Kentucky Court of Appeals
Insurance - Property - Criminal Acts Exclusion
Neighborhood Investments, LLC v. Kentucky Farm Bureau Mutual Insurance Company, ___ S.W.3d ___, 2014 WL 1260480 (Ky.App. March 28, 2014)

A tenant used his leasehold to manufacture methamphetamine and following his arrest left the premises in an uninhabitable condition. By law the premises could not be leased until decontaminated, which of course requires considerable expense. The landlord made a claim on its insurance policy for the cost. The insurer denied the claim based on the criminal acts exclusion, which included loss caused by "anyone to whom you entrust the property for any purpose". The landlord argued that a tenant is not one to whom the property had been entrusted. The Court agreed with the insurer, holding that by entering into the lease the landlord had entrusted the tenant with the property.

Kentucky Supreme Court
Arbitration - Jurisdiction of Trial Court
J P Morgan Chase Bank, N.A. v. Bluegrass Powerboats, 424 S.W.3d 902, 2014 WL 1101473 (Ky. March 20, 2014)

This was a claim against a bank for failure to timely pay or return a deposited check, and in defense the bank asserted that the dispute was subject to an the arbitration agreement. The bank offered no signed agreement, but demonstrated that its usual practice was to require a signature on a card that referred to a booklet that invoked the Federal Arbitration Act. The customer denied signing a card or seeing the booklet, but the trial Court found that he had signed a card and ordered arbitration. The customer did not proceed to arbitration right away, and the bank moved to dismiss based on limitations. The arbitrator dismissed the claim. Shortly after the dismissal, the Supreme Court decided Ally Cat, LLC v. Chauvin, 274 S.W.3d 451, 456 (Ky. 2009), which held that the agreement to arbitrate must be express. The customer filed a motion to take the circuit court case out of abeyance, and the trial Court set aside its order to compel arbitration.

The bank argued that the trial Court had no authority to set aside its prior order because the statutes required it to confirm the award since it had not been vacated, modified or corrected. The Supreme Court disagreed, however, holding that to deny an appeal would render the decision to order arbitration unreviewable. This begs the question of whether the trial Court had authority to set aside its order, but since the award had not been confirmed and appeal would have been appropriate so the result is the same.

Kentucky Court of Appeals - Unpublished
Premises - Open and Obvious
Cobb v. Kamer, 2014 WL 1004619 (Ky.App. March 14, 2014), motion for discretionary review filed April 14, 2014 (2014-SC-191-D)

Following a 2-4 inch snow, Kamer cleared the driveway and walk with a standard snow shovel. Cobb arrived in the morning to clean the house. The sun was shining although it was cold. Cobb parked on the driveway and had no difficulty getting to the house. After cleaning for about two hours, Kamer gave Cobb a Christmas present and she left the house. Her foot slipped on the driveway. The trial Court granted summary judgment on the ground that the icy condition was open and obvious. The Court of Appeals agreed that such a claim was barred notwithstanding recent decisions purporting to change the open and obvious rule. This type of case might be better viewed as simply a failure of proof of negligence, but the result seems clearly correct.

Kentucky Court of Appeals - Unpublished
Insurance - Declaratory Judgment - Choice of Law
James Capital, LCC v. Endurance American Specialty Insurance Company, 2014 WL 897018 (Ky.App. March 7, 2014)

The plaintiffs were named in a class action lawsuit alleging improper collection of delinquent property taxes and filed this action for a declaration that the insurer owed them a duty to defend and indemnify them under a professional liability policy. The trial Court denied the claim, holding that there was no coverage based on exclusions contained therein. The Court of Appeals reversed on the ground that the trial Court had not determined whether Kentucky or Ohio law applied. While the Court was correct in holding that choice of law issues should be resolved before the merits (unless there is no difference in the potential applicable law), the balance of the opinion is unhelpful. The Court of Appeals wrote that Ohio and Kentucky law differed on the issue of insurability of punitive damages, one cannot determine from the opinion how that is material if coverage was excluded on the merits. The Court of Appeals cited Lewis v. American Family Ins. Group, 555 S.W.2d 579 (Ky. 1977), which involved automobile insurance. If relevant at all, it would suggest that the law of the state where the professionals primarily practiced would apply. Finally, the opinion can be read to say choice of law is a question of fact. Probably the Court meant to say that the record was insufficiently developed to allow it to determine which law applied. While this opinion is fortunately unpublished it provides one bit of usefulness to the practitioner - deal with choice of law issues up front.

Kentucky Court of Appeals - Unpublished
Damages - Future Medical Expenses - Sufficiency of Evidence
Curtis v. Grigsby, 2014 WL 891276 (Ky.App. March 07, 2014)

The trial Court excluded the claim for future medical expense due to insufficiency of the proof. The plaintiff had offered the testimony of plaintiff's treating physician who had testified that he would continue to treat plaintiff for a plethora of issues. The doctor did not stated that any of the treatment was causally connected to the accident. The Court of Appeals held that the exclusion of the future medical claim was correct.

United States District Court
Insurance - CGL - Claim by Sovereign for Damages to State
Cincinnati Insurance Company v. Richie Enterprises LLC, 2014 WL 838768 (E.D.Ky. March 4, 2014)

Richie was a pharmaceutical distributor from Kentucky, and was one of the distributors against who the Attorney General filed a suit. This type of suit is billed as part of the battle against the pill mills and the addiction associated with the drugs. In any event, the object of the suit was the harm caused by the distributors to the state of West Virginia, and eight causes of action were set out in the Complaint. These ranged from wilful violations of statutes, nuisance, and negligence. Richie's request for coverage under its CGL insurance policy was denied, and Richie brought this declaratory judgment action in Kentucky. The Court held that there existed a duty to provide a defense but that a decision could not be made concerning the duty to pay until the underlying case was resolved.

Occurrence

The insurer first argued that the facts alleged lacked the fortuity associated with an accident, relying heavily on Cincinnati Insurance Company v. Motorist Insurance Company, 306 S.W.3d 69 (Ky. 2010), which construed the term accident in the context of a construction defect case. The Court observed that several counts alleged negligence, which in lieu of a claim that Richie intended to oversell drugs, failed to determine that it was selling more drugs than should have been properly required under the circumstances. According to the Court, a claim for negligence by definition alleges lack of intent.

Bodily Injury

The complaint sought damages for economic losses the state had incurred as a result of the drug abuse epidemic as well as the costs of medical monitoring. The Court held that this constituted a claim for bodily injury. This seems to be a perversion of the term bodily injury as defined in a CGL policy. The monitoring is not to cure physical harm that has been sustained by anyone, but to prevent future harm alleged to be the product of addiction. In effect the state of West Virginia seeks to finance a new welfare program using liability insurance proceeds to resolve the problems created by its existing welfare programs.

Intentional Act Exclusion

The insurer invoke the holding of Thompson v. West American Ins. Co., 839 SW 2d 579 (Ky. 1992) where the Court refused to find coverage for a sexual molestation even though the Complaint alleged that it was negligently performed. The rationale was that a sexual molestation could not be carried out negligently. In this case, the Court held that the conduct claimed to support the negligence allegations, if true, could be the product of negligent as opposed to intentional or criminal conduct.

United States District Court
Insurance - Homeowners - Seepage Exclusion
Geiman v. Northern Kentucky Water District, 2014 WL 820069 (E.D.Ky. March 3, 2014)

In 2008, Geiman noticed that water had begun to pool in his yard. When he noticed that the yard remained wet during dry spells, he suspected a water leak and contacted the water district. The district found no leak, but the problem continued and by 2011 water was beginning to enter the basement. About seven months later, Geiman filed a claim with his homeowner's insurer. The claim was denied because of the exclusion applicable to loss caused by constant or repeated seepage or leakage of water over a period of weeks, months or years unless the seepage or leakage was unknown and hidden by the walls, ceiling or floor of the structure. The Court found that the plain wording of the exclusion required a finding of no coverage, rejecting an attempt to assert an ambiguity. The Court further opined that the claim would have been also barred by the fact that notice of the claim came seven months after the first leakage into the basement.