BRYANT (ERICA) FLOYD VS. HOPKINS (JUSTIN), ET AL.
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RENDERED: OCTOBER 9, 2009; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-002099-MR
ERICA BRYANT
v.
APPELLANT
APPEAL FROM FLOYD CIRCUIT COURT
HONORABLE JOHN DAVID CAUDILL, JUDGE
ACTION NO. 06-CI-00987
JUSTIN HOPKINS, AND
GRANGE INSURANCE COMPANY
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: LAMBERT AND STUMBO, JUDGES; HENRY,1 SENIOR JUDGE.
LAMBERT, JUDGE: In this appeal, Erica Bryant seeks equitable relief against
Grange Insurance Company (hereinafter “Grange”). She claims the insurance
company should be estopped from denying liability for the payment of
underinsured motorist (“UIM”) benefits in excess of $100,000 to her after it
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Senior Judge Michael L. Henry sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.
elected to substitute payment for the tortfeasor, Justin Hopkins, and after the
insurance company admitted liability for said UIM coverage in its initial answer to
Bryant’s complaint for damages sustained in an automobile collision. The trial
court determined that under the circumstances of this case, estoppel was not
warranted as a matter of law. Finding no error in the trial court’s determination,
we affirm.
On September 2, 2004, while driving her father’s car, Erica Bryant
sustained damages in an automobile collision with Justin Hopkins. Bryant alleged
that she sustained damages in excess of $100,000 as a result of Hopkins’
negligence. Hopkins had liability coverage up to $100,000 under a policy issued
by Liberty Mutual Insurance Company. On August 25, 2005, Hopkins offered his
policy limit of $100,000 to settle any claims Bryant had against him for negligence
resulting from this automobile collision. Bryant accepted Hopkins’ settlement
offer.
In addition to filing a claim for damages with Hopkins’ insurance
carrier, Liberty Mutual Insurance Company, Bryant also filed a claim for UIM
benefits with Grange Insurance Company. Bryant and her husband had a GEICO
automobile insurance policy for the two vehicles that they owned but had rejected
UIM insurance coverage under their GEICO policy. However, Erica Bryant was
also listed as a driver on her parents’ automobile insurance policy with Grange.
The Grange policy provided UIM coverage for insured individuals and family
members residing with the insured individuals.
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In order to preserve her claim for UIM benefits against Grange for
damages sustained in excess of $100,000, Bryant sent Grange a Coots letter on
August 26, 2005. Pursuant to Coots v. Allstate Insurance Company, 853 S.W.2d
895 (Ky. 1993), an injured party with a claim for UIM benefits may settle its
underlying claim with the alleged tortfeasor for the tortfeasor’s policy limits
without waiving the injured party’s right to seek additional benefits under a UIM
insurance policy by following certain procedures outlined therein. Id. at 902.
“Under the Coots procedure . . . the injured party may preserve his or her UIM
claim by giving notice to his or her UIM insurer of the parties' intent to settle and
affording the UIM insurer the opportunity to preserve its subrogation rights against
the tortfeasor by paying the injured party the policy limit amount.” True v. Raines,
99 S.W.3d 439, 445 (Ky. 2003); see also Kentucky Revised Statutes (KRS)
304.39-320 (codifying the Coots procedure).
On September 23, 2005, Grange elected to preserve any subrogation
rights it may have against Hopkins and Hopkins’ insurance carrier by paying
Bryant Hopkins’ $100,000 policy limit amount. No offer to settle Bryant’s UIM
insurance claim in excess of the $100,000 already advanced was ever made. On
October 1, 2006, Bryant filed suit against Hopkins for a determination of damages
sustained in the September 2, 2004, automobile accident and later amended her
complaint to add Grange as a defendant.
In paragraph eight of her amended complaint, Bryant alleged as
follows: “The plaintiff, Erica Bryant, was at the time of the accident referred to
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herein, insured under a policy of insurance with the Defendant, Grange Insurance
Company . . . belonging to Alan Van Turner, Erica Bryant’s parent, which amount
[sic] other coverage’s provided the Plaintiff with underinsured motorist coverage;
upon which policy premiums were paid and which policy was in full force and
effect on the date of the accident referred to above.” Paragraph eleven alleged:
“The Plaintiff, Erica Bryant has demanded payment from Grange Insurance
Company in accordance with the underinsured provision of its policy with the
Plaintiff referred to above, and the Defendant, Grange Insurance Company, has
refused to pay the Plaintiff in accordance with said coverage.”
On December 8, 2006, Grange filed an answer to Bryant’s amended
complaint and a cross-claim against Hopkins. In both its answer and cross-claim,
Grange admitted that Bryant was “covered under a policy of insurance liability
coverage with the Defendant/Cross-Claimant, Grange Mutual Insurance Company.
Said automobile coverage included underinsured motorists coverage.”
Thereafter, the parties engaged in discovery proceedings. During
these proceedings, it was discovered that Bryant was not actually entitled to UIM
benefits under her parents’ policy because she did not reside with them at the time
of the accident. Residence at the address listed on the declarations page of the
policy was a manifest requirement of an insured and the insured’s family members
under the Grange policy. This fact was not uncovered until August 2007, when
Bryant testified via deposition that she resided in Hi Hat, Kentucky, with her
husband and two children at the time of the September 2, 2004, accident. The
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policy itself, issued on June 17, 2004, listed Bryant as a single family member.
Also, in April 2007, when asked the name and address of each and every person
purporting to have knowledge about the automobile accident, Bryant listed herself,
her husband, and her mother and indicated that they all resided at the same P.O.
Box in McDowell, Kentucky. On April 24, 2008, Bryant’s mother confirmed in
her deposition that Bryant had moved out of her parents’ home in 2003, but still
drove a car belonging to her parents which was covered under the Grange policy at
the time of the accident.
Based on the above, Grange moved for summary judgment on
October 17, 2007. In its motion, Grange asked that Bryant’s claim for UIM
benefits in excess of the $100,000 already advanced be dismissed due to the fact
that she was not an eligible insured or family member of an insured under the plain
language of her parents’ policy. Bryant responded, arguing that she was an eligible
insured, that the policy was ambiguous, and that Grange was estopped from
denying liability for UIM benefits in excess of the $100,000 already advanced as
said liability was already admitted in Grange’s answer and cross-claim filed in
December 2006.
On November 21, 2007, Grange filed a motion for leave to amend its
answer. In its motion, Grange stated that it did not intend to admit liability for
UIM benefits in excess of the $100,000 already advanced to Bryant in its answer,
but rather it only intended to admit that a policy of insurance existed and that
Bryant was named as a driver in that policy. Further, Grange argued that it had no
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way of discovering Bryant’s physical address at the time of the accident until after
the answer was filed and discovery was initiated. Since Grange’s policy was
unambiguous in its requirement that family members of named insureds must
reside with said insureds in order to be eligible for UIM benefits, and it was Bryant
not Grange who was in a better position to know whether Bryant met this manifest
requirement, Grange Insurance Company urged the trial court to exercise its
discretion to allow amendment of its answer. Grange further argued that electing
to protect one’s subrogation rights under Coots in no way constitutes an admission
of coverage under a UIM insurance policy and should not be used against the
company, since pursuant to statute, they were permitted only thirty days from
receipt of the Coots letter to make a determination as to whether the company
should substitute payment for the tortfeasor and, thus, protect any future
subrogation claims it may have against that tortfeasor. See KRS 304.39-320.
After reviewing arguments of counsel, including Bryant’s objection to
the motion, the trial court granted Grange’s motion to amend its answer on
November 28, 2007. Thereafter, Grange amended its answer, specifically denying
that Bryant was entitled to UIM benefits in excess of the $100,000 already
advanced. After this amendment, the parties engaged in further discovery. Then,
on August 8, 2008, Grange renewed its motion for summary judgment, arguing
that Bryant’s complaint for UIM benefits in excess of the $100,000 already
advanced should be dismissed as she clearly was not entitled to UIM insurance
benefits under her parents’ policy. Bryant filed a response on August 15, 2008.
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After hearing arguments of counsel, the trial court granted summary judgment on
September 2, 2008, dismissing Bryant’s complaint against Grange for damages in
excess of the $100,000 already advanced to her.
On September 11, 2008, Bryant filed a motion to alter, amend, or
vacate the trial court’s September 2, 2008, summary judgment order pursuant to
the Kentucky Rules of Civil Procedure (CR) 59.05. After a hearing, the trial court
denied Bryant’s CR 59.05 motion by order entered on November 3, 2008. Bryant
now appeals from both the September 2, 2008, summary judgment order
dismissing Bryant’s complaint against Grange Insurance Company and the
November 3, 2008, order denying her CR 59.05 relief.
In her appeal, Bryant asserts only one argument: the trial court erred
in ruling that Grange was not estopped from denying liability for UIM insurance
benefits in excess of the $100,000 already advanced. “Estoppel is a question of
fact to be determined by the circumstances of each case.” Sebastian-Voor
Properties, LLC v. Lexington-Fayette Urban County Gov’t, 265 S.W.3d 190, 194
(Ky. 2008). However, summary judgment is appropriate on questions of estoppel
where the moving party is entitled to judgment as a matter of law. See Bruestle v.
S & M Motors, Inc., 914 S.W.2d 353, 355 (Ky. App. 1996); Rivermont Inn, Inc. v.
Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 643 (Ky. App. 2003). Such
determinations are reviewed de novo. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.
App. 1996).
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In order to be entitled to judgment as a matter of law, the moving
party must demonstrate that it would be impossible for the nonmoving party to
produce any evidence at trial warranting a judgment in the nonmoving party’s
favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 483 (Ky.
1991). When the dismissal of a nonmoving party’s equitable estoppel claim is
sought via summary judgment, it is the nonmoving party’s obligation to “present
some evidence to support his theory of estoppel.” Gailor v. Alsabi, 990 S.W.2d
597, 604 (Ky. 1999).
In Weiand v. Bd. of Trs. of Kentucky Ret. Sys., 25 S.W.3d 88 (Ky.
2000), the Kentucky Supreme Court set forth the following essential elements of
equitable estoppel:
(1) conduct which amounts to a false representation or
concealment of material facts, or, at least, which is
calculated to convey the impression that the facts are
otherwise than, and inconsistent with, those which the
party subsequently attempts to assert; (2) the intention, or
at least the expectation, that such conduct shall be acted
upon by, or influence, the other party or other persons;
and (3) knowledge, actual or constructive, of the real
facts. And, broadly speaking, as related to the party
claiming the estoppel, the essential elements are (1) lack
of knowledge and of the means of knowledge of the truth
as to the facts in question; (2) reliance, in good faith,
upon the conduct or statements of the party to be
estopped; and (3) action or inaction based thereon of such
a character as to change the position or status of the party
claiming the estoppel, to his injury, detriment, or
prejudice.
Id. at 91 (quoting Electric and Water Plant Bd. of Frankfort v. Suburban Acres
Dev., Inc., 513 S.W.2d 489, 491 (Ky. 1974)).
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Bryant claims she was entitled to judgment as a matter of law on her
theory of estoppel because Grange engaged in conduct which was “calculated to
convey the impression that the facts are otherwise than, and inconsistent with,
those which [Grange] subsequently attempt[ed] to assert[.]” Id. Specifically,
Bryant cites the undisputed evidence that Grange substituted payment for Hopkins
pursuant to the requirements set forth in Coots, supra, and KRS 304.39-320. She
argues that an insurance company’s decision to substitute payment for a tortfeasor
and, hence, protect its rights of subrogation against that tortfeasor and the
tortfeasor’s insurance company “is an implied acknowledgment by the UIM carrier
that the injured party has UIM coverage.” Accordingly, Bryant asserts that
Grange’s attempt, in the subsequent litigation, to deny UIM coverage to Bryant in
excess of the $100,000 already advanced under its policy was inequitable and must
be estopped.
We disagree that an insurance company’s election to protect its
subrogation rights under Coots, supra, and KRS 304.39-320 constitutes such an
admission of liability for damages in excess of the amount advanced or a
representation of UIM coverage to the injured party. Indeed, Bryant cites to no
holding or dicta from this or any other jurisdiction which would create such an
admission or presumption. To the contrary, as noted in True v. Raines, 99 S.W.3d
439 (Ky. 2003), the Coots procedure has a two-fold purpose: (1) to allow an
injured party to settle with a tortfeasor while still maintaining a claim against the
alleged UIM insurance carrier; and (2) to allow the alleged UIM insurance carrier
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an opportunity to protect its potential subrogation rights against the tortfeasor and
the tortfeasor’s insurance carrier while at the same time ensuring the injured party
adequate and timely compensation for his damages from the tortfeasor. Id. at 445;
see also Coots, 853 S.W.2d at 902.
Neither of the above purposes encompasses or presumes “an implied
acknowledgment by the UIM carrier that the injured party has UIM coverage.”
Rather, the Coots procedure codified in KRS 304.39-320 is simply a mechanism
for ensuring injured parties the right and opportunity to settle their claims against
tortfeasors in motor vehicle cases without undue interference from UIM insurance
carriers seeking to protect their potential subrogation claims. See KRS 304.39320.
Bryant argues that language in Nationwide Mut. Ins. Co. v. State
Farm Auto. Ins. Co., 973 S.W.2d 56 (Ky. 1998), supports her position. The issue
determined in that case concerned who bore the risk of overpayment when the
amount settled for between the tortfeasor and the injured party, but advanced by
the UIM insurance carrier pursuant to Coots, supra, is greater than the actual award
of damages determined by a jury. Id. at 57. Our Supreme Court held that the most
“accurate and logical” answer was the party who advanced payment prior to the
jury’s final determination of damages. Id. at 58. In explaining its decision, the
Supreme Court noted that placing the risk of loss on the UIM insurance carrier
seeking to protect its subrogation rights was preferable since this resulted in more
efficient, simplified, and less costly litigation proceedings by encouraging the UIM
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carrier to “determine the value of the plaintiff's claim and the value of the potential
subrogation claim when the liability carrier has offered the policy limits.” Id.
We disagree that the language or reasoning set forth in Nationwide
Mut. Ins. Co., supra, is persuasive or even relevant to the determination of this
case. Encouraging UIM insurance carriers to “determine the value of the
plaintiff’s claim and the value of the potential subrogation claim” at the time of
settlement is not equivalent to creating a binding admission of liability upon the
UIM insurance carrier seeking to protect its potential subrogation rights by
advancing payment. Id. “[A]n admission by definition is a formal act done in the
course of judicial proceedings.” Arnett v. Thompson, 433 S.W.2d 109, 114 (Ky.
1968) (internal quotation and citation omitted), see also Nolin Production Credit
Ass'n v. Canmer Deposit Bank, 726 S.W.2d 693, 701 (Ky. App. 1986). No judicial
proceedings were pending at the time Grange advanced payment in this case. In
any event, all parties acknowledged that Bryant had a strong claim for damages
against the tortfeasor, Hopkins, and thus, Grange’s obligation, if any, under
Nationwide Mut. Ins. Co., supra, to assess the strength of Bryant’s tort claim was
met in this case.
What both Bryant and Grange failed to do at the time of settlement
was examine the UIM insurance policy and Bryant’s residence status closely
enough to ensure that Bryant was actually eligible for UIM insurance benefits
under her parents’ policy. Nothing in our caselaw or in the reasoning set forth in
Nationwide Mut. Ins. Co., supra, requires that such a mutual mistake of due
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diligence be borne exclusively by the UIM insurance carrier. As previously noted,
Grange has already accepted and does not dispute that it is exclusively liable for
the $100,000 already advanced to Bryant and that Grange’s only recourse at this
juncture would be to proceed with its subrogation claims against Hopkins and his
insurer, Liberty Mutual Insurance Company, for the $100,000 already advanced.
The only issue in dispute in this case is whether by advancing this payment in
advance of a final determination of UIM insurance policy coverage by either a
court of law or by agreement of the parties, Grange has waived any coverage
defenses it may have in subsequent litigation.
It is significant that Grange was required by statute to advance
payment or abandon its subrogation rights within thirty days of notification of a
settlement between Bryant and Hopkins. KRS 304.39-320. It would be
inequitable and impractical to require an alleged UIM insurance carrier to engage
in the discovery necessary to make a binding determination of coverage within
such an abbreviated period of time or at any time prior to the initiation of judicial
proceedings. See 27 Corpus Juris Secundum (C.J.S.) Discovery § 2 (2009)
(litigation allows parties to utilize the rules of discovery which “permit a litigant to
obtain whatever information he or she may need to prepare adequately for the
issues that may develop without imposing an onerous burden on his or her
adversary”). For these reasons, we hold that the act of protecting one’s potential
subrogation rights by the advancement of payment to an injured party pursuant to
the procedure mandated in KRS 304.39-320 and Coots, supra, in no way creates a
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presumption or acknowledgment, implied or otherwise, that the UIM insurance
carrier has admitted coverage to the injured party beyond the amount advanced
under its policy or that it has waived any defense of non-coverage in any
subsequent litigation against the injured party. Accordingly, Bryant’s arguments to
the contrary are rejected.
Bryant argues that in addition to the substitution of payment pursuant
to KRS 304.39-320 and Coots, supra, Grange engaged in two other acts which,
taken together, support her claim for equitable relief. First, Grange “sent multiple
letters to Bryant’s counsel over an [eleven] month period discussing her UIM
claim without ever raising a challenge to coverage” prior to the filing of Bryant’s
lawsuit in this case. Second, Grange admitted in its answer that Bryant was
entitled to UIM benefits under its policy.
As to the pre-lawsuit “discussions,” Bryant cites no authority or
rationale as to how simply discussing a claim prior to the initiation of litigation
would imply or create a reasonable presumption that the claim was accepted or
admitted. As to the admission, the trial court granted Grange leave to amend its
answer to correct this error. See CR 15.01. Once this amendment was permitted,
the amended answer replaced the original answer and the existence of an
admission upon the record was essentially extinguished. See CR 15.03 (relation
back of amendments); Curry v. Cincinnati Equitable Ins. Co., 834 S.W.2d 701,
704 (Ky. App. 1992) (defense effectively pleaded and not waived where it was
included in amended answer which related back to the date of the original
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pleading). Bryant does not appeal the trial court’s order permitting this
amendment, nor does she argue that the trial court abused its discretion in
permitting this amendment. Accordingly, we find no merit in Bryant’s arguments
that this additional evidence warranted a finding that Grange was equitably
estopped as a matter of law from asserting a defense of non-coverage against her in
its amended answer.
Finally, and in any event, Bryant’s claim of equitable estoppel must
fail as it is axiomatic that a “contract of insurance cannot be created or enlarged by
estoppel or waiver.” Old Republic Ins. Co. v. Begley, 314 S.W.2d 552, 557 (Ky.
1958). Bryant’s citation to American Cas. Co. of Reading, Pa. v. Shely, 314 Ky.
80, 234 S.W.2d 303 (1950), is without effect. In Shely, the Kentucky Supreme
Court held estoppel arguments viable in cases “where an insurance company
undertakes the defense of an accident case [since] the loss of the right by the
insured to control and manage the case is itself a prejudice.” Id. at 305. Grange
undertook no defense of Bryant in this case, and Bryant never lost her right to
control and manage her case. In fact, the opposite was true, as Bryant was
afforded complete control and management of her case via the Coots procedure.
The Shely Court actually distinguished its facts from another case with
facts most similar to the ones found here. Id. at 304. In a case out of Texas where
the insured accidently shot himself in the leg and received insurance benefits for a
period of eleven weeks prior to the insurer denying coverage to the insured, the
Shely Court cited with approval the Texas Court’s holding “that an accident insurer
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does not, by paying disability benefits in respect of an injury not within the
coverage of the policy, thereby render itself liable to continue to pay such benefits
for the full stipulated period, since waiver is ineffectual to extend the coverage of a
policy.” Id.
In Morgan v. Maryland Cas. Co., 458 S.W.2d 789 (Ky. 1970), the
Kentucky Supreme Court rejected an estoppel claim in a case where the employer
at first paid a worker benefits pursuant to a workers’ compensation claim but then
later denied coverage under the applicable statute after the statute of limitations
had appeared to run on the workers’ alternative common law claim. Id. at 790. In
explaining its holding, the Court held that “[t]he office of an estoppel is not to
work a positive gain to a party, and it does not create a new right or give a cause of
action; rather, it serves to prevent losses otherwise inescapable.” Id. at 790-791.
In this case, it is undisputed that Bryant never had coverage under the UIM
benefits section of the Grange insurance policy. Thus, estoppel was not available
in this case to provide Bryant with benefits in excess of the $100,000 already
advanced as there were no losses to prevent since Bryant was not entitled to UIM
benefits in the first place.
Bryant argues that if she knew Grange intended to deny her UIM
benefits in excess of the amount advanced, she never would have settled with the
tortfeasor, Hopkins, for his policy limits, but rather she would have sought a full
recovery from Hopkins beyond his policy limits. While Bryant’s strategy may
have been a miscalculation in hindsight, we do not find any evidence in this record
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that would allow a jury to reasonably believe that Bryant’s reliance on the
availability of UIM benefits in excess of the amount advanced was the result of
any false representations or concealment of material facts by Grange. To the
contrary, it was Bryant not Grange who was in a better position to discover the
dispositive fact concerning Bryant’s residence at the time of the accident in this
instance. As for any delays or confusion caused by Grange’s erroneous admission
in its initial answer, this could not have been prejudicial to Bryant since she had
already waived her claims against Hopkins prior to the filing of this lawsuit by
settling with Hopkins and accepting the substitution payment from Grange.
Raines, 99 S.W.3d at 446.
Finding no reversible error in the trial court’s failure to grant Bryant
equitable relief in this case, the judgments of the Floyd Circuit Court entered on
September 2, 2008, and October 30, 2008, dismissing Bryant’s complaint against
Grange for UIM benefits in excess of the amount already advanced and denying
Bryant’s motion for CR 59.05 relief, are hereby affirmed.
HENRY, SENIOR JUDGE, CONCURS.
STUMBO, JUDGE, DISSENTS AND FILES SEPARATE OPINION.
STUMBO, JUDGE, DISSENTING: Respectfully, I dissent for the
reasons set forth in Nationwide Mut. Ins. Co. v. State Farm Auto. Ins. Co., 973
S.W.2d 56 (Ky. 1998). The fact that litigation has not commenced does not relieve
an insurer such as Grange in this instance, of its duty to investigate claims made
against it, which would include determining whether there actually was coverage.
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The fact that Grange may have made a bad decision in this case should not permit
it to renege on the bargain.
BRIEF FOR APPELLANT:
Robert Allen Rowe, Jr.
Prestonsburg, Kentucky
Jay R. Vaughn
Florence, Kentucky
BRIEFS FOR APPELLEE JUSTIN
HOPKINS:
H. Caywood Prewitt, Jr.
Lexington, Kentucky
BRIEF FOR APPELLEE GRANGE
INSURANCE COMPANY:
Sandra Spurgeon
William W. Tinker, III
Lexington, Kentucky
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