Michael Stevens of the Kentucky Law Blog recently posted an insightful look at the Court of Appeals recent unpublished decision in Neurodiagnostics, PSC v. Kentucky Farm Bureau Mutual Ins. Co., which clarified some of the confusion surrounding the assignment of PIP benefits. Michael begins by noting the “value” of PIP benefits and the “incentive” of health care providers to “race” to payment before discussing some “salient” points for the practitioner. He ends with a summary of the Court’s ruling, which holds that “reasonable proof of the fact and amount of loss realized” is not provided until a PIP application is submitted. Absent an application or direction by the insured, there is no obligation nor authority to pay PIP claims. Click on the headings for the link to Michael’s post and a PDF file of the case.

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The Supreme Court just published Baker v. Shapero, which involved the enforcement of an attorney’s lien by Richard Shapero and Carl Frederick. Shapero and Frederick represented the Appellant Chiu, who sustained serious injuries from an auto collision. He was in the hospital for fifteen days, seven of those in intensive care. Chiu’s sister initiated contact with Shapero and asked to retain his services. Shapero sent a paralegal to the hospital where Chiu, assisted by his sister, signed an employment agreement with Shapero. Shapero, or one of his designees, agreed to represent Chiu in return for a 40% contingency fee. Shapero then transferred the case to Carl Frederick. Chiu subsequently discharged Shapero and Frederick, rehired them four days later, and then permanently discharged them.

Chiu received a settlement of $175,000.00. Shapero and Frederick immediately filed an attorney’s lien, claiming entitlement to their contingency fee. The trial court following LaBach v. Hampton, 585 S.W.2d 434 (Ky.App. 1979), determined that Shapero and Frederick were dismissed without cause, and thus, entitled to a fee based on the contract. Under LaBach an attorney discharged without cause before completion of the contract was entitled to the agreed upon contingent fee less, “the reasonable cost of services of other attorneys required to complete the contract.”

The Supreme Court noted this position was the extreme minority position and that most jurisdictions only allow those discharged attorneys to claim fees on a quantum meruit basis. In fact, the Supreme Court found that the cases cited within LaBach actually supported this majority position. Accordingly, the Court found compelling reasons to overrule the holding in LaBach and apply the majority rule originally intended by those cases. It held, that “when an attorney employed under a contingency fee contract is discharged without cause before completion of the contract, he or she is entitled to fee recovery on a quantum meruit basis only, and not on the terms of the contract. This view is consistent with the client’s unqualified right to discharge his attorney at any time. The case was remanded to allow Shapero and Frederick a chance to prove the quantum meruit value of their services. (The amount considered reasonable to compensate them for their services rendered in the quasi contractual relationship) .

The Court of Appeals recently published Nanny v. Smith,which determined when the statute of limitation tolled for a tort claim arising from an automobile accident. The Complaint was filed within two years of the last PIP payment. However, the Clerk did not issue summons until a day after the statute of limitation period ran.

The sole issue was whether a plaintiff had an affirmative duty to see that a summons was issued within the limitations period. Civil Rule 3.01 declares a civil action commenced upon both the filing of a complaint and the issuance of a summons. This rule is strictly enforced. ““Kentucky courts have consistently held that whatever statute of limitations applies, it is not tolled until summons is issued.”” “As such, the trial court correctly determined that Nanny’’s action was not deemed commenced on the date the complaint was delivered to the clerk, but was, in fact, time barred as a result of the summons being issued after the expiration of the limitations period.”

This is a harsh result. Especially on the issuance of a summons over which the attorney has no real involvement. Last minute filings should be avoided to help prevent this from happening, but can’t always be avoided. Summons must issue within the limitation period to prevent this result.