BRIAN M. SCHMIDT V. HAROLD C. LEPPERT JR. AND NATIONWIDE MUTUAL INSURANCE COMPANY
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BRIAN M . SCHMIDT
V.
APPELLANT
ON REVIEW FROM COURT OF APPEALS
NO. 2004-CA-000784-MR
JEFFERSON CIRCUIT COURT NO. 02-CI-007148
HAROLD C. LEPPERT JR AND
NATIONWIDE MUTUAL INSURANCE COMPANY
APPELLEES
OPINION OF THE COURT BY JUSTICE MINTON
AFFIRMING
Brian Schmidt, an Indiana resident, admits that he negligently caused an
automobile accident in Kentucky injuring Harold C. Leppert Jr . As a result of that
accident, Leppert's no fault insurance carrier, Nationwide Mutual Insurance Company,
paid $4,201 .85 in basic reparation benefits (BRB) for Leppert's injuries and medical
expenses.
Nationwide conceded that Schmidt's automobile liability insurance carrier,
American Family Insurance Company, was not responsible for reimbursing the
BRB already paid because American Family did not conduct business in Kentucky, and
Schmidt's policy did not provide coverage for BRB . So Nationwide sued Schmidt
directly for reimbursement of BRB. Nationwide and Schmidt filed cross-motions for
summary judgment, and the trial court granted judgment to Nationwide, concluding that
Schmidt was personally liable for reimbursement of BRB because he was not a
"secured person" under Kentucky's Motor Vehicle Reparations Act (MVRA) . The Court
of Appeals affirmed .
Although it initially may appear that Schmidt's purchase of an automobile
liability insurance policy, which apparently meets the requirements of Indiana law,
should be sufficient for him to avoid personal liability for an accident occurring outside
Indiana, our analysis of Kentucky's MVRA leads to the inescapable conclusion that
Schmidt is, in fact, personally liable to Nationwide for repayment of BRB because
Schmidt is not a "secured person" under the MVRA . Thus, we affirm the Court of
Appeals .
Before we examine the trial court's grant of summary judgment on its
merits, we must define the proper scope of our review. In assessing the propriety of the
trial court's grant of summary judgment to Nationwide, we recognize that summary
judgment was appropriate only if Nationwide showed that Schmidt "could not prevail
under any circumstances ."' In ruling on a motion for summary judgment, we must view
the evidence in the light most favorable to the party opposed to the motion. When we
review a trial court's decision to grant summary judgment, we must determine whether
the trial court correctly found that there were no genuine issues of material fact. Since
Steelvest, Inc . v. Scansteel Service Center . Inc. , 807 S.W .2d 476, 480 (Ky. 1991) (citing
Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255 (Ky. 1985)) .
Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996) .
findings of fact are not at issue in this case, the trial court's decision is entitled to no
deference.4
Resolution of this appeal turns on the proper interpretation of the MVRA,
specifically Kentucky Revised Statutes (KRS) 304.39-070 . Subsection 2 of that statute
provides that "(a) reparation obligor which has paid or may become obligated to pay
basic reparation benefits shall be subrogated to the extent of its obligations to all of the
rights of the person suffering the injury against any person or organization other than a
secured person ." A "secured person" is defined at KRS 304.39-070(1) as "the owner,
operator or occupant of a secured motor vehicle, and any other person or organization
legally responsible for the acts or omissions of such owner, operator or occupant." As
we recently held, the net joint effect of these subsections is that "if the injury was
caused by an unsecured person, the injured party's reparation obligor may obtain
BRB reimbursement directly from the unsecured person ; but if the injury was caused by
a secured person, the injured party's reparation obligor may obtain BRB reimbursement
only from the secured person's reparation obligor . ,5 So Nationwide may recoup the
BRB from Schmidt only if Schmidt is not a "secured person ." And our task is to
determine if Schmidt is a "secured person" under the MVRA .
Since the MVRA defines a secured person in KRS 304 .39-070(1) as "the
owner, operator or occupant of a secured motor vehicle," in order for Schmidt to be a
4
Id
City of Louisville v. State Farm Mutual Automobile Insurance , 194 S.W.3d 304, 306 (Ky.
2006).
,6
secured person, the vehicle he was driving must have been a "secured motor vehicle.
Unfortunately, the term "secured motor vehicle" is not explicitly defined in the MVRA.
But the term "security" is defined as being "any continuing undertaking complying with
this subtitle, for payment of tort liabilities, basic reparation benefits, and all other
obligations imposed by this subtitle ."'
Thus, in order to have "security" on a motor vehicle, an insured's policy
must include BRB . Since Schmidt's Indiana policy did not include BRB, Schmidt did not
have "security," meaning that his vehicle was not a "secured motor vehicle," which, in
turn, means that Schmidt was not a "secured person ."8 And because Schmidt was not
a "secured person," Nationwide could sue him directly to recoup BRB it had paid to
Leppert .9
We reject Schmidt's argument that Kentucky precedent compels a
different result. Our conclusion that Schmidt is not a secured party is entirely consistent
with our recent holding in City of Louisville v. State Farm Mutual Automobile
Id. at 307 ("KRS 304.39-070(1) defines a `secured person' as `the owner, operator or
occupant of a secured motor vehicle, and any other person or organization legally
responsible for the omissions of such owner, operator or occupant .' Thus, in order for the
City and Alpiger to be `secured person[s],' the vehicle involved in this accident must have
been a `secured motor vehicle ."') .
KRS 304.39-020(17) (emphasis added) .
City of Louisville , 194 S.W.3d at 307-08 ("KRS 304.39-020(17) defines `security' as `any
continuing undertaking complying with this subtitle, for payment of tort liabilities, basic
reparation benefits, and all other obligations imposed by this subtitle .' Since the City opted
not to provide BRB coverage for its vehicles, the vehicle owned by the City and operated by
Alpiger was not a `secured vehicle' under these definitions or under KRS 304.39-080(7) or
(8); thus, the City and Alpiger were not `secured persons' under KRS 304.39-070(1) and
were subject to being sued by State Farm under KRS 304.39-070(2) .")
See KRS 304.39-070(2).
Insurance.' ° In City of Louisville , we concluded that the City of Louisville and its
employee were subject to a BRB subrogation suit because the City of Louisville had not
provided BRB for its vehicles ." Although City of Louisville is factually distinguishable
from the case at hand due to the lack of involvement of a governmental entity in this
case, our ultimate conclusion in City of Louisville that a failure to provide BRB for a
vehicle leads to potential personal liability for the owner or operator of that vehicle is
entirely consistent with our conclusion that Schmidt's failure to provide BRB coverage
for his vehicle leaves him subject to a BRB subrogation suit.
We also reject Schmidt's claim that he must be deemed a secured person
under the Court of Appeals's decision in State Farm Mutual Automobile Insurance
Co. v. Harris . 12 In Harris , the Harrises, who were residents of Tennessee and who were
not liable for causing the accident, were involved in a three-car collision in Kentucky.
The Harrises collected funds from the insurer of one of the other drivers . But the
second driver, who was also not a Kentucky resident, was uninsured. The Harrises'
Tennessee insurance policy did not provide for BRB, nor did their insurance carrier do
business in Kentucky. So the Harrises filed a claim for benefits through the Kentucky
Assigned Claims Bureau. 13 The trial court ordered the Assigned Claims Bureau to pay
10
194 S.W.3d at 304.
Id. at 307-08.
12
850 S.W.2d 49 (Ky.App. 1992) .
13
See KRS 304.39-160(1)(b) ("[a] person entitled to basic reparation benefits because of
injury covered by this subtitle may obtain them through the assigned claims plan
established pursuant to the provisions relating thereto and in accordance with the
provisions on time for presenting claims under the assigned claims plan if:
the Harrises $21,500 .00, whereupon State Farm, the company assigned to the claim,
appealed claiming that the Harrises' claim should be rejected because they did not have
security on their vehicle as required by KRS 304.39-160(4) .' 4 Curiously, the Court of
Appeals held that the Harrises did, in fact, have security on their vehicle simply because
they had an insurance policy that was valid under Tennessee law.
15
Obviously, Harris is not binding on this case because the facts in Harris
are remarkably different from the case at hand . In Harris , an out-of-state resident, who
was not at fault in an accident, sought only to be compensated for injuries caused by an
uninsured driver . Obviously, that situation is a far cry from Schmidt's attempt to use the
MVRA as a shield against liability for an accident that he admittedly caused . We find
Harris to be inapposite . And we find that the Court of Appeals's conclusion in Harris
that simply having an insurance policy valid in another state is sufficient to cause one
always to have "security" under Kentucky's MVRA to be inconsistent with our holding in
City of Louisville and with the definition of security found in KRS 304.39-020(17) . We
overrule Harris to the extent that it holds that anyone operating a vehicle in Kentucky
(b)
Basic reparation insurance applicable to the injury cannot be identified[.]")
14
KRS 304 .39-160(4) provides that "[a] person who sustains injury while occupying a motor
vehicle owned by such person and with respect to which security is required by the
provisions on security and who fails to have such security in effect at the time of an accident
in this Commonwealth causing such injury, shall not obtain through the assigned claims plan
basic reparation benefits, including benefits otherwise due him as a survivor, unless such
person's failure to have such security in effect at the time of such accident was solely
occasioned by the failure of the reparation obligor of such person to provide the basic
reparation benefits required by this subtitle ."
15
Harris , 850 S.W.2d at 51 ("[t]he Harrises had security on their motor vehicle through
Tennessee Farmers Mutual Insurance Company. By law[,] Tennessee Farmers did not
have to provide for basic reparation benefits . The Harrises had insurance on their
automobile. The exception in KRS 304.39-160(4) is not applicable . We agree with the trial
court that the appellees are entitled to recover basic reparation benefits as a result of the
accident they were involved in in the Commonwealth .").
has "security" simply because that operator has a valid out-of-state insurance policy,
even if that policy does not provide for BRB.
We are mindful that people buy insurance to avoid personal liability . And
under Kentucky's MVRA, people operating automobiles in Kentucky without
BRB coverage are subject to personal liability for repayment of BRB. Although such
liability may be a surprise to tortfeasors from out-of-state, it is likely not a surprise to
their insurance companies whose business depends upon a sophisticated
understanding of the insurance laws throughout the United States. Those companies
doubtlessly have already taken Kentucky's MVRA into account in calculating the
premiums they charge their policyholders . Regardless, the personal financial
consequence of liability to Schmidt is, in fact, nonexistent because Schmidt's attorney
concedes that American Family will indemnify Schmidt.
For the foregoing reasons, the decision of the Court of Appeals is
affirmed .
All concur.
COUNSEL FOR APPELLANT :
Mary Jo Wetzel
David Keith Pulliam
Valerie Denise Kessler
Kightlinger & Gray, LLP
One Commerce Square
4106 Charlestown Road
New Albany, IN 47150
COUNSEL FOR APPELLEE:
Robert E. Barnett III
Kenneth E . Dunn
Barnett, Porter & Dunn
Two Paragon Centre, Suite 250
6040 Dutchmans Lane
Louisville, KY 40205
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