QUINTERO (GLORIA), ET AL. VS. UNITED STATES LIABILITY INSURANCE GROUPAnnotate this Case
RENDERED: AUGUST 29, 2008; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
THE ESTATE OF HUGO QUINTERO,
BY PERSONAL REPRESENTATIVE
GLORIA QUINTERO; AND CHRISTOPHER MATEO
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE STEPHEN K. MERSHON, JUDGE
ACTION NO. 05-CI-005560
UNITED STATES LIABILITY INSURANCE GROUP;
AND EL PARAISO, INC.
** ** ** ** **
BEFORE: CLAYTON, DIXON, AND WINE, JUDGES.
DIXON, JUDGE: The Appellants, Christopher Mateo and the estate of Hugo
Quintero (collectively Appellants) appeal from an order of Jefferson Circuit Court
granting summary judgment in favor of United States Liability Insurance Group
(USLIG). We affirm.
In the early morning hours of June 27, 2004, the Appellants were
passengers in an automobile driven by eighteen-year old Xavier Jaramillo, who
had been served alcohol at two restaurants, El Paraiso and El Noa Noa, in
Louisville, Kentucky. At approximately 4:00 a.m., Jaramillo’s vehicle was
involved in a crash in Indiana, killing Quintero and severely injuring Mateo.
On June 24, 2005, Appellants filed a complaint in Jefferson Circuit
Court against the two restaurants and other individual defendants. Thereafter, on
December 9, 2005, USLIG filed an intervening complaint against Appellants
seeking declaratory relief relating to its liquor liability insurance policy with El
Paraiso.1 Following discovery, USLIG and Appellants filed cross-motions for
summary judgment and submitted legal briefs to the court. In a lengthy opinion
rendered June 13, 2007, the trial court concluded El Paraiso’s insurance policy was
void ab initio and granted summary judgment in favor of USLIG. This appeal
Summary judgment “should only be used ‘to terminate litigation
when, as a matter of law, it appears that it would be impossible for the respondent
to produce evidence at the trial warranting a judgment in his favor and against the
movant.’” Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 483
(Ky. 1991) (quoting Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 256 (Ky.
1985)). Accordingly, on appellate review of a summary judgment, we must
El Paraiso did not participate as an intervening defendant in circuit court; likewise, El Paraiso
did not participate in this appeal.
determine “whether the trial court correctly found that there were no genuine
issues as to any material fact and that the moving party was entitled to judgment as
a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996) (citing
Kentucky Rules of Civil Procedure (CR) 56.03).
In October 2002, El Paraiso, through its owner and agent, Roberto
Avila,2 entered into a contract with USLIG for a one million dollar liquor liability
insurance policy. In October 2003 and October 2004, El Paraiso renewed the
policy. The 2003 renewal application contained the following question:
9. Within the past five years has the insured been cited
by the Liquor Control Commission? If yes, describe and
advise as to date.
Avila, on behalf of El Paraiso, marked “No” in response to the question and signed
When Appellants filed suit against El Paraiso, USLIG investigated the
claim and discovered that, in May 2003, El Paraiso was called to an administrative
hearing before the Kentucky Alcoholic Beverage Control Board. The Board issued
a final order resolving three citations for alcohol violations issued to El Paraiso by
officers of the Kentucky Department of Alcoholic Beverage Control. USLIG
concluded that, by failing to disclose the citations, El Paraiso made material
misrepresentations in its 2003 and 2004 renewal applications. As a result, USLIG
sent a letter to EL Paraiso rescinding the insurance contract and refunding the
Avila did not personally participate in the circuit court proceedings.
premiums for the 2003 and 2004 renewal policies. Thereafter, USLIG filed its
complaint in Jefferson Circuit Court seeking declaratory relief.
Kentucky Revised Statutes (KRS) 304.14-110 states:
All statements and descriptions in any application for an
insurance policy . . . shall be deemed to be
representations and not warranties. Misrepresentations,
omissions, and incorrect statements shall not prevent a
recovery under the policy or contract unless either:
(1) Fraudulent; or
(2) Material either to the acceptance of the risk, or to the
hazard assumed by the insurer; or
(3) The insurer in good faith would either not have issued
the policy or contract, or would not have issued it at the
same premium rate, or would not have issued a policy or
contract in as large an amount, or would not have
provided coverage with respect to the hazard resulting in
the loss, if the true facts had been made known to the
insurer as required either by the application for the policy
Appellants contend that summary judgment in favor of USLIG was
improper because material issues of fact exist as to the enforceability of the
contract. Appellants assert: 1) the trial court erroneously relied on USLIG’s
underwriting guidelines; 2) the trial court erroneously considered evidence outside
the scope of USLIG’s rescission; 3) the insurance application was ambiguous; 4)
USLIG had “unclean hands” in rescinding the contract; 5) USLIG failed to
investigate El Paraiso’s application; and 6) rescinding the contract violated public
In their brief, Appellants failed to cite the location in the circuit court
record where their arguments were preserved. CR 76.12(4)(c)(v). “It goes without
saying that errors to be considered for appellate review must be precisely preserved
and identified in the lower court.” Skaggs v. Assad, 712 S.W.2d 947, 950 (Ky.
1986). After reviewing the record, it appears that issues three, five and six were
raised below. Because Appellants cannot “feed one can of worms to the trial judge
and another to the appellate court[,]” we will only address the arguments that were
raised before the circuit court. Kennedy v. Commonwealth, 544 S.W.2d 219, 222
We first address Appellants’ contention that the application was
ambiguous because the term “liquor control commission” used in question number
nine was susceptible to multiple interpretations. Appellants point out that USLIG
changed the format of the question in the 2004 application and eliminated the term
“liquor control commission.”
“The construction and interpretation of a contract, including questions
regarding ambiguity, are questions of law to be decided by the court.” First
Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky. App.
2000). In our review, we are mindful that:
Unless the terms contained in an insurance policy have
acquired a technical meaning in law, they ‘must be
interpreted according to the usage of the average man and
as they would be read and understood by him in the light
of the prevailing rule that uncertainties and ambiguities
must be resolved in favor of the insured.’
Hendrix v. Fireman's Fund Ins. Co., 823 S.W.2d 937, 938 (Ky. App. 1991)
(quoting Fryman v. Pilot Life Ins. Co., 704 S.W.2d 205, 206 (Ky. 1986)).
[t]he rule of strict construction against an insurance
company certainly does not mean that every doubt must
be resolved against it and does not interfere with the rule
that the policy must receive a reasonable interpretation
consistent with the parties' object and intent or narrowly
expressed in the plain meaning and/or language of the
St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223,
226 (Ky. 1994).
Despite Appellants’ argument to the contrary, we are not persuaded
that the question was ambiguous. Question nine stated: “Within the past five years
has the insured been cited by the Liquor Control Commission?” The facts show
that, in addition to the citations issued by the Kentucky Department of Alcoholic
Beverage Control, El Paraiso had also been cited by the Jefferson County
Alcoholic Beverage Control Commission for three separate violations in 2002.
The language of the question at issue, specifically the terms “cited”
coupled with “liquor control commission” are capable of interpretation by a
reasonable person based on common usage. Consequently, we believe a
reasonable person reading the application would recognize that the question
required disclosure of all alcohol-related citations from a regulatory agency.
Furthermore, this interpretation is certainly consistent with the object of the
application, as USLIG relied on the information disclosed in assessing the risk of
insuring El Paraiso.
Since the application was not ambiguous, we conclude that rescission
of the contract was proper. Pursuant to Kentucky Revised Statutes (KRS) 304.14110(2), it is evident that the omission of El Paraiso’s alcohol citations constituted a
material misrepresentation affecting both USLIG’s acceptance of the risk and the
type of hazard USLIG insured. Although Appellants dispute the evidence
supporting rescission, we note, “[t]he party opposing summary judgment cannot
rely on their own claims or arguments without significant evidence in order to
prevent a summary judgment.” Wymer v. JH Properties, Inc., 50 S.W.3d 195, 199
(Ky. 2001). We find no error.
Appellants next argue that rescission was improper because USLIG
failed to investigate El Paraiso’s application for accuracy. We note that Appellants
offer no authority to support their position.
Despite Appellants’ assertions to the contrary, it was El Paraiso’s
responsibility to ensure that its answers on the application were correct. Paxton v.
Lincoln Income Life Ins. Co., 433 S.W.2d 636, 638 (Ky. 1968). USLIG was free to
issue the policy based only on the information provided by El Paraiso in its
application. Hornback v. Bankers Life Ins. Co., 176 S.W.3d 699, 704 (Ky. App.
2005). Consequently, we conclude USLIG had no duty to investigate the
application, and the subsequent rescission of the contract was proper pursuant to
Finally, we address Appellants’ alternative theory that rescission was
against public policy. Appellants rely on automobile insurance cases interpreting
the public policy of the Motor Vehicle Reparations Act (MVRA) (KRS 304.39-010
Specifically, in National Ins. Ass'n v. Peach, 926 S.W.2d 859 (Ky.
App. 1996), a panel of this Court concluded that “[t]he provisions of the MVRA . .
. coupled with the public policy underlying them, requires that the insurer rather
than an innocent third party bear the risk of intentional material misrepresentations
made by an insured.” Id. at 863.
In the case at bar, Appellants argue the same public policy applies to
protect them, as third-party victims of El Paraiso’s negligence. We disagree, as
Peach clearly follows the statutory mandate of the MVRA:
[W]e conclude that the compulsory automobile insurance
statutes, when read together, abrogate the right of an
insurer to rescind automobile liability insurance so as to
deny recovery to an innocent third-party claimant.
Rescission of the insurance contract in this limited
instance is precluded-even though a fraud may have
been perpetrated in securing the coverage.
Id. (emphasis added). Furthermore, in Progressive Northern Ins. Co. v. Corder, 15
S.W.3d 381 (Ky. 2000), also cited by Appellants, the Kentucky Supreme Court
discussed Peach, supra, and concluded:
where loss must be borne by an innocent third party or by
an insurance company which has written a policy
pursuant to a compulsory insurance statute and
accepted a premium therefor, it should be the insurance
company that bears the loss up to the minimum statutory
Id. at 384 (emphasis added).
Despite Appellants’ reliance on Peach and Corder, we are not
persuaded that the statutory policy considerations of the MVRA are applicable to
the type of insurance contract at issue here. In the case at bar, the liquor liability
insurance policy purchased by El Paraiso was not compulsory. Accordingly, KRS
304.14-110 bars recovery due to the material misrepresentations in El Paraiso’s
For the reasons stated herein, we affirm the Jefferson Circuit Court’s
order granting summary judgment in favor of USLIG.
BRIEFS FOR APPELLANTS:
BRIEF FOR APPELLEE:
D. Keith Pulliam
New Albany, Indiana
United States Liability Insurance
Jack E. Ruck
NO BRIEF FOR APPELLEE
El Paraiso, Inc.