Kentucky Tort Journal

The Supreme Court recently published Humana v. Blose, which dealt with the limited issue of whether a claimant can waive his right to a statutory action by signing a release of claims.  The Court of Appeals held that the “remedy for a breach of a release and waiver of a statutory right is “an original action or counterclaim for recovery of damages incurred as a result of the breach,” rather than the dismissal of the statutory action.”

Blose was employed by Humana and terminated allegedly as an overall reduction in workforce.  In exchange for 12 weeks severance pay and continuation of benefits, Blose signed a release, agreeing to settle any claim she might have arising out of her termination.  This included any statutory rights she may have resulting from her disability.  Several years later, she filed suit against Humana, alleging among other claims, disability discrimination.  Humana filed for a dismissal or in the alternative a summary judgment based on Blose’s execution of the release.  The claim was dismissed.

The Court of Appeals held that Blose could not waive a statutory right of action, and that the appropriate remedy to Humana was a suit for breach of contract.  (The breach being Blose’s filing of a lawsuit despite her agreement). The Court of Appeals also held that further discovery was warranted on the factual issues surrounding the execution of the release by Blose.  (This part of the order was not appealed).

The Supreme Court noted that releases and compromise agreements were contracts, governed by contract law.  As such, they could be impeached if procured by fraud, bad faith, or false representations.  Relief from such an agreement could also be granted if the agreement was procured under duress.

The SC noted:

Even before American General , we had held, “a release is a discharge of a claim or obligation and surrender of a claimant’s right to prosecute a cause of action .” Thus, a “‘release’ extinguishes a claim or cause of action.” … Thus, a release without duress, fraud, or bad faith, is effective to waive a plaintiff’s right to bring a claim, whether statutory or otherwise.

Therefore, Humana could assert the release as a defense to Blose’s claim, and not simply counterclaim for breach of the release. The SC reversed so much of the Court of Appeals’ opinion that required the trial court to consider the breach of the release as a counterclaim, as opposed to dismissing the case outright.

Welcome to the new home of the Kentucky Tort and Insurance Law Journal.  I am still working out some content issues, but have resolved the domain problem.   

You should be directed to the new domain (kytortjournal.com) without anything further on your part.  Please be aware that if you did not update your earlier subscription link or bookmark from kytortlaw.blogspot.com, you will not be redirected to this site automatically.  Instead, you will have to visit that site and link here.  Please update your URL’s and bookmarks to the current domain kytortjournal.com.  

Thanks.

The New Year is upon us. Newspapers, television, the internet, and the local water cooler are abuzz with talk about New Year’s resolutions and thoughts on how to keep them. Despite a significant failure rate, every year millions of people vow to change or do something different than the year before. I guess I am no different.

The thought occurred to me before the holidays that my postings for this blog were behind. I had hoped that during the holidays I would have time to catch up with some of the recent cases. Unfortunately, with three kids under six, the holidays offered anything and everything, but free time to devote to my “hobby.” The fact that the court of appeals is publishing more cases than ever each Friday, doesn’t help.

My News Year resolution, in additional to losing weight (how original), is to do a better job giving you the information you need to keep up to date on Kentucky’s legal issues. The enormous amount of tort and insurance law cases issued each week make it almost impossible to digest every case I find interesting or which may impact current law. You may have noticed that my more recent posts dealt only with published opinions. I will continue to digest only published cases. I simply do not have the time or resources to digest them all. However, I hope to at least provide links to those published cases, which do not get digested. That way my readers can view the opinions and make their own decision on how much time to devote to reading each. As always, I welcome your suggestions on how to improve this blog.

That being said, I was confronted with an even harsher fact after the holidays. That being that many of my colleagues and their blogs have for the most part ceased to exist. While the links are still active and the pages there, the postings are outdated. This is unfortunate given these blogs provided a unique insight and information into each specific area of the law it covered. Fortunately, many do still exist and their editors, my friends and colleagues, continue to offer this invaluable service. I wish them continued longevity and luck in the coming year.

I am reminded of a case I read in law school in the late 90′s, involving the American Bantam Car Company. My professor couldn’t help but point out that the American Bantam Car Company was no longer in business and that of the hundreds of car manufacturers originally started in the United States only the big three were left. He found this to be a cautious tale for the tech stock speculation running rampant on Wall Street at the time. Of course, time proved him correct as tech company after tech company went the way of the American Bantam Car Company.

The fact remains that all bloggers share a passion for the written word and a connection to their audience that is devoid of the restrictions of traditional outlets and unlimited due to the reaches of the internet. The fact also remains that the majority of bloggers share their passion for little or no money, recognition, or respect. When these realities are weighed against so many other responsibilities, something simply has to give and often its the blog. Perhaps that is the ultimate reality of this medium, it lasts only so long as its creator’s desire to say something. Maybe that is the way it should be. However, the final fact remains that I am not yet ready to shut my big mouth.

I look forward to another year, discussing the recent legal activity in Kentucky’s tort and insurance law. I hope you will join me. Until then, I hope this post finds you ready to begin the New Year with a resolution of your own.

Ed

The Kentucky Defense Counsel, Inc. has set its Fall Seminar for October 26, 2007, to take place at the Derby Museum at Churchill Downs. The program is approved for 6 hours of CLE credit, including 1 hour of ethics. The keynote speaker is Larry Pozner, who is identified as the co-author of America’s all time best selling book on cross examination. For pricing or registration, please call (502) 228-9256 or email ky.def.csl@att.net.

The Court of Appeals recently published Elder, et. al v. Perry Co. Hospital, et. al, a medical malpractice case involving Kentucky residents and Indiana residents. The parents of the deceased were Kentucky residents who had their son treated in Indiana, where the medical negligence was alleged to have occurred. The case had been pending for six years and at least one appeal to the Supreme Court over jurisdictional issues and the proper forum. The issues decided in this case are numerous but center on whether the Kentucky Courts could exercise personal and subject matter jurisdiction over the Indiana residents and if so, whether the doctrine of forum non conveniens applied.

In considering jurisdiction challenges for lack of personal jurisdiction the main issue is the minimum contacts requirement set forth by the US Supreme Court. (Remember the Volkswagen case from civil procedure?) Of course the purpose is to insure that constitutional protections of due process aren’t violated. According to the Court of Appeals, the minimum contacts were met by the defendants actions in the Commonwealth.

In considering the lack of subject matter jurisdiction challenge presented, the issue raised was really not one of subject matter jurisdiction but one of choice of law. Kentucky Courts have subject matter jurisdiction over medical malpractice cases. However, since nonresident defendants were involved and the tort occurred outside of Kentucky the choice of law question is a valid one, although improperly labeled. The Court of Appeals found that Indiana’s Medical Malpractice Act violated Kentucky public policy, did not provide appropriate protection of Kentucky residents, and likely violated Kentucky’s Constitution; therefore, Kentucky law applied.

Forum non conveniens can still apply, even if jurisdiction is established, if the forum chosen by the Plaintiff is “seriously inconvenient” and another more appropriate forum is still available. The Court discussed factors that made it just as convenient for the defendants to litigate the case in Louisville, as in Tell City, Indiana. It also believed that the Indiana forum was no longer available due to statute of limitations issues. (Despite the trial court’s attempts to prohibit that issue from being raised in Indiana’s courts.) Given the time that had passed before the issue was raised and the lack of an alternative forum, the Court held the doctrine did not apply.

The real issue in this opinion is whether the Plaintiffs were going to be required to pursue two separate actions for malpractice in two separate states with two entirely separate sets of laws. The trouble apparently began when Perry County Hospital sought dismissal of the action. When this was granted, the Plaintiff’s faced the unenviable task of two separate lawsuits. Instead they sought to have Norton dismissed on the same grounds. Norton actually argued against dismissal. Eventually, the trial court dismissed both defendants on forum non conveniens grounds prompting this appeal. The effect of this decision is to overturn the dismissal of Perry County Hospital, allowing the Plaintiffs’ to pursue their malpractice action in Jefferson County, Kentucky against an Indiana resident corporation that never “practiced” in Kentucky but had the minimum contacts to warrant Kentucky exercise of personal jurisdiction.

This case raises all sorts of interesting civil procedural issues. The personal jurisdiction issue should have been reviewed, but the standard “minimum contacts”, means just that, “minimum.” It’s a low standard only meant to insure that a court’s acceptance of jurisdiction does not offend notions of fair play and due process. This minimum contacts inquiry is incorporated into Kentucky’s long arm statute KRS 454.210 as are the other factors identified by the court. In today’s world, it is difficult to find a large corporation that does not meet this requirement, especially ones such as these practicing on the border between Indiana and Kentucky that advertise in Kentucky for business from Kentucky residents.

One interesting question not addressed in this opinion is the issue of venue. Lack of venue is grounds for dismissal. If personal jurisdiction is authorized by Kentucky’s long arm statute, the appropriate venue is either the county where the plaintiff resides or where the cause of action arose. KRS 454.210(4).

So, even if venue is appropriate against Norton due to its relationship to Jefferson County, that does not mean Jefferson County is appropriate for Perry County Hospital or the other nonresident defendants. If personal jurisdiction is exercised over these nonresident defendants the appropriate Kentucky forum is Hancock County, Kentucky where the plaintiffs reside. In fact, the minimum contacts evaluated by the court occurred in Hancock County. Unfortunately, it does not appear the venue issue was ever raised, so it was not discussed by the court of appeals.

However, in Copass v. Monroe Medical Foundation, Inc. 900 S.W.2d 617 (Ky.App. 1995), the court of appeals held that it was not proper to include nonresident defendants in an action in a neighboring county where other defendants were located. This case dealt solely with Kentucky residents. In this case the other defendants are Indiana residents. The appropriate venue for these defendants is not Jefferson County. The true issue for the Indiana residents, aside from the personal jurisdiction inquiry, is the improper venue of the case in Jefferson County, not the inconvenient forum of an otherwise proper venue.

The Court of Appeals just published Codispoti v. First Financial Insurance Company, which dealt with an exclusion to coverage for injury to an employee of the “insured.” The circuit court entered summary judgment holding that an employee exclusion in the policy precluded coverage to Joseph M. Codispoti. This Appeal followed.

Eric Jameson was driving a vehicle in which Codispoti, the owner and president of Preston Highway Motors, was a passenger. Jameson was an independent contractor and, therefore, not an employee of Preston Highway Motors. On behalf of Preston Highway Motors, the two men were taking the vehicle, a 2000 Saturn, to sell at auction in Indianapolis, Indiana. Approximately five miles outside of Indianapolis, Jameson fell asleep, hit a guardrail to the left of the roadway and then bounced to the right where the vehicle hit a wall. Both Codispoti and Jameson sustained personal injuries.

On the date of the accident, a policy of insurance issued by First Financial Insurance naming Preston Highway Motors as the named insured was in effect and covered the vehicle involved in the accident. First Financial did not deny that pursuant to the terms of the policy, Jameson was a permissive user of the vehicle and, therefore, an insured. However, it contends that Codispoti’s status as an employee of Preston Highway Motors, precludes coverage under the policy terms. The exclusion at issue states as follows:

This insurance does not apply to any of the following:

EMPLOYEE INDEMNIFICATION AND EMPLOYER’S
LIABILITY

“Bodily injury” to:

a. An “employee” of the “insured” arising out of and in the
course of:

(1) Employment by the “insured”; or

(2) Performing the duties related to the conduct of the
“insured’s” business.

Condispoti argued that the exclusion did not apply because he was not an employee of the insured Jamison. The Court of Appeals found that it did not matter, because Condispoti was an employee of Preston Motors, who was also an insured. Therefore, the exclusion applied.

Condispoti also argued that the exclusion was void against public policy, because it eliminated insurance coverage for Jameson. The Court of Appeal found this argument lacking as well. It noted that the same exclusion was previously found not to violate public policy in the case of Brown v. Indiana Insurance Co., 184 S.W.3d 528 (Ky. 2005). The Court did candidly recognize the factual distinction between Brown and the present case. Unlike Brown where the accident victim and the tort-feasor were employees of the named insured, Jameson was not an employee. The Court found this to be a distinction without difference. It affirmed the summary judgment.

This Opinion essentially denies Jameson, an insured, coverage for Condispoti’s claims because of Condispoti’s status as an employee. It leaves Jameson without coverage and personally responsible for Condispoti’s damages not because of something he did in violation of the policy but solely due to the status of the person he injured. This of course is an absurd result.

The entire purpose of liability coverage is to provide indemnity to a person charged with legal responsibility for another’s damages. It’s purpose is not to provide coverage to the injured party. Here, Jameson, an insured, is denied coverage and thus indemnity, for his legal responsibility to Condispoti, not as a result of anything he did, but as a result of Condispoti’s status. It would be no different than denying Jameson coverage for injuring a pedestrian, a family member, or any other status of person. The Supreme Court has consistently denied such “status” exclusions, finding them to be in conflict with the purpose of the MVRA. This exclusion is no different.

I also disagree that the exclusion even applies in this case. To begin with the policy begins by noting that, “[t]his insurance does not apply to any of the following.” The title then states: “Employee Indemnification or Employer Liability.” The language which follows and which was relied upon by the Court was clearly meant to apply, as the title suggests, when an employee is seeking indemnification for bodily injury to another employee of the insured, arising out of his employment. Or, where there was an attempt to hold the employer vicariously liable for the employee’s negligence.

Here there was no dispute that Jameson was not an employee of the insured. Therefore, this is not a situation where an employee is seeking indemnification for bodily injury to another employee of the insured. In Brown, the tortfeasor was an employee of the insured who injured another employee in the course of his employment. The exclusion was clearly applicable in that case, as were workers compensation issues discussed. There is no such issue here. This is certainly more than just a distinction “without difference.” Furthermore, in Brown neither the employee tortfeasor or the employer would be personally responsible without the coverage, because workers compensation laws would not allow such an result. Here the result is Jameson is left uninsured and legally responsible.

While it easy to think of liability insurance in terms of covering the injured party, the purpose is to cover the negligent party. A fact lost in this case given the opinion that the “policy did not provide coverage to Condispoti.”

The Court of Appeals just published G&J Pepsi-Cola Bottlers, Inc. v. Fletcher, et al. The primary issue became whether G&J could assert a subrogation claim against the UIM benefits Fletcher was seeking from US Fire Insurance Co. and Ohio Casualty Group. The circuit court concluded that the employer’s statutory subrogation rights extend only to recovery of benefits paid “from the other person in whom legal liability for damages exists[;]” in other words, the tortfeasor.

The Court of Appeals noted, “that while Samples makes clear that the UIM carrier’s liability is measured by the liability of the tortfeasor, it does not follow that payments made under a UIM contract are the payment of legal damages in the traditional sense. While the UIM carriers may stand in the shoes of the tortfeasor for the sole purpose of making the injured party whole, the UIM contract does not provide an additional right of subrogation not provided for in KRS 342.700(1).”

This appeal was held in abeyance pending a ruling by the Supreme Court of Kentucky of the issues advanced in Cincinnati Insurance Company v. Samples, 192 S.W.3d 311 (Ky. 2006). The issue became whether or not that ruling affected the Employer’s subrogation rights for workers compensation benefits. The Court of Appeals found; “It is clear that the holding in Samples is directed to the question of what damages an injured employee may recover from his own or his employer’s UIM carrier; it neither addresses nor changes the law regarding an employer’s subrogation rights as set out in State Farm v. Fireman’s Fund.

Simply put, a workers compensation carrier who pays benefits to an injured party is subrogated to the extent of those benefits against the tortfeasor. They simply cannot recover those benefits from any source of Plaintiff’s recovery, particularly UIM benefits, as those are not payments for damages by the person in whom legal liability rests.

The Court of Appeals just published CSX Transportation, Inc. v. Moody, which dealt with several issues arising from a jury verdict awarding Moody $2.74 million in his FELA action. CSX sought review that: (1) the evidence was insufficient to submit the issue of foreseeability to the jury; (2) the trial court should have given a specific foreseeability instruction; (3) the evidence was insufficient to prove causation; (4) it was error to allow Moody to introduce evidence of other dissimilar claims filed by workers against CSX; (5) the evidence was insufficient to support the jury’s award for future medical expenses and lost wages; (6) the trial court erroneously failed to instruct the jury that lost wages and future medicals are non-taxable; and (7) the trial court should have instructed the jury to discount the award to present value.

The Court discussed each of these at length and found only the $200,000 award of future medical expenses improper. This is an interesting case discussing the difference between ordinary negligence cases and FELA cases, the application of federal and state law in FELA, and the standard for upholding a FELA award. Recommended reading for any practitioner involved with a FELA claim.

The Court of Appeals just published Nationwide Mutual Fire Ins. Co. v. Pelgen, et. al, which dealt with “inferred intent” as it applies to exclude coverage for intentional acts. “Under Kentucky precedent, certain actions by the insured give rise to an “inferred intent,” regardless of the actor’s actual intent, so as to preclude coverage.” The issue addressed was whether the Campbell Circuit Court erred in failing to apply the inferred intent rule to an insured who killed his wife at a time when it is alleged that he lacked the mental capacity to form intent.

Charles R. Swope fatally shot his wife, Cloay Lou Swope, and then shot and killed himself. Some time prior to the incident, Cloay had moved out, and apparently the couple’s marriage was floundering. Cloay was outside at Charles’ residence, the former marital home, when Charles retrieved a shotgun and shot Cloay twice, while she held their three-year-old daughter. He then went inside and shot himself. The record does show that for several years preceding the tragic event, Charles suffered from mental illness manifesting in psychosis, delusions, auditory hallucinations and suicidal thoughts, and that his mental condition probably deteriorated further during the four to six months preceding the shootings.

The administratrix of Charles’ estate, sought personal liability coverage under a Nationwide Homeowner’s policy. Nationwide denied coverage in part under the policy’s stated exclusion for bodily injury “caused intentionally by . . . an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured’s conduct.” The Circuit Court held that Nationwide could not rely on the policy exclusion to deny coverage for the harm resulting from Swope’s acts, because Swope lacked the capacity to understand the physical nature of the consequences of his actions and could not form any intent.

The Court discussed the inferred intent rule under Kentucky law. It concluded; “The inferred intent rule is supported by sound public policy principles, in part because it removes from the trial court the burden of determining an actor’s thought process when engaging in conduct resulting in harm. That is to say, in certain circumstances one may reasonably infer from the facts that the actor intended the harm, without needing to resort to proof of that intent.” The Court then discussed the application of the rule to the current case:

We believe it would be similarly unsound to hold that Swope acted unintentionally when he deliberately pointed a gun at his wife’s face, pulled the trigger, and then took the same gun and shot himself. As noted above, the couple was estranged, their relationship was subject to ongoing strife, Swope retrieved a shotgun from the house, and he used it on his wife, the person with whom he was in conflict. Regardless of whether he was psychotic or unable to appreciate right from wrong, his state of mind obviously was such that he was able to act deliberately and intentionally with respect to Cloay. Additionally, he had sufficient presence of mind not to shoot his daughter whom his wife was holding or any other family members or neighbors who may have been in the area. We conclude, therefore, that the Campbell Circuit Court erred in failing to apply the inferred intent rule.

While the Court was sympathetic to the Swope family, it did not believe Nationwide “contracted to provide coverage in instances like the one at bar.”

Two things come to mind. The first is that coverage under the Nationwide policy is provided for “accidents.” It is not an “all risk” policy, providing coverage for any and all occurrences. Before you even reach the question of whether the act for which coverage is sought is excluded as “intentional”, you must first determine whether it even qualifies for coverage. There are no facts in this case, which would even remotely suggest this is an accidental shooting. Simply put, there is no coverage for this claim, regardless of Swope’s intent at the time of the shooting, without some indication it was accidental. The fact that Swope could not allegedly form intent, does not make this an accident covered under the policy.

Second, the Court was correct to note that Swope’s actions, although perhaps excusable due to his mental state, are still intentional ones, excluded under the policy. Swope intentionally shot and killed his wife. There is no other reason that he went into the house, grabbed a loaded shotgun, pointed it at his wife’s face, and pulled the trigger twice, then went into the house and shot himself. Can it even be rationally argued that his intent was anything else but to do harm to his wife and himself? While Swope may be excused from criminal sanction due to his mental state, (although if he lived I seriously doubt he would be excused), that fact alone does not make his actions any less intentional. This is certainly a sad and unfortunate case, but it’s simply not the kind of “occurrence” that homeowners’ policies are meant to cover.