JAMES MALONE V. KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY
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2007-SC-000468-DG
APP LLAN
JAMES MALONE
V.
ON REVIEW FROM COURT OF APPEALS
CASE NO . 2006-CA-001276-MR
MCCRACKEN CIRCUIT COURT NO . 03-CI-01023
KENTUCKY FARM BUREAU MUTUAL
INSURANCE COMPANY
APPELLEE
OPINION OF THE COURT BY JUSTICE ABRAMSON
AFFIRMING
After sustaining injuries from a car accident, James Malone filed suit
against Timothy Bruce, the other driver involved in the collision, and against
Kentucky Farm Bureau Mutual Insurance Company (Farm Bureau), Malone's
underinsured motorist insurance (UIM) carrier. Prior to trial, Malone accepted
the offer of Bruce's liability insurance carrier for the limits of the policy in
exchange for a release from further liability. Subsequently, Farm Bureau filed
a motion for summary judgment with the McCracken Circuit Court, arguing
that Malone had not provided, pursuant to KRS 304 .39-320 and Coots v.
Allstate Ins. Co. , 853 S.W .2d 895 (Ky. 1993), proper notice of his intention to
settle his claim with Bruce's liability carrier and that the lack of notice
extinguished Malone's claim against his UIM carrier. The circuit court agreed
and granted Farm Bureau's motion . The Kentucky Court of Appeals affirmed
that decision, concluding that Malone had never informed Farm Bureau of his
intent to accept the proposed settlement and that Farm Bureau was entitled to
summary judgment . Convinced that the Court of Appeals was correct in its
analysis, we affirm.
RELEVANT FACTS
The facts of this case are not in dispute . On November 22, 2002,
Timothy Bruce drove his vehicle into the back of Malone's truck. Malone
suffered property damage to the vehicle as well as physical injuries . When the
accident occurred, Bruce maintained liability insurance through the Atlanta
Casualty Insurance Company (Atlanta Casualty), and Malone had UIM
coverage through Farm Bureau . On September 10, 2008, Malone filed an
action in McCracken Circuit Court against Bruce, and later filed an amended
complaint to add Farm Bureau as a defendant. Thereafter, in July 2005,
Atlanta Casualty offered to pay the limits of its policy ($25,000) to Malone in
exchange for a release from further liability. After receiving this offer, Malone's
counsel delivered a letter via certified mail to Farm Bureau informing it of the
proposed settlement .
The certified letter, dated July 28, 2005, stated in pertinent part:
Atlanta Casualty has advised that they have policy
limits of $25,000 .00 and this amount has been offered
to settle their portion of Mr. Malone's claim. We are
considering whether to accept this offer. In the
meantime, because of the seriousness of Mr . Malone's
injuries, we are making a claim for policy limits of all
applicable policies issued by Kentucky Farm Bureau
for underinsured motorist coverage .
By way of this letter, and in keeping with the
mandates of K.R.S . 304 .39-320, Coots vs . Allstate
Insurance Co ., Ky., 853 S.W.2d 895 (1993), and
Allstate Ins. Co . v. Dicke, 862 S .W.2d 327 (Ky. 1993),
you must, within thirty (30) days consent to settlement
with the wrongdoer or forward a check in the amount
of the liability carriers' policy limits . If you wish to
preserve your subrogation position you must advance
a sum of money equivalent to the limits of liability of
the wrongdoer's carriers .
The letter also directed Farm Bureau to sign and return a separate waiver form
if it intended to waive its subrogation rights . On August 5, 2005, Farm
Bureau's counsel responded to the letter, informing Malone that "you indicate
that `we are considering whether to accept [Atlanta Casualty's] offer.' When
your client makes his decision, Farm Bureau can make its decision whether or
not it is going to substitute payment in order to preserve its subrogation
rights ." Malone never responded to this letter and there was no further
communication between Malone and Farm Bureau .
A month later, on September 9, 2005, Malone accepted Atlanta
Casualty's offer and signed a release . On October 18, 2005, Bruce's counsel
sent a letter to Farm Bureau informing it of Malone's settlement . Farm Bureau
then filed a motion for summary judgment seeking a dismissal of Malone's UIM
claim. Farm Bureau argued that Malone's purported notice, which stated only
that he was "considering whether to accept this offer," was not sufficient notice
of an agreement to settle as required by KRS 304 .39-320, and that this lack of
notice extinguished any later UIM claim by Malone against Farm Bureau . As
noted, the McCracken Circuit Court agreed and the Court of Appeals affirmed .
Subsequently, this Court granted Malone's motion for discretionary review .
ANALYSIS
Summary judgment is proper if the record, when examined in its
entirety, shows that there is "no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law." CR 56 .03 . "The
record must be viewed in a light most favorable to the party opposing the
motion for summary judgment and all doubts are to be resolved in his favor ."
Steelvest, Inc . v. Scansteel Service Center, Inc ., 807 S.W.2d 476, 480 (Ky.
1991) . When reviewing a court's decision to grant summary judgment, this
Court must determine whether the trial court correctly found that there were
no genuine issues of material fact. Because there are no relevant findings of
fact in this case, the trial court's grant of summary judgment is not entitled to
deference on appeal . Schmidt v. Leppert, 214 S .W.3d 309, 311 (Ky. 2007) .
The sole question before this Court is whether Malone's July 28, 2005
letter to Farm Bureau satisfied the notice requirements of KRS 304 .39-320 .
That statute states in pertinent part :
(3) If an injured person or, in the case of death, the
personal representative agrees to settle a claim with a
liability insurer and its insured, and the settlement
would not fully satisfy the claim for personal injuries
or wrongful death so as to create an underinsured
motorist claim, then written notice of the proposed
settlement must be submitted by certified or
registered mail to all underinsured motorist insurers
that provide coverage . The underinsured motorist
insurer then has a period of thirty (30) days to
consent to the settlement or retention of subrogation
rights . An injured person, or in the case of death, the
personal representative, may agree to settle a claim
with a liability insurer and its insured for less than
the underinsured motorist's full liability policy limits.
If an underinsured motorist insurer consents to
settlement or fails to respond as required by
subsection (4) of this section to the settlement
request within the thirty (30) day period, the injured
party may proceed to execute a full release in favor of
the underinsured motorist's liability insurer and its
insured and finalize the proposed settlement without
prejudice to any underinsured motorist claim .
(Emphasis supplied) . The opening clause of subsection (3) unequivocally
provides for its application in those circumstances where the injured party or a
personal representative "agrees to settle" with another motorist and his liability
carrier. An agreement to settle connotes not ongoing negotiations, not
consideration of an outstanding offer but rather actual acceptance on the part
of the injured party. Indeed, "agree" is defined variously as "1 . To consent or
accede to ; say 'yes' 2 . To be in harmony or accord 3 . To be of the same opinion ;
concur with 4. To arrive at a satisfactory understanding (on or about prices,
terms, etc .) ." Webster's New World College Dictionary (3d ed . 1988) . Further,
this Court held in Coots , 853 S .W .2d at 902, that the UIM insurer is entitled to
notice of the settlement in order to protect its subrogation rights . In his July
28, 2005 letter, Malone's counsel merely stated that Atlanta Casualty had
made an offer and "[w]e are considering whether to accept this offer." Plainly,
no settlement agreement existed.
Malone contends that the notice he provided complied with the intent of
IRS 304 .39-320 because it apprised Farm Bureau of the impending, proposed
settlement and allowed Farm Bureau the opportunity to protect its subrogation
rights. In making this argument, however, Malone disregards the threshold
requirement of an actual agreement with the other motorist and his liability
carrier by focusing exclusively on the statute's later use of the term "proposed
settlement." In the context of KRS 304 .39-320, the settlement between the
injured party, on the one hand, and the other motorist and his carrier, on the
other, is necessarily "proposed" as opposed to fully consummated because the
underinsured carrier (Farm Bureau) has a. statutory right, after receipt of
proper notice, to "consent to the settlement or retention of subrogation rights."
Under subsection (4) of the statute, the underinsured carrier can refuse
consent, pay the amount that the tortfeasor/ motorist and his carrier had
agreed to pay and, after resolving the UIM claim with its own insured (in this
case, Malone), seek subrogation against the underinsured driver's liability
carrier and the underinsured driver himself. Thus, the statute contemplates a
binding agreement between the injured party and the underinsured motorist
and his carrier which will be finalized unless the injured party's underinsured
carrier exercises its right to withhold consent and substitute its own money in
exchange for preserving all subrogation rights against the underinsured
motorist and his carrier. In short, "proposed settlement" does not allow for the
circumstances present in this case; an offer from the other motorist and his
liability carrier which the injured party is still deciding whether or not to
accept.
Malone also argues that because the overall tenor of the July 28 letter
clearly notified Farm Bureau of a pending settlement, he complied with KRS
304 .39-320 . Again, this argument disregards the essential function of the
statute . A letter stating that a settlement offer is under consideration simply
does not put the recipient on notice that the injured person has agreed to
settle . Here, the letter related all required information in the usual
underinsured motorist scenario except the central underpinning of KRS
304 .39-320, a binding agreement to settle between Malone and the
underinsured motorist and his liability carrier. Ironically, while the July 28
letter informed KFB what it "must" do under KRS 304 .39-320, it never stated
that Malone himself had done what he "must" do in order to invoke KRS
304.39-320, i.e., "agree to settle" with the other motorist and his liability
carrier. Having concluded that the trial court and the Court of Appeals were
correct in requiring compliance with the unambiguous language of KRS
304 .39-320, we affirm.
CONCLUSION
In sum, although Malone's letter informed Farm Bureau that an offer
had been tendered and provided Farm Bureau with instructions on how to
protect its subrogation rights, as to whether he had actually agreed to settle,
Malone merely stated that he was "considering whether to accept this offer ."
This purported notice only revealed that an offer had been made and was not
sufficient under KRS 304 .39-320 to put Farm Bureau on notice that "an
injured person or . . . personal representative, agree[d] to settle a claim with a
liability insurer and its insured ." Thus, even though Malone allegedly intended
to notify Farm Bureau of his agreement to settle, the plain language of his
letter did not convey that an agreement had been reached as required by KRS
304 .39-320. Accordingly, the Opinion of the Court of Appeals upholding the
trial court's grant of summary judgment is affirmed.
Minton, C.J . ; Noble, and Venters, JJ ., concur. Cunningham, J., dissents
by separate opinion in which Schroder and Scott, JJ ., join .
CUNNINGHAM, JUSTICE, DISSENTING: Because I believe that Malone's
letter satisfied the requirements of Coots v. Allstate Ins. Co., 853 S .W.2d 895
(Ky. 1993), 1 dissent .
KRS 304 .39-320(3) requires that the injured party must give notice to the
UIM carrier that a settlement has been proposed . If the UIM carrier fails to
respond within thirty days, the injured party may "proceed to execute a full
release ." In other words, the injured party may then finalize the settlement
offer. We have emphasized that the "underinsurer is entitled to notice of the
tentative settlement and an opportunity to protect those potential rights by
paying underinsurance benefits before release ." 853 S.W.2d at 902, quoting
Schmidt v. Clothier, 338 N .W.2d 256, 263 (Minn . 1983) (emphasis added) .
When reading KRS 304 .39-320 and Coots together, it is clear that the
injured party is required to give the UIM carrier notice of an intention to accept
the tortfeasor's proposed settlement . The substance of the notice requirement
is to relay to the UIM carrier that a settlement has been proposed and an
intention to accept the settlement .
This Court has never identified a "magic phrase" that must be uttered in
r
order to satisfy the requirements of Coots . However, we seem to have done so
today. By focusing solely on Malone's statement, "We are considering whether
to accept this offer," the majority has ignored the plain meaning of the overall
correspondence. Any ambiguity created by this single sentence is fully and
completely resolved when the letter is read in its entirety .
The letter is clear that an offer of settlement was made in the amount of
$25,000 . The letter specifically stated that it was being sent in satisfaction of
the requirements of KRS 304 .39-320 and Coots . It informed Farm Bureau that
it "must" respond "within thirty days." It further directed Farm Bureau to
either consent to settle or forward a check "if you wish to preserve your
subrogation position ." Finally, the letter contained a separate "form waiver" for
Farm Bureau to execute. The letter directed Farm Bureau to sign and return
the waiver if it intended to waive its subrogation rights. Again, Malone directed
Farm Bureau to return this form waiver within thirty days.
Farm Bureau asserts that its return letter to Malone illustrates its
understanding that formal notice had not been received for the purposes of
Coots and KRS . 304 .39-320 ; however, this argument rests on the erroneous
assumption that the sufficiency of notice depends on the recipient's
understanding of the notice . "The essence of notice, when it is sufficient in
form and content, is its objective effect on the person to whom it is given, not
the subjective intent of the person who gives it." 58 Am. Jur. 2d Notice ยง 2
(2008) (emphasis added) . Our consideration should be limited to an objective
analysis of Malone's notice letter, not the subjective interpretation by Farm
Bureau . "Notice is but a medium of information, which if conveyed is sufficient
notice. Notice `is not a question of diligence but of knowledge of essential
facts ."' Jackson v. Int. Union of Operating Engineers , 307 Ky. 485, 489, 211
S .W.2d 138, 141 (1948) (internal citation omitted).
The majority has placed too much focus on Malone's phrase, We are
considering whether to accept this offer,' while ignoring the overall context
within which that statement was made. Malone's July 29th letter to Farm
Bureau is unambiguous in its direction to Farm Bureau regarding its
subrogation rights, and satisfies the requirements of KRS 304 .39-320 and
Coots by relating the required information. When read in its entirety, the letter
clearly conveyed that a settlement had been offered to Malone and that Farm
Bureau should act within thirty days if it wished to preserve its subrogation
rights .
Schroder and Scott, JJ ., join.
COUNSEL FOR APPELLANT:
David Vance Oakes
Saladino, Oakes 8s Schaaf, PLLC
700 Clark Street
P.O. Box 1246
Paducah KY 42002-1246
COUNSEL FOR APPELLEE:
Michael Darin Moore
103 Fountain Avenue
Paducah KY 42001
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