2000-SC-000495-DG.pdf
Size: 958 kb
Date: 3/18/2003

(1) Mable Raines ("Raines") incurred damages of $219,071 .00 as a result of a two-vehicle accident caused by Lecia True ("True"), who had liability coverage of only $100,000.00 . Raines, who was driving her own automobile at the time of the collision, had a $50,000.00 UIM policy, and Ted Rice ("Rice"), with whom Raines lived in a residence they jointly owned, had UIM coverage of $50,000.00 under a separate policy.  Although Rice's policy did not list Raines as a named insured, Raines was listed on Rice's policy as a driver "residing in your household ." Was Raines entitled to recover UIM benefits under Rice's policy? Because Rice's policy was clear and unambiguous in its UIM coverage, and Raines was neither a named insured nor otherwise covered by Rice's policy while driving her own automobile, we hold that Raines was not entitled to recover UIM benefits under Rice's policy .

(2) During the trial of this case, True's insurer, Kentucky Farm Bureau Mutual Insurance Company ("Farm Bureau"), offered to settle with Raines for the $100,000 policy limit. However, to preserve its subrogation rights, Raines's UIM insurer, Preferred Risk Mutual Insurance Company ("Preferred Risk"), agreed to make the $100,000 .00 payment to Raines itself and thereby substitute its own funds for Farm Bureau's . The jury determined Raines's damages to be $219,071 .00 . Was True relieved from all liability in excess of her $100,000 .00 liability coverage by virtue of Preferred Risk's substitution of funds? While Preferred Risk's substitution of funds operated to release True from any further personal liability to Raines, the substitution preserved Preferred Risk's subrogation rights against True and thereby subjected True to personal liability to Preferred Risk for any amount it paid to True under its UIM coverage."

LouisvilleLaw.Commentary/Analysis:  This is a must-read case for personal injury lawyers doing car accidents.  The first issue addressed stacking of UIM policies (which analysis will apply with equal force to UM policies).  Specifically, the Supremes continue the first and second class insured analysis without specificially referencing that concept previously followed in its earlier opinions.  This case is not about anti-stacking or exclusions of coverage, but is rather one of contract interpretation as to the coverage purchased.  The driver was not a named insured, spouse, or resident of household to qualify as an insured under the other vehicles of the policy.  Therefore, the permissive driver who happened to be a listed driver did not arise to any of the three categories of insureds who get the benefits of a stacked policy.  She was only a permissive user deriving UIM benefits on the car she was driving.  Being a "listed driver" under the policy does not make you the equivalent of a first class insured - named, spouse, or resident. 

The second issue addressed a long-unanswered question regarding the advancement of UIM funds under Coots v. Allstate.  Think about it, the plaintiff is willing to accept $100,000 in settlement of her claims against defendant driver.  A settlement agreement has effectively been reached subject to the UIM carrier's right to preserve its subrogation rights for any UIM benefits paid to the plaintiff.  The UIM carrier advances the defendant tort-feasor's liability limits (or a lesser amount is possible per statute and Metcalf v. Liberty Mutual).  No release is usually given, and the trial goes forth against the defendant tort-feasor driver who continues to be defended by her liability carrier (since the duty to defend and the duty to indemnify are separate).  At trial, there are three separate possibilities with a verdict. 

One - trial verdict is less than the liability limits(or more precisely, the amount advanced by the UIM carrer).  The result is risk born by UIM carrier with plaintiff keeping the full amount advanced and the UIM carrier eating the difference it paid.  

Two - trial verdict is greater than amount advanced but less than the total UIM benefits.  The result is that the plaintiff keeps the advanced sums and is paid up to the UIM benefits from her own carrier with the UIM carrier having a claim for the advanced sums and a claim for UIM benefits paid (are these subrogation vs. indemnity claims?  go figure.  The bottom line is the advanced sums will/should be paid by the defendant's liability carrier, and the excess is a claim against the defendant tort-feasor.

Three - trial verdict exceeds both liability and UIM benefits.  This is the new one.  Per Raines now, the underinsured defendant gets a release from the plaintiff for the money's advanced per agreed settlement, but is still liable for the UIM benefits paid by the UIM carrier to the plaintiff.  The UIM carrier recovers the advanced amounts from the defendant's liability carrier, and has a claim for the UIM benefits against the defendant.  This leaves the sum in excess of the UIM + liability amounts which is nobody's claim.  That risk is born by the plaintiff and the UIM carrier.

A settlement was reached but for the UIM's advancement.  Plaintiff agreed to accept a set sum in exchange for a complete release of the defendant BUT FOR the UIM carrier.  The fact the money comes from the UIM carrier rather than the liability carrier does not affect the agreement between defendant and plaintiff who has waived any claim for the excess.  Coots advancements should be documented in writing that the amounts are advanced, the amounts of UIM and liability coverage, plaintiff agrees to cooperate and subordinate his/her claim against the defendant for the advanced amount so the UIM carrier gets paid first, and the plaintiff will not impede the UIM's subrogation rights.

Whewwww.  That was a long one.  I apologize for typos and grammar but this was written free-form.

Kentucky law has consistently upheld the position of Bullitt County and we find no reason to change that position . One of the earliest cases occurred one hundred years ago in the seminal decision of City of Louisville v. Brewer's Adm'r, 24 Ky. Law Rep . 1671, 72 S .W . 9 (1903). In that case it was held that a county road in property.annexed by the city of Louisville became a street of the city upon annexation . The court also held that the city became "chargeable with all the duties with reference thereto that they owe to any public streets and alleys of the municipality; that formal recognition of this fact by a resolution of its board of council was wholly unnecessary." Id . at 10 . 

The principle of law that arises from all of these authorities is that once a city annexes a road it is the responsibility of the city to maintain that road ."