DEC. 14, 2007 KENTUCKY COURT OF APPEALS DECISIONS (2007:60)
PUBLISHED (COA).
STRIKER GOLD CO., INC. V. FIRST SECURITY BANK OF LEXINGTONThe COA affirmed summary judgment granted in favor of the creditor bank against Jones,the debtor, on the bank's claim for a deficiency judgment against Jones resulting from his execution of two guaranty agreements for the security of Striker Golf's debt obligations.
Jones had executed two guaranty agreements in which he assumed personal liability for Striker’s liabilities to First Security
Bank up to a “maximum aggregate liability”of $36,000 and $72,000.
Striker's assets were sold but were not enough to satisfy the loan.
The bank then went after Jones on the security agreements he signed.
Jones defended by attacking the lack of commercial reasonableness in the selling of Striker Golf's assets.
However, beyond refusing to agree to the sale, Striker Golf and Jones did little more to legitimately contest the
sale of the assets.
Because First Security accounted for the commercial
circumstances of the sale, Striker Golf and Jones were required to do more than simply disagree with the court's granting of the motion to dispose.
The failure of Striker Golf and Jones to contest the sale of the asset to Markham despite receiving detailed notice of the purchase is fatal to their appeal.
Summary judgment affirmed.
Michael Stevens
GARCIA, M.D. V. ASSOCIATED INS. SERVICE, INC.
This appeal arises from a personal injury claim by the Garcias against the Star of Louisville who was defended by its liability carrier, HIH Casualty and General Insurance, Ltd. (HIH). While the litigation was pending, HIH declared bankruptcy, withdrew its defense of the Star and, in effect, repudiated coverage. Suddenly faced with the prospect of a large, uninsured liability, the Star negotiated a settlement with the Garcias in exchange for the Garcias’ promise to “forbear” seeking enforcement against the Star. As part of this settlement, Star assigned its claims against Star’s insurance agent, Associated Insurance Service, Inc. (Associated), an insurance agency operating in Louisville. Associated then filed a third-party complaint against AON Risk Services Inc. of Ohio (AON).
COA disagreed with the trial court, reversing the
summary judgement, and held that the Star’s assignment of its claims against Associated and AON was valid,
remanding the matter for further proceedings.
The trial court erred by disallowing as a matter of law the assignment of the Star’s claims against its insurance agent and broker. Although the trial court’s ruling focused on the assignment of the Star’s claims, Associated and AON attack other aspects of the Garcias’ settlement with the Star as well. In light of these additional contentions, it is useful to begin by noting that the type of settlement at issue here, in a closely related context, has already received widespread judicial approval.
Where an insurer denies coverage of a claim against its insured, refuses to defend, or unreasonably refuses to settle, the insured, to protect itself against the
threatened out-of-pocket loss, will frequently have a strong incentive to settle with the plaintiff. Such settlements often take the form of a stipulated judgment against the
insured, the insured’s assignment to the plaintiff of its claims against the insurer, and the plaintiff’s agreement not to seek execution of the judgment against the insured.
Although each of the elements of these agreements has been challenged, these agreements have been widely upheld. See Note, “Judicial Approaches to Stipulated Judgments, Assignments of Rights, and Covenants not to Execute in Insurance Litigation,” 47 Drake L. Rev. 853 (1999). In Kentucky, although the law in this area is sparse, our highest Court has approved an insured’s assignment of his claims against his insurer. Terrell v. The Western Casualty & Surety Company, 427 S.W.2d 825 (Ky. 1968); Grundy v.
Manchester Insurance & Indemnity Company, 425 S.W.2d 735 (Ky. 1968).
However, where an insured’s exposure is not attributable to the insurer, or where, as in this case, the insurer is insolvent, an obvious variation on the above
agreement is for the insured to assign his claims against some other entity, such as an insurance agent allegedly responsible for the failure of coverage. In the context of such settlements, assignments of claims against allegedly negligent insurance agents have also been upheld. Stateline Steel Erectors, Inc. v. Shields, 837 A.2d 285, 288 (N.H. 2003).
Associated and AON challenge this settlement not only as an invalid assignment, but contend as well that the Garcias’ agreement not to execute against the
Star undermined the purported assignment. They further contend that the judgment—the arbitrator’s ruling against the Star—may not be employed against them as a binding
measure of the Star’s purported damages.
As the trial court correctly noted, the general rule in Kentucky is that tort claims for personal injuries may not be assigned. State Farm Mutual Automobile
Insurance Company v. Roark, 517 S.W.2d 737 (Ky. 1974). The trial court believed that this rule extended to all tort-based claims. Further convinced that the Star’s malpractice like claims against its agent and broker sounded in tort, it concluded that those claims
were not assignable. However, in Grundy v. Manchester Insurance & Indemnity Company, supra, however, our state’s highest Court indicated that tort claims could be assigned “for torts which are founded upon contracts and grow out of the contractual relations between the
parties" and upheld an insured’s assignment of his bad-faith-settlement claim against his insurer on the ground that the duty of good faith the insurer allegedly breached arose from the insurance contract. Likewise, the duty of care Associated and AON allegedly breached arose from their contracts with the Star and the alleged breaches gave rise to purely economic injury. Thus, under Grundy, the Star’s claims are assignable.
In sum, notwithstanding the fact that the agent is
providing a “personal” service, the insured-agent relationship is a simple, commercial transaction not genuinely comparable to the highly personal relationship between attorney and client and therefore not subject to the same bar against the assignment of malpractice
claims and does not raise the public policy concerns courts have noted in the attorney-client context
.
There was nothing improper in the Star’s seeking to protect its suddenly uninsured assets from a potentially ruinous judgment, or in the Garcias seeking to
translate their claim against the Star into real rather than nominal but uncollectible relief.
The real problem is simply that, by insulating the Star from execution, the settlement left the parties not truly adverse. Strangers to the agreement, therefore, such as Associated
and AON, have no assurance that the Garcias’ claims, particularly the amounts of their damages, have been scrutinized and tested. With all due respect for the arbitration in this case, an arbitrator’s opinion simply cannot substitute for the thorough adversarial vetting
upon which our system was founded. Tort victim-assignees of claims against insurance agents bear the burden of proof on the assigned claims and that
the insurance agents, “who were not parties to the settlement agreement, cannot be bound by its terms.” Stateline Steel Erectors, Inc. v. Shields, 837 A.2d at 289; Campione v. Wilson, supra. To recover against the insurance agent/broker, furthermore, the assignee
must prove the elements of its assigned malpractice claim, including the fact of the insured-assignor’s injury.
In conclusion, the Star’s malpractice claims against its insurance agent and insurance broker were assignable to the Garcias notwithstanding the tort-like elements of
the claims, the personal-services nature of the Star’s relationships with its agent and broker, and the Garcias’ agreement not to seek execution against the Star. The trial court erred, therefore, by dismissing the Garcias’ assertion of those claims on the ground that they were not assignable.
On remand, the Garcias will bear the burden of proving the damages from the assigned malpractice claims, including the fact that the Star was injured by the alleged malpractice. Neither the Garcias’ agreement not to seek execution against the Star nor the arbitrator’s ruling against the Star will be probative with respect to that
injury.
Michael Stevens
CA affirms entry of SJ dismissing third-party complaint for indemnification in this slip-and-fall case.
Community Trust owns an office building in Ashland; Mussetter was a renter. Mussetter's employee slipped on stairs in the common area of the building, which were wet from a leaking pipe in the stairwell. She filed WC and SS claims and sued Community Trust. Community Trust filed a third-party complaint against Mussetter and his liability insurer seeking coverage and a defense. On cross-motions for SJ, the TC determined that the provision in the lease requiring Mussetter to obtain liability insurance for the building's public areas was overly broad, vague and against public policy.
CA affirms, but for different reasons. CA holds that the "hold-harmless" or indemnity language controls the ruling. While a party may contract to indemnify itself against its own negligence, when there is doubt as to the meaning of the indemnity clause, the construction is against self-indemnification. The lease used the term "and/or," literally requiring Mussetter to indemnify Community Trust from any liability, from any cause, in any location, and regardless of whether or not the damages arise from Mussetter's occupancy of his leased office space. Such an indemnification clause is simply too broad and would be against public policy.
NOT PUBLISHED (COA)
WILSON V. AMERICAN NATIONAL PROPERTY AND
CASUALTY CO.
INSURANCE: UIM exclusion for owned but not insured vehicle upheld
2006-CA-002632
NOT PUBLISHED: 124
DATE RENDERED: 12/14/2007
WORLEY V. DUGGER
TORTS: No vicarious liability for independent contractors unless nuisance
or inherently dangerous
2006-CA-002207
NOT PUBLISHED: 108
DATE RENDERED: 12/14/2007
WALLS V. ROBINSON
TRIALS: "Pot of money" argument indirectly implicates mention of
insurance in tort case (MVA)
2006-CA-002148
NOT PUBLISHED: 116
DATE RENDERED: 12/14/2007
JARRET V. SALTZ, M.D.
TORTS: Medical negligence and Loss of chance
2006-CA-001251
NOT PUBLISHED: AFFIRMING
PANEL: LAMBERT PRESIDING JUDGE; ACREE, ROSENBLUM CONCUR IN RESULT ONLY
COUNTY: BOYD
DATE RENDERED: 12/14/2007
HAWKINS V. COM.
CRIMINAL: Ineffective assistance of counsel
2003-CA-1394
WATERS V. COM.
CRIMINAL: Due process claim for failure of prosecutor to provide contact
info
2006-CA-001553
NOT PUBLISHED: 109
DATE RENDERED: 12/14/2007
ASHLAND HOSP. CORP. V. COM.
EMLOYMENT: Unemployment insurance
2006-CA-001010
NOT PUBLISHED: 99
DATE RENDERED: 12/14/2007
HAWKINS V. COM.
CRIMINAL: Ineffective assistance of counsel
2006-CA-001859
NOT PUBLISHED: 126
DATE RENDERED: 12/14/2007
MARCUM V. COM.
CRIMINAL: Competency to stand trial
2006-CA-002118
NOT PUBLISHED: 84
DATE RENDERED: 12/14/2007
CONNER V. COM.
CRIMINAL: Search probable cause, warrantless, informant
2006-CA-002188
NOT PUBLISHED: 105
DATE RENDERED: 12/14/2007
INTEGRATED ELECTRICAL & DATACOM V.
HUSSEY
WORKERS COMP: Multipliers (3x)
2006-CA-002216
NOT PUBLISHED: 98
DATE RENDERED: 12/14/2007
ALDRIDGE V. ALDRIDGE
FAMILY LAW: Abuse of discretion by judge in maintenance and survivor benefits
award
2006-CA-002304
NOT PUBLISHED: 112
DATE RENDERED: 12/14/2007
CONN V. MORGAN
CRIMINAL: Prison discipline
2006-CA-002446
NOT PUBLISHED: 110
DATE RENDERED: 12/14/2007
HAMILTON V. COM.
CRIMINAL: Instructions for LIO
2006-CA-002557
NOT PUBLISHED: 80
DATE RENDERED: 12/14/2007
MCCAULEY V. COM.
CRIMINAL: Ineff. assistance of counsel claim
2006-CA-002649
NOT PUBLISHED: 85
DATE RENDERED: 12/14/2007
BIF, INC. V. COUNTY OF CAMPBELL, KY
ATTORNEY FEES: Recoverable costs; condemnation
2007-CA-000047
NOT PUBLISHED: 105
DATE RENDERED: 12/14/2007
HAMPTON V. COM.
CRIM: Investigatory stop
2007-CA-000288
NOT PUBLISHED: 97
DATE RENDERED: 12/14/2007
ASHEY V. CITY OF LAGRANGE
PROPERTY: Dedicating to public and no need for formal dedication
2007-CA-000497
NOT PUBLISHED: 94
DATE RENDERED: 12/14/2007
GUASTINEI V. CONN
FAMILY LAW: Child, grandparent; withholding visitation
2007-CA-000892
NOT PUBLISHED: 87
DATE RENDERED: 12/14/2007
CHAS COAL V. NEAL
WORKERS COMP: Reopening
2007-CA-001688
NOT PUBLISHED: 92
DATE RENDERED: 12/14/2007
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