Document of Car Insurance Policy for background

The Kentucky Supreme Court recently issued an opinion regarding which of two insurance policies provided primary insurance for purposes of uninsured motorists (UM) benefits provided to a passenger.

The car in which the passenger was riding was struck by a car later found to be uninsured. The driver of the car maintained an insurance policy that provided coverage for UM benefits.  The passenger also owned a car of her own, which likewise provided UM benefits in the event she was injured by an uninsured car.

An argument arose between the two insurance companies regarding which insurance company was responsible to provide primary coverage to the passenger or whether they were both responsible for providing coverage under their respective “other insurance” clauses that provided coverage on a pro rata basis.

The Court identified two issues for determination.  First, should the competing insurance companies “other insurance” clauses apply so that they were mutually repugnant and therefore pro rata apportionment was necessary or should they be deemed in violation of the Motor Vehicle Reparations Act (MVRA), and second, who bears the primary responsibility for providing UM coverage the vehicle’s insurance company or the passengers?

With respect to the first question the Court found that the “other insurance” clauses should be disregarded entirely in the UM context.  It stated:

This case illustrates the importance of that point, and makes clear that our reasons in Shelter for “declin[ing] . . . to further embroil Kentucky courts in unduly complicated two-step insurance policy interpretations of continually emerging and changing insurance avoidance clauses,” apply just as much to priority disputes between vehicle and passenger insurers in UM cases as to similar disputes between vehicle and permissive-driver insurers in liability cases. We agree with the Court of Appeals, accordingly, that between such insurers, “[a]bolishing the rule of apportionment for UM coverage is a logical and natural extension of Shelter.” (Citations omitted).

With respect to the second question the Court found that the car in which the injured passenger is riding owes primary coverage for UM benefits.  It stated:

As we indicated in Shelter, however, given the increasing demise of the “general rule” as an industry standard, and given the proliferation of “other insurance” clauses and
the inevitable litigation they spawn, any contrary result runs directly counter to the MVRA’s basic purposes of minimizing insurance litigation and “encourag[ing] . . . prompt payment of needed medical care and rehabilitation” to accident victims.  As in Shelter, therefore, we find in the stated purposes of the MVRA a legislative intent to the effect that in instances where both the vehicle owner and a non-owner passenger are separately insured with UM coverage, the vehicle owner’s coverage shall be primary.  (Citations omitted).

This case closely mirrored the problems that the Supreme Court was concerned about with these types of clauses and issues.  Two insurance companies arguing over who is supposed to provide UM coverage to an injured passenger that both companies agree she should receive.  It took four years, however, before either insurance company paid any benefits to the passenger.  As such, the Court found that allowing competing insurance clauses did nothing more than give the insurance companies a reason to argue with each other and delay payment to the insured in violation of the MVRA’s specific purpose of prompt payment of claims.  It also noted the inherent difficulty in finding the insurer for a passenger as opposed to a car, which was readily identifiable and required.

A very thorough and well-reasoned opinion that should bring the different coverages available into agreement with one another.  Frankly, I have on several occasions had this issue come up in the UM and UIM context and have never had an insurance company for the car in which my client was riding try to deny its primary role in providing coverage.  This opinion effectively renders these two issues resolved in Kentucky as to all types of insurance coverage.

You can read the entire opinion, Countryway-vs.-United Financial Casualty.

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Car Insurance PolicyThe Court of Appeals recently discussed what qualifies as “occupying” a car for purposes of qualifying for underinsured motorists coverage (UIM) in Jackson vs. State Farm Fire Cas. Co., unpublished.  The Court discussed the four factor test to determine if someone is “occupying” a car.  The Court of Appeals found as follows:

Considering the facts most favorably to Jackson under an expansive interpretation of the State Farm policy, we conclude the trial court erred by determining as a matter of law that Jackson was not “occupying” Doyle’s vehicle:  (1) there was a causal relationship or connection between where Jackson was located when he received his injury and the use of the insured vehicle; Hayes’s action of calling to Jackson, Doyle’s action of stopping his vehicle behind Jones’s vehicle, and Jackson conversing with Hayes through the open passenger window with his back to Jones’s vehicle put him in a vulnerable position behind her vehicle and the impact of the two vehicles resulted in his injuries from being pinned
between them and hitting his head on Doyle’s vehicle; (2) Jackson was in reasonably close geographic proximity to Doyle’s vehicle because he was in actual physical contact with it when he was hit by Jones’s vehicle; (3) Jackson was vehicle oriented because he had his hands on the vehicle and was talking to Hayes through the window; and (4) Jackson was arranging a ride which was an essential transaction to enable him to use the vehicle as a passenger and, although paused, the vehicle was still being driven which is also an essential use of the vehicle. Therefore, the trial court erred in granting summary judgment to State Farm.

The Court also determined that regardless of the four factor test, Jackson qualified as “occupying” the car under State Farm’s own policy, regardless of the four part test.  The Court did not believe that Jackson’s receipt of Basic Reparations Benefits from GEICO as a “pedestrian” was significant, since Jackson qualified for those benefits under State Farm’s definition of “occupying” and he could have applied for the benefits from State Farm.  Finally, the purpose of the Motor Vehicle Reparations Act (MVRA) is to expand coverage, not to limit it and the four part test should not be used to limit the application of coverage, but to expand it.

A very well reasoned and fact specific application of the four part test set forth in Kentucky Farm Bureau v. McKinney, 831 S.W.2d 164 (Ky. 1992).  The fact specific nature of the four part test makes it doubtful that this case will have broad application with the exception of the discussion regarding expansiveness.  In the summary judgment context both the policy of insurance and the MVRA’s purpose are to be viewed as expanding coverage to persons injured in car accidents, not in limiting it.  This is keeping with the summary judgment standard of “viewing the facts in the light most favorable to the non-moving party” and the MVRA’s purpose in providing a “source of recovery for injured persons.”