The Supreme Court recently published Knott v. Zurich Ins. Co., holding that the Uniform Claims Practices Act applies during litigation. “KRS 304.12-230 imposes what is generally known as the duty of good faith and fair dealing owed by an insurer to an insured or to another person bringing a claim under an insurance policy.” “[I]t proscribes a list of particular acts and practices.” “The commencement of litigation by the filing of a complaint, even when the claim adjustment process is underway, however, does not change the fundamental nature of what the claimant seeks .” “Nothing in KRS 304 .12-230 limits its applicability to pre-litigation conduct, and since the statute applies to “claims,” it continues to apply to an insurer so long as a claim is in play. As such, we hold that KRS 304.12-230 applies both before and during litigation.”

The Zurich Court went on to address “what sorts of post-filing conduct by an insurer will be admissible in a bad faith action.” “Our preferred rule as to what evidence of post-filing conduct may be admissible in a bad faith action is best summed up as follows:

In principle, an insurer’s duty to settle should continue after the commencement of litigation . If the insurer were immunized for objectional settlement conduct occurring after litigation begins, the insured would be left without a remedy. It makes sense, therefore, to hold the insurer responsible for such conduct…

The Court further emphasized “that before admitting evidence of post-filing behavior, courts must be careful to weigh the probativeness of the proposed evidence against its potential for prejudice, as required by KRE 403.” Therefore, while litigation strategy or trial tactics may not be admitted to show bad faith, evidence of its settlement behavior may be. This evidence is not automatically admissible, but subject to a KRE 403 analysis.

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The Court of Appeals just published Estate of William Bryant v. Mid-States Plastics, Inc., which dealt with the issue of Mid-States’s vicarious liability for the death of Bryant. Bryant, a nonbusiness passenger, accompanied Daniel Edwards, President and General Manager of Mid-States, on a business trip to Indianapolis. During the return flight, Edwards negligently flew the plane into a guy wire of a cell phone tower. The Montgomery Circuit Court granted summary judgment in favor of Mid-States on Plaintiff’s claim for vicarious liability.

The sole issue on appeal was whether there “is a genuine issue as to a material fact concerning Mid-States’s vicarious liability to the Bryant Estate for Edward’s negligence…” “If a negligent act of an employee occurs in the course and scope of the employer’s business, an employer can be held vicariously liable. This liability extends to the employee’s own vehicle if the employee’s conduct at the time of the occurrence was within the scope of employment.” The Court of Appeals ruled that a “factual finding must be made as to whether Mid-States had actual knowledge of Edward’s practice of allowing a non-business passenger to accompany him on a business trip and failed to object.” “If evidence of this knowledge is substantial enough, a question of fact is raised as to whether this knowledge and lack of objection make the nonbusiness passenger an invitee of the employer or constitutes a grant of apparent authority to the employee to offer these rides.”

It was undisputed that Mid-States knew that Edward’s wife accompanied Edwards from time to time on his business trips. The Court of Appeals concluded genuine issues of material fact existed as to Mid-States’s knowledge of Edward’s travel practices and Edwards authority in setting the travel policies.

Comment: The fact that Mid-States was aware that Edward’s wife sometimes accompanied him would have been sufficient to overrule the summary judgment, at least initially. However, the Court of Appeals went on to conclude that “Mid-States offered no evidence of the extent of Edward’s authority, except the affidavit of Chairman Long, which the trial court did not consider in granting summary judgment in Mid-States’s favor.” It further criticized Mid-States for its failure to present evidence “as to conversations between Edwards and Mid-States as to its policy regarding a non-business passenger … to allow a determination as to whether it was a prohibited or accepted practice.”

The fact that the trial court did not consider an affidavit in making its ruling does not mean the affidavit is not evidence that should be considered in determining if summary judgment is appropriate. Furthermore, the burden should remain on the Plaintiff to show that Edward’s had apparent authority to invite non-business passengers, and not, as suggested, on Mid-States to prove the negative. Finally, a demonstration of “no genuine issue of material fact” does not mean that the moving party must eliminate all possibilities. A showing that there is a lack of “evidence” on an essential issue or element is sufficient. Mid-States was simply unable to make such a showing on the issue of apparent authority.

I have been meaning to post on David Hoskin’s Kentucky Employment Law Notes for some time. I hope David will forgive me for the delay. David’s Blog has items of interest for employment lawyers and HR professionals alike. David is a member of Frost Brown Todd, LLC. and works in their Louisville office. This is another excellent resource for Kentucky lawyers in the area of employment and labor law. I recommend David’s site and have added a link to the sidebar.

The Louisville Bar Association will be hosting two upcoming CLE geared toward the trial practitioner. On May 22, 2006, the Bar will host Advanced Cross Examination, which will discuss and demonstrate cross examination techniques. Topics include: The Risks & Dangers, How to Prepare for Cross Examination, the Approach to Cross Examination, and Cross Examining the Helpful & Unhelpful Witness. On May 25, 2006, the Young Lawyers Section will be hosting Depositions Skills for Young Lawyers. Topics include a discussion on sharpening your depositions skills, proper depositions, and trial techniques to strengthen your practice of law. Click on the links for details and payment options.