Automobile Insurance SubrogationAutomobile Total Loss ThresholdsDeductible ReimbursementDiminution of ValueFirst Come, First Served: Subrogating Multiple Claims in Excess of Policy LimitsFuneral Procession Traffic LawsImputing Contributory Negligence of Driver to Vehicle OwnerLaws Regarding using Cell Phones/Headphones/Texting While DrivingLoss Of UseMed Pay/PIP SubrogationOwner Liability For StolePayment of Sales Tax After Vehicle Total LossPedestrian and Crosswalk LawsRental Car Company Physical Damage and Loss of Use ClaimsRental Car Company’s Liability Insurance Primary or ExcessSlower Traffic Keep RightSudden Medical Emergencies While DrivingSuspension of Drivers’ LicensesUse of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Federal , State, and Local Governmental EntitiesMunicipal/County/Local Governmental Immunity and Tort LiabilityState Sovereign Immunity And Tort Liability
General Tort Laws/StatutesAnti-Indemnity StatutesContribution ActionsContributory Negligence/Comparative FaultDog Bite LawsEconomic Loss DoctrineParental ResponsibilitySpoliationStatute of LimitationsStatute of Limitations Exceptions
Health Insurance SubrogationHealth and Disability Insurance
InvestigationAdmissibility of Expert TestimonyPre-Suit Disclosure of Liability Policy Limits in Third-Party ClaimsRecording Conversations
Product Liability SubrogationProduct Liability Law
Property Subrogation“Matching Regulations” And Laws Affecting Homeowners Property ClaimsCondominium/Co-Op Waiver of Subrogation LawsDamage to Property Without Market ValueGeneral Contractor Overhead And Profit Payments In First-Party ACV Property Damage ClaimsLandlord/Tenant Subrogation
Subrogation GenerallyAnti-Subrogation RuleCriminal RestitutionMade Whole DoctrineMedical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Workers’ CompensationEmployee Leasing LawsHospital Lien LawsOCIP/CCIP Subrogation In Workers’ Compensation Construction CasesRecovery Of Increased Workers’ Compensation Premiums By EmployerWhich Workers’ Compensation “Benefits” Can Be Subrogated?Workers’ Compensation Subrogation Waiver EndorsementsWorkers’ CompensationWorkers’ Compensation Claims by Undocumented Employees
Automobile Insurance Subrogation
Automobile Total Loss Thresholds
Total Loss Threshold (75%).
Cost of parts and labor to rebuild vehicle to pre-accident condition exceeds 75% as set forth in NADA price guide. K.R.S. § 186A.520(1)(a).
Automobile: Pro-Rata. 806 Ky. Admin. Reg. 12:095 §7(d)(5) provides: “If requested by claimant, insurers shall include first-party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on a proportionate basis with first-party claimant, unless deductible amount has been otherwise recovered. Deduction for expenses shall not be made from deductible recovery unless outside attorney is retained to collect recovery. The deduction shall then be for only pro-rata share of allocated loss adjustment expense.”
Deductible must be included in any collision subrogation demand upon claimant’s request.
Diminution of Value
First Party: An insurer is required to restore the physical condition but not the value of the damaged automobile, which was previously followed by the Court of Appeals in Tomes v. Nationwide Ins. Co., 825 S.W.2d 284 (Ky. App. 1991) and General Accident Fire & Life Assurance Corp. v. Judd, 400 S.W.2d 685 (Ky. 1966).
Third Party: In 2018, the Court of Appeals applied the DIV rule with regard to real property to third-party vehicle damages. Muncie v. Wiesemann, 548 S.W.3d 877 (Ky. 2018). The recovery shall be the difference in value of the property before the injury occurred, and the value immediately after it is completed. The after-value shall take into account stigma damages, if any. Conrad v. Shrout, 2018 WL 3814610 (Ky. App. 2018).
First Come, First Served: Subrogating Multiple Claims in Excess of Policy Limits
A liability carrier must not abuse the power it has to negotiate and make settlements and refuse to settle within the limits of the policy if the damage to the insured is reasonably certain. State Farm Mut. Auto. Ins. Co. v. Marcum, 420 S.W.2d 113 (Ky. 1967), overruled by, Manchester Ins. & Indem. Co. v. Grundy, 531 S.W.2d 493 (Ky. 1975). There must be a showing of bad faith, as opposed to mere negligence, to create liability on part of insurer for failure to settle within policy limits, and that factors to be considered, weighed and evaluated together in determining whether insurer is guilty of bad faith in failing to settle a claim so as to be liable for excess of policy limits include:
- probability of recovery and that the recovery would be in excess of the policy limits;
- the negotiations in respect to settlement;
- any offers to settle for policy limits or less than these limits; and
- whether the insured made a demand for settlement on the insurer. Grundy, supra.
However, one case seems to indicate that the fact that a policy limits settlement offer does not include all claimants who have claims against those limits, tends to support the insurer’s good faith argument in rejecting the settlement demand and not settling. Harvin v. U.S. Fidelity & Guaranty Co., 428 S.W.2d 213 (Ky. 1968).
Funeral Procession Traffic Laws
Kentucky grants funeral processions the right-of-way at intersections without regard to any traffic control signal. The escort vehicle driver can direct the procession to proceed through an intersection or make any necessary movements despite any traffic control signals. This implies that the lead funeral escort vehicle can disregard a red traffic signal. A funeral procession is defined as at least two vehicles accompanying the body of a dead person when every vehicle has its headlights lit or displays a pennant. It is not specific as to whether funeral processions may go through a red light, but it grants them right-of-way at intersections if the escort vehicle displays flashing red, yellow, or blue lights, and each vehicle exercises due care. Processions must yield to emergency vehicles, trains, or when directed otherwise by a police officer. Other vehicles cannot drive between, interfere with, or pass the procession unless directed by a police officer. Ky. Rev. Stat. Ann. § 189.378.
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: The contributory negligence of a driver will not be imputed to the owner, in an action for damages, unless the relationship between them is such that the plaintiff would be liable as defendant for harm caused to others by such negligent conduct of the third person.
K.R.S. § 186.590 was intended only to provide another source of recovery of damages when a minor driver is at fault, and does not mean that the contributory negligence of the minor driver will be imputed to the owner. Sizemore v. Bailey, 293. S.W.2d 165 (Ky. App. 1956).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
Kentucky recognizes the Family Purpose Doctrine. Keeney v. Smith, 521 S.W.2d 242 (Ky. 1975).
Sponsor Liability for Minor’s Driving: K.R.S. § 186.590(1): Any negligence of a minor driver shall be imputed to the person who signed the application of the minor for the license. That person shall be jointly and severally liable with the minor for any damages caused by the negligence.
Laws Regarding using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: Any driver under the age of 18 who has an instruction permit, intermediate license, or operator’s license shall not operate a motor vehicle or motorcycle while using a personal communication device. K.R.S. § 189.294.
No driver may operate a motor vehicle and write, send, or read text-based communications using a personal communication device. Exceptions include emergency situations, summoning emergency help, or reporting illegal activity. K.R.S. § 189.292.
Other Prohibitions: No Applicable Laws.
Comments: No city, county, urban-county, local government, or special district may impose restrictions on phone use in vehicles. K.R.S. § 65.873
Loss Of Use
Loss of Use: Yes. Pursuant to K.R.S. § 304.39-115, “loss of use of a motor vehicle, regardless of the type of use, shall be recognized as an element of damage in any property damage liability claim. Such a claim for loss of use of a motor vehicle shall be limited to reasonable and necessary expenses for the time necessary to repair or replace the motor vehicle.” Direct evidence of reasonable and necessary expenses (such as substitute vehicle rental costs) is required. In re Greyhound Lines Trial Grp., No. CV 05-239, 2008 WL 11343421, at *3 (E.D. Ky. Oct. 22, 2008). Evidence of a rental vehicle value is sufficient, and the failure of an owner to hire another vehicle during the process of repair does not preclude loss of use recovery. Pope’s Admr. V. Terrill, 214 S.W.2d 276 (Ky. 1948). Whether vehicle is partially or totally destroyed is unimportant for loss of use damages. Daniel v. Kerby, 420 S.W.2d 393 (Ky. 1967).
Lost Profits: No support for lost profits as a measure of loss of use. “The legislature’s inclusion of the word ‘necessary’ makes sense given that one purpose of the statute was to allow loss of use compensation where the vehicle had been damaged beyond repair, thereby necessitating replacement.” Am. Premier Ins., 159 S.W.3d at 348 (Ky. 2004). “Had the legislature intended otherwise, it easily could have omitted the word ‘necessary’….[t]herefore, because the plain language requires that any loss of use expense be ‘necessary.’” State Farm Mut. Auto. Ins. Co. v. Norcold, Inc., 143 F. Supp.3d 586, 591 (E.D. Ky. 2015), aff’d, 849 F.3d 328 (6th Cir. 2017).
Med Pay/PIP Subrogation
Med Pay: Optional coverage. Subrogation allowed. State Farm Mut. Auto. Ins. Co. v. Roark, 517 S.W.2d 737 (Ky. 1974).
PIP: If injury caused by “unsecured person”, injured party’s “reparation obligor” (subrogated carrier) can subrogate (obtain Basic Reparation Benefits [“BRB”] reimbursement directly from the unsecured person). If injury is caused by a “secured person”, the carrier can obtain BRB reimbursement only from secured person’s reparation obligor (third-party carrier). City of Louisville v. State Farm, 194 S.W.3d 304 (Ky. 2006); K.R.S. § 304.39-070(2)(3). The first one thousand dollars ($1,000.00) paid on a PIP claim is exempt from subrogation.
- Choice No-Fault State. Monetary and verbal threshold. Third-party tort action allowed if medicals exceed $1K or if injury results in permanent disfigurement, permanent injury, permanent loss of bodily function, or death. K.R.S. § 304.39-060(2)(b).
Made Whole: Can be overridden with Plan language. Wine v. Globe Am. Cas. Co., 917 S.W.2d 558 (Ky. 1996).
Statute of Limitations: The statute of limitations is two (2) years from the date of injury or date of last BRB or ARB (“Added Reparation Benefits”) payment made by reparation obligor (subrogated carrier) whichever occurs later. K.R.S. § 304.39-230; Lawson v. Helton Sanitation, 34 S.W.3d 52 (Ky. 2000). Only BRB and ARB toll the statute of limitations – not Med Pay benefits.
Owner Liability For Stole
Key In The Ignition Statutes: K.R.S. § 189.430.
Common Law Rule: A Kentucky Court has held that a vehicle owner, who left his keys in the ignition, was not liable for injuries sustained by a third party in an accident that occurred while a thief was driving the vehicle because the theft was a superseding cause of the third party’s injuries. Bruck v. Thompson, 131 S.W.3d 764 (Ky. Ct. App. 2004).
Payment of Sales Tax After Vehicle Total Loss
First-Party Claims: If the policy provides for the settlement of first-party auto total loss, the insurer may elect to either (1) offer a replacement auto that is at least comparable including all applicable taxes, license fees, or other fees, or (2) offer a cash settlement based on the actual cost of a comparable vehicle including all applicable taxes, license fees, or other fees. 806 Ky. Admin. Regs. § 12:095.
Third-Party Claims: 806 Ky. Admin. Regs. § 12:095 defines “claimant” as a first-party claimant, a third-party claimant, or both. Bulletin 81-DM-007, 1981 states “it is necessary for sales tax to be included in establishing the value of damage when such tax is obviously an obligation of the claimant upon replacement of total losses.” However, no other applicable statute or case law.
Pedestrian and Crosswalk Laws
K.R.S. § 189.570: When traffic control devices are not in operation, vehicle must yield to pedestrian. Pedestrians must not leave curb when cars are too close to stop in time. Pedestrians shall not cross diagonally.
K.R.S. § 189.570: Pedestrians outside crosswalk must yield to vehicles. At intersections with traffic control signals, pedestrians must use the crosswalk. Notwithstanding any other provision, every operator of a vehicle shall exercise due care to avoid colliding with a pedestrian.
Summary: Duty of driver to yield to pedestrian arises when the driver was aware or should’ve been aware of the presence of the pedestrian. Conley v. Rice, 444 S.W.2d 898 (Ky. 1969). Pedestrians may recover for injuries even if they were negligent in crossing the road if the driver could have avoided the pedestrian by exercising ordinary care. Heskamp v. Bradshaw’s Adm’r, 294 Ky. 618, 172 S.W.2d 447 (Ky. 1943).
Rental Car Company Physical Damage and Loss of Use Claims
Recovery From Renter: Recovery of physical damage and loss of use are not prohibited or otherwise regulated. Terms of rental agreement control. Collision Damage Waivers not regulated.
Recovery From Third-Party: Loss of use is recoverable and limited to the time necessary to repair or replace the motor vehicle. K.R.S. § 304.39-115.
Rental Car Company’s Liability Insurance Primary or Excess
Summary: The car rental company’s policy is primary up to $10,000 for economic loss suffered by a driver or occupant of a rented vehicle. For all other liability, it is not primary. Ky. Stat. §§ 304.39-030, 040, and 050. If the car rental company’s policy has an escape clause stating that its coverage is non-existent when other coverage is in place, and where the renter’s policy contained an excess clause, the escape clause of the car rental company’s policy is determinative and the renter’s policy is primary. The renter’s insurance company was also to a duty to defend its insured. Empire Fire and Marine v. Everett Haddix, 927 S.W.2d 843 (Ky. App. 1996).
Slower Traffic Keep Right
Statute: K.R.S. § 189.300 and K.R.S. § 189.340 (7).
Summary: Slower moving traffic must keep right. The operator of any vehicle when upon a highway shall travel upon the right side of the highway whenever possible, and unless the left side of the highway is clear of all other traffic or obstructions for a sufficient distance ahead to permit the overtaking and passing of another vehicle to be completed without interfering with the operation of any vehicle approaching from the opposite direction or any vehicle being overtaken. The overtaking vehicle shall return to the proper traffic lane as soon as practicable and, if the passing vehicle enters the oncoming traffic lane, before coming within 200 feet of any approaching vehicle. Vehicles shall not be driven in the left lane of any limited access highway of four lanes or more with a posted speed limit of at least 65 MPH, except in overtaking a slower vehicle, yielding to traffic coming on to such a highway, or when traffic conditions exist which would prohibit safe use of the right or center lanes. The operator of any vehicle moving slowly upon a highway shall keep his vehicle as closely as practicable to the right-hand boundary of the highway, allowing more swiftly moving vehicles reasonably free passage to the left.
Sudden Medical Emergencies While Driving
Blackout Defense. If a defendant demonstrates that he suddenly became incapacitated while driving, and the ensuing accident was a result thereof, and further demonstrates that the sudden incapacity was not reasonably foreseeable, he shall have a defense to any liability that would otherwise arise from the accident. However, once a prima facie case of negligence has been made against the defendant, he must demonstrate that the sudden illness or incapacity could not have been anticipated or foreseen. Rogers v. Wilhelm-Olsen, 748 S.W.2d 671 (Ky. App. 1988).
The “Blackout” Defense is an affirmative defense which must be specially pleaded. Once the court is satisfied that the defendant has produced sufficient evidence of the defense, the question of liability is for the jury to decide. Rogers v. Wilhelm-Olsen, 748 S.W.2d 671 (Ky. App. 1988).
Suspension of Drivers’ Licenses
Administrative Suspension: Kentucky’s Financial Responsibility Law does not address administrative suspensions of drivers’ licenses.
Judgment: Upon receipt of the judgment, the Cabinet will suspend the driver’s license and registration of any person against whom the judgment was rendered. K.R.S. § 187.410. The license will remain suspended until the judgment is stayed, satisfied, or discharged. K.R.S. § 187.420.
Contact Information: State of Kentucky, Kentucky Transportation Cabinet, Division of Driver Licensing, 200 Mero Street, Frankfort, KY 40622, (502) 564-1257, http://transportation.ky.gov/Driver-Licensing/Pages/default.aspx.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: 806 Ky. Admin. Reg. 12:095(8).
Summary: The insurer may not require the use of non-OEM parts unless the part is equal in quality to its OEM equivalent.
Federal , State, and Local Governmental Entities
Municipal/County/Local Governmental Immunity and Tort Liability
Claims Against Local Governments: Local governments liable for negligence unless there is exception in Act. K.R.S. §§ 65.2001 to 65.2006 (1988). “Local government” includes city, county, special district, etc. K.R.S. § 65.2002.
Notice Deadlines: Notice of a claim against city for defect in the condition of any bridge, street, sidewalk, alley, or other public thorough-fare must be provided to mayor, city clerk, or clerk of the board of aldermen within ninety (90) days of occurrence. K.R.S. § 44.110. General Statutes of Limitations apply.
Claims/Actions Allowed: Municipalities remain liable for acts of employees carrying out “ministerial” duties. This includes negligent maintenance of thoroughfares and designing and building storm drainage systems. K.R.S. § 65.2003; Com., Trans. Cabinet, Dept. of Highways v. Nash, 2006 WL 2382730 (Ky. App. 2006). Municipality must defend and indemnity employees. K.R.S. § 65.2005.
Comments/Exceptions: No liability for: (1) Claim covered by work comp; (2) Collection of taxes; (3) Judicial or legislative act; and (4) “Discretionary” act. K.R.S. § 65.2003. The process of deciding to build a sewer system is a discretionary function, while the actual building of the system is ministerial. City of Frankfort v. Byrns, 817 S.W.2d 462 (Ky. App. 1991).
Damage Caps: $200,000 Per Person. $350,000 Per Occurrence. K.R.S. § 44-070. After a final judgment local government may be allowed to pay judgment in periodic payments if the judgment was not totally covered by insurance and funds available are not sufficient to cover the judgment. K.R.S. § 65.2004.
State Sovereign Immunity And Tort Liability
Tort Claims Act: Kentucky Board of Claims Act.
The Board of Claims has jurisdiction over civil actions brought against the Commonwealth, its agencies, officers, and employees, while acting within the scope of their employment. K.R.S. §§ 49.040 and 49.060 (2021).
Notice Deadlines: All claims must be filed with the Board of Claims within one year from the time the claim for relief accrued. K.R.S. § 49.120.
Claims/Actions Allowed: The Board is empowered “to investigate, hear proof, and to compensate persons for damages sustained to either person or property as a proximate result of negligence on the part of the Commonwealth (includes employees’ negligence in operating a motor vehicle). Johnson v. Kentucky State Police, 2010 WL 2788156 (Ky. Ct. App. 2010). The Board of Claims does not have jurisdiction over claims made against State employees in their individual capacity. Spillman v. Beauchamp, 362 S.W.2d 33 (Ky. 1962).
Comments/Exceptions: The Board of Claims preserves sovereign immunity for acts involving:
(1) discretionary acts or decisions;
(2) executive decisions;
(3) ministerial acts;
(4) actions in the performance of obligations running to the public as a whole;
(5) governmental performance of a self-imposed protective function to the public or citizens; and
(6) administrative acts.
K.R.S. § 49.070.
Damage Caps: Jurisdiction of the Board is exclusive, and a single claim may not exceed $250,000. If a single act results in multiple claims, the total award may not exceed $400,000, equally divided among the claimants, but no one claimant may receive more than $250,000. K.R.S. § 49.040.
General Tort Laws/Statutes
Prohibits Intermediate Indemnity. Applies to Construction Contracts or Agreements. Kentucky Rev. Stat. § 371.180.
Applicable to contracts entered into after June 20, 2005.
Pure Several Liability. Several Liability; no right of contribution between co-defendants. K.R.S. § 411.182.
Contribution allowed (unless act of moral turpitude), but rare, because defendants are severally liable only for a percentage of liability based on assessed percentage of fault. Percentages are assigned to settling parties but not to non-parties. Settlement discharges defendant from any liability in contribution. K.R.S. § 412.030; Dix & Assocs. Pipeline Contractors v. Key, 799 S.W.2d 24 (Ky. 1990).
The five (5) year statute of limitations begins to run upon payment by contribution plaintiff. K.R.S. § 413.120; Baker v. Richeson, 440 S.W.2d 272 (Ky. 1969).
Contributory Negligence/Comparative Fault
Pure Comparative Fault: Damaged parties can recover even if 99% at fault. Plaintiff’s share of fault will reduce defendant’s liability. K.R.S. § 411.182.
Dog Bite Laws
Dog owner will be liable for all damage to person, livestock, or property, caused by the owner’s dog. The law gives all people authority to kill a dog seen attacking someone. Ky. Rev. Stat. § 258.235.
Economic Loss Doctrine
Majority Rule. Until recently, the Kentucky Supreme Court had never officially addressed the issue. The ELD permits recovery for damages to property other than the product purchased but denies recovery for damage to the product itself. Mt. Lebanon Personal Care Home v. Hoover, 276 F.2d 875 (6th Cir. 2002). However, in 2011, the Kentucky Supreme Court first announced that the ELD applied in Kentucky, although only to commercial transactions. Giddings & Lewis, Inc. v. Indus. Risk Insurers, 348 S.W.3d 729 (Ky. 2011). The ELD in Kentucky has its origins in products liability actions where the parties’ duties are defined by the Uniform Commercial Code (U.C.C.) and their contract. Louisville Gas and Elec. Co. v. Cont’l Field Sys., Inc., 420 F. Supp.2d 764 (W.D. Ky. 2005). That court noted that:
“[v]irtually every classic description of the economic loss doctrine pertains to and often limits its application to the sale of products [in order to] … preserve the distinction between the remedies available under the U.C.C. and those available in tort. The ELD prevents the commercial purchaser of a product from suing in tort to recover for economic losses arising from the malfunction of the product itself, recognizing that such damages must be recovered, if at all, pursuant to contract law.” Giddings & Lewis, Inc., supra. Stated differently, “the economic loss rule prohibits purchasers of products from recovering purely economic damages under most tort theories.” HDM Flugservice GmbH v. Parker Hannifin Corp., 332 F.3d 1025 (6th Cir. 2003).
Although the rule originally applied to products liability cases, the Kentucky Court of Appeals recently held that it does not extend to negligent misrepresentation (in construction litigation and construction service contracts under Restatement (Second) of Torts § 552. D.W. Wilburn, Inc. v. K. Norman Berry Associates Architects, PLLC, 2016 Ky. App. LEXIS 206 (Ky. 2016). There is no calamitous exception to the ELD. Id. Kentucky courts believe that the parties’ allocation of risk by contract should control without disturbance by the courts via product liability theories borne of a public policy interest in protecting people and their property from a dangerous product. Id. The 6th Circuit held that Kentucky would follow the ELD in at least some circumstances, such as to preclude tort recovery for economic losses stemming from business purchases. The Doctrine applies when parties engage in complex commercial endeavors, in order to preserve parties’ abilities to distribute risks via contract, warranty, and insurance. In an unpublished opinion, it seemed as though Kentucky was leaning toward the Intermediate Rule, by indicating that the ELD applies only where there is not the kind of harm which public policy requires manufacturers to protect independent of contractual obligation. Williams v. Volvo-White, 2003 WL 22681457 (Ky. App. 2003) (unreported decision). If an insured can pursue a warranty claim, so can a subrogated insurer – even without privity. Ohio Cas. Ins. Co. v. Vermeer Mfg. Co., 298 F.Supp.2d 575 (W.D. Ky. 2004). The ELD applies whenever the purchasing party has the opportunity to allocate the risk of loss via contract or warranty. Hoover, supra. A Kentucky federal judge has held that the ELD barred a distributor’s claim based on fraudulent inducement, provided the fraudulent misrepresentation is inseparable from the essence of the parties’ agreement. General Electric Co. v. Latin American Imports, 214 F.Supp.2d 758 (W.D. Ky. 2002). Another federal court held that the ELD applies to bar torts claims arising not only from purchases of goods themselves, but any transaction that may be characterized a “business purchase”, and that the ELD bars tort claims seeking recovery not only for damage to products themselves but also for consequential economic loss. Westlake Vinyls, Inc. v. Goodrich Corp., 2007 WL 2812865 (W.D. Ky. 2007).
In 2017, the 6th Circuit (interpreting Kentucky law) predicted that the Kentucky Supreme Court would decline to extend the ELD to consumer transactions. State Farm Mutual Auto. Ins. Co. v. Norcold, Inc., 849 F.3d 328 (6th Cir. 2017). Recall that in 2011, the Kentucky Supreme Court in Giddings & Lewis held that the ELD applies to commercial transactions. (see above).
In Norcold, an RV and its contents burned and were destroyed when the RV’s refrigerator caught fire. The owner bought the vehicle used, and the refrigerator’s three-year warranty had already expired. The owner was paid $150,000 from his insurer, State Farm, which then subrogated against the manufacturer of the refrigerator. The manufacturer stipulated that it owed State Farm the $150,000 if the ASR did not apply. The court held that consumers (as opposed to commercial purchasers) are not able to allocate the economic risk of a product’s failure to perform as expected. Using the Giddings & Lewis decision, the 6th Circuit predicted Kentucky would not apply the ELD to consumer purchases. The court refused to certify the question to the Kentucky Supreme Court, indicating certainty in its opinion.
In a dissent, one judge pointed out that Norcold did not involve a David-and-Goliath fight between an unsophisticated consumer and a corporation. It involved a commercial insurance company suing a commercial manufacturer. He also argued that consumers are indeed able to allocate the risk of economic loss by purchasing insurance or extended warranties, just as the RV owner did by purchasing the State Farm policy. A footnote in the Kentucky Supreme Court’s decision in Giddings & Lewis suggests this outcome. Kentucky is in the minority with this decision. Most states apply the ELD to both commercial and consumer transactions.
Vandalism. Parents liable for willful marking/defacing of property if joined as defendant. K.R.S. § 405.025.
A maximum judgment amount of $2,500.00 against a parent who is named in the suit. The limit of liability is $10,000.00. Child must be unemancipated and under 18-years-old.
Auto Liability. Person liable for signing minor’s driver’s license application. K.R.S. § 186.590(1).
Owner Entrusting Vehicle to Minor. Vehicle owner liable for entrusting vehicle to minor. K.R.S. § 186.590(3).
There are no limits to liability. Child must be under 18-years-old.
Tort of Spoliation: Kentucky does not recognize separate torts for either first-party or third-party spoliation of evidence. Monsanto Co. v. Reed, 950 S.W.2d 811, 815 (Ky. 1997).
Sanctions/Adverse Inference: The court counteracts a party’s deliberate destruction of evidence through evidentiary rules, civil sanction, and missing evidence instructions. Id.
Statute of Limitations
Personal Property2 YearsK.R.S. § 413.125
Personal Injury/Death1 YearK.R.S. § 413.140(1)(a)
Personal Injury/If Vehicle Involved2 YearsK.R.S. § 304.39-230(6)
Breach of Contract/Written15 YearsK.R.S. § 413.090
Breach of Contract/Oral5 YearsK.R.S. § 413.120
Breach of Contract/Property2 YearsK.R.S. § 413.125
Breach of Contract/Sale of Goods4 YearsK.R.S. § 355.2-725
Statute of Repose/Products/After Sale Date5 YearsK.R.S. § 411.310*
Statute of Repose/Products/After Manufacture Date8 YearsK.R.S. § 411.310*
Statute of Repose/Real Property5 YearsK.R.S. § 413.120(14)**
Breach of Warranty/U.C.C.4 YearsK.R.S. § 355.2-725
Workers’ Comp Third Party Case1 Year; 2 Years for AutoK.R.S. § 342.700
Strict Product Liability/Personal Injury1 YearK.R.S. § 413.140(1)(a)
Strict Product Liability/Personal Property2 YearsK.R.S. § 413.125
Statute of Limitations Exceptions
*5 Years from sale date or 8 Years from manufacture date (rebuttable presumption of no defect). K.R.S. § 411.310.
**7 Years from substantial completion of improvement to real property. K.R.S. § 413.135(1).
Health Insurance Subrogation
Health and Disability Insurance
Statute of Limitations: 1 Year. K.R.S. § 413.140(1)(a). 2 Years, if Motor Vehicle Involved. K.R.S. § 304.39-230(6).
Subrogation of Medical and Disability Benefits are allowed. City of Louisville v. McDonald, 819 S.W.2d 319 (Ky. App. 1991). Made Whole and Common Fund Doctrines apply. Wine v. Globe American Cas. Co., 917 S.W.2d 558 (Ky. 1996); K.R.S. § 412.070 (“Compensation of party pressing claims in common interest for others”); K.R.S. § 304.39-070 (PIP).
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: KY R. Evid. 702
Comments: Rule 702 does not mandate the use of all or any one of the factors suggested by the court. It allows the trial court to use those factors that are appropriate to the case at trial.
Pre-Suit Disclosure of Liability Policy Limits in Third-Party Claims
Duty to Disclose: No.
Failure To Disclose A Basis For Bad Faith: Failure to offer policy limits when insurer knows or should know the claim is in excess of limits can support inference that insurer was not negotiating in good faith. Phelps v. State Farm Mut. Auto. Ins. Co., 736 F.3d 697 (6th Cir. 2012) (applying Kentucky law).
One-Party Consent: Kentucky law bars the interception, recording and or disclosure of any oral or telephonic communication by the means of an electronic recording device without the consent of at least one party or if they are a party to said communication. Ky. Rev. Stat. Ann. § 526.020; Ky. Rev. Stat. Ann. § 526.010.
Product Liability Subrogation
Product Liability Law
Statute of Limitations/Repose: 1 year personal injury and wrongful death. K.R.S. § 413.140. Discovery Rule applies.
Liability Standards: Negligence, Strict Liability, Warranty.
Fault Allocations: Pure Comparative. K.R.S. § 411.182.
Non-Economic Caps/Limits On Actual Damages: No.
Punitive Y/N and Limits: Yes.
Heeding Presumption?: Yes. Snawder v. Cohen, 749 F. Supp. 1473, 1479-80 (W.D. Ky. 1990).
Innocent Seller Statute: Yes.
Joint and Several Liability: No. K.R.S. § 411.182.
Available Defenses: Misuse; Alteration; Learned Intermediary; Inherently Unsafe Products; State of the Art; Government Contractor Defense; Presumption; Compliance With Government Standards; Seatbelts; Alcohol/Drugs; Sophisticated User.
Restatement 2nd or 3rd?: Both.
“Matching Regulations” And Laws Affecting Homeowners Property Claims
Statute/Regulation: If a loss requires replacement of items and replaced items do not reasonably match in quality, color, or size, insurer must “replace all items in the area so as to conform to a reasonably uniform appearance,” though Kentucky courts have refused to apply the regulation in private litigation. 906 Ky. Admin. Regs. § 12:095 § 9(b). However, on October 17, 2023, the Kentucky Department of Insurance published Advisory Opinion No. 2023-08, interpreting and clarifying Kentucky’s matching regulation. She said that this regulation does not permit a “line of sight” rule to be applied when replacing portions of a roof and if the shingles on one slant of a residential roof must be replaced due to damage, absent the availability of matching shingles that would render the slant in question reasonably uniform to the remainder of the roof, an entirely new roof must be installed.
Caselaw: The obligation to pay for matching is an inquiry that hinges on whether the loss payment and valuation conditions in the policy can be read to extend matching. The obvious counter-argument is that allowing coverage for matching would result in a windfall to the insured. Court agreed that allowing for full replacement of roof and siding would be unduly burdensome on an insurer that only agreed to repair damaged portions of the property. Woods Apts., LLC v. United States Fire Ins. Co., 2013 U.S. Dist. LEXIS 105582 (W.D. Ky. 2013).
Comments: Insurance Regulations do not create a private cause of action. Woods Apartments, LLC v. U.S. Fire Ins. Co., No. 3:11-CV-00041-H, 2013 WL 3929706 (W.D. Ky. July 29, 2013).
Condominium/Co-Op Waiver of Subrogation Laws
Associations shall maintain property insurance and liability insurance. These insurance policies require that: each unit owner is an insured person with respect to liability arising out of their interest in the common elements in the association, the insurer waives its right to subrogation under the policy against any unit owner or member of their household, no act or omission by any unit owner, unless acting within the scope of his/her authority on behalf of the association, will void the policy or be a condition to recovery, and the association’s policy provides primary insurance. K.R.S. § 381.9187.
Damage to Property Without Market Value
Service Value: “The court therefore held that the measure of damages for the loss of maps made as part of a geological survey was the cost of the labor which had gone into their production.” W.E. Shipley, Measure of damages for conversion or loss or, or damage to personal property having no market value, 12 A.L.R.2d 902 (1950) (citing Adams Express Co. v. Hoeing, 9 Ky. L. Rptr. 814 (Ky. 1888)).
Intrinsic Value: “…he should be allowed to recover the value to him based on his actual money loss, all the circumstances and conditions considered, resulting from his being deprived of the property, not including, however, any sentimental or fanciful value he may for any reason place upon it.” Davis v. Rhodes, 266 S.W. 1091 (Ky. Ct. App. 1924) (citing Barker v. Lewis Storage & Transfer Co., 61 A. 363 (Conn. 1905)).
Sentimental Value: “…he should be allowed to recover the value to him based on his actual money loss, all the circumstances and conditions considered, resulting from his being deprived of the property, not including, however, any sentimental or fanciful value he may for any reason place upon it.” Davis v. Rhodes, 266 S.W. 1091 (Ky. Ct. App. 1924) (citing Barker v. Lewis Storage & Transfer Co., 61 A. 363 (Conn. 1905)).
General Contractor Overhead And Profit Payments In First-Party ACV Property Damage Claims
Payment And Depreciation Of GCOP/Sales Tax: GCOP not payable in replacement cost policy until actually incurred. GCOP can be withheld where the insured does the work himself and no general contractor hired. Snellen v. State Farm Fire & Cas. Co., 675 F. Supp. 1064 (W.D. Ky. 1987). Kentucky courts have varyingly applied the replacement cost less depreciation rule, the broad evidence rule, and fair market value rule. Snellen, supra.
A tenant’s liability to the landlord’s insurer for negligently causing a fire depends on the intent and reasonable expectations of the parties to the lease as ascertained from the lease as a whole. Britton v. Wooten, 817 S.W.2d 443, 445-47 (Ky. 1991) (subrogation allowed because there was no clause requiring purchase of fire insurance by landlord). It must be determined on a case-by-case basis. A requirement in a lease agreement that the landlord must obtain fire insurance militates against the insurance carrier’s right of subrogation. Liberty Mut. Fire Ins. Co. v. Jefferson Family Fair, Inc., 521 S.W.2d 244 (Ky. 1975). The absence from the lease agreement of a requirement that the landlord provide fire insurance generally permits a right of subrogation.
The Anti-Subrogation Rule is yet to be determined.
Kentucky courts allow for restitution to victims where they have suffered monetary damage as a result of the defendant’s crime, including compensation for medical expenses. K.R.S. § 533.030 (West). However, because an insurer is not an aggrieved party or direct victim, it cannot recover restitution. Clayborn v. Com., 701 S.W.2d 413 (Ky. Ct. App. 1985).
Made Whole Doctrine
Kentucky does not differentiate between equitable subrogation and contractual subrogation with regard to the application of equity. Wine v. Globe American Cas. Co., 917 S.W.2d 558 (Ky. 1996). Therefore, applying general principles of equity, Kentucky holds that an insured must be fully compensated for his injuries or losses before the insurer’s subrogation rights arise. Id. However, the Made Whole Doctrine will not apply if disclaimed by either statutory law or the language of the contract. Id. Therefore, Kentucky joins a minority of states which allow a contractual disclaimer of the Made Whole Doctrine under state law and within the terms of its Plan language. Id. The analysis a court must go through to determine whether a plan’s language successfully disclaims the Made Whole Doctrine, however, is somewhat more complex. This is because Kentucky considers all agreements and communication between an insurer and its insured – settlement agreements, policy and plan language, releases, trust agreements, etc. – in determining the parties’ intent with regard to waiving the Made Whole Doctrine. Id.
The Kentucky Supreme Court has held that subrogation rights may be modified by contract only if violence is not done to established equitable principles. Id. The Supreme Court held that principles of equity did not require insured to be “made whole” before carrier was entitled to subrogation where (1) insurance language clearly and explicitly provided insurer with the right of subrogation and subordinated insured’s interests in any recovery in favor of insurer until insurer was reimbursed, and (2) at time of claim, each party was represented by counsel and enjoyed a parity in bargaining position, and (3) insured’s losses had already been sustained and were fully known and appreciated. Id.
The analysis for determining whether a contract alters the common law priority of right rule between the insurer and its insured is more complex. This complexity results from the fact that all agreements between the parties (i.e., policy language, releases, trust agreements, etc.) are relevant in determining whether the parties intended to modify the common law rule. Id. In order to effectively shift the priority of right of the insured to the insurer, the language must clearly and explicitly document the intent of the parties to: (1) provide the insurer with a right of subrogation; (2) permit that right to arise immediately; and (3) subordinate the insured’s interest in further recovery to that of the insurer to subrogation. Id.
With regard to no-fault subrogation, if the tortfeasor’s liability limits are exhausted, the no-fault lien is automatically extinguished because the injured insured is given priority of recovery over the no-fault carrier. K.R.S. § 304.39-070(4) read together with K.R.S. § 304.39-140(3); State Auto Mut. Ins. Co. v. Empire Fire & Marine Ins. Co., 808 S.W.2d 805 (Ky. 1991); Fireman’s Fund v. Geico, 635 S.W.2d 475 (Ky. 1982). On the other hand, if there are liability limits sufficient to satisfy both the insured’s judgment against the tortfeasor and the subrogation interest of the no-fault automobile carrier, the no-fault automobile carrier is entitled to be reimbursed in full, and the reimbursement is not to be prorated between the carrier and the injured plaintiff. Shelter Mut. Ins. Co. v. McCarthy, 896 S.W.2d 17 (Ky. App. 1995).
Medical Expenses, Insurance Write-Offs, and The Collateral Source Rule
Collateral Source Rule: Pure common law CSR. Schwartz v. Hasty, 175 S.W.3d 621 (Ky. App. 2005). Can recover medical expenses even though paid by collateral source or government entity. Daugherty v. Daugherty, 609 S.W.2d 127 (Ky. 1980). Evidence of collateral sources is not admissible. O’Bryan v. Hedgespeth, 892 S.W.2d 571 (Ky. 1995). K.R.S. § 411.188, which allowed evidence of collateral source payments, found unconstitutional. O’Bryan, supra.
Recovery Of Medical Expenses Rule:
Private Insurance: Plaintiff can recover full amount of medical expenses billed, not amount paid by insurer. Baptist Healthcare Sys. v. Miller, 177 S.W.3d 676 (Ky. 2005).
Medicare/Medicaid: The fact that Medicare contracted with doctor to provide care at rate below usual fee should not relieve tortfeasor from duty to pay reasonable value of medical expenses. Miller, supra. (no mention of write-offs specifically).
Related Law/Comments: Introduction of a medical bill is sufficient to establish its reasonableness considering the statutory presumption in K.R.S. § 304.39-020(5)(a). Daugherty v. Daugherty, 609 S.W.2d 127 (Ky. 1980). If premiums for collateral source paid by tortfeasor, CSR does not apply. Application of the CSR depends more upon the character of the benefits than upon the source of the funds. Patterson v. Norfolk and Western Ry. Co., 489 F.2d 303 (6th Cir. 1973).
Employee Leasing Laws
Under Kentucky law, the employee leasing company is considered the statutory employer of any leased employee. K.R.S. § 342.615.
Hospital Lien Laws
Statute: No statutory provision in Kentucky.
Comments: Any lien that is asserted appears to be asserted via assignment.
OCIP/CCIP Subrogation In Workers’ Compensation Construction Cases
OCIP Law: There is only one unreported federal court decision dealing with the effect of an OCIP in Kentucky. It appears to state that exclusive remedy protection is extended to parties enrolled in an OCIP program in which workers’ compensation coverage was obtained for all subcontractors. Casey v. Vanderlande Indus., Inc., 2002 WL 1496815 (W.D. Ky. 2002) (unreported decision).
Statutory Employer Law: A contractor who subcontracts and his workers’ compensation carrier are both liable for the payment of compensation benefits to the employees of subcontractors unless the subcontractor has secured workers’ compensation coverage on its own. If such a contractor becomes liable for workers’ compensation benefits, it may take advantage of the Exclusive Remedy Rule and claim immunity from tort actions filed by employees of subcontractors. K.R.S. § 342.691(1) (stating that for purposes of Exclusive Remedy Rule, the term “employer” shall include a “contractor” covered by Subsection 2 of § 342.610). In order to obtain the exclusive remedy provision, a “contractor” under § 342.610 must contract with another to do work of a kind which is a recurrent part of the work of the trade or occupation of such person. K.R.S. § 342.610.
Comments: Section 342.610 has been interpreted to mean that a person who engages another to perform a part of the work which is a recurrent part of his business, trade, or occupation is a “contractor”, even though he may never perform that particular job with his own employees. He is still a contractor if the job is one that is usually a regular or recurrent part of his trade or occupation. Firemen’s Fund Ins. Co. v. Sherman & Fletcher, 705 S.W.2d 459 (Ky. 1986).
Recovery Of Increased Workers’ Compensation Premiums By Employer
Recovery For Increased Premiums? Yes.
Statute/Case Law: Sand Hill Energy, Inc. v. Ford Motor Co., 83 S.W.3d 483 (Ky. 2002), cert. granted, judgment vacated sub nom. Ford Motor Co. v. Smith, 123 S. Ct. 2072 (2003).
Rule Summary: Whether an employer is able to recover for increased workers’ compensation premiums as result of a manufacturer’s (tortfeasor’s) defective design of a car was a question for the jury, but the employer is “entitled to be heard” on such a claim.
Which Workers’ Compensation “Benefits” Can Be Subrogated?
Section 44-504 describes a workers’ compensation carrier’s subrogation interest as follows:
… the indemnity and medical expenses paid and payable to or on behalf of the injured employee…
Section 344.0011(f) defines “medical and related benefits” as follows:
(13) “Medical and related benefits” means payments made for medical, hospital, burial, and other services as provided in this chapter, other than income benefits.
The ODG guidelines (see preamble above) contain independent, evidence-based, nationally recognized treatment guidelines for the most common work-related injuries and conditions. ODG’s treatment guidelines contain a comprehensive list of treatments that may be prescribed for injuries to specific body parts or for general conditions based on diagnosis. Kentucky has adopted the OMG Medical Treatment Guidelines. Therefore, the carrier can take the position it may recover the “case manager’s” fee for development of a “treatment plan,” utilizing the ODG guidelines, that is maintained by the “designated physician” under Title 9803, Ch. 025, Kentucky Regulation 096. That regulation states that the fee for preparation of a “treatment plan” which is “maintained by the designated physician” is considered to be an “integral part of the fee authorized in the medical fee schedule for the underlying services.” Regulation 96 also requires “treatment plans” if the employee requires long term medical care, has undergone more than 60 days of passive modality treatment, undergoes elective surgery or needs work hardening, pain management or medical rehabilitation.
Workers’ Compensation Subrogation Waiver Endorsements
Subrogation Statute: K.R.S. § 342.700
Waiver Allowed? No. K. R. S. § 342.700 states that it is contrary to public policy and unlawful for any owner or employer to require another employer to waive its remedies under the Act as a condition to receiving a contract or purchase order.
Effect Of Waiver Endorsement on Carrier’s Right To Assert A Lien On Claimant’s Recovery: Kentucky’s Department of Workers’ Claims interprets the statute to prohibit all waivers of subrogation, whether entered on a voluntary basis. The DOI will no longer approve forms or rates that include a waiver of subrogation for workers’ compensation insurance. Kentucky Advisory Opinion 1999-13 (November 19, 1999).
Other Applicable Law: None.
Statute of Limitations: 1 Year; 2 Years for Auto. K.R.S. § 342.700.
Can Carrier Sue Third Party Directly: Yes, but only if the employee has not filed suit.
Right to Intervene: Must Intervene.
Recovery from UM/UIM Benefits: No.
Subrogation Against Medical Malpractice: Yes.
Subrogation Against Legal Malpractice: Undecided.
Recovery Allocation/Equitable Limitations: No reimbursement from non-economic damages. Modified Made Whole Doctrine applies.
Employer Contribution/Negligence: Yes, the third-party can seek contribution from the employer, which reduces the plaintiff’s recovery, lien, and credit.
Attorney’s Fees/Costs: Lien is reduced by pro-rata share of of the plaintiff’s attorney’s fees and costs.
Future Credit: Yes, the lien must exceed the plaintiff’s attorney’s fees and costs or there’s no credit. The credit is reduced by the percentage of the employee’s and employer’s fault.
Auto No-Fault: Yes.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statute states an employee is every person regardless if they are lawfully or unlawfully employed. Silent on “aliens.” Kan. Stat. Ann. § 5-44-508(b).
Case Law: Abel Verdon Const. v. Rivera, 348 S.W.3d 749 (Ky. 2011).
Comments/Explanation/Other: Also see, Ky. Rev. Stat. Ann. § 342-0011-21. The statute defines “alien” but does not make mention of “alien” in conjunction with “employee.”
Rivera held that an unauthorized alien is an employee under Ky. Rev. Stat. Ann. § 342.640-1. They also noted that the IRCA did not preempt the workers’ compensation law that covers unauthorized aliens.