Day v. Personal Service Insurance Company et al
Filing
18
MEMORANDUM OPINION & ORDER: 1) Defs' Motion for Summary Judgment 13 is GRANTED; 2) Defs' Motion to Bifurcate 8 is DENIED AS MOOT. 3)Separate judgment shall enter concurrently herewith. Signed by Judge William O. Bertelsman on 12/5/2014.(ECO)cc: COR
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION AT COVINGTON
CIVIL ACTION NO. 2:14-cv-120 (WOB-CJS)
TASHA DAY
PLAINTIFF
VS.
PERSONAL SERVICE INSURANCE
COMPANY, ET AL
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This case is before the Court on Defendants’ Motion to
Bifurcate (Doc. 8) and Defendants’ Motion for Summary Judgment
(Doc. 13).
The Court previously heard oral argument on these motions,
after which it took them under advisement. (Doc.
).
After
further study, the Court now issues the following Memorandum
Opinion and Order.
I.
Factual and Procedural Background
On January 13, 2011, Plaintiff was involved in a car accident
in Campbell County, Kentucky when Lynn Siebler improperly
changed lanes on Interstate 471.
Plaintiff drove onto the
shoulder of the Interstate in an effort to avoid a collision
with Siebler.
Because it had recently snowed, and the snow had
been plowed onto the shoulder of the Interstate, Plaintiff was
unable to avoid hitting a snow bank and ice.
Plaintiff’s car
spun out of control, crossed three lanes of traffic, and crashed
down a hillside into a ditch in the median.
Plaintiff’s car was
totaled, and Plaintiff suffered serious injuries.
Prior to the accident, Defendant issued Plaintiff an
automobile policy (“Policy”).
The Policy insured three
vehicles: a 2001 Ford Ranger, a 2001 Pontiac Grand Am, and a
1998 Jeep Grand Cherokee.
The Policy provided for Underinsured
Motorist (“UIM”) benefits in the amount of $12,500 per person,
$25,000 per occurrence, and all three vehicles carried separate
premiums.
provisions.
The Policy contained anti-stacking and set-off
The Policy also contained a notice provision that
required Plaintiff to provide written notice to Defendant of any
legal action against an underinsured motor vehicle operator.
Plaintiff filed a lawsuit against Siebler after the accident
and settled with Siebler’s insurer for Siebler’s policy limit of
$100,000 on August 1, 2013.
Plaintiff executed a Settlement and
Release Agreement (“Settlement”) to document the settlement with
Siebler’s insurer.
The Settlement released Siebler, her
insurer, and “all other persons, firms, or corporations liable .
. . from any and all claims . . . as the result of an accident.”
(Mot. for Summ. J. at 3).
There is no evidence of record that
Plaintiff notified Defendant of the Settlement prior to its
execution.
The funds received from the Settlement did not cover
all of Plaintiff’s damages from the accident.
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Plaintiff requested that Defendant pay her UIM benefits in
the amount of the damages she suffered in excess of the funds
that she received from the Settlement.
Defendant refused, and
Plaintiff brought this action alleging breach of contract and
bad faith.
Defendant has filed a motion to bifurcate the proceedings and
hold in abeyance Plaintiff’s bad faith claim.
Defendant has
also filed a motion for summary judgment on all claims.
II. ANALYSIS
A.
Ohio Law’s Applicability to the Policy
Defendant argues that Ohio law should govern the Policy
because Kentucky courts have recognized, using the “most
significant relationship” test, that the law of the residence of
the named insured will determine the scope of the coverage.
Defendant argues that because Plaintiff is an Ohio resident,
Ohio law should govern the Policy.
Plaintiff argues that Kentucky law does not apply the
traditional “most significant relationship” test when applying
another state’s law would violate Kentucky’s public policy.
Plaintiff argues that applying Ohio law would violate Kentucky’s
public policy against set-off and anti-stacking provisions in
automobile insurance policies.
In order to determine which law applies, the modern test is
which state has the most significant relationship to the
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transaction and the parties.
Lewis v. Am. Family Ins. Grp., 555
S.W.2d 579, 581 (Ky. 1977) (citation omitted) (internal
quotation marks omitted).
Using this test, in most cases the
law of the residence of the named insured will determine the
scope of his automobile liability insurance policy.
Id. at 582.
Here, Plaintiff resides in Ohio, the Policy was issued in
Ohio, and the only contact with Kentucky is that the accident
occurred there.
Therefore, Ohio law governs the parties’ rights
and responsibilities under the Policy “absent some compelling
reason” not to apply Kentucky’s general choice-of-law rule.
State Farm Mut. Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d
875, 879 (Ky. 2013).
Contracts voluntarily made between competent persons are not
be set aside lightly.
Id. at 880 (citing Zeitz v. Foley, 264
S.W.2d 267, 268 (Ky. 1954)).
Public policy, invoked to bar the
enforcement of a contract, is not simply something courts
establish from general considerations of supposed public
interest, but rather something that must be found clearly
expressed in the applicable law. Id. at 880-881 (citing Ky. Farm
Bureau Mut. Ins. Co. v. Thompson, 1 S.W.3d 475, 476-477 (Ky.
1999)).
There is certainly authority that indicates set-off
provisions in insurance contracts are against Kentucky public
policy.
See KY. REV. STAT. ANN. § 304.39-320(2) (requiring an
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insurance company to make available UIM coverage and pay its
insured for uncompensated damages she may recover on account of
injury due to a motor vehicle accident).
See also Coots v.
Allstate Ins. Co., 853 S.W.2d 895, 898 (Ky. 1993) (“All of the
coverage in the [Motor Vehicle Reparations Act] is so provided
to carry out the ‘policy and purpose’ of the statute . . ..”)
(emphasis added).
However, even if this Court were to construe
set-off and anti-stacking provisions in insurance contracts as
against Kentucky public policy, the question would then become
“whether the public policy was so strong as to require a
Kentucky court to interject Kentucky law into a dispute having
none but a fortuitous connection with Kentucky.”
Hodgkiss-
Warrick, 413 S.W.3d at 882.
The fact that a contract, if made in Kentucky, would not be
enforceable as a matter of public policy does not necessarily
mean that it is against Kentucky public policy to enforce such a
contract when valid where made.
Id. (citation omitted).
The
Kentucky public policy against enforcement must be a substantial
one, a well-founded rule of domestic policy established to
protect the morals, safety, and welfare of our people.
Id.
(citation omitted) (internal quotation marks omitted).
Where no
Kentucky resident has been affected, rarely will that standard
be met.
Id.
In Hodgkiss-Warrick, a case not cited by either party, the
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Supreme Court of Kentucky addressed a very similar set of facts.
A plaintiff brought suit against her insurer and alleged that a
“regular use” provision embedded in the UIM coverage under her
insurance policy was unenforceable because it violated Kentucky
public policy.
413 S.W.3d at 878.
The plaintiff was a
Pennsylvania resident, and the only connection to Kentucky was
that the accident occurred there.
Id. at 879.
The contract was
entered into in Pennsylvania, and it covered primarily vehicles
that the plaintiff registered, garaged, and used exclusively in
Pennsylvania.
Id.
The Court held that those facts were
insufficient to override traditional choice-of-law principles
and interject Kentucky law.
See id. at 883 (“Since here no
Kentucky resident is affected, nothing requires a Kentucky court
to interfere with the balance Pennsylvania has chosen for its
citizens.”).
Here, Plaintiff is an Ohio resident who entered into an
insurance contract in Ohio.
The only connection to Kentucky is
that the accident occurred here.
This connection is
insufficient to override traditional choice-of-law principles
and interject Kentucky law into a dispute that would ordinarily
be governed by Ohio law.
Plaintiff cites an unpublished Kentucky Court of Appeals case
for the proposition that Ohio law should not apply in this case
because the Policy’s set-off and anti-stacking provisions
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conflict with Kentucky public policy.
See Ward v. Nationwide
Assurance Co., No. 2012-CA-000809-MR, 2013 WL 5051677 (Ky. Ct.
App. 2013), vacated (June 11, 2014).
However, Ward was vacated
and therefore does not alter the analysis in this case.
Further, Ward is contrary to Hodgkiss-Warrick, supra.
II. Enforceability of Set-Off and Anti-Stacking
Provisions Under Ohio Law
Under Ohio law, UIM coverage is not excess coverage to other
applicable liability coverage, and the policy limits of the UIM
coverage must “be reduced by those amounts available for payment
under all applicable bodily injury liability bonds and insurance
policies covering persons liable to the insured.”
ANN. § 3937.18(C).
OHIO REV. CODE
In accordance with O.R.C. § 3937.18(C), the
Supreme Court of Ohio has held that UIM coverage was not
intended to be excess insurance to the tortfeasor’s applicable
liability insurance, and that the “amounts available for
payment” are the amounts the insured actually recovers from a
tortfeasor whose liability policy is subject to the claim of the
insured.
Clark v. Scarpelli, 744 N.E.2d 719, 725 (Ohio 2001).
Here, Plaintiff recovered $100,000 from Siebler’s insurer,
which is an amount greater than Plaintiff’s UIM benefits under
the Policy.
Therefore, under Ohio law, the Policy’s set-off
provision is enforceable and Plaintiff is barred from recovering
UIM benefits.
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Because Ohio law resolves this issue, the Court need not
address the parties’ remaining arguments.
Therefore, having heard the parties, and the Court being
sufficiently advised,
IT IS ORDERED that:
(1) Defendants’ Motion for Summary Judgment (Doc. 13) be, and
is hereby, GRANTED.
(2) Defendants’ Motion to Bifurcate (Doc. 8) be, and is
hereby, DENIED AS MOOT.
(3) A separate judgment shall enter concurrently herewith.
This 5th day of December, 2014.
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