, 2009. Suit was initially brought against the tortfeasor, and a motion to amend the complaint, adding an underinsured motorist claim, was filed on September 21, 2009. While the motion was filed in a timely fashion, the trial Court did not rule on the motion and allow the amendment until after the limitations period had passed. The trial Court held that the underinsured motorist claim was not commenced in time, The Court of Appeals reversed. The Court detemined that a literal application of the term "commence" as used in C.R. 3.01 and KRS 413.250 would be inequitable in this context. Those provisions require the filing of a complant and issuance of a summons within the limitations period, which clearly did not occur here.

The opinion suggests that equity requires such a liberal construction because a party has no control over the court's schedule, but does not suggest that the motion could not have been filed earlier. Thus, even if such a construction of the statute and rule were provident, the holding is much broader than necessary. According to the opinion, the filing of a motion to amend is the equivalent of filing a complaint and issuance of summons - period. The opinion also notes that the defendant was not prejudiced because it knew of the filing of the motion. The opinion does not, however, say such notice is necessary to its ruling. If the decision is premissed on some kind of equitable tolling, then prejudice would be part of the fairness calculation, but if it is based on the rule and statute, it would not be relevant.