Kentucky Supreme Court
Insurance - No-Fault
Samons v. Kentucky Farm Bureau Mutual Insurance Company, 399 S.W.3d 425, 2013 WL 2285087 (Ky. May 23, 2013)

This case is puzzling for a number of reasons, aside from the fact that it was wrongly decided. Unless something is missing from the opinion, one has to wonder why a plaintiff would pursue such a case to the Supreme Court when a victory offers nothing in the way of an economic reward. Plaintiff had an easy source of no-fault benefits without this case in the assigned claims plan. For the same reason, one must wonder why the Supreme Court would take such a case to review. And finally, why would the Court go to such trouble to rewrite the no-fault statute when the holding offers no new benefit to any plaintiff, but complicates the life of every liability insurer whose insured has an accident driving a non-covered automobile. But it did and all insurers can do is adapt and brace for the unintended consequences.

The plaintiff was a pedestrian within the meaning of the no-fault statute, and was struck by an automobile which was uninsured. The driver was not the owner, and had his own policy which covered his vehicles and covered him when driving vehicles owned by another. The statutory system is set out in KRS 304.39-050. In section (1), the statute provides that a pedestrian may recover benefits from the security covering the vehicle. If there is no security, then the pedestrian can recover from his or her own insurance under section (2). If the pedestrian has no insurance, then benefits are recoverable under the assigned claims plan. KRS 304.39-040(2). Under this system, the fact that the owner of the vehicle had failed to provide security did not have any effect on the ability to obtain no-fault benefits.

In this case, however, the Court determined that the phrase "security covering the vehicle" encompasses the insurance of a driver, even though his policy provides no coverage to the vehicle in question. The entire no-fault statute is premised on the duty of an owner to provide security covering his vehicle. However, from here on out, in any case where the automobile in question is operated by someone other than the owner, a claimant can look to the driver's policy or the policy covering the vehicle. This creates an exposure on the part of every liability insurer that did not exist prior to this opinion, and which makes no sense in terms of the purposes of the no-fault statute. The Court might be tempted to try to limit the holding to cases where the automobile is uninsured, but such a limitation could not be based on the statute. If a driver's personal insurance is security covering a non-covered automobile for one purpose, it must be for all purposes. Is the next step for the Court to extend the driver's no-fault and UIM coverage to all occupants?

Kentucky Court of Appeals - Unpublished
Insurance - Commercial Crime
Piles Chevrolet Pontiac Buick, Inc. v. Auto Owners Insurance Company, 2013 WL 2120319 (Ky.App. May 17, 2013), motion for discretionary review denied April 9, 2014 (2013-SC-401-D)

A commercial umbrella policy issued by Auto Owners provided coverage up to $15,000 for commercial crime caused by employee dishonesty, up to $10,000 for loss of property caused by employee dishonesty, and up to $10,000 for loss of property caused by forgery or alterations to negotiable instruments. The insured was an automobile dealer. Lorna Sluder was employed as a bookkeeper. Over a nine month period Sluder (and her husband) stole almost $600,000.00.

Sluder used two schemes to steal the money. First, she wrote checks to herself and her husband, and obtained signatures on them by hiding them in a stack of checks to be signed. Second, she and her husband bought cars from the insured and she made sure the checks were never cashed.

The issue in the case was whether there was a single or multiple occurrences. The policy defined occurrence to be " all loss caused by, or involving one or more ‘employees’, whether the result of a single act or series of acts." The trial Court had determined that there was a single occurrence and awarded limits under each of the three coverages. The insured argued that the definition of occurrence was ambiguous. The Court reviewed a number of foreign cases and concluded it was not.

Kentucky Court of Appeals - Unpublished
Immunity - Reverse Condemnation
Farmer v. Grieshop, 2013 WL 2120265 (Ky.App. May 17, 2013)

A landowner brought suit against Harlan county and its Judge-Executive alleging that they caused a change in the natural flow of water on his property. This was alleged to be the result of the construction of a drainage ditch. The county was entitled to sovereign immunity, while the judge-executive in his official capacity was entitled to the same. However, while the complaint alleged trespass, the Court viewed it as a claim for reverse condemnation, a claim to which sovereign immunity is not a bar.

Sixth Circuit Court of Appeals
Aviation - GARA
Crouch v. Honeywell International, Inc., 682 F.3d 788, 2013 WL 1955681 (6th Cir. May 14, 2013)

This claim arose out of the crash of a Piper Lance II allegedly caused be the detachment of the magneto from the engine. The engine was manufactured in 1978 by AVCO and the magneto was installed in 2005 during an overhaul performed in accordance with the manufacturer's instructions in the overhaul manual. Suit was filed in 2007. The claim against the engine manufacturer was that the instructions for the overhaul were negligently written.

The District Court had granted summary judgment on the ground that the claim against AVCO was barred by the General Aviation Revitalization Act [GARA], 49 U.S.C. §40101. At the risk of over simplification, GARA establishes repose in favor of a manufacturer of an general aviation aircraft or component 18 years after delivery of the new aircraft. The repose does not apply to an entity that is sued as something other than a manufacturer, like a mechanic or pilot, just because they happen to also be a manufacturer. The time is restarted as to any new component or part replacing a component in the original aircraft if the subject part can be shown to have caused the injury or damage. The statute also provides exceptions, one of which is knowingly misrepresenting certain types of information to the FAA.

The plaintiff first argued that because the claim was for the drafting of the overhaul manual, that this constitutes a separate capacity and GARA did not apply. The Court made short work of this argument, observing that the drafting and updating of such manuals was part of the manufacturing process. The inclusion of the "capacity as a manufacturer" language was not intended to narrow the scope of the repose, but was to keep the repose protection from being overbroad, such as where the fact that a defendant manufactured aircraft had nothing to do with the claims being made against it.

The more interesting argument revolved around whether changes to the manual at various times restarted the repose period under §2(a)(2). This argument turns on the idea that if the manual is a "component, system, subassembly, or other part originally in" the aircraft, and then is replaced or added, a new period begins. The trial Court had found that the manual was not a part, but was an accessory. The Court appears to have agreed with the trial Court on this point, but the opinion turns on another issue. The plaintiff could show that changes had been made to the manual, but they did not show that the changes had any causal role in the injuries which formed the basis of their claims. The Court found this to be fatal to the plaintiff's claims.

There was also an issue raised concerning the alleged misrepresentation to the FAA, but this issue was decided on procedural grounds. There is dictum that one may read if interested in the subject.

United States District Court
Punitive Damages - Employer Liability
Dean v. Pike Electric Company, 2013 WL 2009900 (W.D.Ky. May 13, 2013)

This case arose out of an automobile accident, in which Pike Electric's employee was at fault and was intoxicated while in a company vehicle. The employee had been employed for over twenty years, and had a substantial history of being arrested for driving his own vehicle while intoxicated. However, it was undisputed that Pike did not know about the prior off-duty arrests. Five years earlier the employee was caught driving a company vehicle off road while intoxicated. As a result he was required to undergo six weeks of treatment and random drug testing for one year. As a result of the incident at issue in the case the employee was terminated.

Under KRS 411.184(3), an employer can be assessed punitive damages for the conduct of an employee only upon a showing that the conduct was authorized, ratified or should have been anticipated. The Court held the evidence was insufficient to support a jury instruction on punitive damages.

Kentucky Court of Appeals - Unpublished
Immunity - Governmental Agencies
Metcalfe County Nursing Home Corporation v. Roberts, 2013 WL 1919542 (Ky.App. May 10, 2013)

This case may be more significant than its unpublished status would suggest, or the Supreme Court may review it and reject it entirely. The thesis of this holding is that the Kentucky Supreme Court completely reformulated the test for whether an entity created by government is a governmental agency in Comair, Inc. v. Lexington Fayette Urban County Airport Corp., 295 S.W.3d 91 (Ky. 2009). It is no doubt true that the Comair Court changed course, since the airport board could not come close to meeting the then existing test, but it is not so clear that the change was intended to be a dramatic as is suggested by this opinion.

According to this panel of the Court, the Comair test is also a two prong test. An entity will be found to be a governmental agency and entitled to that level of immunity if 1) the entity's parent enjoyed immunity, and 2) the entity serves a governmental function. In this case the Court readily found that providing a nursing home was a governmental function. The Court's analogy to boards of education is a false one, as the duty of the Commonwealth to provide for education is a constitutional one, and there is no such duty in that case of health care generally or elder care specifically. The second prong of the test as articulated by this panel is actually a non sequitur, as one would be reasonable to query why a county should be involved in any entity that did not serve some governmental function. In the Court's defense, it should be said that the area of sovereign immunity has been a mess ever since government became so involved in the details of day to day life, and the Court's have struggled to account for this. Perhaps this case will give Justice Minton the chance to drain this judicial swamp as he has said on several occasions he would like to.

Kentucky Court of Appeals - Unpublished
Settlement - Enforceability
Beams v. New Hart County Health Care, LLC, 2013 WL 1868076 (Ky.App. May 3, 2012), motion for discretionary review denied April 9, 2014 (2013-SC-355-D)

This action arises from a sip and fall at the defendant nursing home. Five days before trial the parties attended a settlement conference. A settlement was reached and memorialized on the video record, although the terms were said to be confidential. Apparently, the terms were discussed off the record and the video suggests plaintiff agreed to them. Once plaintiff discovered that Medicare would take most of the recovery, she claimed she had agreed to an amount greater than the defendant claimed. The defendant filed a motion to enforce the settlement, which the trial Court granted. The Court of Appeals affirmed the enforcement of the oral agreement to settle the case.

The moral of the story is that you can't assume the plaintiff or her attorney is aware of the implications of the Medicare Secondary Payer Act, so make sure it is part of the settlement conversation. The Court could have easily ruled that the amount was due but did not include the MSP amounts, in which case the defendants insurer would have had to pay twice.