Abell's Kentucky Law Blog

Insured Must Request Added Reparation Benefits (ARB) Coverage

Kentucky law requires an auto insurer to provide added reparation benefits (ARB) coverage.  This obligation, however, is triggered by the request of the insured by Kentucky Court of Appeals ruled recently in Cain v. American Commerce Insurance Company, No. 2008-CA-001500 (October 30, 2009).

Cain was injured in an auto accident due to the fault of another driver.  She was paid basic reparation (BRB also known as PIP) benefits of $10,000 plus added reparation benefits of $20,000 for each of her three insured vehicles for a total of $70,000.  Cain claimed that she was entitled to $40,000 in per insured vehicle.  She argued that KRS 304.39-140(1) entitled her to that level of coverage because it mandated that American Commerce "shall be ... required to provide" in ARB coverage per vehicle the lesser of $40,000 or $80,000, which represented the amount of liability coverage for Cain over the required minimum of $25,000.

The Court of Appeals rejected Cain's argument, ruling that American Commerce's obligation to provide Cain with $40,000 of ARB coverage per vehicle was triggered only "upon the request" of Cain.  Since Cain had not shown that she had requested $40,000 in ARB coverage, the Court ruled that she was not entitled to that level of ARB coverage.

Robert L. Abell
www.RobertAbellLaw.com

Uninsured Motorist (UM) Benefits Collected Despite "Exclusive Remedy" of Workers Compensation Benefits

Uninsured motorists (UM) coverage provides insurance benefits where the injuries sustained as the result of negligence related to operation of a motor vehicle exceed the injured party's ability to recover compensation for those damages from other sources. The Kentucky Court of Appeals recently ruled in State Farm v. Slusher, No. 2008-CA-000169 (February 27, 2009), that the Estate of a State Farm insured, who was killed during the course of his employment, could recover the UM benefits for which he had purchased coverage on his own vehicle. This is a decision recognizing the basic principle of law that insurance coverage paid for should be received.

David Slusher was a coal truck operator for Bell County Coal Corporation. As a result of a co-worker’s negligent failure to properly secure the parking brake on a coal truck, he was killed. His Estate was able to collect workers’ compensation death benefits, which were insufficient to cover the damages and losses sustained by reason of his death. Therefore, the estate claimed UM benefits under Slusher's own policy on his own vehicle with State Farm. State Farm refused to pay and argued that collection of the UM benefits was barred, because workers’ compensation death benefits had been paid.

Slusher’s UM benefits became applicable because the losses caused by his death exceeded those which he otherwise was “legally entitled to recover.” State Farm argued that since workers’ compensation benefits was the sole and exclusive remedy as against Slusher’s employer and as against the co-worker whose negligence caused his death, he was not “legally entitled to recover” any damages from either. Therefore, the insurance company claimed that it was not obligated to pay.

The Kentucky Court of Appeals rejected this argument. First, the Court applied the “essential facts” doctrine and concluded that benefits should be paid because (a) negligence regarding operation of motor vehicle had caused Slusher's death; and (b) the damages exceeded by more than $50,000, which was the policy limits of the UM coverage, the workers compensation death benefits that had been paid. Secondly, the Court ruled that Slusher entertained “a reasonable expectation” to collect the benefits for which he had paid premiums. Finally, the Court noted that Kentucky law includes a “expansive view” regarding UM and UIM (underinsured motorist) insurance coverage toward assuring that injured parties are made whole.

The Kentucky Consumer Guide To Buying Car Insurance can tell you more about the importance of UM and UIM coverages. 

Robert L. Abell
www.RobertAbellLaw.com

Daughter Covered by Mother's Underinsured Motorist (UIM) Coverage

When is an automobile an automobile? Turning on that question was whether a daughter was covered by the underinsured motorist (UIM) coverage in her mother's car insurance policy decided by the Kentucky Court of Appeals in Auto-Owners Insurance Company v. Goode, 2008-CA-000350 (February 13, 2009.

Crystal Goode was injured in a one-car motor vehicle accident and later made a claim for underinsured motorist (UIM) benefits under a policy held by her mother. The policy extended UIM coverage to "a relative who does not own an automobile." At the time of the accident, Crystal owned a 1994 Ford Escort at the time of the accident. However, the car had been damaged and unavailable for use for quite some time with no prospect of running again anytime soon. Under Kentucky law "a car that has been retired from service for an indefinite time into the future should not be considered to be a 'passenger automobile' within the meaning of [an] insurance policy." Therefore, the court ruled that Crystal did not own an "automobile" within the meaning of her mother's insurance policy and was entitled to receive the UIM benefits under that policy. 

Robert L. Abell
www.RobertAbellLaw.com

Court Rejects Claim for Underinsured Motorist (UIM) Benefits

Underinsured motorist (UIM) coverage applies where the liability insurance of the person responsible for the car wreck is insufficient to fairly compensate the insured for the injuries and losses sustained. Since as more fully explained in the Kentucky Consumer Guide to Buying Car Insurance, it is prudent to buy as much UIM coverage as you can afford, many individuals and families do so. Depending on the number of vehicles and how the premiums for UIM coverage are calculated and paid, UIM coverage units may be stacked, which means added on top of one another to increase coverage. The circumstances in which UIM coverage can be stacked and, sadly, in which it cannot were addressed by the United States Court of Appeals for the Sixth Circuit in Pennington v. State Farm, No 07-6187 (January 21, 2009), where the court rejected a claim that UIM benefits should be stacked following the death of teenager killed by a drunk driver.

Stacey Pennington, a 17 year old, was killed when a drunk driver ran a red light and crashed into her car. The drunk driver's insurer, Progressive, paid the full amount of his liability coverage, $50,000, for Stacey's wrongful death. Stacey's estate then claimed that her insurer, State Farm, owed multiple units of UIM coverage.

The Pennington family had four drivers and five vehicles, all insured by State Farm. In addition to the vehicles' insurance, the Penningtons bought UIM coverage with limits of $100,000per person/300,000 per accident (100/300 UIM coverage). The UIM coverage was on only one vehicle but covered all drivers at all times, since UIM coverage was personal to each driver and not tied to a particular vehicle. Stacey's estate claimed that it was entitled to three units of UIM coverage, or $300,000.

The court rejected the claim, ruling that the process by which the UIM premium was calculated was determinative. The Penningtons paid $90.72 for their UIM coverage. This premium was not simply a multiplier of coverage (e.g., multiplying the base premium rate by the number of drivers); rather, it was determined based on a rating factor of 2.7, an actuarial calculation of the added risk associated with adding additional drivers to a single UIM policy. The premium of $90.72 was reached by multiplying the one-driver rate of $33.60 by 2.7 (the risk multiplier that State Farm had determined was appropriate for households with three or more drivers).  This calculation barred the claim the court ruled: "The Penningtons therefore got what they paid for: namely, one unit of UIM coverage for four drivers."

Robert L. Abell
www.RobertAbellLaw.com

Parents' Underinsured Motor Vehicle Coverage Applies to Vehicle Owned by Child

    Underinsured motor vehicle insurance (UIM) coverage that parents purchased applied to the passenger (one of their children) who was tragically killed in a truck owned by another of their children the Kentucky Supreme Court ruled in Williams v. State Farm (No. 2006-SC-000856 decided June 19, 2008).  The key issue, as the Court saw it, was whether the truck was "furnished" to the driver, one of their children who lived with them.  Since it was undisputed that the child owned the truck, the Court concluded that the truck was not "furnished" to him within the meaning of the policy.  Therefore, the Court ruled that the parents' UIM coverage applied. 

Robert L. Abell
www.RobertAbellLaw.com