Kentucky Court of Appeals
NEW Sovereign Immunity
Louisville/Jefferson County Metro Government v. Cowan, ___ S.W.3d ___, 2016 WL 5319295 (Ky.App. September 23, 2016)

The plaintiff in this case was injured in a fall at a public swimming pool operated by Louisville, which is now a merged government. The trial Court denied the city's defense of sovereign immunity on the ground that a swimming pool was not a function integral to state government. The Court of Appeals properly observed that where the state is the actor, sovereign immunity is absolute. It is only when trying to determine whether a separate agency is entitled to governmental immunity is the integral function analysis applicable.

Kentucky Court of Appeals
NEW Causation - Police Chase
Pursifull v. Abner, ___ S.W.3d ___, 2016 WL 5335515 (Ky.App. September 23, 2016)

This case presents a tragic set of facts. A neerdowell named Poppiti was suspected of stealing gasoline and led to state troopers on a high speed chase between Harlan and Pineville. He drove his vehicle off the road and directly into the side of a sheriff's cruiser, killing both the Deputy Sheriff and his canine unit. The estate of the Deputy Sheriff filed suit against the troopers. This panel of the Court of Appeals affirmed that the pursuing officers were not the legal cause of the conduct of Poppoti.

The panel followed existing precedent as set out in Chambers v. Ideal Pure Milk Co., 245 S.W.2d 589 (Ky. 1952). The panel also discusses the general principles of causation, noting that the conduct must be both the but for cause and a substantial factor. The panel concluded that the troopers' conduct was not a substantial factor.

While the result is clearly correct, we must question the rationale. A better basis for the holding would be based on public policy, and the public interest in leaving police free to apprehend criminals. If the holding is premised on the substantial factor test, then it would apply with equal force to any vehicle chase, whether law enforcement or not. We could conceive of situations where a vehicle chase could cause an injury to a third person and liability should follow. An example might be a domestic dispute where one spouse flees and is followed by the other. In that situation, we would likely conclude that the chasing spouse was a substantial factor in causing the other to flee.

Kentucky Supreme Court
NEW Insurance - Unfair Claims Settlement Practices Act
Hollaway v. Direct General Insurance Company of Mississippi, Inc., ___ S.W.3d ___, 2016 WL 5245694 (Ky. September 22, 2016)

This is one of two potentially important cases offering the Supreme Court an opportunity to clarify and better define the tort of bad faith, and the Court's first effort is encouraging. We discussed the issues that might be clarified in this case in our discussion of the Court of Appeals opinion in 2014. The Court did not directly address conflict between Farmland Mut. Ins. Co. v. Johnson, 36 SW 3d 368 (Ky. 2000) and the earlier cases. But the Court did reaffirm the principles of the prior cases, which should limit the ability of plaintiffs to confuse the lower courts with their arguments based on Farmland.

Hollaway had been involved in an automobile accident with Direct General's insured, Sykes. She demanded that her property claim be paid and that limits ($25,000) be paid to compensate her for bodily injury. There was a dispute about how the accident happened. The physical evidence was suggestive of a low impact collision. Direct General paid the property damage claim and offered $5,000.00 to Hollaway for her bodily injury claim. The claim notes stated that the amount of the offer was based on the differing accounts of who was at fault. When she filed suit against Sykes, she included a UCSPA claim against Direct General asserting that it "had failed to reasonably evaluate, investigate, and negotiate a settlement…". Apparently the bodily injury claims were settled at some point for $22,500.00. Direct General then moved for summary judgment based on the disputed proof as to negligence, causation and the minor nature of the injuries. Hollaway argued, relying largely on the language in Farmland, that the payment of her property damage claim, coupled with the later payment of almost all of the policy limits was an admission of liability for her injuries. In other words, she posited that the fact that there was evidence making the position taken fairly debatable was no defense, because Direct General had not debated fairly, taking the view of the plaintiff bar that Farmland had substantially broadened liability in UCSPA cases. The trial Court granted summary judgment.

The Court of Appeals affirmed on the ground that there was no evidence of bad faith. As noted in our prior discussion, the Court of Appeals opinion was muddled because of its handling of an expert issue. Plaintiff offered in response to the motion for summary judgment a report from an expert. In neither opinion is it explained what opinions might have been in the expert's report, and in fact that information is also not provided in Hollaway's briefs. But the Court of Appeals accepted the trial Court's position that the report should not be considered at all because it was not an affidavit. The Supreme Court found this position to be unnecessary, suggesting that even with the report there was no proof of bad faith. Once again, the Court has ignored an expert report but has not set out any real guidance as to when, if ever, and expert can properly comment on bad faith.

The gist of the plaintiffs' claim was that by paying the property damage claim admitted liability, offered a mere $5,000.00 in the face of a limits demand for $25,000.00 and then after much litigation paid $22,500.00. This is a very common template used by the bad faith lawyers, and the Supreme Court rejected it. The Court reaffirmed that a bad faith plaintiff must prove that the insurer owed the money and that the insurer's motive was recklessly indifferent to her right to recover.

The Supreme Court observed that this case presented two issues in assessing the insurer's duty to compensate Hollaway. The first issue was whether the accident was the result of the insured's fault. The Court held that the payment of the property damage claim did not establish liability because settlements are not evidence of legal liability. But the Court further recognized that whatever the initial impressions, the insurer can change its position based on developments as the investigation proceeds. The second issue that must be assessed is damages. This is critically important because the bad faith attorneys like to argue that they only have to show that the amount offered was unreasonable. The Court observed that the extent and severity of the injuries were contested from the outset. Hollaway had a history of complaint similar to those offered in support of the claim. The insurer repeatedly viewed the accident as "low impact" and observed that her work as a nurse predisposed her to such complaints. The fact that the adjuster referred to her limits demand as "crazy nuts" not only did not show bad faith, but reinforced that the insurer contested the severity of the claim. In this regard the Court made a remarkable statement that, if applied in future case, will seriously curtail third party bad faith claims. The Court observed "[b]ecause Direct General's absolute duty to pay her claim is not clearly established, this alone would be enough to deny her bad faith claim under Wittmer. " This quote would suggest that bad faith can only apply to liquidated amounts, or values that are reasonably clear from the facts. In other words, if the value of the claim is disputed the insurer cannot be in bad faith, because liability is not clearly established. This may be a huge development. But even where that test is met, the plaintiff must establish malevolent intent. The Court stated that an insurer has not duty to "acquiesce to a third party's demands, ", and there must be proof that the insurer did not intend to negotiate fairly to reach a settlement.

The Supreme Court clearly intended to constrain the many bad faith abuses which have become part of Kentucky's tort system by the opinion. Amazingly, the opinion was unanimous. If the Court applies the same serious analysis to the Demetre case, 2016 will be a banner year for those who believe in the tort system and that insures have a duty to pay what is owed and an equal duty to resist claims that are not owed.

Kentucky Supreme Court
NEW Malicious Prosecution
Martin v. O'Daniel, ___ S.W.3d ___, 2016 WL 5244518 (Ky. September 22, 2016)

Several state troopers conducted an investigation into whether O'Daniel had attempted to fraudulently title a stolen vehicle. The results of the investigation were submitted to the Commonwealth Attorney, who expressed doubt about bringing charges because criminal intent seemed to be lacking. However, citing a conflict, the Commonwealth Attorney asked the Attorney General to assign a special prosecutor. The special prosecutor submitted the investigation and the testimony of one of the officers to the grand jury, which indicted O'Daniel. O'Daniel was acquitted and he brought a malicious prosecution action. The officers argued on appeal that they were immune and that they did not initiate or continue the criminal proceedings, and the trial court granted summary judgment on the ground that they neither arrested O'Daniel nor filed a criminal complaint.

Immunity in Malicious Prosecution Cases

While there is an absolute immunity for witnesses before the grand jury, this does not extend to other conduct of such witnesses just because they ultimately testified before the grand jury. Therefore the only immunity that could be applicable to the police officers is a qualified immunity. There court found that since acting with malice and acting in good faith are mutually exclusive, the immunity cannot apply to a malicious prosecution case.

Who Is Liable for Malicious Prosecution

In a number of cases an essential element of the tort has been stated to be the institution or continuation of proceedings "by, or at the instance, of the plaintiff." The Supreme Court determined that the word instance was both archaic and ambiguous. The Court has rephrased this inquiry as follows: "the defendant initiated, continued, or procured a" proceeding. The Court said that the word procuring is synonymous with being the proximate cause of putting the law in motion. The Court said that one might procure a prosecution by inducing the filing through providing inaccurate, false or misleading information. The opinion does not say that there must be knowledge of the falsity, but without such a requirement mere negligence would be sufficient. The Court remanded the case for application of the new standard to the facts of this case.

Kentucky Court of Appeals
NEW Animals - Dog Bite
Maupin v. Tankersley, ___ S.W.3d ___, 2016 WL 4934283 (Ky.App. September 16, 2016)

Ms. Maupin was walking on a dirt path through woods in Jackson County on property owned by Mr. Tankersley when she was attacked by dogs owned by Mr. Tankersley and seriously injured. An action was brought under KRS 258.235(4), and the trial Court gave jury instructions couched in terms of negligence. Maupin contended that the statute required submission under a strict liability theory. The Court of Appeals held that the language of the statute notwithstanding, the case law required that the owner of the dog be aware of the person on his property before liability can be found. Any other holding would be nonsensical, especially in the context of rural woods like those at issue in this case. This would be a good case for the Court to hold either that KRS 258.235(4) only applies to invitees on the premises or at least does not apply to trespassers or bare licensees.

Kentucky Court of Appeals
NEW Insurance - No-Fault - Medical Records Review Insufficient Basis to Terminate Benefits
Houchens v. Government Employees Insurance Company, ___ S.W.3d ___, 2016 WL 4709168 (Ky.App. September 9, 2016), motion for discretionary review filed October 7, 2016 (2016-SC-000546-D)

The Court of Appeals held that a no-fault insurer may not rely on a peer review of a claimant's medical bills to deny or limit payment of claims. In this opinion, should be permitted to stand, the Court of Appeals has stripped automobile insurers of the ability to contest fraudulent and unnecessary medical expenses without undergoing the often unnecessary and always expensive Independent Medical Examination. This case will almost certainly trigger review by the Kentucky Supreme Court if requested, and it would be absurd for review not to be requested by the insurer given that the case has for some reason been granted class-action status. In the meantime, however, automobile insurers are going to have to be very careful in how they approach cases with questionable medical or chiropractic treatment, and the marginal providers who feed from no-fault insurance will be emboldened. It is most likely that the Kentucky Supreme Court will reverse this opinion, there will likely be further efforts in the legislature but as long as the house is held by the plaintiffs’ bar these efforts will likely be frustrated. This is a bit puzzling to the extent that it is not clear that no-fault itself is of benefit to the plaintiffs’ attorneys unless one continues to believe that the amount of medical expense, without regard to its character, increases pain-and-suffering awards.

The Court of Appeals panel acknowledged that it was in unexplored territory, and essentially held that KRS 304.39-270 was the exclusive method for verifying claims for medical expense. The panel acknowledged that KRS 304.39-280 requires a claimant to provide an authorization for medical records, but suggests that the only reason for this is to determine if there is good cause to obtain an IME under KRS 304.39-270. The panel found that the MVRA does not permit an insurer to unilaterally determine whether benefits are due. In other words, any claim made must be paid unless an IME is obtained and refutes the claim. In other words, the right to no-fault benefits is to be unilaterally determined by physicians and chiropractors whose bills will be paid.

It should be obvious to anyone that has actually practiced in this area of law that this approach is impractical and nonsensical, and would be unique in the area of insurance. Further, the language of the MVRA neither supports nor compels this result. The right to basic reparation benefits [BRB] is established by KRS 304.39-030 and KRS 304.39-040(2). BRB are defined in KRS 304.39-020(2) as "reimbursement for net loss suffered through injury arising out of the operation, maintenance, or use of a motor vehicle." Loss, in the context of expense, is defined in KRS 304.39-020(5)(a) is "reasonable charges" for "reasonably needed products, services, and accommodations." By the same token, the language of KRS 304.39-270 does not support the theory that it was intended to be the exclusive method for contesting a claim. First, an IME is not permitted for all claims, but only where "the mental or physical condition of a person is material to a claim." So this option is not even available to determine whether a particular charge is reasonable or in many cases whether a charge was necessary. Likewise, the language of the statute is permissive, not mandatory. Finally, to suggest that the legislature intended to require a claimant to submit to an examination in every case even though a less intrusive method is available is inconsistent with the purposes of the MVRA.

While the statute establishes a presumption that medical bills are reasonable, there is no such presumption that they are reasonably necessary. Further, in Kentucky a presumption is only pertinent if there is no evidence to the contrary. Once there is contrary evidence, the presumption disappears. A presumption is not an inference. So the question becomes, who decides whether a claim is covered? In every other context, including workers' compensation, the insurer makes the initial decision and then that decision is subject to review by the courts. And missed by this panel is the fact that the MVRA sets up the exact same procedure. In KRS 304.39-210(5), the MVRA sets out the procedure for rejecting a claim. Why would this provision be included if the MVRA did not contemplate the right of an insurer to do so? It was included to establish a process if the claimant contests a denial of benefits which includes review by a court, which somehow this panel thought was missing.

Based on the tenor of the opinion, the panel seemed to be largely influenced by its skepticism about the peer review process used in the case. The peer review was performed by a third party medical consultant. This panel implied that this procedure is "rigged" in favor of the insurer. If there is evidence to support such a contention, that would seem to go to weight, not materiality. As noted in the opinion, a legislative clarification of these issues is not possible so long as the plaintiff bar controls the House, and so the issue will soon be before the Supreme Court. And once again they will have to clarify the meaning of a poorly drafted MVRA and find a proper balance between the claimant's desire for prompt payment and the growing problem with fraud in the automobile insurance system and its attendant costs on the motoring public.

Kentucky Court of Appeals
NEW Joint Tortfeasors
Memorial Sports Complex, LLC v. McCormick, ___ S.W.3d ___, 2015 WL 4575676 (Ky.App. September 2, 2016)

Memorial owned a baseball field on which Mowery was injured when he dove for a ball in right field. His left arm slid under the outfield fence and he sustained a greenstick fracture. He filed suit against Memorial alleging the premises was not maintained in a safe condition. Memorial filed third party complaints against McCormick (coach), Mowery's father, and Geddes (fence builder). The third party defendants were each granted summary judgment and the order provided for apportionment instructions to be given if the proof supported it.

Indemnity

Memorial argued that the granting of summary judgment was improper because a factual issue existed as to its claim for indemnity. This argument was rejected because it was Memorial that had designed the park and specified the safety features, or lack thereof. Since Memorial created the risk of injury, it was not entitled to indemnity. While the opinion goes on to describe the third party defendants' roles as passive, this is not necessary to the result. A party that created the risk cannot recovery indemnity from a joint tortfeasor, whether the tortfeasor's conduct is active or passive.

Contribution

The panel goes on to hold that contribution was not available as well. It is well settled that apportionment obviates the need for contribution. Some of the language used, however, is broader than the law actually is. Contribution does still exist if no apportionment instruction is given, although the Supreme Court could change that. But since the Court ruled an apportionment instruction would be given, there was no need for contribution and the result is correct.

Kentucky Supreme Court
Arbitration - Definition
The Kentucky Shakespeare Festival, Inc. v. Dunaway, 490 S.W.3d 691, 2016 WL 3371085 (Ky. June 16, 2016)

This case arose from a dispute concerning the bonus due under an employment agreement. The employment agreement contained a provision that the parties agreed to be bound by a third party's determination of net profits in the event of a dispute (interestingly, the bonus is calculated by increase in net revenues, not net profits). The trial court denied the employer's motion to treat the determination as a binding arbitration award. The employer sought review as though the ruling was a denial of a request for a temporary injunction. The Court of Appeals held that the provision was an arbitration agreement, and the Supreme Court agreed. The Court held that an agreement to have a third party calculate an amount is not an agreement to arbitrate, as arbitration is a process, not just a calculation. Since the issue did not involve arbitration, there was no basis for interlocutory review.