Current Issues: Tort Law and Property and Casualty Insurance IIK-EKU Spring... · Ethics and the...

Current Issues: Tort Law and Property and Casualty Insurance

June 3, 2014

Hilton Lexington Downtown 369 West Vine Street

Lexington, Kentucky 40507

June 4, 2014

Holiday Inn Louisville East 1325 S. Hurstbourne Parkway

Louisville, Kentucky 40222

Jointly sponsored by:

Insurance Institute of Kentucky

EKU Risk Management and Insurance Program

6.0 CLE Units (1 unit of ethics) 5.0 CE Hours (1 unit of ethics)

TABLE OF CONTENTS

Seminar Schedule ……………………………………………………………… 2

Ethics and the King’s Speech:

Burke Christensen Bio …….……………………………………………. 3

Presentation …………..…………………………………………………..… 4-17

Tort and Insurance Legislative Update - Panel Discussion:

Stan Lee Bio ………….………………………………………….….…….... 18

Paula Smith Bio …….……………………………………………………….. 19

Presentation …………..…………………………………………………….… 20-36

Good/Bad Faith Claims Handling:

Douglas L. Hoots Bio …….…………………………………………….…. 37

Presentation …………..…………………………………………………….… 38-77

Kentucky No-Fault Insurance: A Primer:

Ronald L. Green Bio …………..……………………….……………….… 78-80

Presentation …………..………………………………………………..….… 81-132

Emerging Issues and Trends - Panel Discussion: J. Warren Keller Bio …………..……………………………………….… 133

Michelle Keller Bio ……...……..……………………………………..… 134

Laurie Dudgeon Bio ……….…..……………………………………...… 135

Doug McSwain Bio …...………..……………………………………...… 136

Presentation …………..…………………………………………………….… 137-179

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SEMINAR SCHEDULE

8:00 AM – 8:30 AM Registration

8:30 AM – 8:35 AM Welcome

8:35 AM – 9:35 AM Ethics and the King’s Speech Burke Christensen

9:35 AM – 9:45 AM Break

9:45 AM – 11:00 AM *Tort and Insurance Legislative Update Panel Discussion

Rep. Stan Lee Paula Smith

11:00 AM – 11:15 AM Break

11:15 AM – 12:30 PM Good/Bad Faith Claims Handling Douglas L. Hoots

12:30 PM – 1:45 PM Lunch on your own

1:45 PM – 3:00 PM Kentucky No-Fault Insurance: A Primer Ronald L. Green

3:00 PM – 3:15 PM Break

3:15 PM – 4:30 PM *Emerging Issues and Trends Panel Discussion J. Warren Keller Justice Michelle Keller Laurie Dudgeon Doug McSwain

* The schedule shown is for Lexington. The two panels will switch times for

Louisville.

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Burke A. Christensen, JD, CLU

Robert B. Morgan Chair of Insurance

Risk Management & Insurance Program

College of Business & Technology

Eastern Kentucky University

Richmond, Kentucky

Mr. Christensen has over thirty years experience as an attorney and executive officer in

the insurance industry. He is the holder of the Robert B. Morgan Chair of Insurance at

Eastern Kentucky University. In June 2006, he retired as Chief Operating Officer and

General Counsel of Concert Health Plan Insurance Company of Oak Brook, Illinois.

Previously he served as vice president of operations and in-house counsel to

Quotesmith.com (now Insure.com), an Internet-based life and health insurance brokerage

agency. He was general counsel of the Society for Financial Services Professionals (FSP

Society) and in that capacity he prepared and presented testimony before state

legislatures, federal agencies and the U.S. Senate. He began his career as an attorney

with the Northwestern Mutual Life at its home office in Milwaukee, Wisconsin.

He is the author/editor of three college textbooks on the law of insurance published by

The American College. Including his columns, he has written more than 150 articles on

professional ethics, market conduct compliance, producer liability and the regulation of

insurance. He has served as the editor of The Insurance Counselor, a series of primers on

legal and tax issues published by the American Bar Association.

Mr. Christensen participated in the creation of the American Business Ethics Award and

served as Co-Chair of the Judges Panel in 1994 and 1995. He also participated in the

creation of the ethics program for the Greater Chicago Better Business Bureau. For ten

years he managed the FSP Society’s Ethical Guidance Hearings. Mr. Christensen

participated as the senior staff officer for the Ethics Committee of the FSP Society in the

creation and promulgation of the Insurance Illustration Questionnaire and the

Replacement Questionnaire. He was a member of the board of directors for the Greater

Chicago Better Business Bureau where he served on the Ethics Committee.

Mr. Christensen has been a guest lecturer in insurance and law at the Wharton School of

the University of Pennsylvania and at the John Marshall Law School. He has spoken on

law, regulation and ethics topics at insurance industry and bar association meetings

throughout the United States.

Mr. Christensen frequently serves as an expert witness and consultant to counsel in

litigation involving insurance companies. He has also served as a mediator and arbitrator

in business litigation for over twenty years.

Mr. Christensen is a graduate of the Utah State University and the University of Utah

College of Law.

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IIK – EKU Spring Seminars June 2014

“To educate a man in mind and not in morals is to educate a menace to society.”

--- Theodore Roosevelt

“Roosevelt lived 100 years ago. This applies to women too.” --- Burke A. Christensen

Living in the Second Circle

A Seminar on Professional Ethics and Insurance Law

by

Burke A. Christensen, JD, CLU Eastern Kentucky University

Richmond, Kentucky

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I. The Theory of Concentric Circles

II. What is the Difference between Law, Morality and Ethics?

A. Law is concerned with whether an act is legal or illegal

i. In this sense, there can be violations of civil and criminal

laws which are accompanied by legal sanctions (e.g., fines,

damages, injunctions, imprisonment).

ii. Example: Market Conduct Compliance Rules; Glenn

Neasham case in California.

iii. Emphasis is more punitive than aspirational: “Follow these

rules or get punished.”

B. Morality is concerned with whether an act is right or wrong.

i. In this sense, there can be violations of moral principles

which are accompanied by moral sanctions (such as

shunning, excommunication, public ridicule, a note in your

permanent file).

ii. Example: Marital fidelity; Exaggerating your expertise.

iii. Moral codes generally have an equal emphasis on warnings

of punishment for bad acts and on exhortations to do the

right thing. There is the sense of a “moral obligation” which

must be met.

iv. “Never underestimate the lengths one lacking a moral

compass is willing to take to distort any information.” Crit

Luallen, Kentucky State Auditor.

C. Ethics is more than merely being a law abiding citizen or even

being a moral person. Ethics is concerned with the very difficult

task of encouraging us to be better than good; to be better than we

have to be; even to be the best person anyone can be.

i. Isn’t knowing the right thing to do but not doing it worse than

not knowing the right thing to do?

1. Mens rea (a bad mind)

2. Altruism (a good mind)

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ii. Being ethical means:

1. Making the better or the best choice;

2. Doing some good thing that you don’t “have” to do;

3. Being better than merely good.

iii. In this sense, there are no ethics “violations” and no

sanctions but there are failures by good people to live up to

ethical principles. Purely aspirational.

iv. If this definition is accepted, then we need to redefine and

rehabilitate the word “unethical” which now means that you

are a bad person. Perhaps unethical should describe people

who are merely not quite as good as they could be or as

you’d like them to be. For example, you might be happy to

work with them but not be excited about them marrying into

the family.

v. Which of the following is an example of Second, Third or

Fourth Circle thinking? You know that there is a hidden and

hard-to-detect defect in the engine of the used car you are

selling:

1. You describe the car as having “no problems that I’m

aware of.” Or “no problems that I can see.”

2. Telling the prospective buyer that there are “no

problems with this car at all.”

3. Making no representations or misrepresentations to

the buyer and selling the car “as is.”

4. Disclosing all the defects to all potential buyers.

Is it morally wrong to sell a car “as is” if you do not lie and

make no affirmative misrepresentations?

If you buy the car, discover and pay to repair the defect, and

then learn that the seller knew of the undisclosed defect,

would you consider the seller to be an ethical person?

ASK YOURSELF: What’s the insurance equivalent of

selling this car?

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Consider the problems of law and ethics faced by Hamlet’s uncle,

Claudius, the King, in Hamlet, Prince of Denmark, Act III, Scene III. The

former King, Hamlet’s father, was killed by Hamlet’s uncle. After killing his

brother, Claudius has taken the throne and married Hamlet’s mother. The

new King wants to rid himself of both the sin and the guilt of murder. As

King, Claudius can pardon himself from the sanctions of the law, but can

he pray for God’s forgiveness without forsaking the fruits of the crime?

Kneeling in the castle chapel, the King says:

O, my offence is rank it smells to heaven;

It hath the primal eldest curse upon't,

A brother's murder. Pray can I not,

Though inclination be as sharp as will:

My stronger guilt defeats my strong intent;

And, like a man to double business bound,

I stand in pause where I shall first begin,

And both neglect. What if this cursed hand

Were thicker than itself with brother's blood,

Is there not rain enough in the sweet heavens

To wash it white as snow? …

… But, O, what form of prayer

Can serve my turn? 'Forgive me my foul murder'?

That cannot be; since I am still possess'd

Of those effects for which I did the murder,

My crown, mine own ambition and my queen.

May one be pardon'd and retain the offence?

What’s the moral?

If, like Claudius, you have harmed someone for your personal gain, how

do you take back the act?

Claudius learned that the things he gained by his actions were not worth

the cost.

What do you learn from the choices and dilemma of Claudius?

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What about Hamlet’s choices?

Hamlet has sworn to kill his uncle to avenge his father’s murder. He

comes up behind the new King while Claudius is kneeling at the church

altar. Hamlet wants to kill the King but faces conflicting desires similar to

those faced by his uncle. Hamlet’s dilemma is whether killing Claudius

while the King is at prayer would send the King’s soul to heaven or to hell?

Hamlet speaks:

Now might I do it pat, now he is praying;

And now I'll do't. And so he goes to heaven;

And so am I revenged. That would be scann'd:

A villain kills my father; and for that,

I, his sole son, do this same villain send

To heaven. O, this is hire and salary, not revenge.

He took my father grossly, full of bread;

With all his crimes broad blown, as flush as May;

And how his audit stands who knows save heaven?

But in our circumstance and course of thought,

'Tis heavy with him: and am I then revenged,

To take him in the purging of his soul,

When he is fit and season'd for his passage?

No!

Up, sword; and know thou a more horrid hent:

When he is drunk asleep, or in his rage,

Or in the incestuous pleasure of his bed;

At gaming, swearing, or about some act

That has no relish of salvation in't;

Then trip him, that his heels may kick at heaven,

And that his soul may be as damn'd and black

As hell, whereto it goes.

After Hamlet departs, King Claudius rises from the altar and we are reminded that the King’s intentions (he wants to keep the crown and wife) were not consistent with his appearances of a man at prayer seeking God’s forgiveness. Claudius says:

“My words fly up, my thoughts remain below:

Words without thoughts never to heaven go.”

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What’s the lesson for us?

First: It is not ethical (nor legal) to kill your brother so you can take his job

and marry his widow.

Second: When our words and deeds are not consistent with our beliefs,

we have lost our integrity.

“Integrity: Cite: Dictionary.com.

1. adherence to moral and ethical principles; sound moral

character; honesty.

2. the state of being whole, entire, or undiminished: to preserve the integrity of the empire. 3. a sound, unimpaired, or perfect condition: the integrity of a ship's hull.”

III. Three Theories of Ethics: Deontology, Teleology and Virtue Ethics.

A. Deontological ethics (from the Greek deon meaning obligation).

i. Rule-based or duty-based ethics.

1. The core question of deontology: What rules, if

always followed by everyone, will produce the best

society?

2. Deontology looks at the action rather than the results.

a. What is the Rule?

b. Is it the Right Rule?

c. Are you following the Right Rule?

3. One of the most important implications of deontology

is that if we are sure the rules are the right rules, then

praiseworthy goals can never justify a violation of the

rules….The Ends do not justify the Means.

4. Deontology is the search for, and the application of,

the universally good ethical rules which define our

duties.

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http://dictionary.reference.com/browse/sound

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ii. Famous deontological philosophers – Part 1.

1. Immanuel Kant and the Categorical Imperative: A

course of action that should always be carried out is a

categorical imperative. “Always act in such a way that

you can will that the maxim of your action should

become a universal law.”

a. “Maxim:” a concisely expressed principle or

rule of conduct; a statement of a general truth.

2. Some acts are wrong and should not be carried out

under any circumstances whatsoever; some are not.

a. Malum in se – Always wrong because it’s

wrong

b. Malum prohibitem – Wrong only because we

say it’s wrong

3. Conversely, acts that further the status of people as

free and rational beings should always be carried out,

under any circumstances whatsoever.

4. Famous Deontological Philosophers – Part 2:

a. Your Mother: “Don’t do that. What would happen if everybody did that?”

B. Teleological Ethics (aka Consequentialism). From Greek telos

meaning ends.

i. This is an ethical theory in which the ends can justify the means if the end achieved produces the greatest good for the greatest number.

1. Why? Because actions are judged primarily in terms of whether they produce good consequences for all.

2. The deontological search for the right rules for

everyone to obey is replaced by the teleological search for the right goals for everyone to seek.

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3. Once the right goals are identified, then our actions are ethical only if they move society toward those right goals.

C. In his play, Antigone, Sophocles (496-406 BC) tells the story of

Eteocles and Polyneices, the two sons of Oedipus, the king of

Thebes. The play explores the questions of how to know what

is the right thing to do. Oedipus decrees that upon his death, the

two boys are to take turns ruling as king of Thebes. Eteocles gets

to be king first but refuses to give up the throne at the end of his

turn. Polyneices starts a rebellion to get his turn as king and

attacks the city of Thebes. Both brothers are killed in the battle.

The new king is Creon, the brother of Oedipus who inherits the

throne after the battle. Creon gives Eteocles a hero’s burial for

defending the city. But as punishment for treason, he decrees that

the body of Polyneices must lie exposed to rot in the dust - a

terrible fate to befall the soul of a 4th century BC Greek because the

spirit of an unburied sole never goes to the ancient Greek

equivalent of heaven. Creon also decrees the death penalty for

anyone who buries Polyneices.

Antigone, the sister of the dead boys, decides to bury her brother

and rescue her brother’s soul from perpetual torment.

Her comment on Creon’s decree is pure natural law:

“[Your] order did not come from God. Justice,

That dwells with the gods, knows no such law.

I did not think your edicts strong enough

To overrule the unwritten unalterable laws

Of God and heaven, you being only a man.

They are not of yesterday or to-day, but everlasting….” (Translation from the Greek by E.F. Watling in Sophocles, The Theban Plays;

New York: Penguin, 1964).

Creon says that the treasonous rebellion of Polyneices against the city-state of Thebes warrants death. Disobedience to the city’s laws (i.e., Creon’s decrees to leave Polyneices unburied) also warrants death.

What do you think? Who did the right thing? How do you know?

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D. Some Practical Theories of Ethics.

i. Ken Blanchard and Norman Vincent Peale

1. Is it legal? 2. Is it balanced? 3. How does it make me feel?

ii. The Front Page of the Newspaper test.

1. Do I want to read the full details of my decision or

action on the front page of tomorrow’s newspaper?

iii. The Laura Nash Model asks these questions:

1. How would I view this issue if I were on the other side?

2. Am I able to discuss my decision with my family? 3. Will I feel as comfortable about my decision over time

as I do today?

iv. The Wall Street Journal Model asks these questions:

1. Is the planned action in compliance with the law? 2. What will be the contribution of this decision to:

a. Shareholders? b. Employees? c. Customers? d. Community?

v. The “What will my competition say?” Model.

1. Can my action withstand the analysis if my client later

seeks the opinion of a fully-informed, honest and knowledgeable competitor?

vi. Burke’s Laws:

1. The Law of the Plaintiff: After reviewing my actions, recommendations and decisions, will a plaintiff’s lawyer take a case against me on a contingency fee basis?

2. The Law of Universal Knowledge:

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a. If my client knew everything I know, would he/she respect me for what I have recommended?

b. Knowing what I know, would I be pleased with the quality of this advice if it were given to me by someone else?

E. A Summary:

i. Teleological/Consequentialist theories (ends-based) assert

that an act is right (and should therefore be carried out) if it maximizes the good.

ii. Deontological theories (rule-based) assert that we should choose an action only if we are willing that everyone else should also always act in the same way.

IV. The Difference between an Occupation and a Profession.

A. What is an Occupation?

B. The Common Law Definition of Profession.

An occupation, such as law or medicine, that: (1) encompasses a body of knowledge beyond the common understanding of the general public, (2) requires considerable training or specialized study to master, (3) has a competency examination or some other barrier to entry into the profession, (4) which is maintained by a self-regulating guild or society that, (5) imposes a code of ethics on the members of the profession obligating them to take action which is in the best interest of those they serve in their professional capacity.

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C. Consequences of Assuming the Legal Duties and Ethical Obligations of a Profession.

i. Choose your status and that choice determines your duties.

ii. There is a difference between holding oneself out as…

1. An expert or an idiot. 2. A counselor giving advice or a clerk taking orders.

iii. How do you represent yourself to your clients?

iv. Have you ever described whether a bad person would do do

some questionable act by saying: “He’s not above that.”?

1. What are you above doing? 2. What would people who know you say you are above

doing? D. Universal Ethical Obligations. Ethics often requires us to do

something that serves another person’s best interests and which may not be in our own immediate best interests.

i. Examples are:

1. “Women and children first…” 2. Giving to the poor 3. Exposing oneself to danger in order to rescue a child

from fire or flood 4. Telling the truth and accepting responsibility for your

mistakes. 5. Not taking more than your fair share when there is not

enough food to go around.

ii. Putting your client’s interests ahead of your own is the very essence of being a professional.

iii. If you are an inhabitant of The Second Circle, the self-imposed standard of behavior is: Surpassing the minimum requirements of state market conduct compliance rules.

E. Enforcing the Unenforceable.

i. Living in a Culture of Trust. John Fletcher Moulton’s article

“Law and Manners” published in The Atlantic Monthly, July 1924. Behavior “control” is divided into three domains.

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1. The three domains:

a. Positive Law – that which must be obeyed.

b. Manners – “Obedience to the unenforceable.” Here there is no law to the contrary but a range of behaviors from: a felt personal obligation or duty to act in a certain way which is nearly as strong as law, to matters in which there is so little restriction as to be near to complete freedom.

c. Free Choice – Areas in which there are no

rules at all; anarchy, might makes right.

2. For Moulton, the strength of a society is found in the size of the Domain of Manners.

ii. The Rotary Four-Way Test

1. Is it the truth? 2. Is it fair to all concerned? 3. Will it build goodwill and better friendships? 4. Will it be beneficial to all concerned?

iii. Are there different ethical rules for you when you are at work

and when you are at home?

1. Are the “rules” different? 2. Are the “ends” different? 3. Is a “good person” defined differently? 4. What difference does it make that someone’s money

is in play?

iv. The Language of Rationalization: 1: to bring into accord with reason or cause something to seem reasonable: as a: to substitute a natural for a supernatural explanation of (rationalize a myth) b: to attribute (one's actions) to rational and creditable motives without analysis of true and especially unconscious motives (rationalized his dislike of his brother); broadly : to create an excuse or more attractive explanation for (rationalize the problem).

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http://www.merriam-webster.com/dictionary/rational

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Some forms of rationalization:

1. Everybody else does it. 2. If we don’t do it, the competition will. 3. That’s the way it’s always been done. 4. That’s the way they do it here. 5. We’ll wait until the lawyers tell us it’s wrong. 6. It doesn’t really hurt anyone. 7. I was just following orders. 8. To get along; go along.

v. There is no honor among thieves, aka Who do you trust?

1. If your boss can get you to lie for her to someone

else….. a. That establishes you as a liar, so… b. Won’t she also believe you will lie to her for

someone else?

2. If your boss is willing to ask you to lie to someone else for him…..

a. That establishes him as a liar, so… b. Why should you expect him to be honest with

you?

3. What is the price tag on your integrity?

“Always do right. This will surprise some people and astonish the rest.” --- Mark Twain

F. Homework or Study Group Assignment. An ethics quiz:

Jean Val Jean breaks into a bakery and steals a loaf of bread because he

has no money and his sister (a widowed single mom with no money) and her

children are hungry. Jean Val Jean has committed a crime.

1. Does the fact that his act was a crime automatically make the act unethical?

2. If you violate a law for a “good reason” should you still go to jail? 3. Using deontological ethical theory (rule-based), is this act unethical?

What’s the applicable rule? 4. Using teleological ethical theory (ends-based), is this act unethical?

What’s the greatest good for the greatest number?

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5. Using the Virtue Ethics theory, is this act unethical? What should a good person do?

V. Some Final Thoughts.

A. The painting, “The Fall of Icarus” by Breughel shows Icarus, after the wax in his wings was melted by the sun, falling into the sea while everyday life goes on oblivious to the disaster. It is a painting about how we tend to ignore the suffering of others. In the poem “Musee des Beaux Arts” by W. H. Auden, we learn how easy it is to ignore things we would prefer not to see.

“About suffering they were never wrong, The Old Masters; how well they understood Its human position; how it takes place While someone else is eating or opening a window or just walking dully along; . . . In Breughel's Icarus, for instance: how everything turns away Quite leisurely from the disaster; the ploughman may Have heard the splash, the forsaken cry, But for him it was not an important failure; the sun shone As it had to on the white legs disappearing into the green Water; and the expensive delicate ship that must have seen Something amazing, a boy falling out of the sky, had somewhere to get to and sailed calmly on.”

At the core of the concept of a “profession” is the idea that we are each responsible for the behavior of our peers. To the extent that any of us acts unethically, the reputations of all of us are tainted by that act. I hope we all realize that we cannot afford to turn away quite leisurely from the disaster for the ethical lapses of any one of us is an important failure for all of us.

B. Wrapping it up with Thanatopsis by William Cullen Bryant.

“So Live, that when thy summons comes to join The innumerable caravan, that moves To that mysterious realm, where each shall take His chamber in the silent halls of death, Thou go not, like the quarry-slave at night, Scourged to his dungeon, but sustain’d and sooth’d By an unfaltering trust, approach thy grave, Like one who wraps the drapery of his couch About him, and lies down to pleasant dreams.”

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J. Stan Lee

Education

J.D., University of Kentucky (1988)

B.S., University of Kentucky (1983)

Bar Admissions

Kentucky Bar

U.S. District Courts for the Eastern and Western Districts of Kentucky

U.S. Court of Appeals for the Sixth Circuit

Affiliations

Fayette County Bar Association

Kentucky Bar Association

American Bar Association

Professional Highlights

Serves as Member of Kentucky House of Representatives (2001 to present), for the 45

th District in Fayette County

Current Committee Assignments: Judiciary, Natural Resources & Environment and Local Government

Previously served as Minority Whip, Kentucky House of Representatives (2006-2008)

Member, Bowles Rice Executive Committee

Graduate of National College of Trial Advocacy

Recipient of Defending Liberty Award from Bluegrass Institute for Public Policy Solutions (2009)

Recipient of Protector of Economic Freedom Award from Kentucky Club for Growth (2007, 2008 and 2009)

Recipient of Public Policy Award from the American Diabetes Association (2006)

Successfully tried dozens of jury trials to defense verdicts in a wide variety of cases, in both federal and state courts throughout the Commonwealth

Frequent speaker on public policy issues

J. Stan Lee

Partner

Practice Areas

Insurance, Bad Faith

Commercial Litigation

School/Education Law

Construction Law

Administrative Law

Contact Information

[email protected]

Telephone: (859) 422-7505

Facsimile: (859) 259-2927

333 West Vine Street, Suite 1700


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PAULA PABON SMITH Counsel, Governmental Affairs

9201 Bunsen Parkway

Louisville, KY 40220

(502) 493-7606

Professional Bio

EDUCATION

J.D., University of Louisville, Brandeis School of Law 1994

B.A., University of Louisville, 1991, Woodford R. Porter, Jr. Scholar

PROFESSIONAL HISTORY

Governmental Affairs Counsel, Kentucky Farm Bureau Mutual Insurance Company

**December 2008-Present: Responsibilities include: Serving as legislative agent and lobbyist before

the KY General Assembly on issues that affect the business of insurance; being a corporate liaison with

regulatory authorities, such as the Kentucky Department of Insurance regarding day-to-day interaction

on matters involving insurance regulation and legislation; keeping up with new legislative and

regulatory developments on both the state and federal level; monitoring elections statewide; managing

the County Loan Program for the company; and working with the company to develop proactive

legislation and finding ways to integrate new legislation and regulations into the organization.

Prosecuting Attorney, Kentucky Board of Nursing

**April 2002-November 2008: Prosecuting attorney in the Consumer Protection Branch. Represented

the Board before administrative hearing panels in all nurse disciplinary matters; advised the Board in

other areas of litigation, including appellate work; provided legal advice to the Board, including the

nurse investigators and other Board staff as required.

Legal Counsel, Kentucky Legislative Ethics Commission

**May 1997-April 2002: Chief legal counsel to nine-member commission, advised members of the

Kentucky General Assembly on current ethics laws; created ethics manuals and brochures; provided

ethics education and presented training seminars on ethics issues.

Staff Attorney, Kentucky Court of Appeals

**September 1994-1997: Responsible for Appellate Motion Docket: Screened all procedural and

substantive motions filed with the Court; reviewed appellate briefs and evaluated pleadings; appeared

before the Chief Judge of the Court for disposition of motions; corresponded with Judges and state

wide support staff; communicated and advised parties on appellate procedure.

ORGANIZATIONS and CIVIC INVOLVEMENT

Chair, Kentucky Insurance Council

Women Leaders in Insurance Conference committee

Kentucky Bar Association Member

Louisville Bar Association Member

Kentucky Women in Governmental Affairs

Certified Cantor, St. Michael Catholic Church

Former School Board member St. Michael Catholic School

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Current Issues: Tort Law and Property and Casualty Insurance Legislative Update Panel Discussion

I. Issues in 2014 Session

A. "Offense" Issues

1. HB 369: Statute of Limitations

2. HB 317: PIP Fraud/Solicitation

3. HB 162/SB 78: Landlord Liability

4. SB 214: Post-Judgment Interest

5. Other Legislation

B. "Defense" Issues

1. SB 183: Event Data Recorders

2. HB 498/576 Sinkhole

3. Various Workers Comp Bills

4. Other Legislation

II. Issues in Future Sessions

A. "Offense" Issues

1. PIP Abuses

2. Other Insurance Fraud

3. Tort Reform

4. Ridesharing/Transportation Network Companies

5. SB 119: Medical Review Panels

B. "Defense" Issues

1. Data Collection/Privacy

2. Slip and Fall

3. Workers Comp Issues

4. Litigation Funding

5. Expungement of Conviction Records

III. Question and Answers/Discussion

A. "Offense" Issues

B. "Defense" Issues

C. Effect of Technology Changes

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Current Issues: Tort Law and Property and Casualty Insurance Legislative Update Panel Discussion

Bill # Sponsor Topic 2014 Result

Claims

HB 80

Richards Driving on Flooded Road Not Heard in Committee

HB 109

Watkins OEM Parts for Vehicles Under Warranty Withdrawn

HB 498

Richards Sinkhole Endorsement Not Heard in Committee

HB 576

M. King Sinkhole Endorsement Not Heard in Committee

SB 183

Webb Event Data Recorders Not Heard in Committee

Torts

HB 162

S. Lee Definition of Dog Owner Not Heard in Committee

HB 232

Riggs Security Breach - Private Companies Signed by Governor

HB 304

Moore Good Samaritan Immunity Not Heard in Committee

HB 317

Gooch Anti-Solicitation Fix Passed House, Not Heard in Senate

HB 335

Stumbo KY False Claims Act Not Heard in Committee

HB 369

Yonts Statute of Limitations Signed by Governor

SB 74

Higdon Emergency - Limit Liability Signed by Governor

SB 78

Girdler Definition of Dog Owner Passed Senate, Not Heard in House

SB 116

McDaniel Patent Trolling Passed Senate, Not Heard in House

SB 119

Denton Medical Review Panels in LTC Civil Litigation Passed Senate, Not Heard in House

SB 134

Westerfield Medical Testimony Not Heard in Committee

SB 140

McGarvey Discrimination - Sexual Orientation Not Heard in Committee

SB 214

Girdler Judgment Interest Not Heard in Committee

Underwriting

HB 14

Collins DUI Threshold Not Heard in Committee

HB 33

Mills Texting Restrictions Passed House, Not Heard in Senate

HB 34

Harmon DUI Penalties Not Heard in Committee

HB 74

Denham Headlights on When Wipers On Not Heard in Committee

HB 90

Meeks Citation Notification for Minors Signed by Governor

HB 156

Flood Vulnerable Users of Highway Not Heard in Committee

HB 199

Hall Child Booster Seats Passed House, Not Heard in Senate

HB 355

Stone Traffic/Misdemeanor Expungement Passed House & Senate in Different Forms

SB 110

Denton Traffic/Misdemeanor Expungement Not Heard in Committee

Workers Comp

HB 27

Nelson WC - Cancer in Firefighters Not Heard in Committee

HB 153

De. Butler WC - Cancer in Firefighters Passed out of Committee, Recommitted

HB 251

De. Butler Volunteer Firemen - WC and Cancer Passed out of Committee, Recommitted

HB 467

Denham WC Cancellation Notification Passed House, Not Heard in Senate

HB 507

Sinnette WC Changes Not Heard in Committee

HB 557

Montell WC Special Fund Settlement Not Heard in Committee

SB 63

McDaniel WC Special Fund Settlement Passed Senate, Not Heard in House

SB 81

Schickel Employee Misclassification Passed House & Senate in Different Forms

SB 136

Buford WC Changes Not Heard in Committee

SB 137

Carroll WC Changes Not Heard in Committee

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http://www.lrc.ky.gov/record/14RS/SB183.htm

































14RS

WWW Version

The hyperlink to a bill draft that precedes a summary contains the most recent version (Introduced/GA/Enacted) of the bill. If the session has ended, the hyperlink contains the latest version of the bill at the time of sine die adjournment. Note that the summary pertains to the bill as introduced, which is often different from the most recent version.

Claims Bills HB 80/LM (BR 218) - J. Richards

AN ACT relating to financial responsibility of motor vehicle operators. Create a new section of KRS Chapter 189 to define "expenses of an emergency response," "public agency," and "reasonable costs"; require a driver who drives on a highway that has been barricaded due to flooding be held liable for the costs of rescue or recovery; allow a driver convicted of violating KRS 189.290 for driving on a highway that is flooded to be held liable for the costs of rescue or recovery; limit liability under this section to $2,000; allow insurance policies to exclude coverage for a person's liability under this section; amend KRS 189.290 and 39F.120 to conform.

HB 109 (BR 459) - G. Watkins

AN ACT relating to motor vehicles and repairs. Create a new section of Subtitle 20 of KRS Chapter 304 to require that motor vehicles that are involved in an accident and are still under a manufacturer's warranty be repaired with new factory parts unless the use of after-market parts are approved in writing by the owner; require an insurance company to reimburse for new factory parts.

HB 498 (BR 1860) - J. Richards, W. Stone

AN ACT relating to property insurance. Create a new section of Subtitle 20 of KRS Chapter 304 to require insurers who offer property insurance to offer an additional policy rider, for an additional premium, covering sinkhole damage.

22

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http://www.lrc.ky.gov/legislator/H020.htm





http://www.lrc.ky.gov/home.htm

HB 576 (BR 1863) - M. King

AN ACT relating to property insurance. Create a new section of Subtitle 20 of KRS Chapter 304 to require an insurer offering property insurance to include coverage for catastrophic ground cover collapse from sinkholes in all policies.

SB 183 (BR 1891) - R. Webb

AN ACT relating to motor vehicles sales. Create new sections of KRS Chapter 190 to define a motor vehicle event data recorder and motor vehicle owner; require disclosure that a motor vehicle is equipped with an event data recorder; establish provisions for retrieval of data recorded by the device; prohibit an insurer or lessor from requiring an owner to release data as part of payment for a claim or as a condition of a lease; amend KRS 190.990 to establish a fine of $500 for failure to disclose the presence of the event data recorder or for improper release of information recorded by the equipment.

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http://www.lrc.ky.gov/record/14RS/SB183/bill.doc

http://www.lrc.ky.gov/legislator/S018.htm

Tort Bills HB 162 (BR 183) - S. Lee, M. Harmon, D. Horlander, B. Montell

AN ACT relating to dogs. Amend KRS 258.095 to amend the definition of who qualifies as the owner of a dog to include persons permitting the dog to remain on or about premises owned and occupied by the person.

AN ACT relating to dogs.

Be it enacted by the General Assembly of the Commonwealth of Kentucky:

Section 1. KRS 258.095 is amended to read as follows:

As used in KRS 258.095 to 258.500, unless the context requires otherwise:

(5) "Owner," when applied to the proprietorship of a dog, includes every person having a right of property in the dog and every person who keeps or harbors the dog, or has it in his care, or permits it to remain on or about premises owned and[or] occupied by him; HB 232 (BR 67) - S. Riggs, M. King, S. Westrom

AN ACT relating to security breach notifications. Create a new section of KRS Chapter 365 to require consumer notification when a data breach reveals personally identifiable information.

HB 232 - AMENDMENTS

HCS - Create a new section of KRS Chapter 365 to require consumer notification when a data breach reveals personally identifiable information. HFA (1, S. Riggs) - Amend to recognize potential future amendments of referenced federal laws. SCS - Retain provisions of GA version; create a new section of KRS Chapter 365 to require cloud computing service providers contracting with educational institutions to maintain security of student data; define terms. SCA (1/Title, M. Wilson) - Make title amendment.

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http://www.lrc.ky.gov/record/14RS/HB232/HCS1.doc

http://www.lrc.ky.gov/record/14RS/HB232/HFA1.doc

http://www.lrc.ky.gov/record/14RS/HB232/SCS1.doc

http://www.lrc.ky.gov/record/14RS/HB232/SCA1.doc

HB 304/LM (BR 1312) - T. Moore

AN ACT relating to civil liability for emergency care. Amend KRS 411.148, relating to the "Good Samaritan" law and nonliability for emergency care, to apply the law to all persons rendering care without remuneration, rather than to named persons; repeal KRS 311A.150 to conform.

HB 317 (BR 1364) - J. Gooch Jr.

AN ACT relating to solicitation of an individual for a service related to a claim for basic reparation benefits. Amend KRS 367.409 to prohibit solicitation of any service relating to making a claim for basic reparation benefits, rather than related to a motor vehicle accident; clarify that emergency personnel are exempt if acting within the course and scope of their official duties.

HB 335 (BR 1086) - G. Stumbo, J. Tilley

AN ACT relating to the Kentucky False Claims Act. Create new sections of KRS Chapter 15 to establish a False Claims Act with provisions that establish enhanced civil liability and penalties for committing fraud against the state; allow the Attorney General or private citizens to sue on behalf of the state to recover those amounts, with some of the proceeds of the action being distributed to the person successfully bringing the action; grant the Attorney General enhanced investigatory authority; provide an administrative sanctioning system for fraudulent Medicaid providers; provide civil protections for fraud whistleblowers; provide uniformity for allowable civil penalties and recovery mechanisms among other similar statutes.

HB 369 (BR 1473) - B. Yonts, W. Coursey, J. DeCesare, J. Gooch Jr., M. King, R. Quarles, J. Richards, B. Rowland, F. Steele

AN ACT relating to the statute of limitations for written contracts. Amend KRS 413.160 to reset the statute of limitations for actions on a written contract at ten years instead of the current 15-year period; amend KRS 413.090 to conform.

HB 369 - AMENDMENTS

HFA (1, B. Yonts) - Amend to specify that the 10 year statute of limitations applies only to contracts executed after the effective date of the bill. SCS - Amend to recognize statutes which contain specific statutes of limitation.

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SB 74 (BR 325) - J. Higdon, T. Buford

AN ACT relating to disaster and emergency response. Amend KRS 39A.280 to provide civil liability protections to licensed professional engineers and licensed architects who voluntarily provide professional services at the request of officials during or after a declared emergency, disaster, or catastrophe; establish limitations to liability protection; require the Division of Emergency Management to promulgate administrative regulations.

SB 74 - AMENDMENTS

SCS - Amend KRS 39A.280 to provide civil liability protections to licensed professional engineers and licensed architects who voluntarily provide professional services at the request of officials during or after a declared emergency, disaster, or catastrophe; establish limitations to liability protection. SFA (1, J. Higdon) - Amend KRS 39A.280 to authorize liability protection for licensed professional engineers and licensed architects and to specify that this liability protection occurs if the services rendered arise out of a declared emergency and if the professional rendering the services acts as an ordinary reasonably prudent member of the profession. HCS - Retain original provisions; amend KRS 154.26-010 to allow companies with approved economic revitalization projects qualifying for incentives under the Kentucky Industrial Revitalization Act (KIRA) to undertake supplemental projects during or within 24 months following the term of the initial project and to qualify for additional incentives; amend KRS 154.26-080 to establish the requirements for supplemental projects; amend KRS 154.26-090 and KRS 154.26-100 to conform; amend KRS 139.480 to exempt property incorporated into the construction or modification of a blast furnace as part of a KIRA supplemental project from the state sales and use tax; provide that sales tax exemption provisions are EFFECTIVE August 1, 2014. HCA (1/Title, T. Pullin) - Make title amendment. SB 78 (BR 388) - C. Girdler, D. Seum, W. Blevins Jr., T. Buford, J. Carpenter, D. Harper Angel, D. Parrett, D. Ridley, J. Schickel

AN ACT relating to dogs. Amend KRS 258.095 to amend the definition of who qualifies as the owner of a dog to include persons permitting the dog to remain on or about premises owned and occupied by the person.

SB 78 - AMENDMENTS

SFA (1, J. Rhoads) - Amend to restore original statutory language and to then exempt non-occupant property owners when there is insurance coverage of at least $100,000 for injuries caused by dogs. (Defeated)

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http://www.lrc.ky.gov/record/14RS/SB74/SCS1.doc

http://www.lrc.ky.gov/record/14RS/SB74/SFA1.doc

http://www.lrc.ky.gov/record/14RS/SB74/HCS1.doc

http://www.lrc.ky.gov/record/14RS/SB74/HCA1.doc














SB 116 (BR 192) - C. McDaniel, W. Westerfield

AN ACT relating to intellectual property. Create a new section of KRS Chapter 367 to establish a bad-faith assertion of patent infringement as a violation of Kentucky's consumer protection chapter and authorize the utilization of the remedies available for those violations in addition to private remedies established in the bill.

SB 116 - AMENDMENTS

SCS - Insert provision to exempt molecular patents in pharmaceutical research from the scope of the bill. SB 119/FN (BR 407) - J. Denton, C. Girdler

AN ACT relating to medical review panels. Establish KRS Chapter 216C; create within that chapter various new sections establishing a medical review panel system for use in civil litigation relating to health care providers, including sections setting out definitions, delineating covered health care facilities and providers, panel membership and formation, functions and deliberations of the panel, and utilization of panel results in civil actions.

SB 119 - AMENDMENTS

SCS - Retain original provisions, except extend the amount of time that plaintiffs have to bring their initial evidence; state that this bill shall not impact any currently pending cases; allow evidence produced during pretrial discovery that would have had a substantial impact on the panel's deliberations to act to make the report of the panel inadmissible. SB 134 (BR 1025) - W. Westerfield

AN ACT relating to medical practice. Create new sections of KRS Chapter 311 to require the Board Medical Licensure to design a program to ensure that a physician offers testimony in accord with his or her professional knowledge of skills; create an expert witness certificate program for individuals who submit certain documents; require that individuals testifying as expert medical witnesses be certified by this program before their testimony may be admitted as expert testimony; clarify that the certificate shall only permit an individual to testify and not practice medicine; state 16 subjects to which an individual, under penalty of perjury, shall attest before he or she may receive an expert witness certificate; state circumstances under which the board may pursue disciplinary action, issue fines of up to $10,000, and revoke an expert witness certificate; create a new section of KRS Chapter 454 to establish standards for medical expert witness testimony.

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http://www.lrc.ky.gov/record/14RS/SB119/FN.doc







SB 140/LM (BR 385) - M. McGarvey, D. Harper Angel, P. Clark, G. Neal, J. Rhoads, R. Thomas

AN ACT relating to civil rights. Amend KRS 344.010 to include definitions for "sexual orientation" and "gender identity"; amend KRS 344.020, relating to the purpose of the Kentucky's civil rights chapter, to include a prohibition on discrimination because of sexual orientation and gender identity; amend KRS 344.040, 344.050, 344.060, 344.070, and 344.080, relating to prohibited discrimination in various labor and employment practices, to include sexual orientation and gender identity; amend KRS 344.025, 344.100, 344.110, and KRS 18A.095 to conform; amend KRS 344.120 and 344.140, relating to prohibited discrimination in places of public accommodation and advertisements therefor, to include sexual orientation and gender identity; amend KRS 344.170, 344.180, 344.190, 344.300, and 344.310, relating to the state and local human rights commissions, to include prohibition of discrimination on the basis of sexual orientation and gender identity in the scope of their powers and duties; amend KRS 344.360, 344.680, 344.370, and 344.380, relating to prohibited discrimination in certain housing, real estate, and other financial transactions, to include sexual orientation and gender identity; amend KRS 344.367, relating to prohibited discrimination in certain insurance sales, to include sexual orientation and gender identity; amend KRS 344.400, relating to prohibited discrimination in certain credit transactions, to include sexual orientation and gender identity; and make various technical amendments.

SB 214/LM (BR 1829) - C. Girdler

AN ACT relating to the judgment interest rate. Amend KRS 360.040 relating to the judgment interest rate to provide an alternative method of calculation based upon the federal reserve prime rate and to limit the applicability of interest as to those portions of a judgment relating to non-economic damages.

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http://www.lrc.ky.gov/record/14RS/SB140/LM.doc











Underwriting Bills HB 14/LM/CI (BR 40) - H. Collins, K. Hall

AN ACT relating to driving under the influence. Amend KRS 189.520, 189A.010, 189A.120, and 281A.2102 to move the per se DUI threshold from 0.08 to 0.05.

HB 33 (BR 123) - T. Mills, J. Jenkins, J. Richards

AN ACT relating to injury prevention and making an appropriation therefore. Amend KRS 189.292, prohibiting texting while driving, to prohibit the entering of a telephone number or name into a personal communication device in order to place a call while driving a vehicle in a highway work zone or school zone; amend KRS 189.990(30) to make technical corrections; increase the fines for violations of Section 1 of the Act and KRS 189.294 to $50 for the first offense and $100 for subsequent offenses; direct that 50% of the fines collected for violations of these offenses be directed to the Kentucky Injury Prevention and Research Center at the University of Kentucky and appropriate the funds for the purpose of injury prevention research; APPROPRIATION.

HB 33 - AMENDMENTS

HFA (1, T. Mills) - Amend Section 1 to explicitly state an exemption for Bluetooth or other electronic systems that allow for completely hands free operation and clarify references to the exemption for selecting or entering a number; create a new Section 3 to encourage the Transportation Cabinet to engage in an aggressive educational campaign prior to the effective date of the bill to inform citizens about change to the law. HB 34/LM/CI (BR 126) - M. Harmon, K. King

AN ACT relating to driving under the influence. Amend various sections in KRS Chapter 189A, relating to driving under the influence, to restructure the existing penalties from a four-tiered structure to a three-tiered structure; expand the look-back window for prior offenses from five years to ten years, and to allow forfeiture of motor vehicles used in a DUI if the operator's license had been previously suspended; amend KRS 281A.2102 to conform.

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http://www.lrc.ky.gov/record/14RS/HB14/CI.doc















HB 74 (BR 224) - M. Denham

AN ACT relating to Transportation. Amend KRS 189.030 to require the illumination of headlights on motor vehicles with a model year of 2000 or newer during any period of precipitation that necessitates the use of windshield wipers by motorists; amend KRS 189.90 to specify that there will be a courtesy warning period until July 1, 2015; establish fine range of $20 to $100; specify that no court costs or points will be imposed.

HB 90 (BR 448) - R. Meeks

AN ACT relating to the operation of a motor vehicle by persons under the age of 18. Create a new section of KRS Chapter 186 to require the Transportation Cabinet to forward a copy of all uniform traffic citations issued to drivers under the age of 18, to the parent or guardian who accepted liability for the minor under KRS 186.590; cite this legislation as "the Denzel Steward Act of 2014."

HB 90 - AMENDMENTS

HCS - Remove original provisions; amend KRS 189.999 to prohibit the prepayment of traffic violations by persons under the age of 18; amend KRS 24A.175 to prohibit a court from adjudicating a case for traffic violation, for persons under the age of 18, if the person that assumed responsibility for the minor under KRS 189.590 is not present, unless the defendant is an emancipated minor; cite this legislation as the "Denzel Steward Act of 2014." HCA (1/Title, T. Mills) - Make title amendment. HB 156/LM/CI (BR 439) - K. Flood, R. Crimm, B. Linder, K. Sinnette

AN ACT relating to users of public roadways. Create a new section of KRS Chapter 189 to prohibit the operation of a motor vehicle in a careless or distracted manner that causes a collision and serious physical injury or death to a vulnerable user of a public roadway; establish definition of "vulnerable user of a public roadway"; establish penalties for violation; permit persons convicted to petition to enter a community labor program and attend a traffic safety course in lieu of penalties; direct the Transportation Cabinet to promulgate administrative regulations to implement the traffic safety program; amend KRS 27A.060 to conform.

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http://www.lrc.ky.gov/record/14RS/HB90/HCA1.doc








HB 199 (BR 1042) - K. Hall, R. Henderson, J. Crenshaw, R. Palumbo, J. Richards, F. Steele, B. Yonts

AN ACT relating to child booster seats. Amend KRS 189.125, relating to vehicle occupant restraints, to require booster seats to be used by children who are less than nine years old and are between 40 and 57 inches in height; clarify that a child of any age who is over 57 inches in height shall not be required to be secured in a booster seat.

HB 355/LM (BR 139) - W. Stone, J. Tilley, J. Bell, M. King, T. Riner, A. Simpson, B. Yonts

AN ACT relating to expungement. Amend KRS 431.078 to allow expungement of multiple misdemeanors, violations, or traffic infractions.

HB 355 - AMENDMENTS

HCS/LM - Amend to clarify the point in time from which the five year waiting period runs. SCS/LM - Keep original provisions; amend KRS 186.574 to clarify that the $25 fee paid to the AOC by attendees of a traffic school operated by a county attorney is in lieu of court costs and to charge participants a $10 fee payable to the sheriff of the county and a $10 fee for local police. SCA (1/Title, W. Westerfield) - Make title amendment.

SB 110/LM (BR 1005) - J. Denton, D. Harper Angel, R. Thomas

AN ACT relating to expungement. Amend KRS 341.078 to allow expungement of multiple unrelated misdemeanors or violations; allow expungement of felony arrests or charges on which no indictment has issued after 24 months.

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http://www.lrc.ky.gov/record/14RS/HB355/HCS1LM.doc


http://www.lrc.ky.gov/record/14RS/HB355/SCS1LM.doc

http://www.lrc.ky.gov/record/14RS/HB355/SCA1.doc






Workers Comp Bills

HB 27/LM (BR 140) - R. Nelson, K. Hall

AN ACT relating to firefighters. Create a new section of KRS Chapter 95 establishing a rebuttable presumption that cancer, resulting in either temporary or permanent disability or death, is an occupational disease for full-time firefighters; establish the guidelines for compensation; establish the types of carcinogens associated with specific types of cancers.

HB 153/LM (BR 494) - De. Butler, R. Benvenuti III, J. Donohue, C. Embry Jr., J. Greer, M. Harmon, J. Jenkins, C. Miller, T. Mills, R. Nelson, S. Overly, R. Palumbo, K. Sinnette, F. Steele, G. Watkins

AN ACT relating to firefighters. Create a new section of KRS Chapter 95 to establish a rebuttable presumption that cancer, resulting in temporary or permanent disability or death, is an occupational disease for full-time paid firefighters; establish the guidelines for compensation; establish the types of carcinogens associated with specific types of cancers.

HB 251/FN/LM (BR 1124) - De. Butler, R. Benvenuti III, K. Bratcher, H. Collins, J. Donohue, C. Embry Jr., K. Flood, M. Harmon, R. Henderson, D. Horlander, J. Jenkins, C. Miller, R. Nelson, K. Sinnette, R. Smart, G. Watkins, S. Westrom

AN ACT relating to firefighters. Amend KRS 95A.262 requiring the Commission on Fire Protection Personnel Standards and Education to purchase workers' compensation insurance for paid and volunteer firefighters; create a new section of KRS Chapter 95A establishing a rebuttable presumption that specific types of cancer, resulting in either temporary or permanent disability or death, are an occupational disease under KRS chapter 342 for paid or volunteer firefighters; specify that a recipients firefighters must have worked as a firefighter for 5 years or more and not used tobacco for ten years.

HB 251 - AMENDMENTS

HCS/FN/LM - Amend KRS 95A.262 requiring the Commission on Fire Protection Personnel Standards and Education to purchase workers' compensation insurance for paid and volunteer firefighters covered under KRS Chapters 67, 67A, 67C, 75, 95, and 273; create a new section of KRS Chapter 95A establishing a rebuttable presumption that specific types of cancer, resulting in either temporary or permanent disability or death, are an occupational disease under KRS Chapter 342 for paid or volunteer firefighters; firefighters must have worked as a firefighter for five years or more and not used tobacco for 10 years; if the Commission on Fire Protection Personnel Standards

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http://www.lrc.ky.gov/record/14RS/HB251/HCS1FN.doc

http://www.lrc.ky.gov/record/14RS/HB251/HCS1LM.doc

and Education fails to use the funds for the workers' compensation insurance, then the presumption for cancer fails to exist. HB 467/FN (BR 1591) - M. Denham, J. Greer, R. Heath, R. Quarles, J. Richards

AN ACT relating to notifications by the Department of Workers' Claims. Amend KRS 342.260 to direct the commissioner to promulgate administrative regulations no later than December 31, 2015 to establish the information necessary to create an e-mail notification system where a person may enter his or her e-mail address into the Insurance Converge Look-up database to be notified of any cancellation of a specific business' workers' compensation coverage; amend 342.340 to conform.

HB 507/LM (BR 1685) - K. Sinnette, J. Short, D. Horlander, D. Owens

AN ACT relating to workers' compensation. Amend several provisions of the Workers' Compensation Act in KRS Chapter 342 to define and recognize temporary partial disability benefits and amend other statutes to comply; define medical provider; limit medical benefits to age 70 or five years after date of injury, whichever is later except for permanent total awards or awards involving prosthetic devices which continue for as long as the employee is disabled; allow attorney's fees or increased payments for medical fee disputes that are decided in favor of the claimant; amend the reopening statutes to allow for reopening for additional temporary total or partial benefits; permit claimants who have awards of $60 or less per week to elect a lump sum and receive a one point higher discount rate than that set by the commissioner; require settlements for future medicals to be approved by the federal Medicare Secondary Payer Act; permit claimants to recover damages from an insurance carrier who commits an unfair claims settlement practice; increase attorneys' fees to a total of $24,000; specify that administrative law judges do not approve attorney's fees; enumerate changes to the manner that income benefits are determined; increase the maximum for temporary total or partial income benefits from 100% of the state average weekly wage to 120% of the state average weekly wage; increase the maximum of permanent partial income benefits from 75% to 85% of the state average weekly wage; increase and clarify multiplier language factors; provide that the time limit for permanent partial income benefits is determined by the impairment ratings; make other amendments to conform.

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http://www.lrc.ky.gov/record/14RS/HB467/FN.doc












HB 557 (BR 1351) - B. Montell, R. Benvenuti III, Dw. Butler, J. Carney, T. Couch, J. DeCesare, B. DeWeese, J. Fischer, D. Floyd, M. Harmon, R. Heath, T. Herald, K. Imes, K. King, A. Koenig, B. Linder, D. Mayfield, M. Meredith, S. Miles, T. Moore, R. Quarles, M. Rader, B. Rowland, S. Santoro, J. Shell, D. St. Onge, K. Upchurch, R. Webber, A. Wuchner

AN ACT relating to the Workers Compensation Funding Commission and special fund. Amend KRS 342.120 to require the Division of Workers' Compensation Funds to engage in an aggressive attempt to settle special fund claims; amend KRS 342.122 to eliminate all funding provided to the Labor Cabinet from special fund assessments; amend KRS 342.1224 to increase the number of board members and require appointees from the Kentucky League of Cities and Kentucky Association of Manufacturers.

SB 63 (BR 382) - C. McDaniel, J. Schickel, C. Girdler, S. Gregory

AN ACT relating to the workers' compensation special fund and Funding Commission. Amend KRS 342.120 require the Division of Workers' Compensation Funds to engage in an aggressive attempt to settle special fund claims; amend KRS 342.122 and eliminate all funding provided to the Labor Cabinet from special fund assessments.

SB 63 - AMENDMENTS

SCS - Amend KRS 342.120 and direct that the Division of Workers' Compensation Funds engage in an aggressive attempt to settle special fund claims; set forth provisions to provide financial or legal advice for special fund claimants and provide for a fee; amend KRS 342.122 and eliminate all funding provided to the Labor Cabinet from special fund assessments. SFA (2, C. McDaniel) - Make minor amendments to Section 1(4); delete added language in Section 2(1)(a) and reinsert current statutory language, only striking out of date language; amend KRS 342.1223 by requiring certain items to be reported to interim joint committees; amend KRS 342.1224 to add two members to the board of directors.

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SB 81 (BR 1000) - J. Schickel

AN ACT relating to employee misclassification. Amend KRS 336.010 to define "contractor," "person," "prime contractor," "secretary," and 'subcontractor"; amend KRS 336.040 to require the Labor Cabinet to be the determining authority in issues related to employee misclassification; create a new section of KRS Chapter 336 to establish criteria for determining whether a person is an independent contractor, exempting a prime contractor for a subcontractor's misclassification of an employee, and exempting independent contractors from certain benefits; amend KRS 336.050 to require the secretary to develop a training program on classification of employees; amend KRS 336.990 to establish a penalty for misclassification of employees; amend KRS 342.640 to delete provisions relating to newspaper delivery persons.

SB 81 - AMENDMENTS

SFA (1, J. Schickel) - Retain original provisions; amend criteria to determine an independent contractor to include that the person is engaged in a distinct occupation or business and that the person supplies the instrumentalities, tools, and skills required to perform the work contracted for. HCS - Create new sections in KRS Chapters 131, 336, and 342 and amend KRS 131.020 and 151B.280 to require the Education and Workforce Development Cabinet, Department of Revenue, Department of Workers' Claims, and Department of Workplace Standards to create and execute information sharing agreements related to employee misclassification; create a reporting requirement for all the agencies to annually report data on employee misclassification to the Interim Joint Committees on Appropriations and Revenue and Labor and Industry.

SB 136/LM (BR 1072) - T. Buford, D. Seum

AN ACT relating to workers' compensation. Amend several provisions of the Workers' Compensation Act in KRS Chapter 342 to define and recognize temporary partial disability benefits and amend other statutes to comply; define medical provider; limit medical benefits to age 70 or five years after date of injury, whichever is later except for permanent total awards or awards involving prosthetic devices which continue for as long as the employee is disabled; allow attorney's fees or increased payments for medical fee disputes that are decided in favor of the claimant; amend the reopening statutes to allow for reopening for additional temporary total or partial benefits; permit claimants who have awards of $60 or less per week to elect a lump sum and receive a one point higher discount rate than that set by the commissioner; require settlements for future medicals to be approved by the federal Medicare Secondary Payer Act; permit claimants to recover damages from an insurance carrier who commits an unfair claims settlement practice; increase attorneys' fees to a total of $24,000; specify that administrative law judges do not approve attorney's fees; enumerate changes to the manner that income benefits are determined;

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http://www.lrc.ky.gov/record/14RS/SB81/HCS1.doc





increase the maximum for temporary total or partial income benefits from 100% of the state average weekly wage to 120% of the state average weekly wage; increase the maximum of permanent partial income benefits from 75% to 85% of the state average weekly wage; increase and clarify multiplier language factors; provide that the time limit for permanent partial income benefits is determined by the impairment ratings; make other amendments to conform.

SB 137/LM (BR 1109) - J. Carroll, W. Blevins Jr., D. Harper Angel

AN ACT relating to workers' compensation. Amend KRS 342.320 to double the maximum amount of attorney fees in original and reopened worker's compensation claims and add potential fees for post-award income benefits; amend KRS 342.730 to require worker's compensation income benefits to be paid until age 70 or 5 years after the injury whichever is later.

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Douglas L. Hoots

Landrum & Shouse LLP

106 West Vine Street, Suite 800


(859) 255-2424

[email protected]

Areas of Practice

Civil Litigation

Bad Faith Litigation

Personal Injury Litigation

Municipal Law

Insurance Coverage Disputes

Police Misconduct

Sex Discrimination

Employment Discrimination -- Employer

Complex Litigation

Federal Appellate Practice

Federal Trial Practice

State Appellate Practice

State Trial Practice

US Court of Appeals for the Federal Circuit

Litigation Percentage

100% of Practice Devoted to Litigation

Bar Admissions

Kentucky, 1985

U.S. District Court Eastern District of Kentucky, 1989

U.S. District Court Western District of Kentucky, 1998

U.S. Court of Appeals 6th Circuit, 1991

U.S. Supreme Court, 1985

Education

University of Kentucky College of Law, Lexington, Kentucky o J.D. - 1985

Western Kentucky University, Bowling Green, Kentucky o B.A. - 1982

o Major: Economics

37

mailto:[email protected]

Representative Cases

Roberson v. Property and Casualty Ins. Co. of Hartford, 2009 WL 603852, published

(W.D.Ky 2009)

Neurodiagnostics, Inc. v. Kentucky Farm Bureau Mutual Ins. Co., 250 S.W.3d 321,

published (Ky 2008)

Community Trust Bancorp, Inc. v. Mussetter, 242 S.W.3d 690, published (Ky.App 2007)

National Sur. Corp. v. Hartford Cas. Ins. Co., 493 F.3d 752, published (6th Cir.Ky 2007)

National Sur. Corp. v. Hartford Cas. Ins. Co., 445 F.Supp.2d 779, published (W.D.Ky

2006)

Cincinnati Ins. Co. v. Samples, 192 S.W.3d 311, published (Ky 2006)

Knotts v. Zurich Ins. Co., 197 S.W.3d 512, published (Ky 2006)

Snow v. West American Ins. Co., 161 S.W.3d 338, published (Ky.App. 2004)

USA v. Sullivan, 246 F. Supp. 2d 700, published (E.D. Ky 2003)

Daley v. Reed, 87 S.W.3d 247, published (Ky 2002)

Omni Ins. Co. v. Harmon, 185 F.3d 646, published (6th Cir.Ky 1999)

ARA Services, Inc. v. Pineville Community Hosp., 2 S.W.3d 104, published (Ky.App

1999)

Empire Fire and Marine Ins. Co. v. Haddix, 927 S.W.2d 843, published (Ky.App 1996)

Classes/Seminars

Former Instructor of Paralegal Studies, Eastern Kentucky University

Honors and Awards

Martindale-Hubbell AV Peer Review Rated

Top Attorneys in Kentucky

Best Lawyers in America

Chartered Property and Casualty Underwriter (CPCU)

Rated by SuperLawyers

Member of the Million Dollar Advocates Forum

Professional Associations and Memberships

Kentucky Defense Counsel

Defense Research Institute and Insurance Institute of KY

Insurance Institute of Kentucky

Fraternities/Sororities

Sigma Alpha Epsilon

38

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Ronald L. Green

Green Chesnut & Hughes PLLC

201 East Main Street, Suite 1250

Lexington, KY 40507

Tel: (859) 475-1471

Fax: (859) 455-3332

Cell: (859) 229-6198

http://www.gcandh.com

Ron Green, along with Pamela A. Chesnut, founded the firm of Green & Chesnut PLLC

in 2010; in 2013 Elizabeth Hughes joined the firm, creating Green Chesnut & Hughes PLLC.

The firm is proud to support and be a member of the Insurance Institute of Kentucky.

He graduated from Murray State University in Murray, Kentucky with a Bachelor of

Science in Economics and minor in Physics in 1978. He then attended the University of

Kentucky College of Law, graduating in December of 1980 with a J.D. While attending the

University of Kentucky he was a member of the Kentucky Law Journal staff and the

International Moot Court team.

Prior to Green Chesnut & Hughes PLLC, he began his legal career by joining the

Lexington office of what was then Boehl, Stopher, Graves & Deindoerfer as a law clerk in 1979,

was employed as an associate attorney in 1981, and was a partner in the firm from January of

1986 to June of 2010. He was named managing partner of the Lexington office in 2005.

He has tried a wide variety of cases to judges, juries and arbitrators in a wide variety of

forums. He has likewise handled a large number of appeals in the Kentucky Court of Appeals,

Kentucky Supreme Court and the Circuit Courts for the Fifth and Sixth Circuits. He is admitted

to practice before all Kentucky Courts, United States District Court, Eastern and Western

Districts of Kentucky, Fifth and Sixth Circuit Courts of Appeals, and United States Supreme

Court, and has been admitted pro hac vice in foreign jurisdictions.

78

tel:%28859%29%20475-1471

tel:%28859%29%20455-3332

tel:%28859%29%20229-6198

http://www.gcandh.com/

Ron's current practice includes aviation, product liability, professional negligence, extra-

contractual liability, general negligence litigation and appellate practice. Between 1985 and

1990, he was engaged as an adjunct professor teaching legal writing at the University of

Kentucky College of Law. He has also taught Health Care Law at Eastern Kentucky University

in the past. In 2006, he was appointed as a Special Justice to the Kentucky Supreme Court and

served in that capacity with respect to the matter styled Fletcher v. Graham, 192 S.W.3d 350

(Ky. 2006). He served as a member of the Kentucky Executive Branch Ethics Commission from

2007 to 2012, and as Chairman for two of those years.

His published works include: Green, Appellate Practice: Placing the Cart Before the

Horse, 42 Kentucky Bench & Bar 17 (1980); Comment, The Obscenity Defense to Copyright

Revisited, 69 Ky. L. J. 161 (1980-81); Jenkins & Green, Torts Survey, 69 Ky. L. J. 663 (1980-

81); Kentucky Civil Practice After Trial, Ch. 8 (1990); Green, Torts Survey, 86 Ky. L. J. 907

(1997-98); and Green, Due Process Limits on Punitive Damages: A Primer, January/February

Fayette County Bar News 6 (2007). He frequently speaks at seminars on various subjects relating

to insurance defense practice and issues. He also maintains a web site that is intended to assist

those interested in the development of Kentucky personal injury and insurance law, which may

be found at http://www.rongreen-law.com.

He is a member of the Kentucky Bar Association, Fayette County Bar Association,

Defense Research Institute, Kentucky Defense Counsel, the Professional Liability Defense

Federation, The Claims and Litigation Management Alliance, Federalist Society - Lexington

Chapter, and National Association of Forensic Economics. He has received General Civil

Mediation Training by the Administrative Office of the Courts. He is also a Certified Litigation

Management Professional.

79

http://www.rongreen-law.com/

He was born in Spokane, Washington and as an Air Force "brat" resided in various parts

of the world prior to landing in Kentucky in 1972. He resides in Lexington with his wife and

three canine children.

80

KENTUCKY NO-FAULT LAW

BY RONALD L. GREEN

Page | i

Last Updated May 13, 2014

Green Chesnut & Hughes PLLC, 201 East Main Street, Suite 1250, Lexington, Kentucky 40507

Tel: (859) 475-1471 Fax: (859) 455-1471 www.gcandh.com

TABLE OF CONTENTS 1. Acceptance of the Act 1.1. Implied Consent 1.2. Rejection 1.3. Infancy and Other Disabilities 2. Persons Covered 2.1. One Who Registers 2.2. One Who Operates 2.3. One Who Maintains 2.4. One Who Uses 2.5. Added Reparation Benefits 3. Vehicles Covered 4. Arising Out of the Use or Maintenance 4.1 Causal Relationship 4.2 Use of a Motor Vehicle 4.3 Maintenance of a Motor Vehicle 5. Territorial Application 5.1. Accidents Occurring Outside Kentucky 5.2. Non Residents in Kentucky 5.3. Legislative Jurisdiction 5.4. Accidents Occurring on Private Property

PAYMENT OF BENEFITS 6. Nature of PIP Benefits 7. Benefits Payable--Injury Claims 7.1 Medical Expense 7.2. Work Loss 7.3. Replacement Services Loss 8. Benefits Payable--Death Claims 8.1. Survivor Defined 8.2. Survivor's Economic Loss 8.3. Survivor's Replacement Services Loss 8.4. Dead Man Statute 8.5. Multiple Survivor Claims

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9. Calculation of Net Loss 9.1. Workers' Compensation 9.2. Income Tax Savings 9.3. Uninsured Motorist Coverage 10. Other Limitations on Benefits 10.1. Amount per Week 10.2. Accrual of Loss 11. Persons Excluded From PIP Coverage 11.1. Persons Who Have Rejected 11.2. Intentional Injury 11.3. Converted Motor Vehicles 12. Carrier Responsible 12.1. Occupants 12.2. Pedestrians 12.3 Effect of No Primary Carrier 12.4. Effect of No Insurance 12.5. Leased Vehicles 12.6. Limit on Amount 12.7. Denial by Primary Carrier 13. Presentment of Claims 13.1. Proof of Loss 13.2 Independent Medical Examinations 13.3. Rejection of Claim 13.4. Time to Pay 13.5 Who to Pay 14. Interest 15. Penalties 15.1. Reasonable Foundation 15.2. "Premium" Interest 15.3. Attorney Fees 16. Statute of Limitations 16.1. Injury Benefits 16.2. Death Benefits 16.3. Beginning of Time 16.4. Survival of Actions 16.5. Effect of Legal Disability 16.6. Suits against Wrong Carrier

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16.7. Assigned Claims Plan

IMPACT ON TORT LIABILITY 17. Application of the Thresholds 17.1. Persons Subject to Threshold 17.2. Types of Accidents 18. Threshold Requirements 18.1. Medical Expense 18.2. Permanent Injury 18.3. Disfigurement 18.4. Other Thresholds 19. Abolished Liability 19.1. PIP Benefits Paid or Payable 19.2. Uninsured Plaintiffs 19.3. Effect at Trial 20. Statute of Limitations 20.1. Applicability of MVRA Limitations 20.2. Tolling Statutes

SUBROGATION 21. Nature of Right 22. Methods of Recovery 22.1. Joinder 22.2. Arbitration 23. Persons Subject to Subrogation 24. Effect of Policy Limits 25. Attorney Fees 25.1. Entitlement to Fee 25.2. Amount of Fee 26. Statute of Limitations

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1. ACCEPTANCE OF THE ACT

The Motor Vehicle Reparations Act of 1974 provides that its terms shall apply

to all registrants, owners, operators, maintainers and users of motor vehicles in

Kentucky. The Court has undertaken to give the Act its broadest possible

application within the limits imposed by the statutory language and the Kentucky

Constitution.

1.1. IMPLIED CONSENT

At the very foundation of the MVRA is the concept of implied consent. The

Kentucky Constitution prohibits legislation which limits the amount recoverable "for

injuries resulting in death, or for injuries to person or property". Since the MVRA

does limit the right to recover damages for personal injury under certain

circumstances, the Act implies consent from the fact of registering, operating,

maintaining or using a motor vehicle, and use of the public roadways, Fann v.

McGuffy, 534 S.W.2d 770, 777 (Ky.1975). Critical to the validity of this implication,

however, is that such a person has the right to reject the terms of the act.

1.2. REJECTION

Any rejection of the MVRA must be in writing and filed with the

Commissioner of Insurance prior to the date of the accident at issue. It is the duty

of the insurance carrier to inform a prospective insured of his right to reject by

supplying a form with a reasonable explanation thereof. This duty appears to apply

to non-resident insureds as well as to residents, and the limitations of the MVRA

cannot be imposed where there has been no affirmative opportunity to reject. In

Stinnett v. Mulquin, 579 S.W.2d 374 (Ky. App. 1978), the Court of Appeals held

that, where a non resident plaintiff denied having received the form, a jury issue was

raised as to whether there had been an opportunity to reject.

Where, however, no issue is raised as to the receipt of the form, the question

of whether the MVRA was rejected is of simple resolution. There exists a rebuttable

presumption of acceptance of the terms of the MVRA, D&B Coal Co., Inc. v.

Farmer, 613 S.W.2d 853, 854 (Ky.1981). It has not yet been decided what type of

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BY RONALD L. GREEN

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evidence would be sufficient to rebut the presumption, and perhaps it would be

sufficient for the plaintiff to testify that he filed his rejection form. However, in light of

the fact that the rejection is effective upon filing, the records of the Commissioner of

Insurance should ultimately be conclusive on the issue. It should likewise be kept in

mind that such a rejection may be revoked so long as it is done in writing and

presumably before the accident.

1.3. INFANCY AND OTHER DISABILITIES

The concept of consent raises difficulties when the person, for whatever

reason, is unable to make such a decision. Persons who have not attained the age

of majority or who are insane have long been considered to be under a legal

disability. Accordingly, the legislature vested the responsibility for rejection by these

persons upon his legal guardian, conservator or natural parent.

The failure of such person to file a rejection form on behalf of one under a

disability constitutes acceptance of the MVRA. Furthermore, such a form must be

filed within six months of the time the act becomes applicable to the person under a

disability, Lawrence v. Risen, 598 S.W.2d 474 (Ky. App.1980). Should such a

person be involved in an accident within the six months allowed, it is doubtful that

the MVRA would apply.

2. PERSONS COVERED

The activities which cause the MVRA to become applicable are not tied to

what the injured person was doing at the time of the accident, but relate to the

status of the person generally.

2.1. ONE WHO REGISTERS

The term registers is not defined in the MVRA, but its meaning is clear. Any

person whose name appears on a title to a motor vehicle, whether that person owns

it or not, has accepted the provisions of the MVRA. Outside of the context of the

MVRA the Court at one time noted a distinction between the registrant and owner in

certain cases, holding that registration is not conclusive of ownership. However,

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Kentucky is now a title state and in most instances the person who registers and

owns the vehicle are one and the same.

The MVRA does not include owners as a separate class of persons to whom

the act applies, but in such cases the term operator likely closes any gaps.

Likewise, it does not matter that the accident occurred in a vehicle other than that

owned, or whether the person is insured, Atchinson v. Overcast, 563 S.W.2d 736

(Ky.App. 1977).

2.2. ONE WHO OPERATES

The meaning of operator is not defined in the MVRA, and has not yet been

clearly defined by the Court. In Probus v. Sirles, 569 S.W.2d 707 (Ky.App.1978),

the Court of Appeals held that an uninsured passenger was an operator. She did

not own an automobile, and had only recently obtained a driver's license. Her

driving experience was limited to learning how to drive and taking the driving tests.

The Court based its holding on the premise that in learning to drive she had created

the possibility of causing accidents and that presumably she would continue to drive

on Kentucky's highways. The Court indicated but did not decide whether a driver's

license was necessary for a person to be an operator. At a minimum, however, it

would appear necessary for such a person to have driven a motor vehicle since the

effective date of the MVRA to be considered an operator.

2.3. ONE WHO MAINTAINS

A person who maintains a motor vehicle is one who leases the same, without

regard to ownership. There need be no consideration, however, as it is sufficient

that the person have legal custody, possession or responsibility for a motor vehicle.

2.4. ONE WHO USES

In the early cases the Court had considerable difficulty in applying this

component of the test due to its attempts to relate it to the statutory definition of a

"user", See Dixon v. Cowles, 562 S.W.2d 639 (Ky. App.1977); Lawrence v. Risen,

598 S.W.2d 474 (Ky.App.1980). In D & B Coal Co. v. Farmer, 613 S.W.2d 853 (Ky.

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1981), the Kentucky Supreme Court held that one could accept the MVRA without

being a user as that term is defined. Instead the Court relied on the definition of

"use of a motor vehicle." Thus, for purposes of determining whether a person is

covered by the MVRA the question is whether that person actually uses a motor

vehicle, Schroader v. Atkins, 657 S.W.2d 945 (Ky. 1983), while the question of

whether a person is a user as that term is defined in KRS 304.39-020(15) relates to

the application of particular sections of the MVRA.

2.5. ADDED REPARATION BENEFITS

The persons who are entitled to recover added reparation benefits are not

necessarily, and usually are not, the same persons entitled to recover basic

reparation benefits. Usually, these benefits are payable only to named insureds

and their relatives, and limiting the scope of coverage has been approved.

Stevenson v. Anthem Cas. Ins. Group, 15 S.W.3d 720 (Ky. 1999). Thus, a

passenger or pedestrian usually cannot recover added reparation benefits unless it

is provided by their own policy. Recently, a Court of Appeals panel observed that

the statutory requirement set out in KRS 304.39-140(1) relates only to the

requirement that such benefits be offered for purchase, and does not require that

additional benefits be included in each policy. Cain v. American Commerce Ins.

Co., Inc., 332 S.W.3d 81 (Ky.App. 2009).

3. VEHICLES COVERED

Because the MVRA applies to accidents arising out of the maintenance or

use of motor vehicles, it is important to take note of the vehicles not included in the

definition thereof. A motor vehicle is defined as any vehicle which transports

persons or property and which is propelled by other than muscular power. This has

been held to include a trailer, at least while it is hitched to a tractor. Goodin v.

Overnight Transportation Co., 701 S.W.3d 131 (Ky. 1985). Exceptions to this

general definition are road rollers, road graders, farm tractors, vehicles on which

power shovels are mounted, construction equipment generally used on the site, any

vehicle which operates on rail and electric vehicles powered by overhead power if

not operated more than five miles outside the municipal limits.

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Mopeds are likewise specifically excluded, but if the operator of a moped

collides with a motor vehicle the operator would be covered by the MVRA. Howard

v. Hicks, 737 S.W.2d 711 (Ky.App. 1987).

Motorcycles are considered motor vehicles but are treated differently for

purposes of the MVRA. The motorcyclist and his passengers are not entitled to PIP

benefits from any source unless the MVRA is specifically accepted.

Non-licensed, off-road recreational vehicles have posed a special problem,

because the definition of motor vehicle is broad enough to encompass them.

However, in Kenton Cty. Public Parks Corp. v. Modlin, 901 S.W.2d 876 (Ky.App.

1995), the Court of Appeals held that a golf cart being operated on a fairway was

not a motor vehicle. The Court noted that such a vehicle might become a motor

vehicle if operated on a public highway at the time of the accident. However, in

Manies v. Croan, 977 S.W.2d 22 (Ky.App. 1998) this rule was applied to an

accident involving an all-terrain vehicle. While this accident occurred off-road, the

rationale for the decision was that the vehicle was not subject to registration. Under

that theory, such a vehicle should not be considered a motor vehicle whether on or

off road. More recently in O'Keefe v. North American Refractories, 78 S.W.3d 760

(Ky.App. 2002), the Court considered whether a forklift was a motor vehicle. The

Court held that it was not based on the fact that it was not primarily designed for use

on the highway.

4. ARISING OUT OF THE USE OR MAINTENANCE

The primary definition of the scope of the Act is found in the phrase "injury

arising out of maintenance or use of a motor vehicle". Without satisfying this

requirement, there can be no benefits due, the extended limitations period does not

apply, and the special rules regarding subrogation have no application.

4.1 CAUSAL RELATIONSHIP

The term "arising" ordinarily suggests a causal connection between, in this

context, the injury and the use or maintenance of a motor vehicle. In State Farm

Mut. Auto. Ins. Co. v. Rains, 715 S.W.2d 232 (Ky. 1986), the Court rejected the

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positional risk theory utilized in workers' compensation cases. Generally this means

that an injury does not arise out of the use of a motor vehicle if the vehicle itself was

merely the place where the injury occurred. In Rains, the Court found causation

lacking in two situations. One involved a fight where the motorist was hit with a

baseball bat while entering the vehicle, and the other involved a shooting of a

person who was occupying the motor vehicle. Through this holding the Court

applied the same meaning to the word "arising" that is used in liability policies

insofar as causation is concerned. In relying on liability cases, however, one must

keep in mind that in the liability context it is the liability that must arise out of the use

while in the no-fault context the focus is on the cause of the injury itself.

The Court of Appeals has found it difficult to properly apply this concept. In

Griffin v. Thompson, 725 S.W.2d 27 (Ky. App. 1987), the majority reached the

rather bizarre conclusion that a person who was injured when pushed from a

vehicle had a constitutional right to bring the action while the dissent correctly

concluded the injury did not arise out of the use of the vehicle at all. Likewise, in

Kentucky Farm Bureau Mut. Ins. Co. v. Hall, 807 S.W.2d 954 (Ky. App. 1991), a

majority of a panel of the Court held that a motorist who was struck by a rock thrown

by a lawnmower arose from the use of the motor vehicle. The majority relied in part

on the distinction between an intentional act, such as a shooting, and a negligent

act in this case. Insofar as the causal role of the vehicle, this is a distinction without

a difference. The other basis for the holding was that there was no real difference

between being hit by a rock thrown by a lawnmower and a rock thrown up by a

vehicle. There actually is a difference, in that being struck by debris in the highway

is an ordinary part of driving a vehicle. But by the same token, one could note that

a person occupying a vehicle is at no greater risk of being struck by a rock thrown

by a lawnmower than a pedestrian would be, and the vehicle plays no causal role in

that injury. The dissent pointed out that the majority was actually applying the

positional risk theory rejected by the Supreme Court. Finally, in Key v. Rager, 858

S.W.2d 718 (Ky. App. 1993), a panel held that an injury from an explosion arose

from the use of the vehicle. In that case the driver entered the cab of a semi from

the passenger's side, and before moving to the driver's side he used the truck's

cigarette lighter to light a cigarette, with the explosion following. The panel held it

sufficient that he was in the vehicle and that the vehicle had filled with vapors from

some external source, missing altogether the requirement that the use of the vehicle

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must also be "as a vehicle". The time has come for the Supreme Court to revisit

this issue and either reaffirm the Rains holding or move to a different definition.

4.2 USE OF A MOTOR VEHICLE

The MVRA provides a definition of the phrase "use of a motor vehicle" in

KRS 304.39-020(6) which provides as follows:

“Use of a motor vehicle” means any utilization of the

motor vehicle as a vehicle including occupying, entering

into, and alighting from it. It does not include:

(a) Conduct within the course of a business of

repairing, servicing, or otherwise maintaining

motor vehicles unless the conduct occurs off the

business premises; or

(b) Conduct in the course of loading and

unloading the vehicle unless the conduct occurs

while occupying, entering into, or alighting from it.

The definition provides three examples of use, and while these are not exclusive

most uses are covered by occupying, entering into or alighting from the vehicle. The

definition then provides two instances where what would otherwise be a use is

outside the statute.

It is important to note that not just any use of a motor vehicle will satisfy the

definition, but the use must be "as a vehicle." The definition of motor vehicle, KRS

304.39-020(7), would suggest that a motor vehicle is being used as a vehicle if it is

being used to transport persons or property. See Goodin v. Overnight Transp. Co.,

701 S.W.2d 131 (Ky. 1985).

This requirement has often been ignored in the Court's analysis, such as in

Kentucky Farm Bureau Mut. Ins. Co. v. Hall, 1991 WL 5057, 807 S.W.2d 954 (Ky.

App. 1991). The Court held that there was a causal relationship between the use of

the truck and the explosion that caused the injury, but never addressed the more

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serious issue of whether the use of the cigarette lighter in a parked vehicle was a

use as a vehicle. The Court did address the issue in Cochran v. Premier Concrete

Pumping, Inc., 2010 WL 1728920 (Ky. App. 2010). The claimant was operating a

concrete truck's pump hose when he was flung from the truck. The Court observed

that no one was occupying, entering or alighting from the vehicle at the time of the

injury. Implicit in the holding is that the claimant was using the vehicle at the time,

but not as a vehicle. Instead he was using the vehicle as a tool for the job he was

working on.

Occupying

In most cases the idea of occupying a motor vehicle is a simple one to apply,

the typical situation being a driver or passenger being driven in a motor vehicle. D

& B Coal Co., Inc. v. Farmer, 613 S.W.2d 853 (Ky. 1981); Schroader v. Atkins, 657

S.W.2d 945 (Ky. 1983). The Court has also held that being inside a trailer hitvched

to a tractor constitutes "occupying" a motor vehicle. Dream Furniture, Inc. v. Brow,

2012 WL 5457503 (Ky. App. 2012). However, being outside the vehicle, Clark v.

Young, 692 S.W.2d 285 Ky. App. 1985), under the vehicle, Commercial Union

Assurance Companies v. Howard, 637 S.W.2d 647 (Ky.1982), or beside the vehicle,

State Farm Mut. Auto. Ins. Co. v. Hudson, 775 S.W.2d 922 (Ky.1989) does not

constitute “occupying” a motor vehicle.

Entering Into

The process of entering into a vehicle begins with evidence of the overt act of

making contact with the vehicle with the intention of entering it. Fields v. BellSouth

Telecommunications, Inc., 91 S.W.3d 571 (Ky. 2002). It is not necessary that the

contact with the vehicle be maintained so long as the actions are part of the entry

into the vehicle. In Fields, the claimant stepped back as she opened the door and

tripped over a guy wire and the Court held that she was using the vehicle when that

occurred. Presumably, had she instead broken off the act of entry to engage in an

unrelated activity, for example to converse with a friend, she would have ceased to

be entering until she returned to the vehicle and made contact with it.

Alighting From

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The Court rejected a physical contact test for determining whether one is

alighting from a motor vehicle. In West American Ins. Co. v. Dickerson, 865 S.W.2d

320 (Ky. 1993), the Court held that one has not finished alighting from the vehicle

until, at a minimum, both feet are firmly planted upon the ground. The actual test

seems to be, however, whether, at the time the injury is sustained, the party was

still in the process of alighting or had transitioned to become a pedestrian.

Repairing a Vehicle

One of the two exceptions applies to conduct in the course of a repair or

service business unless it occurs off the premises. So the first issue is whether the

act of repairing or servicing a vehicle is within the general definition of use. The

Courts have had difficulty with this concept, although the statutory intent is pretty

clear.

The Supreme Court had little difficulty in determining that the act of repairing

a vehicle is not a use of the vehicle as a vehicle in Commercial Union Assur.

Companies v. Howard, 637 S.W.2d 647 (Ky. 1982). In that case, the claimant was

injured while underneath the vehicle working on the suspension on his own

property. Since the exception only applies to the business of repairing, it had no

application to the decision. The Court could not have been more clear when it

stated: "Basic automobile insurance policies are intended to cover “driving” the

vehicle, not repairing it." The Court of Appeals has all but ignored the Supreme

Court in this regard. In State Farm Mut. Auto. Ins. Co. v. Kentucky Farm Bureau

Mut. Ins. Co., 671 S.W.2d 258 (Ky. App. 1984), a panel held that the act of

attaching a tow rope to a stalled vehicle was a use of the vehicle, ignoring that it

was not a use of a vehicle as a vehicle. In Kentucky Farm Bureau Mut. Ins. Co. v.

Gray, 814 S.W.2d 928 (Ky. App. 1991) the Court held that an injury to one outside a

vehicle while in the process of jump starting a vehicle was using the vehicle, again

ignoring the fact that it was not being used as a vehicle. In this case the panel

made the classic novice mistake of holding that the fact that an exception does not

apply actually enlarges the general rule. This issue is ripe for further review by the

Supreme Court.

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The actual exception has only been considered once with little difficulty. In

Thompson v. Kentucky Farm Bureau Mut. Ins. Co., 901 S.W.2d 874 (Ky.App. 1995),

was injured when a truck he was repairing was started in gear. Thompson admitted

that the injury occurred on his business premises, and accordingly the MVRA did

not apply.

The Court has not yet addressed a situation where one in the business of

repairing motor vehicles is injured off the premises. This proviso to the exception

logically relates to things such as test driving, where there is a connection with

repairs but the vehicle is also being used as a vehicle. The exception should not

be read as making repair conduct a use of the vehicle just because it occurs off the

premises, but the Court of Appeals precedent referred to above make it difficult for

trial Courts to reach the correct conclusion at this time.

Loading and Unloading

Loading and unloading is not a use of the vehicle unless the claimant was at

the time occupying, entering into or alighting from the vehicle. The loading and

unloading exception was first addressed by the Court of Appeals in Clark v. Young,

692 S.W.2d 285 (Ky. App. 1985), where the claimant was standing on a trailer

loaded with pipes when one of the straps being used to secure the load struck him

in the eye. Since he was not occupying the vehicle and was involved in the loading

the Court held the MVRA inapplicable. By contrast, the Supreme Court

subsequently held in Goodin v. Overnight Transp. Co., 701 S.W.2d 131 (Ky. 1985)

that one standing inside a trailer and injured while unloading was occupying a motor

vehicle and thus the exception was not applicable. Unfortunately, the Court made

the unnecessary error of stating that any conduct not within the exception is within

the general rule, which of course violates basic principles of logic. However, this is

obiter dictum and the case actually stands for the proposition that the transport of

property is a use of the vehicle as a vehicle. The transport of property would

include loading and unloading unless the exception applies. This makes much

more sense than the Court's dicta, although the result is the same.

Subsequently, the Court in State Farm Mut. Auto. Ins. Co. v. Hudson, 775

S.W.2d 922 (Ky. 1989) held that one standing on the ground while unloading was

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not using the vehicle, relying on the loading and unloading exception. In

distinguishing its prior discussion in Commercial Union Assur. Companies v.

Howard, 637 S.W.2d 647 (Ky. 1982), the Court observed that it had used an

exception to the exception to find a use based on his status of occupier (Howard

was actually a repair case). Likewise, in discussing the holding in Goodin the Court

seems to refashion the reasoning to more closely match the rationale offered

above.

There remains the question of when does loading or unloading begin, and

when does it end. In Interlock Industries, Inc. v. Rawlings, 358 S.W.3d 925 (Ky.

2011), the load of aluminum bundles had shifted during transport, and a forklift

operator was beginning the unloading process. In the meantime, Rawlings was

standing on the bed and was rolling up the straps when a bundle of aluminum fell

and injured him. The Court held that he was in the course of unloading becaue

release and storage of the straps was an integral part of the unloading process.

Future cases will require a very fact specific analysis, beginning with a

determination of what is and is not integral to the loading or unloading process.

4.3 MAINTENANCE OF A MOTOR VEHICLE

In addition to use, the MVRA applies to injuries arising from the maintenance

of a motor vehicle. In Commercial Union Assur. Companies v. Howard, 637 S.W.2d

647 (Ky. 1982), the Supreme Court observed that maintenance in this context does

not mean repair and servicing. The phrase "maintaining a motor vehicle" is defined

in KRS 304.39-020(16), as meaning "having legal custody, possession or

responsibility for a motor vehicle by one other than an owner or operator." It is

difficult to see how this adds anything not covered by use of vehicle in the context of

no-fault.

5. TERRITORIAL APPLICATION

After determining that a particular person is subject to the Act, it must next be

ascertained whether the accident in question comes under the Act. Obviously, a

Kentucky resident who is injured on a Kentucky highway is covered, but coverage is

not limited to such a situation.

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5.1. ACCIDENTS OCCURRING OUTSIDE KENTUCKY

The provisions of the No Fault Act apply to an accident which occurred

outside Kentucky, so long as it occurs within the United States, its territories, or

Canada. Application is, however, limited to specific persons who suffer a loss

arising out of maintenance or use of a motor vehicle. Those persons are (1) a

named insured under a no fault policy; (2) a spouse or relative of a named insured,

if living in his household; (3) a minor in the custody of a named insured; and (4) the

driver and other occupants of an insured vehicle other than (a) a vehicle such as a

bus of which five or more are owned by the same person(s); or (b) a vehicle owned

by a governmental unit. It has not yet been settled whether the above listed

persons lose their rights in tort as well, but in most cases this should follow.

5.2. NON RESIDENTS IN KENTUCKY

The statute which authorizes PIP benefits refers to "every person" which

includes non-residents. Bohl v. Consolidated Freightways, 777 S.W.2d 613

(Ky.App. 1989). Such a person may be entitled to these benefits and at the same

time not lose their right to sue in tort if the requirements relating to implied consent

are not met.

The MVRA does provide a rejection mechanism for certain non-residents as

follows:

Provided, however, any person who, at the time of the accident, does

not have basic reparation insurance but has not formally rejected such

limitations of his tort rights and liabilities and has at such time in effect

security equivalent to that required by KRS 304.39-110 shall be

deemed to have fully rejected such limitations within the meaning of

this section for that accident only.

Security as defined by the MVRA includes not only minimum liability limits but also

basic reparation benefits. Obviously a non-resident whose home state has a no-

fault system would be covered by this statute and the MVRA would not apply.

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Where the non-resident is from a state that does not have a no-fault system, the

non-resident does not have security and he is not a secured person. Stephenson v.

State Farm Ins. Co., 217 S.W.3d 878 (Ky.App. 2007).

5.3. LEGISLATIVE JURISDICTION

Non-resident drivers and vehicles often carrier insurance with out of state

insurers. If the insurer is registered to do business in Kentucky they are bound to

provide Kentucky no-fault benefits. If the insurer does no business in the state,

however, due process would not permit Kentucky to assume jurisdiction over the

contract, and the insurer is not bound to provide benefits in accordance with

Kentucky law. State Farm Mut. Auto. Ins. Co. v. Tennessee Farmers Mut. Ins. Co.,

785 S.W.2d 520 (Ky.App. 1990)(note that personal jurisdiction would usually also

be a problem). A case could arise where an out of state insurer does not write

insurance in Kentucky but has other contacts. It is likely that Kentucky would want

to apply its own law to the contract if possible, and thus the question would be

whether Kentucky had sufficient contacts with the insurance contract to permit the

imposition of Kentucky law.

5.4. ACCIDENTS OCCURRING ON PRIVATE PROPERTY

The MVRA has been held to apply to private property with the same force as

it does on a public highway. In Lyle v. Swanks & Madison Std. Service Station, 577

S.W.2d 427 (Ky.App. 1979). See also Phillips v. Robinson, 548 S.W.2d 511

(Ky.App. 1976), reversed on other grounds, 557 S.W.2d 202 (Ky. 1977). The Court

held that the provisions of the MVRA were applicable to accidents which occurred

on private property as well, as highways. Thus, the place of occurrence is of little

importance in determining whether a given accident is controlled by the MVRA,

except as it might impact whether a motor vehicle was involved.

6. NATURE OF PIP BENEFITS

Entitlement to PIP benefits has nothing whatever to do with fault or fairness.

However, benefits are only payable for loss which is economic in nature, meaning

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an out of pocket expenditure of a type compensable under the MVRA. Five types of

loss are designated by the MVRA.

7. BENEFITS PAYABLE--INJURY CLAIMS

The MVRA designates three types of loss which may be payable for an injury

not resulting in death. These are medical expense, work loss, and replacement

services loss.

7.1. MEDICAL EXPENSE

The term "medical expense" is broadly defined to include reasonable

charges for any reasonably needed products, services and accommodations. These

may relate to medical care, physical rehabilitation, rehabilitative occupational

training and other remedial care. The Court has not been called upon to construe

this definition often, but an interesting argument was presented in Smith v. Meyer,

660 S.W.2d 9 (Ky.App. 1983). Therein the Court of Appeals was confronted with a

claim that marriage counseling was a medical expense. The plaintiffs had testified

that their marital problems were the result of the injuries and the work disability.

Unfortunately, the Court did not reach the issue because the plaintiffs had failed to

produce the testimony of the psychologist who had rendered the care.

KRS 304.39.020(5)(a) provides that "[t]here shall be a presumption that any

medical bill submitted is reasonable." In Bolin v. Grider, 580 S.W.2d 490 (Ky. 1979)

the Court construed this to refer to necessity in addition to reasonableness.

Accordingly, unless the insurer has evidence to show lack of causation, the medical

expense qualifies as a benefit under the Act. (In an unpublished opinion, a panel of

the Court of Appeals has applied this provision to tort litigation, even though it has

no such application by its terms. Kentucky Farm Bur. Mut. Ins. Co. v. Brandenburg,

2005 WL 327196 (Ky.App. 2005)).

As to the meaning of accommodations, the Court has not been called upon

to decide. The statute further addresses the term, however, in providing that, except

for intensive care, the amount of liability is limited to the customary charge for semi

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private accommodations. Thus it seems clear that the legislature intended for the

word to relate to hospitalization, and not motel or other types of accommodations.

It should be noted that benefits are payable for non-medical care which is in

accordance with a well-recognized religious method of healing. Definition can be

given to this item of expense only on a case by case basis.

An insured is authorized to negotiate with a provider of medical services as

to the amount of medical expense, and if the provider agrees to a reduction, then

the remainder cannot be billed to the claimant. KRS 304.39-245. This statute does

not authorize a unilateral reduction by the insurer. For guidance as to what may

constitute negotiation see DOI Bulletin 13-4

(https://insurance.ky.gov/Documents/bulletin1304reductchargesnofaultrev021814.p

df)

7.2. WORK LOSS

Benefits are payable for work loss under two circumstances. First, the injured

person has lost income from work he probably would have performed but for the

injury. Second, the injured person has incurred expenses in obtaining replacement

services for the production of income, as would likely be the case where a farmer is

injured. In the second instance, those expenses must be reduced by any income

from substitute work he performed.

In Gregory v. Allstate Ins. Co., 618 S.W.2d 582 (Ky.App. 1981), the Court of

Appeals held that work loss benefits were payable "only to an injured employed

person for actual loss of earnings while absent from work." Under this holding, an

unemployed person who has applied for a job, but, has not been hired prior to the

accident, would be precluded from showing that he probably would be hired. How

the Supreme Court would view such a case remains to be seen.

In most cases where the claimant is an ordinary employee determination of

lost wages is straightforward. Where the earnings arise from contract labor,

however, documentation of the loss can be more difficult. In Kentucky Farm Bur.

Mut. Ins. Co. v. Troxell, 959 S.W.2d 82 (Ky. 1998) the Court held that self-serving

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receipts for automobile repair work which were prepared by relatives after the fact

were not sufficient to support a claim for benefits. The Court did not delineate a

clear rule, but did suggest that tax returns were the best evidence if available.

7.3. REPLACEMENT SERVICES LOSS

A claimant may be entitled to benefits based on expenses suffered in the

hiring of someone to perform tasks which he would have usually performed. The

services must be "ordinary and necessary." Such does not mean that they must be

absolutely necessary, and the requirement will probably do no more than eliminate

remote or frivolous expenses. The services replaced cannot be for income (or

arguably profit) and must be for the benefit of the claimant or his family.

8. BENEFITS PAYABLE--DEATH CLAIMS

Two types of loss are available to the survivors of an injured person. These

are survivor's economic loss and survivor's replacement services loss. They are,

however, payable only to survivors.

8.1. SURVIVOR DEFINED

A survivor is defined by the MVRA as a person who would be entitled to

benefit from an action brought by the estate for wrongful death. This would

ordinarily be any surviving spouse and children. If there are none, then the parents

of the deceased may be entitled. A non-familial dependent is not a survivor under

this definition, nor is the administrator of the decedent's estate, United States Fid. &

Guar. Co. v. McEnroe, 619 S.W.2d 593 (Ky. 1980). If the person or persons who

are survivors by reference to the statute have no claim for loss, such does not

authorize more remote descendants to recover. Shepard v. Shelter Mut. Ins. Co., 2

S.W.3d 794 (Ky.App.1999).

In Lane v. Traveler=s Ins. Co., 726 S.W.2d 313 (Ky.App. 1986), the Court of

Appeals held that any entitlement of benefits by a survivor is derivative. Therefore,

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if the decedent, had he lived, would not have been entitled to BRB benefits, then the

survivors are likewise barred.

The interesting question of when a spouse ceased to be a spouse was

broached in Automobile Club Inc. v. Lainhart, 609 S.W.2d 692 (Ky.App. 1980).

Therein the decedent had been separated from his spouse six months, and they

had filed for divorce three months prior to his death. No steps were taken to effect

the divorce, and the widow testified they were working towards reconciliation. The

Court held that she was a survivor, and apparently this holding will control unless a

decree dissolving the marriage has been entered prior to the death.

8.2. SURVIVOR'S ECONOMIC LOSS

A survivor is entitled to recover the value of economic contributions that they

would have received but for the accident. This does not include services which

would have been performed by the decedent, and must be a "thing" which has a

market or economic value. The carrier is entitled to a credit for expenses which the

survivor would have incurred but for the death.

8.3. SURVIVOR'S REPLACEMENT SERVICES LOSS

If the decedent was performing a service for the survivor's benefit, the

survivor may recover the reasonable cost of replacing that service if replacement is

"ordinary and necessary." While the statute does not specifically say so, this

expense is likely to be limited to services not for income, as this element of damage

is covered under economic loss. A credit is again given for expenses which the

survivor did not incur because of the injury, except that a credit for a particular

expense cannot be taken for both replacement and economic loss.

The Court of Appeals originally held that in order to recover this benefit, the

survivor must produce evidence of expenses actually incurred by him, France v.

Kentucky Farm Bur. Mut. Ins. Co., 605 S.W.2d 773 (Ky.App. 1980). However, the

Court of Appeals subsequently held that such loss was payable where the decedent

would have rendered personal and household services, Kentucky Farm Bur. Mut.

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Ins. Co. v. McQueen, 700 S.W.2d 73 (Ky.App. 1985). This reversal of position is

based on a Supreme Court case construing the word incurred.

It must, however, be the claimant's loss, and accordingly the Court has held

that no loss was shown where claimant's father's corporation, and not the claimant,

had to replace him. Holsclaw v. Kenilworth Ins. Co., 644 S.W.2d 353 (Ky.App.

1982).

8.4. DEAD MAN STATUTE

A significant limitation on a survivor's ability to "conjur" claims is the Court of

Appeals holding in France v. Kentucky Farm Bur. Mut. Ins. Co., 605 S.W.2d 773

(Ky.App. 1980). Testimony by a survivor as to transactions with the decedent were

held inadmissible under the so called Dead Man statute. Under that statute,

however, a disinterested person could testify as to such a transaction if the

testimony was otherwise admissible. However, to the extent that the Kentucky

Rules of Evidence have modified the Dead Man statute, this impediment has been

removed.

8.5. MULTIPLE SURVIVOR CLAIMS

There may be cases in which an insured's death results in an economic loss

to more than one survivor. In such a case, each survivor's claim is separate, and

the release of one does not release any others, Howard v. Hamilton, 612 S.W.2d

345 (Ky.App. 1981). A question which has not been addressed is priority among

survivors. The PIP policy limits apply to all persons entitled to benefits from any

one injury. The MVRA is silent, however, as to any priority among survivors. The

most logical solution is that priority be determined by when a particular loss became

due. However, where the collective loss is substantially greater than policy limits,

the safest course may be to petition the Court to distribute the proceeds, so as to

avoid the possibility of being required to make a double payment.

9. CALCULATION OF NET LOSS

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The measure of PIP benefits is net loss as defined in the MVRA. The act sets

out specific deductions which may taken by the carrier in making such calculations.

In Kentucky Farm Bur. Mut. Ins. Co. v. Allstate Ins. Co., 681 S.W.2d 919 (Ky.App.

1984), the Court of Appeals held that these exceptions were exclusive, and that a

claimant could recover as work loss sums which had been paid to her under a union

contract, even though a double recovery was thereby allowed. This was based in

large part on the collateral source rule, the premise of which is that a tortfeasor

should not receive a windfall from the fact that the victim procured insurance.

Obviously, the reason for the rule has no application to a no fault system. The Court

of Appeals ignored the fact that if the claimant was paid, particularly if by a work

related source, then no net loss has been sustained. However, until the Supreme

Court reviews the issue the holding stands.

9.1. WORKERS' COMPENSATION

The MVRA specifically provides for a set off for Workers' Compensation,

which is the equivalent of a coordination of benefits clause in other policies. The set

off encompasses benefits paid or payable, which prevents the injured person from

choosing the source of compensation. The effect of the statute is to make no fault

secondary to the Workers' Compensation system. Morrison v. Kentucky Central Ins.

Co., 731 S.W.2d 822 (Ky.App. 1987).

9.2. INCOME TAX SAVINGS

Where a benefit is paid, either under no fault or as a set off, to compensate

loss of income, a further deduction is allowed to the PIP carrier in the amount of the

tax savings seen by the claimant. In other words, if a claimant lost $1,000.00 in

wages, and would have been required to pay $100.00 in taxes, the net loss may be

reduced by $100.00. Apparently this set off encompasses federal, state and local

income taxes, but is unlikely to be construed to cover other deductions such as

FICA although arguably a tax on income. This set off is, however, limited to 15% of

the loss of income.

9.3. UNINSURED MOTORIST COVERAGE

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Situations may arise wherein a claim is made by a particular insured under

PIP and uninsured motorist coverage. In State Farm Mut. Auto. Ins. Co. v. Fletcher,

578 S.W.2d 41 (Ky. 1979), the Court held that a dollar for dollar set off could not be

taken for coverage provided under either against the other, so as to reduce the

coverage available under either, even if the policy so provides. However, an

insured cannot recover under each coverage for the same item of damage.

10. OTHER LIMITATIONS ON BENEFITS

In ascertaining the entitlement of a particular claimant, and after net loss is

computed, two further considerations exist, which may in some cases reduce the

amount to be paid as PIP.

10.1. AMOUNT PER WEEK

Any basic benefits for work loss, survivor's economic loss, replacement

services loss or survivor's replacement services loss are not to exceed $200.00 per

week per injured person. For a period of less than a week, the limitation is pro-

rated downward. An exception of sorts exists for seasonal or irregular employees in

that the limit is to be adjusted upward toward an annual basis. KRS 304.39-130 by

its own terms would not apply to added reparation benefits, although an insurer

presumably may through policy provisions provide similar limitations.

10.2. ACCRUAL OF LOSS

Benefits are not payable until loss accrues, which is when the expense or

loss is incurred. The statute on its face would indicate that there can be no recovery

for future loss or expense. However, the Court has indicated that, in the context of

survivor's replacement services, loss recovery could be had for loss of services

which it is reasonably probable would have been rendered in the future, Couty v.

Kentucky Farm Bur. Mut. Ins. Co., 608 S.W.2d 370 (Ky. 1980). However, in

Wemyss v. Coleman, 729 S.W.2d 174 (Ky. 1987), the Court held that this rule does

not extend to other types of loss. It should be noted that the Court refrained from

approving or disapproving of the Couty opinion, and thus there is still room to argue

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that future loss is not recoverable even in the context of survivor=s replacement

services loss.

11. PERSONS EXCLUDED FROM PIP COVERAGE

The MVRA provides for three types of persons who can never be entitled to PIP

benefits, even though they meet the requirements set out above.

11.1. PERSONS WHO HAVE REJECTED

Any person who has filed a rejection with Commissioner of Insurance is not

entitled to PIP benefits under the Act, unless he has purchased them as additional

benefits. Presumably, he could only recover from his carrier. A person who is from

another state that does not have the equivalent of basic reparations benefits, even

if the liability coverage requirement of at least 25/50/10 is met, will be entitled to

benefits under the Kentucky program.

11.2. INTENTIONAL INJURY

The MVRA specifically excludes any person from PIP coverage who

intentionally injures or attempts to injure himself or another person. It must have

been his intent to cause the injury, however, and is not enough that his act was

intended or that it was reckless. This applies to his survivors, and will bar his claim if

he is a survivor.

11.3. CONVERTED MOTOR VEHICLES

The MVRA specifically excludes any person who converts a motor vehicle

from PIP coverage under any policy other than one in which he is a named insured

or a spouse, minor or relative living in the same household as a named insured.

This applies to survivor's benefits as well, whether on his behalf or to be collected

by him. This exclusion will not apply if he had a good faith belief that he was entitled

to use the vehicle. A further limitation is found in the requirement that the injury

arose out of the use of the converted, and not some other, vehicle.

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The fact that a vehicle was converted does not, however, affect the rights of

a passenger to collect PIP benefits where the passenger does not have knowledge

of the conversion, Stuart v. Capital Enterprise Ins. Co., 743 S.W.2d 856 (Ky.App.

1988).

12. CARRIER RESPONSIBLE

The coverage for PIP benefits is triggered by the relationship of a particular

vehicle with the injury in question, and the connection required depends on the situs

of the injured person at the time of the injury. A self-insured trucking company is a

reparations obliger for the purpose of determining who is liable for benefits, Bohl v.

Consolidated Freightways Corp., 777 S.W.2d 613 (Ky.App. 1989).

12.1. OCCUPANTS

Where the injured person is occupying a motor vehicle at the time of the

accident, the primary carrier is the carrier providing insurance for that vehicle. The

unresolved problem in this connection is whether occupancy equates with use of a

motor vehicle, for if not, then persons entering into or alighting from a vehicle are

not covered. It is inconceivable that the Court will allow such a gap, and thus the

vehicle's carrier is most likely responsible in such a case.

12.2. PEDESTRIANS

Where the injured person is a pedestrian at the time of his injury, the primary

carrier is the carrier providing coverage for the vehicle which struck the pedestrian.

The critical fact is the physical contact between pedestrian and vehicle. In State

Farm Mut. Auto. Ins. Co. v. Kentucky Farm Bur. Mut. Ins. Co., 671 S.W.2d 258

(Ky.App.1984), the Court of Appeals noted that it was not necessary for the striking

vehicle to be in operation. Therein, the injured person was attaching a tow rope

between two vehicles, and a third vehicle collided with same, causing him to be

pinned between them. The Court stated that, if the injured person was considered a

pedestrian, the vehicle which was pushed into him was the vehicle that struck him,

and it did not matter that the third vehicle caused his injury. The Court did not reach

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the more difficult question of who had primary coverage as between the two

vehicles which came into actual contact with him.

The Court of Appeals subsequently held that a pedestrian could recover from

either of the carriers insuring the two vehicles which struck him, without regard to

which vehicle caused his injury, Capital Enterprises Ins. Co. v. Kentucky Farm Bur.

Mut. Ins. Co., 804 S.W.2d 377 (Ky.App. 1991). In a footnote, the Court left open

whether the carrier who paid could seek contribution from the other.

12.3. EFFECT OF NO PRIMARY CARRIER

In the event that the vehicle whose carrier would be primary is unsecured,

the MVRA establishes secondary coverage. Such an injured person may look to

any policy as to which he is a "basic reparation insured." The latter phrase includes

named insureds as well as a spouse or relative of a named insured, or a minor in

the custody of a named insured, as long as such persons reside in the same

household as the named insured. Where there is more than one such policy, the

injured person may collect from any one of them, and there is no statutory method

for distributing such a loss among secondary insurers. It should be noted that

secondary liability may exist where the insured vehicle is in the state of Kentucky

and the injury occurs in another vehicle in another state. Dairyland Ins. Co. v.

Assigned Claims Plan, 666 S.W.2d 746 (Ky. 1984).

Recently, the Kentucky Supreme Court, for no apparent reason, decided to

rewrite the Act and held that the insurance covering the driver can also be

secondary. Samons v. Kentucky Farm Bureau Mutual Ins. Co., 399 S.W.3d 425

(Ky. 2013). It remains to be seen if the driver's insurer in this context is primary

over the statutory secondary carrier, or how one decides which should pay.

12.4. EFFECT OF NO INSURANCE

Occasionally a claim may arise wherein there exists no primary or secondary

insurer as to a particular claim for PIP benefits, or such insurance is unidentifiable

or unavailable. For such occasions the legislature created the Kentucky Assigned

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Claims Plan and the assigned claims bureau to administer same. This procedure

eliminates any possibility of suit against an uninsured motorist for PIP benefits.

In Blair v. Day, 600 S.W.2d 477 (Ky.App. 1979), an uninsured pedestrian

brought such a suit against an uninsured motorist, which the Court dismissed. The

fact that the pedestrian was uninsured did not bar a claim against the plan in that

the plaintiff was not occupying an unsecured vehicle owned by him, and the

assigned claims plan was held to be the exclusive method of obtaining benefits in

such a case.

12.5. LEASED VEHICLES

A special problem can arise where the vehicle is leased, and both the lessor

and lessee have purchased insurance. It is clear that if the leased vehicle is the

primary vehicle, one of the two is the primary carrier but as between them the

question is not clear. The only suggestion which appears from the MVRA is that the

fact that it is the owner who is required to provide security. Thus, it is arguable that

the MVRA contemplates the lessor to be responsible. If, however, the lessee has

agreed to purchase insurance, the lessee's carrier could be ultimately liable to the

lessor's carrier. It is equally arguable, however, that the MVRA's distribution of

liability is final and not to be altered by contract or that such a contractual provision

does not give such a right of action to the carrier. Until a court decides the question,

no view is sure, and one can only be aware of the problem.

12.6. LIMIT ON AMOUNT

Except where additional benefits are involved, each injured person can

recover PIP from only one carrier, and not in excess of $10,000. Thus, when

presented with a claim for PIP, if any benefits have been paid, even if less than

$10,000, such would appear to be a complete defense to liability for PIP benefits.

12.7. DENIAL BY PRIMARY CARRIER

Where the primary carrier exists, is identifiable, and should pay benefits but

does not, the injured person may look to any secondary carrier in the same manner

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as though there were no security. However, in such a situation the statute provides

for a right of full reimbursement over and against the primary carrier. The right to

reimbursement is not based on the law of torts, but rather on the duty to pay under

the MVRA, Affiliated FM Ins. Cos. v. Grange Mut. Cas. Co., 641 S.W.2d 49

(Ky.App. 1982). Therefore, it is not governed by the rules of ordinary subrogation,

and could be construed as an assignment of the injured person's right to PIP

benefits. If the Court ultimately were to adopt that construction, the secondary

carrier would be entitled to interest and penalties to the same extent that the injured

person would have been allowed.

13. PRESENTMENT OF CLAIMS

The MVRA places duties upon both the injured person and the carrier with respect

to the handling of claims. The injured person has the duty to furnish the carrier with

proof of the fact and amount of loss, while the carrier has specific duties with

respect to rejection or payment of claim.

13.1. PROOF OF LOSS

The burden is on the injured person to furnish reasonable proof of the fact

and amount of loss. The purpose of the requirement is to give the carrier an

opportunity to investigate the claim so as to ascertain its rights and liabilities prior to

payment of the claim, State Auto. Mut. Ins. Co. v. Outlaw, 575 S.W.2d 489 (Ky.App.

1978). The injured person has the duty to furnish the carrier with copies of the

medical bills incurred, even if the carrier could obtain them itself. A mere offer to

furnish the bills does not trigger any obligation on the part of the carrier, Automobile

Club Ins. Co. v. Lainhart, 609 S.W.2d 692 (Ky.App. 1980).

Likewise, the injured person is obligated to furnish any medical reports

within his possession, and an authorization to inspect any medical reports or

records in the possession of a physician or hospital, Kentucky Farm Bur. Mut. Ins.

Co. v. Roberts, 603 S.W.2d 498 (Ky.App. 1980). As to information not in the

possession of the injured person, however, it is the carrier's duty to search out such

reports, or to cause them to be prepared.

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The tender of medical bills is sufficient in light of the presumption of

reasonableness, Daugherty v. Daugherty, 609 S.W.2d 127 (Ky. 1980). It is the duty

of the carrier to determine whether the loss was reasonably needed, and the mere

fact that another professional would have treated the patient differently is insufficient

ground for denying a claim, Shelter Mut. Ins. Co. v. Askew, 701 S.W.2d 139

(Ky.App. 1986).

13.2. INDEPENDENT MEDICAL EXAMINATIONS

If the mental or physical condition of a claimant is material to a pending

claim, the carrier may petition the Circuit Court for an Order directing an

independent medical exam. The standard is a showing of good cause, which is not

defined by the statute. KRS 304.39-280(3) creates an independent cause of action

in circuit court to resolve issues of this type. State Farm Mut. Auto. Ins. Co. v.

Caudill, 136 S.W.3d 781 (Ky.App. 2004)

The Court has not given much guidance as to what Agood cause@ requires,

but has indicated what is not sufficient. In Grant v. State Farm Mut. Auto. Ins. Co.,

896 S.W.2d 24 (Ky.App. 1995), the Court held that the Circuit Court abused its

discretion by ordering an examination because the Appellate Court could not

determine the reason for the examination. The petition simply recited the language

of the statute, and apparently was filed simply because the liability carrier advised

that it would no longer honor subrogation.

In Miller v. United States Fed. & Guar. Co., 909 S.W.2d 339 (Ky.App. 1995),

the PIP carrier relied on its policy provisions in seeking an examination. The Court

held that the insurer must demonstrate affirmative proof that good cause exists.

The Court referred to a Pennsylvania case in which the case had been submitted to

peer review. The safest way to seek an examination would be to have the IME

physician review the records and execute an affidavit indicating such to be

necessary. The Court may also impose limitations on the IME, including a

requirement that the examination be videotaped, upon a showing of good cause.

Tuttle v. Perry, 82 S.W.3d 920 (Ky. 2002); Metropolitan Prop. & Cas. Ins. Co. v.

Overstreet, Ky., 103 S.W.3d 31 (2003); Primm v. Isaac, 127 S.W.3d 630 (Ky. 2004).

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13.3. REJECTION OF CLAIM

Once the injured person submits a claim, and the carrier determines that his

proof is insufficient, it is the duty of the carrier to promptly notify him, in writing, of

the rejection and reasons therefore. Stating the reason(s) is the most critical aspect

of this procedure.

The purpose of this requirement is to keep the injured person from being

lulled into the false impression that he has complied with his duties, State Auto. Mut.

Ins. Co. v. Outlaw, 575 S.W.2d 489 (Ky.App. 1978). Where the claim is rejected

due to the insufficiency of the proof of loss, or due to the fact that an expense was

not reasonably necessary the failure to specify the defect will result in a waiver of

the insufficiency of the proof, Shelter Mut. Ins. Co. v. Askew, 701 S.W.2d 139

(Ky.App. 1986). Likewise, if the claim is rejected for a reason other than that the

injured person is not entitled to the benefits, he must be informed that he may file a

claim with the assigned claims plan, advising him of the name and address of the

bureau.

Where a complaint is filed by the claimant before the 30 day period expires,

the answer to the complaint is a sufficient written denial of the claim, Holzhauser v.

West American Ins. Co., 772 S.W.2d 650 (Ky.App. 1989).

13.4. TIME TO PAY

The MVRA allows thirty days within which to pay a loss, which begins to run

upon receipt of a reasonable proof of loss. The time does not begin to run on a

claim as to which the proof is insufficient, provided that the claim was properly

rejected, Compare State Auto. Mut. Ins. Co., v. Outlaw, 575 S.W.2d 489 (Ky.App.

1978). Payments are to be made each month for the loss which accrued that

month. A carrier may accumulate loss for a period not exceeding 31 days, provided

that payment is made within 15 days of the end of that period. Where the injured

person has tendered sufficient proof as to a part of his loss, that portion must be

paid during the period it accrued only if it exceeds $100.00.

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13.5. WHO TO PAY

An insured is now allowed to designate how the available benefits may be

distributed among different items of loss. KRS 304.39-241. This designation must

be in writing and only applies to payments made after the written designation is

received by the insurer. Thus, if an insured has other medical insurance he may

prefer that no-fault benefits be reserved for wage loss so as to maximize coverage

for his overall loss. Where such a designation is made and the insurer has been

directed to pay loss other than medical, the failure to pay a medical provider does

not render payment overdue. KRS 304.39-210(1).

At the same time that the legislature amended the Act to allow for such a

designation, it also repealed the provision which allowed for an assignment of

benefits. Accordingly, a medical provider no longer has a direct claim for medical

benefits, regardless of whether a designation has been made under KRS 304.39-

241. Neurodiagnostics, Inc. v. Kentucky Farm Bureau Mut. Ins. Co., 250 S.W.3d

321 (Ky. 2008). This holding would seem to have the practical effect of allowing a

claimant to accept payment of medical benefits and choose which bills to pay. It

may even permit the claimant to stiff the medical provider, although the medical

provider may have a claim against the patient where the payment was for medical

bills since these changes do not affect the priority of payment based on when the

loss is incurred.

As a result, it became common for plaintiff's attorneys to demand direct

payment of medical expense to the claimant. The Court of Appeals has held that

this may be improper where the claimant has not paid the medical expense,

because until payment is made the loss has not accrued. In Medlin v. Progressive

Direct Ins. Co., --- S.W.3d ----, 2013 WL 1365912 (Ky.App. 2013), the Court held

that there were two options set out in the MVRA for the payment of medical

expense benefits. First, the insurer may pay the provider directly, or second,

reimburse the claimant after he has paid the provider. The opinion suggests a third

option, issuing a check payable to the claimant and provider may be acceptable as

well.

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Not considered in Medlin is the impact of amendments to KRS 304.39-241,

which became effective on July 12, 2012. This statute now permits the claimant to

direct payments of medical benefits to (1) A health benefit plan as defined by KRS

304.17A-005(22); (2) A limited health service benefit plan as defined by KRS

304.17C-010; (3) Medicaid; (4) Medicare; or (5) A Medicare supplement provider.

To the extent this statute suggests that payment can be directed away from

Medicare, it is clearly in conflict with the Medicare Secondary Payer Act, which in

general gives Medicare reimbursement a priority over all other potential payees.

14. INTEREST

The effect of allowing a carrier 30 days to pay a claim is to establish an interest free

period during which the claim might be investigated. Once that time has elapsed,

however, payment is "overdue", and accordingly bears interest at the rate of 12%

per annum. A medical provider has no standing to enforce a claim for interest.

William C. Eriksen, P.S.C. v. Kentucky Farm Bureau Mut. Ins. Co., 336 S.W.3d 909

(Ky.App. 2010).

15. PENALTIES

While "overdue" payments accrue interest, if they are both overdue and

delayed or denied without reasonable foundation, the penalties are applicable,

Automobile Club Ins. v. Lainhart, 609 S.W.2d 692 (Ky.App. 1980). A medical

provider has no standing to enforce a claim for penalties. William C. Eriksen,

P.S.C. v. Kentucky Farm Bureau Mut. Ins. Co., 336 S.W.3d 909 (Ky.App. 2010).

The statutory penalties for overdue payments are exclusive and thus a claimant

may not also bring a Abad faith@ action based on the Unfair Claims Practices Act.

Phoenix Healthcare of Kentucky, LLC v. Kentucky Farm Bur. Mut. Ins. Co., 120

S.W.3d 726 (Ky.App. 2003). It has not been decided whether conduct other than

delay of payment could support such an action.

15.1. REASONABLE FOUNDATION

A delay in payment to ascertain the amount of loss is reasonable, State Auto.

Mut. Ins. Co. v. Outlaw, 575 S.W.2d 489 (Ky.App. 1978); this is true even though

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the payments are overdue as a result of a failure to properly reject the claim. By the

same token, the failure to take any action on a claim where the injured person has

complied with his duties is a delay without reasonable foundation, Kentucky Farm

Bur. Mut. Ins. Co. v. Roberts, 603 S.W.2d 498 (Ky.App. 1980). More complicated

problems may arise where the proof is sufficient but questions arise as to the

propriety of the payment of benefits based thereon.

First, the investigation by the carrier may uncover facts which conflict with

those presented by the claimant. The Court has not considered the issue in this

context, but the test should be whether a reasonable person could believe the

controverting facts. Of course, those facts, if believed, must constitute a defense to

payment, Shelter Mut. Ins. Co. v. Askew, 701 S.W.2d 139 (Ky.App. 1986). Second,

the basis for denial may depend on the legal entitlement of an injured person to PIP

benefits. In most cases, the issue turns on whether the legal stand taken is a

reasonable one. The denial of a claim based on a legitimate and bona fide defense

constitutes reasonable foundation even if ultimately decided against the carrier's

position, Automobile Club Ins. Co. v. Lainhart, 609 S.W.2d 692 (Ky.App. 1980).

Thus, a carrier may explore potential defenses found in ambiguities in the MVRA or

cases construing same without fear of the imposition of penalties. By the same

token, a carrier may take a position which is novel or uncertain without acing in bad

faith, Kentucky Farm Bur. Mut. Ins. Co. v. Hall, 807 S.W.2d 954 (Ky.App. 1991).

But, a defense cannot be based on an unclear decision, or statute, which has been

clarified by a subsequent case, Kentucky Farm Bur. Mut. Ins. v. McQueen, 700

S.W.2d 73 (Ky.App. 1985). Presumably, one is always free to challenge the opinion

of an intermediate Court where it is not clearly correct and the highest Court has not

spoken on the subject.

15.2. "PREMIUM" INTEREST

Where payment is overdue and the delay or denial is without reasonable

foundation, the payments bear interest at the rate of 18% per annum. The

language of the statute is mandatory, and thus if the above described conditions are

met, then the higher rate of interest must be allowed.

15.3. ATTORNEYS FEES

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The MVRA provides that, as an ancillary to the imposition of a higher rate of

interest, an injured person may likewise recover his attorneys fees incurred in

recovery of said PIP benefits. The attorney fees need not be incurred in a civil

action, but may be recoverable if the carrier is notified of the representation prior to

payment. The language of the statute indicates that the recovery of such attorney

fees are within the discretion of the trial Court, but where the same are awarded and

an appeal is taken but not successful, the trial Court may award attorney fees

incurred on appeal, Moore v. Roberts, 684 S.W.2d 276 (Ky. 1985).

16. STATUTE OF LIMITATIONS

The MVRA establishes a specific statute of limitations which applies to the

filing of suit for recovery of PIP benefits. In the absence of such statutes, claims

would either be governed by the fifteen year limitation for actions on a contract, or

the five year limitation for actions based on a right created by statute. The

limitations imposed by the MVRA appear, however, to be all encompassing.

16.1. INJURY BENEFITS

An action for benefits must be brought within two years, but the question of

when the two years begins to run varies. Where no benefits have been paid to the

injured person, two facts must be present before the time begins to run. First, the

loss must be suffered, and second, the injured person must know, or in the exercise

of reasonable diligence should know, that the loss was caused by the accident in

question. Without regard to the discovery of loss, or the suffering of same,

however, no action may be brought more than four years after the date of the

accident.

The Court of Appeals has considered the question of when the loss is

"suffered" within the meaning of the limitations statute, and gave the term a liberal

construction in State Auto. Ins. Co. v. Lange, 697 S.W.2d 167 (Ky.App. 1985), but

the Supreme Court may or may not agree in the event the issue should be brought

before it. In that case the accident occurred three years prior to the filing of suit,

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and the carrier argued that the first loss triggered the two year period. The Court of

Appeals rejected this argument, holding instead that the two year period began for

each given "loss" when it accrued. The Court did, however, hold that the injured

person could not bring an action which had accrued more than two years prior to

the filing of suit. Thus, under this decision, the four year "cap" is probably the most

important time frame where loss is ongoing, and the two year period is in effect a

limitation on the amount recoverable.

If the injured person has been paid PIP benefits, however, the two year

period begins to run on the date of the last payment. This would apply to another

claimant who, for example, has sustained a replacement services loss, without

regard to whether such person had himself received any benefits, and vice versa.

16.2. DEATH BENEFITS

Unlike actions for injury benefits, the time within which a survivor may bring

in action depends on whether PIP benefits have been paid to a survivor or the

decedent. Where no benefits have been paid, suit must be filed within one year

from the date of death, or four years from the date of the accident, whichever comes

first. There is no requirement of discovery for survivor benefits. However, if benefits

were paid to the decedent in his lifetime, the four year period begins to run from the

date of the last payment, or one year from the date of death, whichever comes first.

Where PIP benefits have been paid to any survivor, however, a different

limitation is imposed. In such a case, any survivor, whether he was paid benefits or

not, may file an action no later than two years after the last payment of survivor

benefits. Presumably, if benefits had been paid to the decedent, and then to a

survivor, this latter limitations would apply.

16.3. BEGINNING OF TIME

Where the statute tolls the limitations period until PIP benefits have been

paid, the time begins to run on the date the last check is written, not the date

received. Dickey v. Liberty Mut. Ins. Co., 2012 WL 1556291 (Ky.App. 2012).

Where PIP benefits and med pay benefits are available, the statute will begin to run

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when the benefits paid exceed the PIP limits, Stull v. Steffen, 374 S.W.3d 355, 2012

WL 3047130 (Ky.App. 2012), regardless of how the benefits are designated. Cole v.

Fagin, --- S.W.3d ----, 2013 WL 1694758 (Ky.App. 2013).

16.4. SURVIVAL OF ACTIONS

The Court has not yet considered the question of whether an injured person's

estate may recover benefits which were due to the decedent during his lifetime but

not paid. This question is of particular interest where the death is unrelated to the

accident. At least as early as 1797, actions in contract have been held to survive,

See Kennedy v. McAfee=s Ex=s, 1 Litt. 169 (Ky. 1822). In other contexts the Court

has held that a claim for PIP benefits was an action in contract, See France v.

Kentucky Farm Bur. Mut. Ins. Co., 605 S.W.2d 773 (Ky.App. 1980), and thus such a

claim would appear to be subject to survival.

The interesting but unresolved question arises, however, where the decedent

did not satisfy his duties with regard to proof of loss prior to death. PIP benefits are

not due until such duties are complied with, and thus it may be argued that there

were, in such a case, no benefits due at death, and accordingly the claim cannot

survive.

16.5. EFFECT OF LEGAL DISABILITY

The legislature has enacted tolling provisions in the general statute of

limitations chapter which toll the limitations as to persons who are infants or of

unsound mind. In the context of claims for PIP benefits, however, the MVRA

specifically provides that the period of such a disability shall be counted as a part of

the time for commencement of an action. It is not clear whether the Court will

ultimately find this exception to the tolling provisions to be violative of the Kentucky

Constitution, Fann v. McGuffy, 534 S.W.2d 770, 778 (Ky. 1975).

16.6. SUITS AGAINST WRONG CARRIER

Where a claimant files suit in timely fashion but it is determined that such

carrier is not responsible due to the priority provisions, then the claimant is allowed

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60 days in which to bring suit against the carrier whose coverage applies or the

assigned claim plan. The time begins to run as of the date that the initial action

became final, or the date which the suit could have otherwise been brought,

whichever is later.

16.7. ASSIGNED CLAIMS PLAN

While the limitations periods outlined above would be applicable in the

ordinary case where the assigned claims plan is involved, a special provision has

been made for the filing of suit on such claims. A suit on an assigned claim must be

filed within sixty days after notice is received that the carrier to which the claim was

assigned has rejected the claim. However, this limitation is subject to the above

discussed limitations periods, and thus can only serve to extend said periods.

17. APPLICATION OF THE THRESHOLDS

In exchange for the entitlement to benefits for economic loss without regard

to fault, the MVRA places limitations upon the right of certain persons to sue for

non-economic loss. The MRVA "abolishes" the right to sue unless certain

thresholds are met.

17.1. PERSONS SUBJECT TO THRESHOLD

As noted above, the types of persons to which the MVRA is applicable is

very broad. However, the class of persons to which the threshold applies is more

restricted. Thus, some persons may be entitled to the benefits of the MVRA without

being subject to its limitations. The MVRA specifically provides that the limitations

on the right to sue do not apply to injured persons who are not owners, operators,

maintainers or users of a motor vehicle. As far as the first three are concerned no

disparity is apparent. However, the MVRA defines a "user" in a way which is

different than a person using a motor vehicle, See Schroeder v. Atkins, 657 S.W.2d

945 (Ky. 1983).

In the original legislation the term "user" was simply defined as a "basic

reparation insured" or one who would have been had he not rejected the MVRA.

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This definition led the Court of Appeals to hold that an uninsured passenger was not

subject to the threshold requirements, Dixon v. Cowles, 562 S.W.2d 639 (Ky.App.

1977). Such a holding would have likewise been applicable to such pedestrians and

infants.

Effective July 17, 1978, the meaning of the term user was redefined by the

legislature, and now means "a person who resides in a household in which any

person owns or maintains a motor vehicle. In Lawrence v. Risen, 598 S.W.2d 474

(Ky.App. 1980), the Court of Appeals held that under the amendment the sole

criterion was whether a rejection was filed with the Commissioner of Insurance. In a

dissenting opinion, Judge Vance argued that it was incumbent upon the defendant

to show that the injured person was an owner, operator, maintainer or user. Six

years later, however, Justice Vance authored the majority opinion for the Supreme

Court in Whitman v. Lowe, 702 S.W.2d 436 (Ky. 1986), which, without saying so

specifically, overruled Lawrence.

In Whitman a nine year old bicyclist was struck by a motor vehicle but had

not met the threshold. The Supreme Court held that, absent some evidence that the

child was a user as that term is defined, the threshold does not apply. Thus, a

defendant may not rely on the presumption of acceptance to establish the

applicability of the threshold where the injured person is not operating a vehicle at

the time of the injury, See Thomason v. Piasta, 662 S.W.2d 223, 225 (Ky.App.

1983).

In a concurring opinion Justice Liebson argued that it is also necessary that

the person be using a motor vehicle at the time of the accident. In reaching this

conclusion the difference between a "user" and a person "using" a motor vehicle is

ignored, and in light of the stated difference is clearly incorrect. However, because

of the opinion, the argument is likely to surface in the future.

It should likewise be noted that the Court of Appeals has held that a person

who has chosen not to provide PIP benefits may be sued without regard to the

threshold requirements, Davis v. Transit Authority of River City, 710 S.W.2d 873

(Ky.App. 1986). While that case involved a governmental entity which had not

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accepted the MVRA, the same rationale may apply to a defendant who has rejected

the MVRA or is uninsured.

17.2. TYPES OF ACCIDENTS

The threshold applies to liability "arising" from the ownership, maintenance or

use of a motor vehicle. The Court has not yet considered whether this phrase

differs in meaning from the test for application of the MVRA, which relates to the

injury. Thus, it is not clear whether the manufacturer of a defective tire could claim

the benefit of the threshold requirement, even though the injured person would be

entitled to PIP benefits.

In Griffin v. Thompson, 725 S.W.2d 27 (Ky.App. 1987), the Court of Appeals

held that the threshold did not apply to a suit brought by an off duty police officer

alleging a battery. The officer was pushed from a moving vehicle in the course of

assisting in an arrest. The majority opinion makes little sense other than in the

result reached. However by a concurring opinion, Judge Gudgel pointed out that

the holding was compelled by the Supreme Court's opinion regarding entitlement to

BRB benefits. Thus, the Court appears on its way to utilizing the same test for

application of the threshold as with entitlement to BRB benefits.

18. THRESHOLD REQUIREMENTS

Where the threshold is applicable, tort liability is abolished unless the plaintiff

can establish certain conditions which exist with respect to his injuries. Once met,

the MVRA provides that a plaintiff may recover for "pain, suffering, mental anguish

and inconvenience." The Court has read into the statute the entitlement to lost

earnings and impairment of earning capacity, so as to avoid serious constitutional

problems.

18.1. MEDICAL EXPENSE

The MVRA authorizes a suit in tort where the injured person has incurred

medical expense in excess of $1,000.00. To qualify for inclusion in determining the

threshold, such medical expense must meet the same criterion as required for

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payment of PIP benefits. However, medical treatment may count towards the

threshold even though no PIP benefits have been paid or are payable. If such

expenses would have been compensable but for an authorized deductible or

insurance policy they may be included in the threshold calculation. Likewise, free

treatment will be included subject to its equivalent value.

A question which remains unresolved is the time frame within which the

threshold must be met. In Higgins v. Searcy, 572 S.W.2d 623 (Ky.App. 1978), the

Court of Appeals affirmed a summary judgment on the ground that the threshold

had not been met. At the time the complaint was filed, Higgins had incurred only

$766.60 in medical expense. Searcy moved for summary judgment alleging that

Higgins had not received any medical treatment for fourteen months. Three months

after the motion was filed, Higgins began receiving treatment again. The defendant

was granted summary judgment notwithstanding an affidavit to the effect that

Higgins had incurred $917.00 in medical expense, and that future treatment was

anticipated.

It is possible that a prime factor in the Court's decision was that the facts

gave rise to a sharp inference that expenses were being run up for the sole purpose

of meeting the threshold requirements. Accordingly, the result may be different if the

treatment is more consistent. While it is not clear that the Court will ultimately adopt

such a position, a strong argument can be made that the threshold must be

exceeded prior to the expiration of the statute of limitations. Even if a complaint is

filed prior thereto, it does not state a claim until the threshold is met. Accordingly,

while the MVRA does not specifically limit the time allowable, the threshold should

be met within two years of the injury.

18.2. PERMANENT INJURY

A plaintiff may bring an action in tort if he has sustained a permanent injury

within reasonable medical probability. Obviously, the existence of such an injury is

a question which must be proven by expert testimony. The primary question in such

cases is when the defendant is entitled to a summary judgment. In Duncan v.

Beck, 553 S.W.2d 476 (Ky.App. 1977), the Court of Appeals upheld a summary

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judgment where the medical testimony of record did not support a finding of

permanency. However, in Davis v. Devers, 617 S.W.2d 56 (Ky.App. 1981), the

Court of Appeals held that it was the defendant's burden to show that there was no

permanent injury. The Davis Court distinguished its opinion in Duncan on the

ground that the plaintiff had not been given full opportunity to develop his case.

18.3. DISFIGUREMENT

In Duncan v. Beck, 553 S.W.2d 476 (Ky.App. 1977), the plaintiff had suffered

small scars on the knee which could be seen only on close examination. The Court

of Appeals held that such an injury did not constitute disfigurement within the

meaning of the MVRA, noting that one of the purposes of the threshold was to limit

lawsuits to accidents involving serious injuries. In Smith v. Higgins, 819 S.W.2d 710

(Ky. 1991), the Supreme Court overruled Duncan v. Beck, 553 S.W.2d 476 (Ky.App.

1977). In that case, plaintiff had suffered small scars on the knee which could be

seen only on close examination. The Court of Appeals held that such an injury did

not constitute disfigurement within the meaning of the MVRA, noting that one of the

purposes of the threshold was to limit lawsuits to accidents involving serious

injuries. In Smith however, the Court held any scar capable of ordinary perception

or which causes ongoing personal discomfort constitutes disfigurement. The

problem with such a test is demonstrated by the facts of the case. The majority

described the injury as five scars on the knees, the largest beings five inches. The

dissent noted that the trial Judge, who examined the knees in person, found that

they were visible only upon close examination. The dissent correctly noted that the

Smith test poses numerous problems in application, and probably eliminates this

threshold from consideration.

18.4. OTHER THRESHOLDS

Notwithstanding the failure of a plaintiff to meet the foregoing threshold

requirements, it should be noted that the claimant may pursue his rights in tort if he

has sustained a fracture of a weight bearing bone; a compound, comminuted,

displaced or compressed fracture of any bone; loss of a body member; permanent

loss of a bodily function; or if he dies as a result of the accident.

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19. ABOLISHED LIABILITY

Where the threshold applies, tort liability is abolished to the extent that PIP

benefits are paid or payable, or that would be payable but for any authorized

deductible, or under any insurance policy. In short, a plaintiff may not recover the

first $10,000.00 of economic loss in such a case.

19.1. PIP BENEFITS PAID OR PAYABLE

The Court of Appeals was faced with an unusual situation in Hargett v.

Dodson, 597 S.W.2d 141 (Ky.App. 1979), wherein the tortfeasor's carrier was also

the carrier responsible for payment of PIP benefits. The Court therein held that the

tortfeasor was entitled to a credit for such sums as were paid by the carrier under

the MVRA. Subsequently, in Dudas v. Kacamarek, 652 S.W.2d 868 (Ky.App. 1983),

the Court of Appeals held that a credit was due for PIP benefits paid where the

parties were not covered by the same carrier.

Likewise, the Court indicated that it did not matter whether PIP benefits were

actually paid. In Thompson v. Piasta, 662 S.W.2d 223 (Ky.App. 1983), the Court of

Appeals held that it was immaterial whether the plaintiff attempted to collect PIP

benefits, the sole question being whether such benefits were payable. But see

Slone v. Caudill, 734 S.W.2d 281 (Ky.App. 1997) in which another panel seemed to

disagree without citing Thompson.

The Supreme Court held in Wemyss v. Coleman, 729 S.W.2d 174 (Ky.

1987), that the credit awarded will apply only to the extent that the benefits could be

recovered at that time. Thus, there is no credit for economic loss which has not

accrued, and the plaintiff is entitled to a full recovery of future medical expense and

loss of earning capacity, even if actual economic loss is less than $10,000.00.

However, where the jury awards more than was paid by BRB, a credit must be

applied for all past loss payable under BRB. Henson v. Fletcher, 957 S.W.2d 281

(Ky.App. 1997); Speck v. Bowling, 892 S.W.2d 309 (Ky.App. 1995). Further, the

loss for which benefits are paid must be the same as the loss for which damages

are sought. Thus, there is no credit for survivors benefits in a wrongful death action.

Luttrell v. Wood, 902 S.W.2d 817 (Ky. 1995).

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Finally, it should be noted that the abolition of tort liability applies to benefits

paid or payable under Added Reparations coverage. Saxe v. State Farm Mut. Auto.

Ins. Co., 955 S.W.2d 188 (Ky.App. 1997).

This rule has no application, however, to a workers= compensation carrier=s

claim for subrogation. Jefferson Cty. Bd. of Educ. v. Cowles, 982 S.W.2d 224

(Ky.App. 1998). This makes sense given the fact that comp is primary as to no-fault

and therefore represents a distinct loss from that paid or payable by PIP.

One must be careful, however, where a case is submitted for trial where

benefits, if causally related, are payable under the Act but have not been paid. In

Jewell v. Kentucky School Board Assoc., 309 S.W.3d 232 (Ky. 2010), the no-fault

insurer had paid only a small portion of the medical bills that the jury found causally

related. The Supreme Court discerned a rule from the Slone and Hensen cases

that the credit for unpaid but payable medical benefits does not apply if the provider

refused to pay them. The opinion turned on the failure of the defendant to request

findings on that issue, but probably also establishes a new rule in the context of

trial. The dissent suggests that there is some support for eliminated the payable

portion of the statute from the credit altogether, so this issue bears watching in the

future.

19.2. UNINSURED PLAINTIFFS

As to most uninsured plaintiffs the above discussion applies. However, where

the owner of a vehicle which is uninsured is injured while occupying that vehicle, no

PIP benefits are payable to such plaintiff. In Gussler v. Damron, 599 S.W.2d 775

(Ky.App. 1980), the Court of Appeals held that an uninsured motorist who exceeded

the threshold could bring an action in tort. Based on the idea that an uninsured

motorist should not receive an advantage by reason of his failure to comply with the

MVRA, the Court of Appeals held in Stone v. Montgomery, 618 S.W.2d 595

(Ky.App. 1981), that such a plaintiff could not recover for such loss as would have

been payable under the MVRA. In effect then, an uninsured motorist waives the

right to recover the first $10,000.00 of economic loss in a suit against a tortfeasor.

See also Bartlett v. Prime Ins. Syndicate, Inc., 156 S.W.2d 299 (Ky.App. 2005).

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This principle was likewise applied to an uninsured motorcyclist in Miller v.

Barr, 737 S.W.2d 182 (Ky.App. 1987). The Supreme Court was not asked to review

the decision, and it would seem to be inconsistent with the reasoning in Stone. In

that a motorcyclist is not required to reject the MVRA, it follows that he could comply

with the act and still not have benefits paid or payable. Thus, the Miller case

penalizes a motorcyclist rather than putting him on an even footing with a secured

person.

19.3. EFFECT AT TRIAL

At least where there is no claim asserted by a PIP carrier, the question is

raised as to the role expenses which are payable under the MVRA may play at trial.

In Frith v. Lambdin, 703 S.W.2d 890 (Ky.App. 1986), the Court of Appeals was

presented with the question but the holding of the Court was based on the failure to

preserve the error. However, the Court noted that evidence as to medical expense

was admissible to prove that the plaintiff met the threshold. The Supreme Court

was likewise confronted with this issue in Carter v. Dale, 718 S.W.2d 126 (Ky.

1986). Therein the Court held that it was reversible error to submit expenses paid

by PIP to the jury where the carrier had not asserted a claim. In a concurring

opinion, Justice Liebson argued that such expenses would nonetheless be

admissible to prove pain and suffering. If the majority of the Court ultimately accepts

this proposition, such admissible expenses should be limited to medical expense.


Prior to the adoption of the MVRA automobile accidents were subject to the

general one year limitation governing other actions for personal injury. However,

the MVRA provides:

An action for tort liability not abolished by KRS 304.39 060 may be

commenced not later than two years after the injury, or the death, or

the last basic or added reparation payment made by any reparation

obligor, whichever later occurs.

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It is the issuance of the check for PIP benefits, not the receipt or negotiation of

same, which triggers the statutory time. Wilder v. Noonchester, 113 S.W.3d 189

(Ky.App. 2003). Payments made under other coverages, such as med pay, do not

extend the limitations period. Lawson v. Helton Sanitation, Inc., 34 S.W.3d 52 (Ky.

2001). So far, the discovery rule has not been applied to automobile cases, but the

Supreme Court when asked to review the issue, declined. Frost v. Dickerson, 2012

WL 592193 (Ky.App. 2012).

The Court has in the past had considerable difficulty in determining when this

limitation, as opposed to the general statute of limitations, applies.

20.1. APPLICABILITY OF MVRA LIMITATIONS

Prior to discussing the cases which have construed the limitations provision,

some discussion may prove helpful as to the language used by the legislature. First

of all, because it is a specific statute, its scope necessarily must be limited to the

scope of the MVRA itself. Secondly, consideration must be given to the meaning of

the phrase "tort liability not abolished by KRS 304.39 060. It is this phase which

has generated the most confusion. The most likely meaning intended by the

legislature is that the statute applies to cases which would be barred had the

plaintiff not met the threshold requirements. Under this view the statute would apply

only where the defendant was charged with the negligent operation of a motor

vehicle, and the one year statute would apply to cases involving other theories of

recovery, such as product liability, that are related to a motor vehicle accident.

Another view would apply the statute to any case wherein the injuries arose out of

an automobile accident, without regard to the theory of liability. This construction

renders the phrase meaningless, however, in that there is no need for a statute of

limitations where tort liability is "abolished." Unfortunately, the rule which has

resulted has nothing to do with the language of the statute or the intent of the

legislature.

The initial review of the scope of the statute occurred in Everman v. Miller,

597 S.W.2d 153 (Ky.App. 1979), wherein the plaintiff sought to have the Court of

Appeals apply the statute to a claim which arose prior to the effective date of the

MVRA. The Court refused to do so, noting that the statute applied only to actions for

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personal injury brought under the MVRA. In Tucker v. Johnson, 619 S.W.2d 496

(Ky.App. 1981), the defendant argued that the statute applied only to actions for

benefits. While this argument was patently incorrect, the Court of Appeals held that

the two year limitation applied to actions which would have been barred by the

MVRA had the threshold not been met. As noted above, this interpretation is most

consistent with what the language of the statute states.

However, the Supreme Court had not yet spoken. In Floyd v. Gray, 657

S.W.2d 936 (Ky. 1983), the Supreme Court held that a claim for loss of consortium

was governed by the one year general statute of limitations. It reasoned that such a

claim was not covered by the MVRA, and therefore its statute of limitations could

not apply. It was at this point that the Court lost sight of the statute's focus on the

nexus between the liability of the defendant and the use of a motor vehicle. In a

dissenting opinion, two justices argued that a claim was "not abolished" within the

meaning of the statute without regard to whether the threshold applied.

In the next case heard, the dissent became the majority view. In Bailey v.

Reeves, 662 S.W.2d 832 (Ky. 1984), the plaintiff's vehicle struck a cow in the

highway. An action was filed against the owner of the cow, who relied on the

general statute of limitations. The Supreme Court held that the two year limitation

provided by the MVRA applied, in that the plaintiff was one of the class of persons

the MVRA was designed to protect. According to the Court, it was of no

consequence that the defendant was a non-motorist. The Court attempted to

distinguish its earlier opinion in Floyd on the ground that therein it was the plaintiff

who was a non-motorist. Accordingly, the Supreme Court had taken the position

that the two year statute applied to all actions which involved a motor vehicle,

without regard to whether the threshold applied.

While the Bailey rule seemed clear enough, the Supreme Court has rendered

two further opinions which indicated that such was not the case. In Ashby v. Money,

717 S.W.2d 223 (Ky. 1986), the Court held that the two year limitation applied to

non resident passengers. On the same day, however, the Court rendered its opinion

in Hanley v. Downinq, in which it was held that the two year limitation did not apply

to a person who rejected the MVRA. The majority opinion turns on the fact that a

person who has rejected does not reach the threshold and thus such liability is "not

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abolished" within the meaning of the statute. Thus, at least in this one factual

situation, the Court has found it necessary to come full circle and reach the same

conclusion initially articulated by the Court of Appeals. Three Justices in dissent

point out the fact that the opinion is inconsistent with Bailey, and urged adherence

to that rule.

In Troxell v. Tramell, 730 S.W.2d 525 (Ky. 1987), the Kentucky Supreme

Court expressly overruled its opinions of a year earlier in Ashley and Hanley.

Accordingly, it is no longer relevant whether a party is covered by the MVRA. The

Court held that KRS 304.39-230(6) fully replaced the general one year limitation as

to personal injury claims brought by victims of motor vehicle accidents. However, it

is still necessary that the accident arise out of the ownership, maintenance or use of

a motor vehicle, and thus where the only vehicle involved is the claimant=s, the

issue may arise as to whether the claimant was entering into or alighting from the

motor vehicle when injured. While one can be alighting from a motor vehicle while

no longer in physical contact, West American Ins. Co. v. Dickerson, 865 S.W.2d 320

(Ky. 1993)(holding that one has not finished alighting until a new direction of activity

has been undertaken, and at least both feet are firmly on the ground), one begins to

enter a vehicle by making physical contact with the automobile. Fields v. Bellsouth

Tele., Inc., 91 S.W.3d 571 (Ky. 2002). One who has alighted from or has not yet

begun to enter the vehicle at the time of injury is subject to the one-year statute of

limitations. The same is true of a person unloading a vehicle. Interlock Industries,

Inc. v. Rawlings, 358 S.W.3d 925 (Ky. 2011)

20.2. TOLLING STATUTES

The MVRA does not contain any tolling provisions. In Lemons v. Ransom,

Ky., 670 S.W.2d 478 (1984), however, the Supreme Court held that the tolling

provisions contained in the general statutes of limitation applied to actions covered

by the MVRA.

21. NATURE OF RIGHT OF SUBROGATION

The MVRA specifically provides for the recovery of PIP benefits by the PIP

carrier. The right to subrogation applies to both basis and added reparation

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benefits, United Services Auto. Assoc. v. State Farm Mut. Auto. Ins. Co., 784

S.W.2d 786 (Ky.App. 1990). The subrogation right given is derivative, however, and

thus the carrier has no greater right to recovery than the injured person would have

had were the MVRA not applicable, Carlson v. McElroy, 584 S.W.2d 754 (Ky.App.

1979). The purpose of the right is to reallocate benefits, which are paid without

regard to fault, based on traditional fault concepts, Affiliated FM Insurance Cos. v.

Grange Mut. Cas. Co., 641 S.W.2d 49 (Ky.App. 1982). However, if the jury awards

less than the amount paid the carrier is still entitled to recover the full amount paid

as long as policy limits are not exhausted, Shelter Mut. Ins. Co. v. McCarthy, 896

S.W.2d 17 (Ky.App. 1995).

The effect of the subrogation statute is to transfer an injured person's right to

recover to the PIP carrier, and thus the PIP carrier is the only real party in interest

with respect to such a claim. Accordingly, in Stovall v. Ford, 661 S.W.23 467 (Ky.

1983), the Court held that the injured person could not release the carrier's claims,

See also State Farm Mut. Auto. Ins. Co. v. Allstate Ins. Co., 684 S.W.2d 283

(Ky.App. 1985); Zurich American Ins. Co. v. Haile, 882 S.W.2d 681 (Ky. 1994);

Hottzhauser v. West American Ins. Co., 722 S.W.2d 650 (Ky.App. 1989); Mosley v.

West American Ins. Co., 743 S.W.2d 854 (Ky.App. 1987).

22. METHODS OF RECOVERY

The right of subrogation is limited somewhat by the requirement that such a

claim be asserted in specified ways. The MVRA provides that a carrier may either

join in an existing action or arbitrate its claim. These two procedures are the

exclusive methods of asserting a subrogation claim, Progressive Cas. Ins. Co. v.

Kidd, 602 S.W.2d 416 (Ky. 1980). However, these methods of recovery are not

exclusive where a tortfeasor is uninsured, Ohio Cas. Ins. Co. v. Atherton, 656

S.W.2d 724 (Ky. 1983). These limitations on the right of subrogation have passed

constitutional muster, Fireman=s Fund Ins. Co. v. Government Employees Ins. Co.,

635 S.W.2d 474 (Ky. 1982).

22.1. JOINDER

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The most common method for joining in an insured's suit is through

intervention, but any procedure which results in the carrier being a party satisfies

the requirement, State Farm Mut. Auto. Ins. Co. v. Waldeck, 619 S.W.2d 494 (Ky.

1981). The filing of a motion to intervene is sufficient to establish the right, even if

the trial Court refuses to act on the motion, Stovall v. Ford, 661 S.W.2d 467 (Ky.

1983). Nor can the right be defeated by a voluntary dismissal of the claim by the

parties after the filing of the motion, Grange Mut. Cas. Co. v. McDavid, 664 S.W.2d

931 (Ky. 1984).

22.2. ARBITRATION

A carrier may elect to assert its subrogation claim through arbitration sixty

days after the claim has been presented to the adverse carrier. To effectuate this

option, the MVRA calls for the creation of the Kentucky Insurance Arbitration

Association. The right to recovery by this method is limited to those instances

authorized by the Association. For a copy of the Arbitration Rules, click here.

23. PERSONS SUBJECT TO SUBROGATION

A subrogation claim may be asserted against a person "other than a secured

person." Thus, suit cannot be brought against an insured person, or anyone who is

responsible for the acts or omissions of said person, See United States Fid. & Guar.

Co. v. Smith, 580 S.W.2d 316 (Ky. 1979). Therefore, the claim must be asserted

against the liability carrier of the tortfeasor(s). Where the tortfeasor is uninsured,

however, a direct action is permitted, Ohio Cas. Ins. Co. v. Atherton, 656 S.W.2d

724 (Ky. 1983). The same is true where a municipal corporation has opted out of

the no-fault system, City of Louisville v. State Farm Mut. Auto Ins. Co., 194 S.W.3d

304 (Ky. 2006), or where a tortfeasor is insured under a policy which does not

provide for no-fault. Schmidt v. Leppert, 214 S.W.3d 309 (Ky. 2007). But in such a

case, the right to subrogation does not arise until the victim is fully compensated,

Wine v. Globe American Cas. Co., 917 S.W.2d 558 (Ky. 1996).

Where the owner of a motor vehicle has failed to provide security, and

benefits are payable to a third person and would have been payable by the security

covering that vehicle, the carrier who does pay may bring a subrogation claim

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against the owner. Travelers Ins. Co. v. Bowling, 806 S.W.2d 40 (Ky. App. 1991).

This is true even through the injured person does not have a valid tort claim against

the owner.

24. EFFECT OF POLICY LIMITS

Where the defendant's liability policy is insufficient to cover the entire loss

suffered by the plaintiff, problems may arise as to how to distribute those funds and

at the same time effect the purposes of the MVRA which provides that the injured

person shall take priority. The initial reaction of the Court was to simply ignore the

liability carrier's limits. In Ohio Security Ins. Co. v. Drury, 582 S.W.2d 64 (Ky.App.

1979), the Court of Appeal held that policy limits did not apply to the carrier's

subrogation claim. However, for accidents occurring after July 17, 1978, the claim

for subrogation must be satisfied within policy limits or not at all. Where the case

goes to the jury there is no problem. The plaintiff is first entitled to all loss not

payable in PIP benefits, and the carrier is entitled to its loss second, to the extent

that policy limits have not been consumed. In this context, the term policy limits

does not include the limits of an excess policy, State Auto Mut. Ins. Co. v. Empire

Fire & Marine Ins. Co., 808 S.W.2d 805 (Ky. 1991). Where the value of the case is

set by the parties, however, and limits are expended, a more difficult question is

raised.

Such a case was considered by the Court of Appeals in Fireman's Fund Ins.

Co. v. Bennett, 635 S.W.2d 482 (Ky.App. 1981), aff=d on other grounds, 635

S.W.2d 475 (Ky. 1982), wherein the plaintiff had effected a settlement for policy

limits. The PIP carrier argued that it was entitled to have the reasonableness of the

settlement submitted to the jury. The Court noted that the claim far exceeded the

policy limits, and that the parties should have the freedom to settle. It is clear that in

a closer case this procedure could easily result in abuses by the parties in the case.

A liability carrier could agree to pay more than the plaintiff's claim is worth to avoid

the cost of litigation, all to the disadvantage of the PIP carrier. Therefore, a PIP

carrier should be entitled to a determination of the damages sustained by the

plaintiff, for the sole purpose of determining whether the plaintiff is entitled to keep

the entire policy limits. In a proper case, the Court may consider adopting such a

procedure.

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25. ATTORNEYS FEES

In connection with the grant of a right of subrogation for PIP benefits, the

MVRA provides that the attorney for the insured plaintiff shall be entitled to a

reasonable attorney fees. The statute raised two questions, those being, when an

award is appropriate, and the amount which is reasonable.

25.1. ENTITLEMENT TO FEE

There need be no contractual relationship between the PIP carrier and

plaintiff's counsel for the statute to apply. In Meridian Mut. Ins. Co. v. Walker, 602

S.W.2d 181 (Ky.App. 1980), the Court of Appeals defined representation as "that

which decidedly influences the opinion and action of the lower court. There must,

however, be a recovery on the part of the PIP carrier. Thus, in State Farm Mut.

Auto. Ins. Co. v. Beard, 636 S.W.2d 26 (Ky.App. 1982), the court held that plaintiff's

counsel was not entitled to a fee where the same carrier held coverage for the

plaintiff and defendant. This was true even though the carrier obtained the

equivalent of a recovery of a credit against liability. The requirement of a recovery

should likewise be dispositive where policy limits are insufficient to cover the loss.

The Kentucky Supreme Court considered this matter in Baker v. Motorists

Ins. Cos., 695 S.W.2d 415 (Ky. 1985), and held that no benefit was conferred where

there was no dispute as to liability or benefits paid. However, the Court held further

that where a benefit was conferred on the PIP carrier, the award of a reasonable

attorney fee is mandatory, See also Morris v. Nationwide Mut. Ins. Co., 657 S.W.2d

248 (Ky.App. 1983). There can be no fee where the PIP carrier has asserted its

claim by way of arbitration, MFA Ins. Co. v. Carroll, 687 S.W.2d 553 (Ky.App. 1985).

25.2. AMOUNT OF FEE

In Woodall v. Grange Mut. Cas. Co., 648 S.W.2d 871 (Ky. 1983), the

Kentucky Supreme Court held that the amount of the fee to which a plaintiff's

counsel is entitled rests within the sound discretion of the trial judge. Accordingly,

such an award is virtually appeal proof, absent a clearly unreasonable award. It

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should be noted that recoverable attorney fees do not include non-taxable

expenses, Shelter Mut. Ins. Co. v. McCarthy, 896 S.W.2d 12 (Ky.App. 1995).


A claim for PIP subrogation asserted by joinder in an existing action may be

brought within five years of the date it accrues, Gray v. State Farm Mut. Auto. Ins.

Co., 605 S.W.2d 775 (Ky.App. 1980). Presumably, the cause of action accrues at

the time of the accident for which PIP benefits may be payable.

Where subrogation is pursued by arbitration, the limitations is supplied not by

statute but by the Kentucky Insurance Arbitration Association. In this instance, the

claim must be asserted within 1) two years from the date of the last basic reparation

benefit, or 2) two years from the date of settlement of the last injury claim arising out

of the accident, or 3) two years after the last expiration of the limitations for the

bodily injury claims arising from the motor vehicle accident, whichever of these

occurs latest. KIAA Plan of Operation at Article 4.C.

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http://www.kyinsplans.org/KIAA%20Plan%20of%20Operations%20Eff%20%2007%2015%20%202010.pdf

BIOGRAPHY OF J. WARREN KELLER

J. Warren Keller, senior partner in the law firm of Taylor, Keller & Oswald in London and Lexington, Kentucky, is a graduate of Rider University and received his law degree in 1979 from the College of William and Mary, Marshall-Wythe School of Law, and has practiced in the area of civil litigation with a focus on insurance defense for over 30 years. Mr. Keller has had a long-standing professional interest concerning the problem of insurance fraud with a particular emphasis on arson and other first-party claims. Mr. Keller has served as president of the National Society of Professional Insurance Investigators (NSPII) and is a founding member and past president of the Kentucky Chapter of the National Society of Professional Insurance Investigators, which bestowed upon him its distinguished service award in 2000, recognizing his success in combating insurance fraud. Mr. Keller also received the F. Lee Brininger investigator of the year award in 2004 from NSPII. Mr. Keller is a past vice chair of the property insurance law committee of the American Bar Association, having been a contributing editor of two previous American Bar Association publications in the field of insurance law. From 1996 to 2002, Mr. Keller was a member of the Board of Governors of the Kentucky Bar Association and from 2002 to 2008 Mr. Keller was a board member of the Kentucky Bar Foundation, having served as its president in 2007. Mr. Keller is currently a Trustee of the Kentucky IOLTA (Interest on Lawyers Trust Accounts) Board. Mr. Keller is a life member of the Federal Sixth Circuit Judicial Conference, having been appointed as a delegate to the Conference three times by the Hon. Eugene E. Siler, Jr., Senior Judge. Long active in pro bono and efforts to improve access to the justice system, Mr. Keller is the founding president and board chair of the Kentucky Access to Justice Foundation and is a past board chair of the Appalachian Research and Defense Fund of Kentucky, Inc., and is the current Board counsel to that organization. F:\WPDOCS\JWK\CVs - Warren Keller\Biography - Updated 10-4-13.wpd

133

Justice Michelle M. Keller

Justice Michelle M. Keller was appointed to the Supreme Court of Kentucky in April 2013 by

Governor Steven Beshear after having served as a Kentucky Court of Appeals judge for six

years. She was appointed to fill the unexpired term of Justice Wil Schroder, who retired in

January, 2013. Justice Keller also serves as chair of the court system’s Technology Governance

Committee.

Justice Keller was elected to the Court of Appeals in November, 2006 to serve as judge for

Division 1 of the 6th

Appellate District. From 2007 through February, 2012, she served as the

Court of Appeals representative on the Judicial Conduct Commission, a post to which her fellow

Court of Appeals judges elected her.

Prior to her election as Court of Appeals judge, Justice Keller practiced law for 17 years. She

has served as an assistant county attorney, prosecutor and criminal defense attorney. Justice

Keller’s practice concentrated in the areas of family law, personal injury, and medical negligence

defense. She is also experienced in administrative law, having represented numerous clients

before state regulatory and licensure boards. She is chairwoman emeritus of the Kentucky

Personnel Board and has served as a hearing officer and member for the board. Justice Keller is

licensed to practice law in Kentucky, the U.S. District Court for the Eastern District of Kentucky

and the U. S. Supreme Court. She has served as a special justice to the Kentucky Supreme Court

and has been commended twice by the Kentucky House of Representatives for her service to the

Commonwealth.

Justice Keller attended Northern Kentucky University’s Salmon P. Chase College of Law while

working as a licensed registered nurse in critical care. She earned her juris doctor from Chase in

1990. As a student at Chase, she was an IOLTA scholar. She received the Chase Excellence

Award in 2007 and was the recipient of the Chase Exceptional Service Award in 2011.

In 2012, Justice Keller was named a 2012 Outstanding Woman of Northern Kentucky.

Most recently, she was honored on Law Day 2013 with the Richard D. Lawrence Lifetime

Achievement Award presented by the Northern Kentucky Bar Association.

She has served in various positions for the Northern Kentucky and Kentucky bar associations. In

2009, she received the KBA’s Donated Legal Services Award. She is a master in the Salmon P.

Chase Inn of Court and was elected president of the Inn for 2012-13.

Justice Keller has served her community through various volunteer and board positions,

including those with the Diocesan Catholic Children’s Home, the Northern Kentucky Children’s

Advocacy Center, Villa Madonna Academy, Centre College, NKU Salmon P. Chase College of

Law and the St. Thomas More Society.

She is a member of the Ethics and Professional Responsibility Judges Advisory Committee for

the American Bar Association, a position to which immediate past-president of the ABA, Wm.

T. (Bill) Robinson III, appointed her.

A lifelong Northern Kentuckian, Justice Keller and her husband, Jim, a physician, are the proud

parents of two daughters.

134

Laurie K. Dudgeon Director, Administrative Office of the Courts As director of the Administrative Office of the Courts, Laurie K. Dudgeon administers the Judicial Branch budget, monitors legislation related to the courts, and works with county, state and national officials on issues affecting the Kentucky court system. She is responsible for providing administrative support to Kentucky’s 403 elected justices, judges and circuit court clerks. Director Dudgeon has streamlined the AOC’s organizational structure and maintained a balanced budget in spite of deep reductions during the state’s financial crisis. As a cost-saving measure, she relocated the AOC’s main offices in Frankfort from a leased facility to a modern, energy-efficient building purchased by the AOC. She is also leading efforts to implement eFiling as part of the Judicial Branch’s plan to update its aging technology. She holds a bachelor’s degree and juris doctor from the University of Kentucky.

135

BIOGRAPHY OF DOUGLAS L. MCSWAIN

Douglas L. McSwain has been a litigator, legal advisor, speaker, and writer in constitutional, administrative, employment, health care, civil rights, insurance, business, trade and equine law for almost 30 years. Doug has been named and peer reviewed as a “Best Lawyer in America,” “Kentucky Super Lawyer” and "Top Rated Lawyer" in health care law, civil rights law and first amendment issues, labor, employment, municipal and appellate litigation. He is a trial lawyer who practices in both state and federal court and before numerous state and federal administrative agencies. He served as Chair of the Joint Local Rules Commission of the U.S. District Courts, Eastern & Western Districts of Kentucky, for 27 years, and is a Life Member of the 6th Circuit Judicial Conference. Doug was a 5th District Bar Governor for the Kentucky Bar Association, President of the Kentucky Bar Foundation, and Chair of the Kentucky Bar Association’s House of Delegates. While on the Board of Governors, Doug also chaired the Civil Rules Committee. He is a member of the Fayette County Bar Association, and is actively involved in law and policy societies. He graduated with a B.A., cum laude, in political science, from Vanderbilt University in 1979, and earned his J.D., with distinction, from the U.K. College of Law in 1983. He clerked for the Hon. Henry R. Wilhoit, Jr., of the Eastern District, in Ashland, Kentucky in 1983-85, and is currently a partner with the law firm of Wyatt, Tarrant & Combs, LLP in Lexington, Kentucky.

136

IIK-EKU SPRING P & C INSURANCE SEMINAR

TRENDS IN THE CIVIL ARENA:

I. IS OPEN AND OBVIOUS DEAD?

II. IS THE JURY TRIAL, LIKE THE 45 RPM RECORD,

A THING OF THE PAST?

By:

JUSTICE MICHELLE M. KELLER

137

Is open and obvious dead?

I. Kentucky River Medical Center v. McIntosh, 319 S.W.3d 385 (Ky. 2010)

Facts: An EMT was helping transport a person into the Kentucky River Medical

Center ER when she tripped over a curb and severely injured knee. She sued alleging the curb

was dangerous. During discovery, McIntosh testified that she had been in that entrance at least

400 times without incident. The Medical Center moved for summary judgment, which the trial

court denied. A jury found that the Medical Center was liable and awarded damages. The

Medical Center appealed arguing that the curb, if hazardous, was open and obvious and the trial

court should have granted SJ.

Holding:

1) The open and obvious doctrine arose during the era of contributory

negligence, when any negligence on the part of the injured party could act as a bar to recovery;

2) Because Kentucky is now a comparative negligence state, the

automatic bar no longer makes sense;

3) Trial courts can no longer label a danger as open and obvious and

render summary judgment. "Rather, they must ask whether the land possessor could reasonably

foresee that an invitee would be injured by the danger. If the land possessor can foresee the

injury, but nevertheless fails to take reasonable precautions to prevent the injury, he can be held

liable;"

4) This position does not absolve the injured party from

responsibility, holding that it would be an extremely rare circumstance when the injured party

would be free of all liability;

5) Both the landowner and the invitee have duties of care and the fact

finder can balance their individual liability accordingly.

II. Shelton v. Kentucky Easter Seals Soc., Inc., 413 S.W.3d 901 (Ky. 2013)

Facts: Mrs. Shelton who was visiting her husband in the hospital, bent to kiss

him goodbye. As she turned to leave, her feet became entangled in cords by her husband's bed,

and she fell. The trial court granted SJ in favor of the hospital and the COA affirmed. The

Supreme Court reversed.

Holding:

1) The proper analysis is not whether the hospital owed a duty, which

was an inference that could be taken from McIntosh, but whether the hospital breached its duty;

138

2) The duty of reasonable care is always there so the analysis must

flow as follows:

a) determine the defendant's duty of care, keeping in mind the

general duty of care and any greater duty imposed by the relationship between the parties;

b) Was the duty breached? AND

c) Is the defendant's liability limited to some degree by the

plaintiffs comparative negligence?

III. Dick's Sporting Goods, Inc. v. Webb, 413 S.W.3d 891 (Ky. 2013)

Facts: A woman slipped and fell on a wet floor as she entered the Dick's store in

Lexington. The evidence indicated that it had been raining most of the day, and the woman

recognized the floor was wet. Dick's had placed two floor mats at the entrance in a v-shape

which caused the water to puddle at the point where the mats met. Ms. Webb was entering the

store with a crowd of customers and she stepped off the mat and tried to step beyond the puddle.

Unfortunately, the tile she stepped onto, which she thought was dry, was not, and she slipped and

fell. The trial court granted SJ. The COA reversed, relying on McIntosh and the Supreme Court

affirmed.

Holding:

1) The water from the mats and/or from the puddle in the V did not

cause Webb's fall. It was the water on the tile that appeared to be dry that did;

2) The danger was not open and obvious and the trial court's reliance

on that doctrine was factually misplaced;

3) The placement of the mats in a V shape caused a puddle to form

and that may have been a violation of Dick's duty;

4) There was evidence that Dick's could have taken other steps to

remediate the danger. Thus there were questions of fact, which made SJ inappropriate.

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Is the Jury Trial, Like the 45 RPM record, a Thing of the Past?

I. Kentucky Uniform Arbitration Act (KRS 417 et seq.)

417.050 Validity of arbitration agreement; exempt agreements

A written agreement to submit any existing controversy to arbitration or a

provision in written contract to submit to arbitration any controversy thereafter

arising between the parties is valid, enforceable and irrevocable, save upon such

grounds as exist at law for the revocation of any contract. This chapter does not

apply to:

(1) Arbitration agreements between employers and employees or between their

respective representatives; and

(2) Insurance contracts. Nothing in this subsection shall be deemed to invalidate

or render unenforceable contractual arbitration provisions between two (2) or

more insurers, including reinsurers.

II. AT&T Mobility, LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740 (2011)

Majority opinion by Justice Scalia, joined by Chief Justice Roberts and Justices Kennedy,

Thomas, and Alito. Justice Thomas wrote a separate concurring opinion.

Dissenting opinion by Justice Breyer, joined by Justices Ginsgurg, Sotomayor, and

Kagan.

Facts: AT&T Mobility advertised that it provided "free" phones. The

Concepcions bought a "free" phone only to be charges $30.22 in sales tax. They filed suit

claiming false advertising and were later joined with others in a putative class action suit. AT&T

Mobility moved to dismiss based on an arbitration agreement in the contract.

The arbitration agreement provided:

1) AT&T would pay all costs for non-frivolous claims;

2) Arbitration would take place in county where customer

billed;

3) If claim was for $10,000 or less then customer could

choose to participate by phone, in person, or by submissions;

4) Either party could bring claim in small claims court;

5) Arbitrator could award any form of relief;

6) AT&T could not seek attorney fees;

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7) If award was less than AT&T's settlement offer, then

AT&T would pay a minimum of $7,500 and double the claimant's attorney's fees;

8) No class actions.

The District court found the class action ban made the agreement unconscionable

and unenforceable because it would not provide for the "deterrent effects of class actions."

The 9th

Circuit Court of Appeals affirmed holding that California law treated

class action waivers in arbitration agreements the same way it did those waivers in non-

arbitration contract actions.

The U.S. Supreme Court reversed holding:

1) Arbitration must be on an equal footing with other contracts;

2) Difficulty occurs when a rule that appears to be generally

applicable is applied in a fashion that disfavors arbitration;

3) California courts are more likely to hold arbitration agreements

unconscionable than other contracts;

4) One of the primary goals of arbitration is the expeditious and

informal resolution of disputes. Class action arbitration sacrifices these advantages because:

a) In a class action the arbitrator must first decide whether a

class exists, if the named party is representative of the class, how discovery should be conducted,

and how to notify and protect potential class members, etc.;

b) Class action litigation requires formality in terms of

discovery and in terms of protecting absentee class members;

c) Class action arbitration greatly increases the risk to the

defendant, who would not contract for arbitration if those risks were known;

d) There is no provision for judicial review of errors,

particularly with regard to class certification;

e) Few arbitrators would likely be familiar with class action

rules;

f) In this case, the Concepcions would have been better off to

proceed under arbitration, where they might get a minimum of $7,500 plus double attorney's

fees;

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g) Because California's anti-class action waiver rule "stands as

an obstacle to the accomplishment and execution of the full purposes and objectives of

Congress" it is preempted by the Federal Arbitration Act.

III. Schnuerle v. Insight Communications Company, LP, 376 S.W.3d 561 (Ky. 2011)

Facts: While Insight was performing an upgrade to its system a number of

customers lost service for several days. They brought a class action suit against Insight. The

average amount in controversy was $40.00. Insight moved to dismiss and for referral to

arbitration under a mandatory arbitration clause in the contract. The arbitration clause provided

that:

1) Customers and Insight had to arbitrate their disputes;

2) Customers could not participate in class action lawsuits;

3) Either party could go to small claims court if the amount in

controversy was small;

4) The law of New York governed any disputes; and

5) Customers could not divulge the results of any settlements reached

through arbitration.

The trial court dismissed finding that the arbitration agreement was binding. The

COA, in a divided opinion, affirmed. The S.Ct. initially affirmed in part and reversed in part.

The S.Ct. found that the arbitration agreement was binding but that the ban on class actions was

not. Therefore, the S.Ct. remanded for referral to arbitration with instructions that the parties be

permitted to litigate their class action in that forum. Insight filed a petition for rehearing. While

that petition was pending, the U.S. Supreme Court rendered Concepcion.

In light of Concepcion, the Court reluctantly held:

1) Justice Thomas's separate concurring opinion in Concepcion did

not make the Supreme Court's opinion a non-binding plurality opinion, because he fully

concurred with the result;

2) The Supreme Court in Concepcion noted that, although the rule

disfavoring bans of class actions applied equally to all contracts, the impact fell disproportionally

on arbitration agreements. Therefore, such bans were in violation of the Federal Arbitration Act;

3) Although the arbitration rules in Concepcion were much more

consumer friendly than in this case, that is not dispositive. The U.S. Supreme Court did not find

those rules to be particularly relevant, focusing rather on the chilling effect permitting class

actions would have on arbitration;

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4) Arbitration clauses may still be struck down as unconscionable if

they strip claimants of a statutory right which cannot be vindicated by arbitration, i.e. the cost is

prohibitively high or the location is remote; however, the simple impracticality of pursuing a

single, small claim is not a sufficient impediment to vindicating one's rights to amount to

unconscionability;

5) The right to go to small claims court gives the claimants a viable

method of enforcing their rights;

6) Kentucky, not New York, law applied;

7) The Court expressed its displeasure with the result and Concepcion

as follows: "[W]hile most, if not all, consumers may well choose to forgo recovery because it is

just not worth the trouble, by the Supreme Court's calculus in Concepcion, it is preferable for the

public to suffer the unjust enrichments that defendants may occasionally gain than to burden the

arbitration process favored by federal law with a [class action] type rule;"

7) The Court determined that the confidentiality provision in the

arbitration agreement was substantively unconscionable and, therefore not enforceable. The

Court noted that the confidentiality provision prevented plaintiffs from obtaining information

regarding precedent, etc. while permitting Insight free reign. Furthermore, the provision blocks

plaintiffs from obtaining any information that might lead to a case of intentional misconduct or

unlawful discrimination.

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