CAIN (JULIA) VS. AMERICAN COMMERCE INSURANCE COMPANY, INC.
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RENDERED: OCTOBER 30, 2009; 10:00 A.M.
TO BE PUBLISHED
CORRECTED: NOVEMBER 6, 2009; 10:00 A.M.
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-001500-MR
JULIA CAIN
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE BARRY WILLETT, JUDGE
ACTION NO. 04-CI-006787
AMERICAN COMMERCE
INSURANCE COMPANY, INC.
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, STUMBO, AND WINE, JUDGES.
STUMBO, JUDGE: Julia Cain appeals from a Declaratory and Final Judgment of
the Jefferson Circuit Court interpreting KRS 304.39-140 and determining that
American Commerce Insurance Company, Inc. fully satisfied its obligation to pay
benefits under an insurance policy it issued to Cain. After being injured in an
automobile accident in which the other driver was at fault, Cain received basic
reparation benefits of $10,000.00 from American Commerce plus added reparation
benefits of $20,000.00 for each of her three vehicles for a total of $70,000.00. In
an action initiated by American Commerce seeking a declaratory judgment, the
Jefferson Circuit Court determined that American Commerce fully satisfied its
obligation to Cain. Cain now argues that the court erred in failing to conclude that
she was entitled to $40,000.00 in added reparation benefits per vehicle for a total
of $130,000.00 ($10,000.00 in basic reparation benefits plus $120,000.00 in added
reparation benefits). We agree with the reasoning of the Jefferson Circuit Court,
and accordingly affirm the Declaratory and Final Judgment on appeal.
In its Declaratory Judgment rendered on November 28, 2006, which
preceded the Declaratory and Final Judgment now on appeal, the trial court recited
the facts underlying American Commerce’s action as follows:
Cain was injured in an automobile collision on
May 12, 2003. It is undisputed that the collision was the
sole fault of the opposing driver, Mohammed Al-Gazawi.
The vehicle Cain was driving was insured by American
Commerce. Under policy number 11-1248052 for the
period April 1, 2003 through October 1, 2003 [sic]. Cain
apparently made the application for automobile coverage
by speaking with an agent or representative of American
Commerce over the telephone on or about October 1,
2001. The policy insured three separate vehicles owned
by Cain. Copies of the applicable American Commerce
insurance policy documents are included in the record.
According to the Kentucky Personal Auto Application,
each vehicle was insured with bodily injury liability
coverage of $100,000 each person/$300,000 each
accident, Property damage coverage of $100,000 each
accident, personal injury protection of $10,000 and
additional personal injury protection of $20,000. A
separate premium was charged for each category of
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coverage per vehicle, except for the additional personal
injury protection, for which no premium was charged.
On the line listing the additional personal injury
coverage, the application shows coverage of $20,000 and
the term “Aggreg Lmt”.
Another policy document, the Kentucky Personal
Injury Protection Form, signed by Cain on October 1,
2001, indicates that Cain selected “Option 1”, “Basic
Personal Injury Protection with selected additional limits
[x] $30,000 limit with no deductible”. Yet another
insurance policy document, the Automobile Insurance
Policy Description of Coverage, indicates that Cain had
“personal injury protection” limits of “$30,000
Aggregate” with no distinction between BRB and ARB.
Following the collision, Cain filed a claim for
basic reparation benefits (BRB) and added reparation
benefits (ARB) from American Commerce. American
Commerce paid $10,000 in BRB and $60,000 ($20,000
per vehicle x 3 vehicles) in ARB to or on behalf of Cain.
Cain argues that she is legally entitled to total reparation
benefits of $130,000 ($10,000 in BRB and $120,000 in
ARB).
The court went on to note that American Commerce was seeking a
declaration on the legal issue of the amount of added reparation benefits to which
Cain was entitled under the policy at issue. Cain asserted a counter-claim alleging
that American Commerce engaged in bad faith in its handling of her claim for
reparation benefits.
In examining the added reparation benefits issue, the court relied on
provisions of the Kentucky Motor Vehicle Reparations Act (“MVRA”). After
noting that added reparation benefits may be added together on a per-vehicle basis
(a.k.a. “stacked”), the court addressed the formula set out in KRS 304.39-140(1)
for determining the amount of added reparation benefits. It determined that Cain’s
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policy provided for personal injury protection in the amount of “$30,000
Aggregate,” which represented $10,000.00 in basic reparation benefits plus
$20,000.00 in added reparation benefits. Since stacking allows the $20,000.00
added reparation benefits to be multiplied by each of Cain’s three vehicles, the
court concluded that Cain was entitled to $10,000.00 in basic reparation benefits
plus $20,000.00 in added reparation benefits for each of the three vehicles for a
total of $70,000.00. Since American Commerce had already paid to Cain the sum
of $70,000.00, the court determined that its obligation under the policy had been
satisfied. It further determined that because American Commerce gave Cain the
opportunity to purchase up to $40,000.00 in added reparation benefits (per
vehicle), and because it paid Cain’s claim for benefits in a timely manner, it was
entitled to a judgment as a matter of law on Cain’s claims under the Kentucky
Unfair Claims Settlement Practice Act and common law bad faith. This appeal
followed.
Cain now argues that the trial court erred in determining that she was
entitled to $20,000.00 in added reparation benefits per vehicle rather than the
$40,000.00 which she seeks. Resolution of her argument turns on the
interpretation and application of KRS 304.39-140, which states:
(1) On and after July 1, 1975, each 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 loss in units of ten thousand dollars
($10,000) per person subject to the lesser of:
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(a) Forty thousand dollars ($40,000) in added reparation
benefits; or
(b) The limit of security provided for liability to any one
(1) person in excess of the requirements of KRS 304.39110(1)(a).
Pursuant to KRS 304.39-110(1)(a), the minimum security provided for liability for
any one person is $25,000.00. American Commerce is a reparation obligor and
Cain is a reparation insured for purposes of KRS Chapter 304.
Applying the formula to the facts, we see that Cain’s liability limit (or
“limit of security provided for liability to any one (1) person” in the language of
KRS 304.39-140(1)(b)) is $100,000.00. Subtracting from that sum the minimum
security provided for liability for any one person of $25,000.00 (set out in KRS
304.39-110(1)(a)) results in a figure of $75,000.00, which represents the “excess”
described in KRS 304.39-140(1)(b). Because added reparation benefits must be
sold in increments of $10,000.00, that figure is round up to $80,000.00. Thus,
pursuant to KRS 304.39-140(1), American Commerce was required to offer to
Cain the lesser of $40,000.00 or $80,000.00 in added reparation benefits.
This leads to the central issue, which is whether KRS 304.39-140(1)
requires American Commerce to “provide” to Cain $40,000.00 in added reparation
benefits as Cain contends, or merely to “offer” it to Cain as the Jefferson Circuit
Court determined and as American Commerce now argues. Our resolution of this
question turns on the language of KRS 304.39-140(1), which states in no uncertain
terms that the reparations obligor (American Commerce) “shall . . . be required to
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provide” the lesser of $40,000.00 or the limit of security provided for liability to
any one (1) person in excess of the requirements of KRS 304.39-110(1)(a) (in this
case $80,000.00) “upon the request of a reparation insured.”
In Nationwide Mutual Insurance Co. v. Hatfield, 122 S.W.3d 36 (Ky.
2003), Justice William Cooper discussed the parallels between
uninsured/underinsured insurance and BRB/ARB insurance and described the
public policy applications to each.
The “younger sibling” relationship between the
UM and UIM statutes is conceptually identical to the
relationship between the BRB statutes, KRS 304.39080(5) and KRS 304.39-110(1)(c), and the added
reparation benefits (ARB) statute, KRS 304.39-140,
which also define coverages that are personal to the
insured. While BRB coverage is mandatory, ARB
coverage is optional. Stevenson [ex rel. Stevenson v.
Anthem Cas. Ins. Group, 15 S.W.3d 720 (Ky. 1999)],
supra, note 6, at 722-24. As does the almost identical
language in the UIM statute, the ARB statute provides
that “each reparation obligor [insurer] 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.” KRS
304.39-140(1). The ARB statute also authorizes “terms,
conditions and exclusions.” KRS 304.39-140(2). Thus, in
Stevenson, supra note 6, we upheld a provision that did
not void the ARB coverage altogether but limited it to
persons who were either named insureds or relatives of a
named insured. Id. at 724.
Like UM coverage (and liability coverage), BRB
coverage is mandatory. Bishop v. Allstate Ins. Co., Ky.,
623 S.W.2d 865, 866 (1981). However, like ARB
coverage, UIM coverage is optional. Mullins v.
Commonwealth Life Ins. Co., Ky., 839 S.W.2d 245, 247
(1992); Flowers v. Wells, Ky. App., 602 S.W.2d 179, 180
(1980). The same “public policy” considerations that
pertain to mandatory coverages do not pertain to optional
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coverages. Bishop, supra, noted that whereas BRB
coverage is “untouchable,” ARB coverage is subject to
exclusions. Id. at 866. See also Stevenson, supra note 6,
at 723. And, as observed in State Farm Mutual
Automobile Insurance Co. v. Mattox, Ky., 862 S.W.2d
325 (1993), “[w]e are unable to rationally distinguish
between the statutory and contractual structure of added
reparation benefits and underinsured motorists
coverage.” Id. at 326.
Allstate Insurance Co. v. Dicke, Ky., 862 S.W.2d
327 (1993), held that the same “public policy” that
precludes application of anti-stacking provisions to UM
coverages in separate policies applies as well to the
application of anti-stacking provisions to UIM coverages
in the same policy. Id. at 329. In fact, no “public policy”
precludes application of anti-stacking clauses to UIM
coverages even if the coverages are in separate policies.
As noted supra, unlike the UM statute, KRS 304.39320(2) only mandates that UIM coverage be made
available to the insured, not that it be provided in every
policy; thus, if UIM coverage is provided “to the
insured” in single limits in one policy, the coverage has
been made available and the mandate of the statute, i.e.,
the “public policy,” has been satisfied regardless of how
many policies are owned by the insured or how many
vehicles are insured by the policy. (Emphasis in original.)
Id., 122 S.W.3d at 49-50, Cooper, dissenting.
The phrase “upon the request of a reparations insured” is subject to
but one interpretation, and it has not gone unnoticed that Cain has not addressed it
in her written argument. The record reveals that Cain did not request the lesser of
$40,000.00 or $80,000.00 in added reparation benefits. Rather, the policy
documents of record show that Cain selected Personal Injury Protection
(representing basic reparation benefits plus added reparation benefits) in the
amount of “$30,000.00 Aggregate.” Since the basic reparation benefits portion of
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Person Injury Protection is fixed at $10,000.00 by operation of KRS Chapter 304,
Cain’s added reparation benefit is $20,000.00. The concept of “stacking” allows
Cain to recover $20,000.00 in added reparation benefits per vehicle, for a total of
$60,000.00. See Stevenson ex rel. Stevenson v. Anthem Casualty Insurance Group,
15 S.W.3d 720, 721 (Ky. 1999). When this amount is added to the $10,000.00 in
basic reparation benefits, Cain was entitled to total benefits in the amount of
$70,000.00. American Commerce paid to Cain the sum of $70,000.00 prior to
litigation. Accordingly, we find no error on this issue.
In a related argument, Cain claims that the insurance contract issued
by American Commerce is violative of KRS 304.39-140 because it does not
provide added reparation benefits to Cain in an amount which is the lesser of
$40,000.00 or the limit of security provided for liability to any one (1) person in
excess of the requirements of KRS 304.39-110(1)(a) (in this case $80,000.00).
Having noted above the dispositive language requiring American Commerce to
provide this additional level of coverage “upon the request of a reparations
insured,” and having further determined that Cain did not request the coverage, we
cannot conclude that the trial court erred ruling that Cain was not entitled to relief
under the Kentucky Unfair Settlement Practice Act or a common law bad faith
claim. Similarly, Cain is not entitled to interest on the purported overdue payments
nor reasonable attorney fees, as American Commerce paid in a reasonable time all
benefits to which Cain was entitled.
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For the foregoing reasons, we affirm the Declaratory and Final
Judgment of the Jefferson Circuit Court.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
David C. Travis
Louisville, Kentucky
David A. Calhoun
Louisville, Kentucky
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