RALPH LAWSON V. HELTON SANITATION, INC.
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AMENDED: FEBRUARY I,2001
RENDERED: OCTOBER 26,2000
RALPH LAWSON
V.
ON REVIEW FROM COURT OF APPEALS
NO. 97-CA-1377
KNOX CIRCUIT COURT NO. 95Cl-217
HELTON SANITATION, INC.
APPELLEE
OPINION OF THE COURT BY JUSTICE COOPER
AFFIRMING
The issue in this case is whether payments made under the medical payments
(“Med-Pay”) coverage of a liability insurance policy qualify as basic reparation benefits
(“BRB”) or added reparation benefits (“AR,“) so as to toll the two-year statute of
limitations for the insured’s tort claim. The Knox Circuit Court held that they do; a
divided panel of the Court of Appeals held that they do not. We granted discretionary
review and now affirm the Court of Appeals.
1. FACTS.
On February 3, 1993, Appellant, Ralph Lawson, was injured when his automobile
collided with a vehicle owned by Appellee, Helton Sanitation, Inc., and operated by
Helton’s employee, Jamie Worley. Lawson was insured by Kentucky Farm Bureau
Mutual Insurance Company (“Farm Bureau”); Helton was insured by The Travelers
Insurance Company (“Travelers”). Farm Bureau paid Lawson a total of $10,000 under
the personal injury protection (“PIP”) coverage’ and $500 under the medical payments
(“Med-Pay”) coverage of his policy. The last PIP payment was made on May 3, 1993.
The last Med-Pay payment was made on July 9, 1993. On April IO, 1995, Lawson
signed a verified complaint seeking tort damages against Helton. However, the
complaint was not filed in the Knox Circuit Court until June 26, 1995, more than two
years after the last PIP payment, but less than two years after the last Med-Pay
payment. On October 20, 1995, Farm Bureau filed an intervening complaint against
Travelers seeking recoupment of the $10,000 in PIP payments which it paid to Lawson.
Pursuant to KRS 304.39-070(2) and (3) a reparation obligor (Farm Bureau), which has
made BRB payments to its insured (Lawson), may intervene in the insured’s tort action
against the tortfeasor (Helton) in order to assert a direct claim against the tortfeasor’s
insurer (Travelers) for reimbursement of the reparation benefits paid to its insured
(Lawson). Granae Mut. Cas. Co. v. McDavid, Ky., 664 S.W.2d 931, 932 (1984); Stovall
v. Ford, Ky., 661 S.W.2d
467 (1983). Farm Bureau’s intervening complaint against
Travelers demanded only “the sum of $10,000.00 representing reimbursement of the
basic reparations [sic] benefits heretofore paid to or for the benefit of the plaintiff, Ralph
Lawson, by Kentucky Farm Bureau Mutual Insurance Company.”
’ Farm Bureau’s standard form automobile policy refers to basic reparation
benefits (BRB), which are defined in KRS 304.39-020(2) as personal injury protection
(PIP) benefits. As noted in Stevenson v. Anthem Cas. Ins. Group, Ky., 15 S.W.3d 720,
723 (1999) those terms are used interchangeably in describing what are often referred
to as “no-fault” benefits. There was uncontradicted evidence in this case that “PIP, BRB
and no-fault benefits” are synonymous terms used interchangeably in the insurance
industry to describe those benefits mandated by KRS 304.39-080(5) and KRS 304.391 1 O( 1 )(c).
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Following a trial by jury at which the jury was not informed of Farm Bureau’s
separate complaint against Travelers, a verdict was returned awarding damages as
follows:
$ 21 ,I 56.22 Past medical expenses
25,OOO.OO Future medical expenses
25000,OO Lost wages or income
14,OOO.OO Permanent impairment
110.000.00 Past and future pain and suffering
$195156.22 Total
Final judgment was entered on May 5, 1997. The judgment awarded Lawson
$185,156.22 against Helton and awarded Farm Bureau $10,000.00 against Travelers.
The only remaining issue in this case is whether Lawson’s complaint against Helton was
barred by the two-year statute of limitations. KRS 304.39-230(6).
The Knox Circuit Court held that the period of limitations expired on July 9, 1995,
two years after Farm Bureau made its last payment under the Med-Pay coverage of
Lawson’s policy. The Court of Appeals held that the period of limitations expired on
May 3, 1995, two years after Farm Bureau made its last payment under the PIP
coverage of Lawson’s policy. Lawson advances three novel, but fundamentally flawed,
theories in support of his claim that payments under the Med-Pay provisions of his Farm
Bureau policy tolled the statute of limitations, viz: (1) Farm Bureau manipulated the
statute of limitations by falsely classifying PIP payments as Med-Pay payments; (2)
Med-Pay payments are “indistinguishable” from PIP payments, thus the last $500 in
payments made by Farm Bureau to or on behalf of Lawson were, in fact, PIP payments;
and (3) since Med-Pay coverage is payable regardless of fault, a Med-Pay payment is
generically a “no-fault” payment which ipso facto tolls the period of limitations. As will
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be seen, none of these theories can withstand even rudimentary legal scrutiny. Our
analysis begins with a perusal of the specific provisions of the contract in question.
II. THE INSURANCE CONTRACT.
The declaration page of Lawson’s Farm Bureau policy reflects that he purchased
the following insurance coverages required by law:
(1) Personal injury and property damage liability coverage, as required by KRS
304.39-080(5) and KRS 304.39-I IO(l)(a), described in Part A of the policy, with limits of
$25,000 per person, $50,000 per accident, and $25,000 property damage (premium:
$56.20);
(2) Uninsured motorist (“UM”) coverage, as required by KRS 304.20-020(l),
described in Part C of the policy, with limits of $25,000 per person and $50,000 per
accident (premium: $4.10); and
(3) Personal injury protection coverage, as required by KRS 304.39-080(5) and
KRS 304.39-I IO(l)(c), described in Part B/l of the policy, with the statutory maximum
limit of $10,000 per person (premium: $20.10).
Lawson had also purchased optional (not statutorily required) Med-Pay
coverage, described in Part B of the policy, with limits of $500 per person and $2,500
per accident (premium: $0.50). KRS 304.20-040(1)(b) recognizes optional Med-Pay
coverage as a separate and distinct coverage from BRB coverage:
“Automobile liability insurance policy” includes only coverage for bodily
injury and property damage liability, basic reparations [sic] benefits, and
the provisions therein, if any, relating to medical payments, uninsured
motorists coverage, and automobile physical damage coverage.
In fact, Med-Pay coverage has been available as a separate optional coverage in
automobile insurance policies since long before the 1974 enactment of the Motor
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Vehicle Reparations Act (MVRA). See, e.a., State Farm Mut. Auto. Ins. Co. v. Roark,
Ky., 517 S.W.2d 737 (1974) (injured party’s insurer has subrogation rights against the
tortfeasor for payments made under Med-Pay coverage); Meridian Mut. l’ns. Co. v.
Siddons, Ky., 451 S.W.2d 831 (1970) (insured may recover under both the UM and
Med-Pay coverages of his own policy, even though such constitutes double recovery).
Paragraph D of the Limit of Liability section of Part B (Med-Pay coverage) of
Lawson’s Farm Bureau policy provides as follows:
Part B -- Medical Payments Coverage shall be excess insurance over anv
Personal lniurv Protection benefits paid or payable but for the application
of a deductible under Personal Injury Protection Coverage because of
bodily injury sustained by an Insured. (Emphasis added.)
Since the Med-Pay coverage is excess insurance over the PIP coverage, the PIP
coverage is primary and the Med-Pay coverage is secondary, i.e., the PIP coverage
must be paid in full before any part of the Med-Pay coverage is due and payable. Cf.
State Farm Mut. Auto Ins. Co. v. Hall, 292 Ky. 22, 165 S.W.2d 838 (1942); Home
Indem. Co. v. St. Paul Fire & Marine Ins. Co., Ky. App., 585 S.W.2d 419 (1979).
Lawson’s Farm Bureau policy also offered other optional coverages, viz:
additional personal injury protection (ARB) coverage, KRS 304.39-140, described in
Part B/2 of the policy; underinsured motorist (UIM) coverage, KRS 304.39-320,
described in Part C/l of the policy; and automobile physical damage (collision)
coverage, KRS 304.20-040(1)(b) and (2)(c), described in Part D of the policy. As
required by KRS 304.39-140(l), the ARB coverage was offered in increments of
$10,000, $20,000, $30,000 or $40,000 per person:
[E]ach reparation obligor of the owner of a vehicle required to be
registered in this Commonwealth shall, upon the request of a reparation
insured, be required to provide added reparation benefits for economic
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loss in units of ten thousand dollars ($10.000) per person subiect to the
lesser of:
Forty thousand dollars ($40,000) in added reparation benefits; or
(a)
The limit of security provided for liability to any one (1) person b
(b)
excess of the requirements of KRS 304.39-I 1 O(l)(a). (Emphasis
added .)
Since Lawson had not purchased bodily injury liability coverage in excess of the
minimum $25,000 per person coverage required by KRS 304.39-I IO(l)(a), Farm
Bureau was not required under KRS 304.39-140(1)(b) to offer him the optional ARB
coverage in any of the available increments. Regardless, the declaration page of
Lawson’s policy clearly shows that he did not purchase anv ARB coverage, but instead
opted to purchase $500/$2,500 worth of the Med-Pay coverage described in Part B of
his policy.’
III. LIMITATIONS.
The period of limitations applicable to a tort claim arising out of a motor vehicle
accident is set forth in KRS 304.39-230(6). However, an understanding of the entire
statutory scheme requires an examination of both subsections (1) and (6) of the statute.
304.39-230. Limitations of actions.
(1)
If no basic or added reparation benefits have been paid for loss
arising otherwise than from death, an action therefor may be
commenced not later than two (2) years after the injured person
suffers the loss and either knows, or in the exercise of reasonable
diligence should know, that the loss was caused by the accident, or
not later than four (4) years after the accident, whichever is earlier.
If basic or added reparation benefits have been paid for loss arising
otherwise than from death, an action for further benefits, other than
2 The record does not reflect whether Lawson opted for Med-Pay coverage
instead of ARB coverage because of the negligible premium cost for Med-Pay (fifty
cents) as opposed to ARB coverage, or because Farm Bureau did not offer him the
optional ARB coverage, since he had purchased only the minimum bodily injury liability
coverage, KRS 304.39-140(1)(b), or both (or for some other reason).
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survivor’s benefits, by either the same or another claimant, may be
commenced not later than two (2) vears after the last pavment of
benefits. (Emphasis added.)
i$)
An action for tort liability not abolished by KRS 304.39-060 may be
commenced not later than two (2) vears after the iniurv. or the
death. or the last basic or added reparation pavment made by anv
reparation obliaor, whichever later occurs. (Emphasis added.)
Thus, whether the action is brought against a reparation obligor for payment of
reparation benefits, or against a tortfeasor for payment of a tort liability claim, the twoyear period of limitations commences on either the date of the injury or the last payment
of basic (BRB) or added (ARB) reparation benefits, “whichever later occurs.”
In Milby v.
Wright, Ky., 952 S.W.2d 202 (1997), the insured filed his tort action on March 16, 1992.
The last BRB payment had been made on March 5, 1990. On April 8, 1992, the insured
submitted an additional medical bill to his reparation obligor for payment. Since both
the filing of the tort action and the request for payment of the additional medical bill
occurred more than two years after the last previous BRB payment, we held that the tort
action was barred by the two-year statute of limitations.
In the case sub iudice, Farm Bureau’s “PIP Worksheet” shows that the following
PIP (BRB) payments were made on the dates indicated:
Feb 25,
Feb 25,
Feb 25,
Mar 1,
Mar 30,
May 3,
May 3,
May 3,
1993
1993
1993
1993
1993
1993
1993
1993
Knox County Ambulance
John R. Jones
Dr. Daniel & Seo Radiology
Corbin Medical Associates
Baptist Regional Medical
Ralph Lawson
Self Care Medical Products
M. Jorjani, M.D.
Total:
$ 260.00
100.00
258.00
90.00
6,444.85
137.09
89.00
2.621.06
$1 o,ooo.oo
As noted supra, Lawson did not purchase any optional added reparation benefits
(ARB) coverage. Farm Bureau’s “Medical Coverage” worksheet shows that after
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exhausting its PIP coverage and pursuant to the “excess insurance” provision of Part B
(Med-Pay coverage) of the policy, it made the following Med-Pay payments on the
dates indicated:
May
May
June
June
July
3,
19,
1,
3,
9,
1993
1993
1993
1993
1993
$
Dr. M. Jorjani
Corbin Medical Associates
Corbin Medical Associates
Ralph Lawson
Dr. M. Jorjani
Total:
3.94
20.00
20.00
214.00
242.06
$500.00
On December 7, 1994, Lawson’s attorney sent the following letter to Joe Lake,
Farm Bureau’s local claims representative:
Dear Mr. Lake:
As you are aware, Ralph Lawson was involved in a car accident on
February 3, 1993, in which he received several injuries. He has informed
me that Kentucky Farm Bureau has paid out its full PIP coverage for him.
Please forward me a CODV of his PIP worksheet relative to this accident.
If you have any questions concerning this matter, please do not
hesitate to contact me.
Thank you for your cooperation.
Very truly yours,
IS1
(Emphasis added.) In response, Lake sent Lawson’s attorney a copy of the “PIP
Worksheet” listing the $10,000 in payments made under the PIP coverage and
reflecting that the last PIP (BRB) payment was made on May 3, 1993. On March 13,
1995, Lawson’s attorney sent Lake another letter, viz:
Dear Mr. Lake:
Thank vou for sendina the PIP worksheet as I requested. However,
the other vehicle’s insurance adjustor [i.e., Travelers] has requested
copies of the medical bills. If you have those on file, I would appreciate
you sending me a copy. Please bill my office for the copying charges and
I will have it promptly paid.
Thank you for your assistance on this.
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Very truly yours,
IS/
(Emphasis added.) In response, Lake sent Lawson’s attorney copies of all of the
medical bills paid by Farm Bureau under both the PIP and Med-Pay coverages, as well
as a copy of the “Medical Coverage” worksheet listing the $500 in payments made
under the Med-Pay coverage and showing that the last Med-Pay payment was made on
July 9, 1993.
As previously noted, Lawson signed his complaint for tort damages
against Helton on April IO, 1995, but did not file the complaint until June 26, 1995, more
than two years after the last PIP (BRB) payment, though less than two years after the
last Med-Pay payment.
We now turn to the theories advanced by Lawson in support of his claim that the
last $500 in payments made to him or on his behalf by Farm Bureau tolled the two-year
statute of limitations applicable to his tort claim against Helton.
IV. “MANIPULATION” OF THE STATUTE OF LIMITATIONS?
Lawson first accuses Farm Bureau of intentionally manipulating the statute of
limitations so as to deprive him of his cause of action against Helton by characterizing
reparation payments defined within the MVRA, i.e., KRS 304.39-020(2) and/or KRS
304.39-140, as Med-Pay payments which, of course, are not governed by any provision
of the MVRA. In support of this proposition, Lawson cites cases which hold that a policy
of insurance cannot abrogate a mandatory provision of the MVRA, m, State Farm Mut.
Auto. Ins. Co. v. Mattox, Ky., 862 S.W.2d 325 (1993) (“anti-stacking” provision with
respect to ARB coverage cannot be enforced against the named insured); Elkins v.
Kentuckv Farm Bureau Mut. Ins. Co., Ky. App., 844 S.W.2d 423 (1992) (insurance
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contract cannot establish a lesser period of limitations for bringing an action for BRB
payments than that established by KRS 304.39-230(6)). Of course, those cases have
no relevance here, because Farm Bureau has attempted neither to “abrogate” a
coverage mandated by the MVRA nor to enforce a contractual period of limitations of
lesser duration than that established by KRS 304.39-230(6).
This argument (that Farm Bureau malevolently manipulated the statute of
limitations to Lawson’s detriment) overlooks the fact that Farm Bureau is Lawson’s
insurer, not Helton’s. Farm Bureau is not Lawson’s adversary in this action, but his coplaintiff. Its claim against Travelers for reimbursement of PIP (BRB) payments is
derivative of Lawson’s tort claim against Helton. If Lawson’s claim is barred by
limitations, so, too, is Farm Bureau’s claim against Travelers. State Auto. Mut. Ins. Co.
v. Emoire Fire & Marine Ins. Co., Ky., 808 S.W.2d 805, 807 (1991) (“[t]he right of the
reparation obligor to subrogation is dependent upon the right of the injured person to
recover such damage”); cf. Carlson v. McElroy, Ky. App., 584 S.W.2d 754, 756 (1979)
(“[slubrogation, either legal or conventional, is derivative in nature, and in this case, [the
injured party’s insurer’s] claim against the reparations [sic] obligor of the [tortfeasor]
reached no greater status than [the injured party’s] claim against the [tortfeasor]“).
Thus, it would be to Farm Bureau’s advantaae if the last $500 which it paid to or on
behalf of Lawson had been BRB or ARB payments which would have tolled the statute
of limitations. Farm Bureau not only had no motive to mischaracterize the last $500 of
its payments as Med-Pay payments rather than BRB or ARB payments, but logically
would have had exactly the opposite motive.
However, the inescapable fact is that the last $500 of its payments made to or on
behalf of Lawson must have been Med-Pay payments, because the contract of
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insurance specifies that Med-Pay coverage is “excess insurance” over PIP (BRB)
coverage, ie., Med-Pay payments are payable only after the PIP payments have been
exhausted. (One could only wonder while considering this argument how Farm
Bureau’s claims representative could have “manipulated” the statute of limitations in this
case, since the PIP and Medical Coverage worksheets were prepared in 1993 and were
furnished to Lawson’s attorney in March 1995, whereas the period of limitations did not
expire until May 3, 1995.)
V. “INDISTINGUISHABLE” PAYMENTS?
Lawson’s second theory is that the Med-Pay payments were, in fact, BRB or ARB
payments (the argument does not specify which), because the last $500 in payments
paid by Farm Bureau to or on behalf of Lawson were “indistinguishable” from the first
$10,000 paid to or on his behalf, because “they were all reparation benefit payments.”
This assertion ignores both the language of the statutes pertaining to reparation
benefits (BRB or ARB) and the language of the contract entered into by Farm Bureau
and Lawson. The last $500 paid by Farm Bureau to or on behalf of Lawson could not
have been BRB payments, because BRB payments are limited by statute to a maximum
of $10,000, KRS 304.39-020(2); and that maximum was paid out as of May 3, 1993.
(Remember, the contract provides that Med-Pay coverage is “excess insurance” over
PIP coverage, so it cannot be asserted that the f& $500 was paid under the Med-Pay
coverage and the &t $10,000 was paid under the PIP coverage.) Nor could the last
$500 have been ARB payments, since ARB coverage is statutorily required to be written
“upon the request of’ the insured “in units of $10,000 per person,” KRS 304.39-140(l),
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supra, whereas the Med-Pay coverage was for only $500 per person.3
Lawson’s brief
addresses this obstacle as follows:
They [ARB benefits] also did not have to be “requested” by Mr. Lawson
because Farm Bureau voluntarily made them available under its policy.
It is unclear whether this statement posits (1) that the ARB statute only requires
Farm Bureau to offer ARB in increments of $10,000 each, but does not preclude Farm
Bureau from offering ARB coverage in increments of less than $10,000, if requested
(though the statement appears to concede that Lawson did not request ARB coverage
in lesser increments of, QJ., $500), or (2) that Farm Bureau voluntarily provided ARB
benefits pro bono even though not requested. The proposition that an insurance
company would gratuitously provide coverage which was neither requested nor paid for
is too absurd to merit consideration. Thus, we assume Lawson’s claim is that, even
though the statute requires ARB coverage to be offered in $10,000 increments, and
even though the ARB provision of his Farm Bureau policy offered such coverage only in
$10,000 increments, Farm Bureau was not precluded from contracting to sell ARB
coverage in lesser increments of, Q, $500.
We note at the outset that there is no evidence to support a supposition that
Lawson’s local Farm Bureau agent had the authority to sell ARB coverage to Lawson in
increments neither offered in the policy nor required by the statute. But even if such
were true, the next issue would have to be whether Farm Bureau d& in fact, enter into
such a contract with Lawson; and that issue can only be resolved by examining the
3 The last $500 paid by Farm Bureau did not constitute payment in full of all of
Lawson’s remaining medical bills (thus, could not have been a partial exhaustion of a
$10,000 ARB increment). At trial, Lawson proved $21 ,I 56.22 in past medical
expenses.
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contract, itself. Since the declaration page of the policy reflects that a premium was
paid for Med-Pay coverage with limits of $500/$2500 and a premium was not paid for
ARB coverage, Lawson is reduced to arguing that Med-Pay coverage is but a misnomer
for ARB coverage even though the PIP (BRB), ARB, and Med-Pay coverages are all
described in separate and distinct provisions of the policy which define separate and
distinct coverages which clearly are not “indistinguishable.”
The Med-Pay coverage pays only medical and funeral expenses incurred by an
insured while occupvina or while a pedestrian when struck by anv motor vehicle,
whereas persons other than an insured are covered only if injured while occupving (but
not while a pedestrian when struck by) the insured vehicle. Under the PIP (BRB) and
ARB coverages, “an eligible injured person” can recover not only medical and funeral
expenses, but also work loss, replacement services loss, survivor’s economic loss, and
survivor’s replacement services loss. Under the PIP coverage, an “eligible injured
person” is “the named insured or any relative who sustains bodily injury while occupying
or while a pedestrian through being struck by anv motor vehicle” (emphasis added), or
anv other oerson “who sustains bodily injury while occupvino or while a pedestrian
through being struck by the insured motor vehicle.” (Emphasis added.) The ARB
provision defines an “eligible injured person” only as the “named insured or relative” (not
“any other person”) and does not provide coverage for injuries sustained while a
pedestrian or injuries sustained by passengers in the insured vehicle who are not
relatives of the named insured.4
4 KRS 304.39-140(2) permits ARB coverage to be written with “such terms,
conditions and exclusions as may be consistent with premiums charged.”
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Furthermore, the Med-Pay coverage in Lawson’s policy is limited to $500 per
person and $2.500 per accident. The MVRA does not permit a “per accident” limitation
on either BRB or ARB coverage. Those coverages are required to be provided in
increments of $10,000 per person regardless of the aggregate amount payable per
accident. Thus, the “Med-Pay coverage” described in Lawson’s Farm Bureau policy
could not be simply a misnomer for ARB coverage.
Before leaving this subject, it should be recalled that Farm Bureau did not claim
in its intervening complaint that it was entitled to recoup its $500 in Med-Pay payments
from Travelers.5 KRS 304.39-070(3) and KRS 304.39-140(2) create a right of
subrogation by direct action only with respect to BRB and ARB payments. Nor did the
final judgment entered in this case award Farm Bureau a judgment against Travelers for
the $500 paid under its Med-Pay coverage. Rather, the iudament awarded that sum to
Lawson aaainst Helton, presumably pursuant to the collateral source rule. Burke
Enters., Inc. v. Mitchell, Ky., 700 S.W.2d 789 (1985); Taylor v. Jennison, Ky., 335
S.W.2d 902, 903 (1960). If the $500 Med-Pay payments had, in fact, been BRB or ARB
payments, the right to recover those payments would have belonged not to Lawson, but
by statutory assignment to Farm Bureau. Ohio Cas. Ins. Co. v. Ruschell, Ky., 834
S.W.2d 166, 168 (1992) (“by statutory mandate the tort claimant has no further tort
claim whatsoever for those elements of damages paid or payable under the no-fault
statute”); id. at 170 (no-fault benefits are not “collateral source payments”).
5 Farm Bureau could have filed a subrogation claim against the tortfeasor,
Helton, to recover the Med-Pay payments, State Farm Mut. Auto. Ins. Co. v. Roark,
supra, but did not do so, presumably because the two-year period of limitations had
already expired on that claim before the intervening complaint was filed.
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VI. “GENERIC” NO FAULT BENEFITS?
Finally, Lawson erroneously asserts that the landmark case of Fann v. McGuffey,
Ky., 534 S.W.2d 770 (1975) holds that a payment under the Med-Pay coverage of an
automobile insurance policy tolls the running of the period of limitations for filing a tort
action. For this proposition, Lawson relies on the following passage:
An action for tort recovery not foreclosed by KRS 304.39-060 must
be commenced within two years after the injury or death or after the last
payment of no-fault benefits, whichever is later.
Id. at 775 (citing KRS 304.39-230(6) (emphasis added). Observing that payments
under Med-Pay coverage are payable regardless of fault, Lawson concludes that a
Med-Pay payment is generically a “no-fault” payment, m, a Med-Pay payment tolls
the statute of limitations.
Of course, Justice Palmore was not referring to a payment under the Med-Pay
coverage when he wrote the above passage in Fann v. McGuffev. The first paragraph
of his opinion in that case clearly reveals that he was not referring to all benefits payable
regardless of fault, but only to benefits payable under the MVRA, which is referred to in
that opinion as the “no-fault law.”
The plaintiffs in an action challenging the validity of a “no-fault”
automobile insurance law enacted by the 1974 General Assembly appeal
from a judgment of the Franklin Circuit Court . . . .
Id. at 772 (footnote omitted). As noted supra at note 1, the terms “BRB,” “PIP benefits”
and “no-fault benefits” are used interchangeably in referring to benefits payable under
the MVRA. b:
This is an action filed by Paula L. Ruschell, the insured, seeking a
declaratory judgment and damages against her insurer, Ohio Casualty
Insurance Company, for no-fault benefits. The benefits are described in
her policy as “Personal Injury Protection (PIP)” coverage, and conform to
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the statutory coverage described in the Motor Vehicle Reparations Act
(MVRA) as “Basic Reparations Benefits” (BRB).
Ohio Cas. Ins. Co. v. Ruschell, supra, at 166; see also Stevenson v. Anthem Cas. Ins.
Group, supra note 1, at 723; Troxell v. Trammell, Ky., 730 S.W.2d 525, 527 (1987)
(“[t]he Motor Vehicle Reparations Act is . . . much broader than just basic reparations
[sic] (or no-fault) benefits”). But even if Justice Palmore’s reference to “no-fault
benefits” in Fann v. McGuffev created an ambiguity in that regard, such was resolved in
Crenshaw v. Weinberq, Ky., 805 S.W.2d 129 (1991):
The plain meaning of this subsection [KRS 304.39-230(6)] is, when the
“last . . payment” of BRB losses occurs more than two years after the
accident, this is the event which “later occurs,” and this extends the time
limitation for “an action for tort liability” accordingly.
Id. at 130 (emphasis added). There is no such thing as a generic no-fault payment
which tolls the two-year period of limitations for filing a tort action. The only no-fault
payment which tolls the period of limitations is a BRB or ARB payment as those terms
are defined in the MVRA.
VII. CONCLUSION.
To summarize, (1) pursuant to KRS 304.39-230(6), the two-year statute of
limitations is tolled only by payments of BRB or ARB, as defined within the MVRA; (2)
the last $500 in payments made to Lawson under his Farm Bureau policy were neither
BRB nor ARB payments, but payments under the Med-Pay coverage of his policy, a
coverage which predates the MVRA and which is identified elsewhere in the Kentucky
Insurance Code; (3) Lawson’s tort action against Helton was not filed within two years
after the “last basic or added reparation payment”; thus, (4) his tort action against
Helton was barred by limitations.
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Accordingly, the opinion of the Court of Appeals is affirmed.
Graves, Johnstone and Keller, JJ., concur. Wintersheimer, J., dissents by
separate opinion, with Lambert, C.J., and Stumbo, J., joining that dissent.
COUNSEL FOR APPELLANT:
Brien G. Freeman
Todd K. Childers
Freeman, Copeland & Jorjani
201 South Main Street
P.O. Box 1546
Corbin, KY 40702-I 546
COUNSEL FOR APPELLEE:
Robert F. Duncan
David B. Mattingly
Jackson & Kelly
175 East Main Street
P.O. Box 2150
Lexington, KY 40595-2150
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RENDERED: OCTOBER 26,200O
TO BE PUBLISHED
1999-SC-0308-DG
RALPH LAWSON
V.
APPELLANT
ON REVIEW FROM COURT OF APPEALS
NO. 97-CA-1377
KNOX CIRCUIT COURT NO. 95-Cl-217
HELTON SANITATION, INC.
APPELLEE
DISSENTING OPINION BY JUSTICE WINTERSHEIMER
I respectfully dissent from the majority opinion because the $500 medical benefit
paid to Lawson by his insurer, Kentucky Farm Bureau Mutual Insurance Company,
qualifies as an “added reparation payment” for the purposes of KRS 304.39-230(6).
As correctly noted by Court of Appeals Judge Ember-ton in his dissenting opinion,
the intent of KRS 304.39-020 is that the payment of medical expenses is a reparation
benefit. The statute states in pertinent part that:
As used in this subtitle:
(1) “Added reparation benefits” mean benefits provided by optional
added reparation insurance.
(2) “Basic reparation benefits” mean benefits providing reimbursement
for net loss suffered through injury arising out of the operation,
maintenance or use of a motor vehicle, subject, where applicable, to the
limits, deductibles, exclusions, disqualifications and other conditions
provided in this subtitle. The maximum amount of basic reparation
benefits payable for all economic loss resulting from injury to any one
(1) person as the result of one (1) accident shall be ten thousand
dollars ($lO,OOO), regardless of the number of persons entitled to such
benefits or the number of providers of security obligated to pay such
benefits. Basic reparation benefits consist of one (1) or more of the
elements defined as “loss.”
Regarding limitations, KRS 304.39-230 states in relevant part::
(6) An action for tort liability not abolished by KRS 304.39-060 may be
commenced not later than two (2) years after the injury, or the death, or
the last basic or added reparation payment made by any reparation
obligor, whichever later occurs.
The real question in this case is how we characterize the $500 no-fault medical
benefit. There is nothing in the statute to suggest that an added medical benefit from a
no-fault policy must be expressly designated as a reparation benefit in order to meet the
statutory requirement. Case law is also silent on this question.
Fann v. McGuffev, Ky., 534 S.W.2d 770 (1975) interpreting the statute makes no
specific mention of a reparation benefit payment. It indicates that the payment must be
a “no fault” benefit payment expressed as follows:
An action for tort recovery not foreclosed by KRS 304.39-060, must be
commenced within two years after the injury or death or after the last
payment of no-fault benefits, whichever is later.
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I
.
It is well settled that the MVRA is to be liberally interpreted in favor of the
accident victim. Troxell v. Trammel, Ky., 730 S.W.2d 525 (1987). In addition, contracts
of insurance are to be liberally construed in favor of the insured. State Auto Mutual Ins.
Co. v. Ellis, Ky.App., 700 S.W.2d 801 (1985). This rule of liberal construction applies to
the MVRA as well as to statutes of limitation. See Plaza Bottle Shop, Inc. v. Al Torstrick
Ins. Aaencv. Inc., Ky.App., 712 S.W.2d 349 (1986); Troxell v. Trammel,
This Court
supra, at 528.
has stated that the plain meaning of the statute is that a person has
two years after the last payment of benefits in which to file an action for tort liability
without regard to whether such benefits were first claimed or first paid within two years
of the date of injury. Milbv v. Wriaht, Ky., 952 S.W.2d 202 (1997); Crenshaw v.
Weinberg, Ky., 805 S.W.2d 129 (1991). The Act is to be interpreted to promote the
intent of the legislature to encourage motor vehicle accident victims to look first to their
no fault benefits and then to pursue a tort claim if necessary. See Bailev v. Reeves,
Ky., 662 S.W.2d 832 (1984); Crenshaw, supra.
Lawson brought this action within two years of the last payment of medical
expenses related to the accident. The controversy here is whether these medical
payments were not reparation payments because Farm Bureau labeled them as
“medical expense payments” and not as reparation payments. The issue is whether an
insurance company can control whether payments are classified as reparations under
the MVRA by calling them something other than reparation payments in the insurance
policy.
The position taken by the majority opinion erroneously combines definitional
terms contained in KRS 304.39-020 with non-definitional terms found in KRS 304.39140. The latter states that, if requested, the benefits must be provided in increments of
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$10,000. Clearly, this is a requirement for the insurer to follow and is not intended to
harm the insured. We must also observe that this section is silent as to benefits
provided voluntarily and in less than $10,000 increments, In other words, the statute
does not state that if benefits are not requested, then any benefits provided shall be
deemed non-reparation benefits. Thus, it was permissible for Farm Bureau to provide
added reparation benefits that were not requested in whatever increments it chose.
We have previously held that an insurance policy’s terms, conditions and
exclusions cannot eliminate an item of coverage which the Act requires upon request.
See State Farm Mutual Automobile Insurance Co. v. Mattox, Ky., 862 S.W.2d 325
(1993). An insurance company cannot abrogate the provisions of the MVRA by means
of the language it uses in the policy. Gordon v. Kentuckv Farm Bureau Ins. Co., Ky.,
914 S.W.2d 331 (1996), determined that the one-year limitations period in a Farm
Bureau policy was invalid and held that the 15 year limitations period for contract
actions applied. Although the court observed that the company could contract for less
than a 15 year limitation, such period would have to be at least two years, based on the
MVRA as interpreted in Elkins v. Kv. Farm Bureau Mutual Ins. Co., Ky.App., 844
S. W.2d 423 (1992). No automobile insurance company in Kentucky is permitted to limit
the coverage provided by the MVRA by the use of terms, conditions and exclusions in
an insurance policy.
The medical benefit payments made by Farm Bureau were reparation benefits,
or no-fault payments, under the Act. The ftrst $10,000 and the last $500 in payments
were indistinguishable because they were all reparation benefit payments. Lawson
should not to be denied his right to recovery through construction of the Act which is a
detriment to the accident victim and through a restrictive construction of an insurance
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I
.
policy against the insured. The opinion of the Court of Appeals should be reversed and
the decision of the trial court should be affirmed so as to reinstate the jury verdict in
favor of Lawson.
Lambert, C.J., and Stumbo, J., join in this dissent.
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1999-SC-0308-DG
RALPH LAWSON
V.
APPELLANT
ON REVIEW FROM COURT OF APPEALS
NO. 97-CA-1377
KNOX CIRCUIT COURT NO. 9541-217
HELTON SANITATION, INC.
APPELLEE
ORDER AMENDING
The opinion in the above-styled appeal, rendered October 26, 2000, is hereby
amended to the extent that page two has been replaced with an amended page,
attached hereto, in order to reflect a correction in line five of footnote one which
changes the incorrect abbreviation “PRP” to the correct abbreviation “PIP.”
ENTERED: February 1,200l.
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