Most liability insurance policies contain an exclusion for injury or property damage “which is expected or intended by” the insured. Plenty of intentional acts (i.e., not shoveling the snow off your sidewalk) can result in unintentional injuries (i.e., someone slips and falls, and is injured).

However, Kentucky recognizes a doctrine in law called “inferred intent,” which holds that some actions are so inherently injurious that there is no possible way that the actor could allege that they did not intend the resulting damage.

In Kentucky, “inferred intent” covers things such as sexual molestation and throwing a punch. The recent decision in Kentucky Farm Bureau Mut. Ins. Co. v. Coyle (click here), solidified the holding of Stone v. Kentucky Farm Bureau Mut. Ins. Co. (a case won by our firm’s senior litigation partner, Guy Colson). These two cases make it clear that in Kentucky, the doctrine of “inferred intent” includes the act of pointing a gun at someone and pulling the trigger.

In Coyle, the victim (Elliott) was allegedly stalking Coyle’s wife. Needless to say, one day things came to a head, and Coyle and Elliott engaged in a high-speed chase, which ended when Coyle fired two shots into Elliott’s window. In his civil lawsuit, Elliott first sued Coyle for intentional assault. When KFB intervened seeking a judicial declaration of no coverage, Elliott amended his lawsuit to allege that Coyle negligently (not intentionally) fired the weapon at him. This was the only way to trigger the coverage from the KFB policy. As a side note, Coyle later pleaded guilty to first-degree assault, and gave deposition testimony indicating that he intended to fire the gun at Elliott.

Although the trial judge allowed a jury to determine otherwise (Elliott’s trial testimony was contradictory), the Kentucky Court of Appeals found the act of aiming and pointing a gun to carry an inferred intent to cause injury. While “intent” is usually a factual issue, in this case Coyle’s intentional actions were so inherently dangerous that, as a matter of law, they were intended to cause physical harm.

KRS 304.39-320 (which codified the procedure outlined in Coots v. Allstate Ins. Co.) continues to wreak havoc on attorneys, insurance adjusters, and appellate courts alike. The latest chapter was recently authored by the Kentucky Court of Appeals in Young v. Kentucky Farm Bureau Mut. Ins. Co.

At issue were seven stackable underinsured motorist (“UIM”) policies for Mr. Young, the driver of a car in a car v. big rig accident. Mr. Young was one of three injured persons who filed suit against the truck driver, and a tentative settlement was reached. Mr. Young’s attorney notified KFB of Young’s proposed settlement in the amount of $100,000. Two days later, KFB received correspondence from another of the victims, referring to Young’s $75,000 settlement. (As it turns out, the actual settlement was just under $73,000, thanks to some last-minute bargaining.)

Upon noticing this discrepancy, KFB’s adjuster followed up with a letter to Young’s attorney, seeking clarification as to what the actual settlement was and expressing its intent to substitute. There was no further communication until well after 30 days had elapsed, at which time KFB discovered that Young had finalized his settlement and executed a release in favor of the truck driver. KFB denied Young’s UIM claim, claiming that his actions had prejudiced its UIM subrogation rights.

In reversing the trial court’s summary judgment in favor of KFB, the Court of Appeals relied on several factors. First, the court thought that KFB should have been more diligent in determining the actual settlement, given the conflicting information. (Had the victims’ attorneys deliberately misled, or purposely avoided talking, the outcome may have been different.) Second, the court reiterated that KFB, per the statute, has 30 days to cough up the proposed settlement, not merely announce its intentions. Third, the difference between a $75,000 and a $100,000 settlement would not have mattered to KFB, as they would have pursued their subrogation rights regardless.

It appears that Kentucky courts will continue to require an extremely high degree of diligence from any UIM carrier who does not follow KRS 304.39-320 to the letter.

It should be old news by now that a party cannot resist producing documents by the mere assertion that production is burdensome. The resisting party must prove that burden, usually through an affidavit or testimony from its client.Apparently the lesson needs to be learned again in the electronic context. In a lawsuit between the City of Seattle and the Seattle Supersonics basketball team, the city sought production of emails from six of the eight members of the LLC that owns the team. The club produced 150,000 emails from two of the members, but argued that producing them from the other four members would “increase the universe exponentially,” and generate too many irrelevant documents. The city and the club had agreed on the use of certain search terms, but the club used those terms to search only the two members’ email files. Its argument was that the number of potentially relevant documents would be too large if it searched the other four members’ email files.

After resolving issues of whether the emails were in the custody of the responding party, and whether they were relevant (both questions answered “yes”), the Court turned to the nature of the club’s objection. It reminded counsel that party resisting production has the burden “to provide sufficient details in terms of time, money and procedure required to produce the requested documents.” An objection that only states that the request is burdensome fails to meet this test.

Attorneys and clients both have a tendency to treat electronic discovery as if it were a completely new creature, not subject to well-settled principles applicable to all discovery cases. But electronic discovery is still discovery, and the old rules still apply, as this case reminds us.

The case can be viewed or downloaded here. Thanks to the Justia site for providing the link to this and other court documents.

A recent Sixth Circuit case demonstrates that in order for there to be diversity jurisdiction, at least one of the parties must be a U.S. citizen. The case, Peninsula Asset Mgt., et al. v. Hankook Tire Co., et al. No07-3028, 2007 U.S. App. Lexis 28810, also demonstrates that it is never to late to raise the issue of subject matter jurisdiction, and the Court will do so on its own if none of the parties raise the issue.

Here, The Plaintiff is a Grand Cayman Island corporation, with its principal place of business in the U.S. The Defendant is a South Korean corporation. The Plaintiff brought suit in the Federal District Court for the Northern District of Ohio. That court granted summary judgment to the Defendants and the Plaintiff appealed. In dismissing the appeal the Sixth Circuit noted, on its own initiative, that diversity jurisdiction required one of the parties to be a U.S. citizen, and that neither of the parties in this case were, and thus the Court was required to dismiss the action for lack of subject mater jurisdiction.

Similar to the English language, insurance policies have “double negatives.” Their version is called “exceptions to exclusions.” The policy grants coverage. Exclusions take some coverage away. But the exceptions restore part of it.

State Farm’s automobile liability policy covers the named insured’s use of a “non-owned car,” but excludes coverage for the non-owned car when “used in any other business or occupation.” However, in the next breath, the policy provides an exception to the exclusion, stating that the exclusion does not apply to a “private passenger car driven or occupied by the first person named in the declaration, his or her spouse or their relatives.”

State Farm’s insured, Windell, was driving a 1987 Ford Aerostar mini-van owned by his friend, a florist, en route to a delivery. (Windell apparently had made gratuitous deliveries for his friend in the past; clearly, the mini-van was being used in a business.) While en route, he was at-fault in a serious accident.

The Court of Appeals disagreed with the trial court, and found that the above-quoted exception applied, and State Farm owed Windell coverage. The policy defined “private passenger car” in such a way that included a mini-van not available for public hire. Had Windell been driving a bread truck, a moving van, or a public taxi cab, the exception probably would not have negated the exclusion.

Click here for the opinion (including a more detailed discussion of the policy language)

The Kentucky Supreme Court last week adopted the “Initial Permission” rule. All seven justices concurred in the reversal of the case, but only five adopted the logic of the majority opinion.

The Initial Permission rule comes into play when a vehicle is loaned more than once. In Mitchell v. Allstate Insurance Company, the owner of a car loaned it to her friend, and the friend allowed her son, Allan, to use it. Later that day Allan died in an automobile accident, and two of his friends, who were passengers, were badly injured.

Allstate intervened in the lawsuit to seek a declaration that it did not owe coverage. It argued that Allan was not an insured because he did not have the owner’s permission to drive the car. It supported its argument with statements from the vehicle owner stating that she had forbidden Allan from driving the car. Allan’s mother also stated that Allan exceeded the scope of the permission she gave him by driving around with friends. She had told him to drive straight to work.

But there was other evidence of record that made the issue of permission less straightforward than Allstate made it out be be, including some indication that had the friend asked the owner if Allan could drive the car that day, the owner might have given permission.

The Harrison Circuit Court granted summary judgment for Allstate, and the Court of Appeals affirmed. Writing through Justice Scott, the Supreme Court reversed them both.

Justice Scott first noted that the Initial Permission rule furthers the purposes of Kentucky’s Motor Vehicle Reparations Act (MVRA). He noted that the omnibus clause–the clause in an insurance policy that defines who is a named insured–has as its purpose to maximize the availability of insurance proceeds for the benefit of the general public. Against this public policy Justice Scott measured the three lines of thought emerging from case law and commentary on how a court should analyze a case where the driver of a car deviates from the scope of the owner’s permission.

The first is the “strict” rule, which would limit coverage only if the use of the vehicle was the one intended by the owner. The second line of thought was the one Kentucky courts used before this case, the “minor deviation” rule, where coverage was found if the driver deviated only slightly from the initial permission.

The third line of thought, adopted in Mitchell is the Initial Permission rule, “which allows for coverage even if the use of the vehicle was ‘not within the contemplation of the parties or was outside any limitations placed upon the initial grant of permission.’” Under this rule, so long as the borrower originally takes possession of the vehicle with the named insured’s permission, “any subsequent use of the vehicle by the borrower would be covered by the policy.” That includes subsequent lendings–the original borrower can lend the car to a third borrower, who can lend it to a fourth, and so on. As long as each new driver has permission from the previous borrower, it does not matter whether the owner would have loaned the car to borrower number three or number four.

The MVRA was created to protect the interests of “victims, the public, policyholders, and others,” wrote Justice Scott, the Initial Permission rule comes closest of the three approaches to the spirit of the MVRA: “The initial permission rule thus furthers the General Assembly’s goal of making sure an innocent driver, like Allan, is covered by insurance when given permission by his mother to borrow a car. . . .”

Justice Minton concurred in the result only, holding that the case should have been reversed for the jury to resolve factual issues. He questioned the majority’s authority for adopting the Initial Permission rule, stating the “broad public policy decisions like this belong to our General Assembly…”

In fact, the majority really only cited a little-read New Mexico case for the proposition that a person specifically banned from driving a car by the owner could later obtain permission to drive the same car from a permissive user. And Justice Minton might have noted that United Servs. Auto Ass’n v. Nat’l Farmers Union Prop. & Casualty, 891 P.2d 538 (NM 1995) based its holding in part on the “legislative adoption of the initial permission rule.” Id., 541.  As Justice Minton argued, Mitchell now rewrites every Kentucky compulsory automobile liability policy, and does so without the kind of public debate over the “costs and benefits of this new direction” that belongs in the legislature. “Costs and benefits” was an apt phrase, because this decision can result in nothing but higher insurance premiums.

Justice Minton also noted that a careful reading of the MVRA “does not support the view that the General Assembly meant for that statute always to call for the most liberal compensation of victims, arguing that that spirit applies only to no-fault benefits. In fact, the MVRA limits tort liability.

Justice Abramson joined in Justice Minton’s concurrence.

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The Garcias were injured while aboard the Star of Louisville, which was insured by HIH Casualty and General Insurance. While litigation was pending, HIH took bankruptcy and withdrew its defense of the Star. The Star negotiated a settlement with the Garcias, which included assigning their claims against the Star’s insurance agent and broker for placing coverage with an unreliable carrier. The Garcias promised not to enforce judgment against the Star.

Later the Garcias sued HIH, and the agent who had placed the Star’s coverage with HIH. Jefferson Circuit Court dismissed the claims against the agent, and against the a broker that the agent had sued as a third party, holding that those claims sounded in tort rather than contract, and therefore could not be assigned.

Kentucky has allowed an insured to assign claims against its insurer since Manchester Ins. & Indem. Co. v. Grundy, 531 S.W.2d 493 (Ky. 1975). But where the insurer cannot answer a claim because it is insolvent, the Court of Appeals noted that  suing the agent who placed the claim is “an obvious variation” on the Grundy assignment.

The Court of Appeals agreed with the Jefferson Circuit Court that the general rule is that tort claims cannot be assigned. But it reminded the defendants that Grundy allowed assignments “for torts which are founded upon contracts and grow out of the contractual relations between the parties.” Because the duty of care breached by the agent and broker for the Star “gave rise to purely economic injury,” those claims were assignable.

The trial court analogized the claims to one for legal malpractice, which is not assignable. It cited an Arizona case that held an insured’s business relationship with an agent or broker was just as personal as a contract between a client and attorney, and the same public policy prevented either claim from being assigned. But the Court of Appeals distinguished the relationships, noting that the insured/agent relationship does not hinge on privileged communications, and in fact exists in conjunction with the duty of good faith that the agent may owe to represented insurers.

Finally the Court rejected the argument that, even if the assignment was valid, the Garcias’ promise not to execute against the Star made the assignment contract illusory. The Court of Appeals examined conflicting authorities from other jurisdictions. It noted that, in light of the Kentucky Supreme Court’s repeated validations of an insured’s assignment of claims, that Court would like adopt the majority position that a promise not to execute does not destroy the assignment contract.

The Court did agree, however, that such assignments carry a risk of collusive settlements. Thus, it held that the agent and broker were not subject to the recitals of the Garcias’ injuries contained in that agreement. In their suit against the agent and broker, the Garcias will have to prove that they were injured, and the amount of their injury.

Garcia v. Associated Insurance Service, Inc. is to be published.

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Kentucky, like most states has an out of state motorist statute. KRS188.030.

This statute allows a plaintiff to sue an out-of-state motorist in Kentucky and use service upon the Secretary of State as a substitute for personal service. However, an interesting question arises when the person you want to sue gives the police both an in-state as well as an out-of-state address. Normally, a plaintiff is allowed to rely the address that is shown on the police report as the address for each driver. However, if the police report shows both an in-state and and out-of-state address for a driver, the plaintiff may not simply use the out-of-state address and thereby avail themselves of the Secretary of State service thru KRS 188.030. See Begley v. Kilburn, 525 S.W. 2d 926 (Ky. 1976)

C-Net reminds us that electronic evidence can be critical even in mundane traffic cases. The article “Is Your Car Spying on You?” discusses “black boxes” installed in most Ford and GM cars since the year 2000, devices that record speed, whether ABS braking systems activate, and whether airbags deploy, among other data. According the C-Net the black box in New Jersey Governor John Corzine’s SUV showed that car was traveling 91 mph at the time of his accident (not 70 as witnesses testified), and that the governor was not wearing his seatbelt.

Does that mean the speed witnesses were inaccurate or lied? Not necessarily. Engineer Perry Zucker points out that black boxes were designed to retrieve diagnostic data for mechanics to fix cars; not to provide legal evidence. For various reasons, trying to use those data to determine liability may not always work.

Update: Thomas Kowalick, President of Click, Inc., author of a number of books on the use of vehicle black boxes, spoke to members of Kentucky General Assembly on current issues with black boxes. (Thanks to the Kentucky Law Blog for reporting this.)

Speaking to the Interim Joint Committee on Transportation, Kowalick noted that federal law mandates uniformity for Electronic Data Recorders (EDRs) by 2011, but the federal government has left it to states to decide how the data collected by EDRs may be used. “The challenge is to strike a balance between privacy concerns and the quest for the freedom to travel safely,” he told the committee.

It does not appear that any particular bills regarding EDRs are currently before the committee.

A lawsuit for medical negligence is often a “battle of the experts.” Expert witnesses testify as to the proper standard of care, and whether the doctor’s actions fell short of the standard. Medical experts are almost always required in order for a plaintiff to have their day in court. The only instance in which an expert would not be required is when the act is so obviously negligent, it speaks for itself (think: leaving a surgical sponge inside a patient).

Cynthia Nalley suffered from post-surgical infection, and an MRI later revealed microscopic slivers of metal in her skull. She argued that these two things were so obviously negligent, they spoke for themselves, and she didn’t need an expert to establish the standard of care in her case.

The trial court saw otherwise, and without the presence of an expert to establish the proper standard of care, the trial court dismissed her claim. The Kentucky Court of Appeals affirmed the dismissal (click here). This was the second time in four months that the Court had dealt with this issue – in August, it affirmed the dismissal of another plaintiff’s case for the same reason.

In any medical malpractice case, it’s better to be safe than sorry – always retain an expert.