Opinion ID: 1881223
Heading Depth: 2
Heading Rank: 3

Heading: due by law/legal right to recover.

Text: The Hatfields' policy contains the following two provisions (terms and conditions) that are in concert with the UIM statute and that, along with the statute, preclude payment of the UIM coverage in this case, viz: COVERAGE AGREEMENT We will pay compensatory damages including derivative claims, because of bodily injury suffered by you or a relative and due by law from the owner or driver of: ... 2. an underinsured motor vehicle.... RECOVERY 1. Before recovery, we and the insured must agree on two points: a) whether there is a legal right to recover damages from the owner or driver of an... underinsured motor vehicle; and if so b) the amount of such damages. (Emphasis added.) The policy language limiting recovery to damages that the insured is due by law and has a legal right to recover from an underinsured tortfeasor is consistent with the judgment recovered against requirement of the UIM statute, KRS 304.39-320(1), (2), supra. In Kentucky Central Insurance Co. v. Kempf, Ky.App., 813 S.W.2d 829 (1991), the Court of Appeals held that the judgment recovered against condition meant that entitlement to payment under the UIM coverage was preconditioned upon the insured obtaining an actual judgment against the underinsured motorist. Id. at 831. As applied to the facts in Kempf , this holding did not preclude an insured from collecting the UIM coverage of his policy but rather precluded the UIM insurer that had settled the insured's UIM claim from enforcing its subrogation right against the underinsured tortfeasor. However, the unintended result of Kempf was to preclude any future settlements between UIM insureds and underinsured motorists because no claim could be made against the insured's UIM coverage unless and until an actual judgment was obtained against the underinsured motorist. Kempf `s brief life ended when an attempt was made to apply its holding to a scenario where an insured had settled with, rather than obtained a judgment against, the underinsured tortfeasor and thereby, per Kempf , forfeited any UIM claim. To avoid that result, Coots v. Allstate, supra , reconstrued the judgment recovered against language in the UIM statute as reflecting the same legislative intent as the legally entitled to recover language in the UM statute, 853 S.W.2d at 899, i.e., the UIM statute does not require that the insured actually recover a judgment against the underinsured motorist but only that the insured could recover a judgment against the underinsured motorist. Thus, judgment recovered against means legally entitled to recover which means could recover a judgment against. The problem faced by today's plurality opinion is how to reach the desired result of paying Nationwide's UIM coverage to an insured who could not recover a judgment against the adverse motorist because the adverse motorist is immune from tort liability. The solution, of course, is to reconstrue the judgment recovered against language of the UIM statute to mean something other than could recover a judgment against. At one point, the plurality opinion actually interprets the legal right to recover language in the RECOVERY clause of the policy's UIM endorsement to mean that the insured is entitled to UIM payments only if the insured does not have a legal right to recover from the tortfeasor, ante, at 41, thus construing and if so to mean and if not. Under this construction, the UIM coverage applies only if, as here, a judgment could not be recovered against the underinsured motorist. That construction is, indeed, advanced by Hatfield (Appellee's brief, at 13-14) who, of course, is concerned only with the result of this particular case and not its precedential impact on future casesand that construction does, in fact, support the result reached by the plurality in this case. However, that short-sighted construction, like the holding in Kempf, supra , would have a disastrous impact on the vast majority of future UIM cases, i.e., any case in which the tortfeasor is not cloaked with immunity. I believe the provision means exactly what it says and what Coots said the UIM statute requires: UIM coverage applies only if the insured could recover a judgment against the tortfeasor for the full amount of the insured's damages though the tortfeasor's liability insurance coverage is insufficient to pay the full amount of those damages; but if the insured could not recover a judgment against the tortfeasor for the full amount of damages because the tortfeasor is, e.g., immune from liability, either wholly or partially, neither is the insured entitled to recover against the UIM coverage. As one court has succinctly put it, [a]n immune defendant is not an uninsured defendant. Bruck v. Pa. Nat. Ins. Cos., 449 Pa.Super. 22, 672 A.2d 1335, 1339 (1996). Even more obviously, a partially immune defendant is not an underinsured defendant. Ignoring the plain language of both the policy and the statute, as construed by Coots , the plurality opinion then deletes the could recover a judgment against condition of KRS 304.39-320 (the only possible meaning of the statutory language, judgment recovered against, other than the plain meaning applied in Kempf ) and holds that payment under the UIM endorsement is conditioned only upon proof of (1) fault on the part of the adverse motorist and (2) consequent injury to the insured. Ante, at 39. Thus, proof of the liability of the adverse motorist, i.e., that a judgment could be recovered against the adverse motorist, would no longer be required. The plurality dubs its new construction of the UIM statute the essential facts approach, a concept borrowed from United States Fidelity & Guaranty Co. v. Preston, Ky., 26 S.W.3d 145 (2000), in which the majority opinion deleted the legally entitled to recover language from the UM statute so that the insured in that case could recover under the UM coverage of her policy even though she had already tried and lost her liability case against the uninsured alleged tortfeasor so that, of course, she was not legally entitled to recover anything from that person. Id. at 148. Preston attempted to legitimize its holding with the remarkable claim that the essential facts approach was based on the holding in Coots , even though that approach is the diametrical opposite of Coots `s holding that legally entitled to recover means could recover a judgment against. To justify this assertion, Preston was forced to quote Coots out of context in one instance and to misquote Coots in another. First, Preston quoted Coots for the proposition that coverage for damages caused by an uninsured motorist `exists without regard to whether the obligation of the tortfeasor can be reduced to judgment.' Preston, supra, at 148 (quoting Coots, supra, at 898). In fact, at that point in the opinion, Coots was only referring to the holding in Puckett v. Liberty Mutual Insurance Co., Ky., 477 S.W.2d 811 (1971), that an action for UM payments can be brought against the insurer without first obtaining an actual judgment against the uninsured motorist or joining the uninsured motorist as a party to the action against the insurer. Coots, supra, at 898-99 ( citing Puckett, supra, at 814). [9] In the same paragraph, however, Coots also explained that, while the insurer can be sued without obtaining a judgment against the tortfeasor,  the potential liability of the uninsured motorist and the amount of damages he caused must be established in the suit against the insurer in order to measure the insurer's obligation to the insured under the policy. Coots, supra, at 898 (emphasis added). Liability, of course, requires an inquiry into more than mere fault, e.g., whether the tortfeasor is immune from tort liability because of the workers' compensation exclusive remedy provision, KRS 342.690, or, as here, because the tortfeasor is cloaked with sovereign immunity. Second, Preston quoted Coots as saying that a claimant must prove the `essential facts' to recover UM benefits from an insurer [and]  [t]hese essential facts are that `the offending motorist is a tortfeasor,' and `the amount of damages caused by the offending motorist.' Preston, supra, at 148 (purporting to quote Coots, supra, at 899) (emphasis added). What Coots actually said was: In both [UM and UIM coverages] proof the offending motorist is a tortfeasor and proof of the amount of damages caused by the offending motorist are not preconditions to coverage, but only essential facts that must be proved before the insured can recover judgment in a lawsuit against the insurer on the contract of insurance. Coots, supra, at 899 (emphasis added). Coots did not say that negligence and damages were  the essential facts, i.e., the only essential facts, [10] but only essential facts and went on to explain in the same paragraph: [T]he only rational interpretation of the statute is, while the policy limits specified in the tortfeasor's policy must be exhausted before the UIM carrier has an obligation to pay, the liability of the tortfeasor and the amount of damages sustained are elements that must be established in measuring the UIM carrier's obligation and not a statutory precondition to coverage. Id. (emphasis added). Obviously, Coots was distinguishing between coverage and liability. Coverage is what authorizes an insured to make a claim or file a lawsuit under the policy, and Coots , citing Puckett, supra , held that a civil action could be brought against a UIM insurer without suing or recovering a judgment against the underinsured motorist, thereby overruling Kempf . Coots, supra, at 901. However, Coots also held that entitlement to the proceeds of the coverage requires proof of both (1) the liability of the underinsured motorist (only one element of which is fault), and (2) the amount of damages caused by the accident. Id. at 899. In holding that the statutory language, judgment recovered against, equates with could recover a judgment against, Coots was able to at least place a rational construction on the statutory language, judgment recovered against. Unlike Coots , today's plurality opinion completely abrogates the legislative intent (public policy) embodied in those words and thereby substitutes its own public policy for that established by the General Assembly. Of course, the primary reason that Coots provided no basis for the decision in Preston is that Coots was construing language in the UIM statute that facially required a judgment recovered against the underinsured motorist as a precondition to entitlement to UIM proceeds while Preston was purporting to interpret the UM statute which does not contain that language. The problem faced by the majority in Preston was that Coots equated judgment recovered against with legally entitled to recover, the operative language in the UM statute, ergo, the converse must also be true. This dilemma required the majority in Preston to rewrite Coots instead of simply attempting to distinguish it. Regardless, in departing from the only rational interpretation of the statute, Coots, supra, at 899, both Preston and today's plurality opinion have skewed the language of both statutes (the public policy) and thereby further distanced this Court from the mainstream of American jurisprudence. The plurality's string citation of ten cases claimed to support the so-called essential facts approach, ante, at 39, does not withstand scrutiny. Only three of those ten cases involved an immune tortfeasor and none involved a tortfeasor cloaked with sovereign immunity. While Torres v. Kansas City Fire & Marine Insurance Co., 849 P.2d 407 (Okla.1993), indeed held that the insured could obtain payment under his UM coverage even though the tortfeasor was immune from liability because of the exclusive remedy provision of Oklahoma's workers' compensation statute, id. at 412 n. 6, virtually every other jurisdiction that has considered the issue has held that neither UM nor UIM coverage is payable if the tortfeasor enjoys workers' compensation immunity. See, e.g., Chance v. Farm Bureau Mut. Ins. Co., 756 F.Supp. 1440, 1442-43 (D.Kan.1991) (interpreting Kansas law); Allstate Ins. Co. v. Boynton, 486 So.2d 552, 555 (Fla.1986) (legally entitled to recover means that the insured must have a claim against the tortfeasor which could be reduced to judgment in a court of law); Williams v. Thomas, 187 Ga.App. 527, 370 S.E.2d 773, 775 (1988) (it is a condition precedent to an action against an automobile liability insurance carrier to recover under [the Georgia Uninsured Motorist Act]... that suit shall have been brought and judgment recovered against the uninsured motorist) (emphasis in original, internal quotation omitted); Mayfield v. Cas. Reciprocal Exch., 442 So.2d 894, 896 (La.Ct.App.1983) (UM recovery precluded if tortfeasor enjoys workers' compensation immunity); Hopkins v. Auto-Owners Ins. Co., 41 Mich.App. 635, 200 N.W.2d 784, 786 (1972) (same); Peterson v. Kludt, 317 N.W.2d 43, 49 (Minn.1982) (same); Wachtler v. State Farm Mut. Auto. Ins. Co., 835 So.2d 23, 28 (Miss.2003) (same); Hubbel v. W. Fire Ins. Co., 218 Mont. 21, 706 P.2d 111, 114 (1985) (uninsured motorist provisions should not be used to place an injured claimant in a better position than he would be under the ordinary provisions of an existing insurance policy); Kough v. N.J. Auto. Full Ins. Underwriting Ass'n, 237 N.J.Super. 460, 568 A.2d 127, 132 (App.Div.1990) (same); Stuhlmiller v. Nodak Mut. Ins. Co., 475 N.W.2d 136, 138-39 (N.D.1991) (same principle applied to UIM coverage); State Farm Mut. Auto. Ins. Co. v. Webb, 54 Ohio St.3d 61, 562 N.E.2d 132, 135-36 (1990) (Insurer can assert tortfeasor's workers' compensation immunity); Aetna Cas. & Sur. Co. v. Dodson, 235 Va. 346, 367 S.E.2d 505, 508 (1988) (phrase legally entitled to recover interposes as a condition precedent to UM insurer's obligation the requirement that insured have a legally enforceable right to recover damages from uninsured motorist); Romanick v. Aetna Cas. & Sur. Co., 59 Wash.App. 53, 795 P.2d 728, 730 (1990) (same as Mayfield v. Cas. Reciprocal Exch . ). The other two cases in the plurality's string cite that involved immune tortfeasors, Allstate Insurance Co. v. Elkins, 63 Ill.App.3d 62, 21 Ill.Dec. 66, 381 N.E.2d 1 (1978), and Patrons Mutual Insurance Ass'n v. Norwood, 231 Kan. 709, 647 P.2d 1335 (1982), both involved interspousal immunity (abrogated in Kentucky in Brown v. Gosser, Ky., 262 S.W.2d 480 (1953)). The Illinois intermediate appellate court held in Elkins, supra , that the tortfeasor's interspousal immunity did not bar the UM claim, id. at 3; the Kansas Supreme Court held in Norwood, supra , that it did. Id. at 1340. [11] Pointing out that the purpose of the uninsured motorist statute is to afford the same protection to a person injured by an uninsured motorist as he or she would have enjoyed if the offending motorist had carried liability insurance, id., Norwood also held that the insurer would have available to it, in addition to policy defenses compatible with the statute, the substantive defenses that would have been available to the uninsured motorist such as contributory negligence, etc. Id. at 1338 (quoting Winner v. Ratzlaff, 211 Kan. 59, 505 P.2d 606, 610 (1973)); see also State Farm Mut. Auto Ins. Co. v. Webb, supra, at 135 (It is a universal legal maxim that an insurance company must be able to assert the same defenses as the party for whose injurious action it is requested to provide compensation.); Winner, supra , so held despite using language similar to that in today's plurality opinion, i.e., `legally entitled to recover as damages' [means] simply that the insured must be able to establish fault on the part of the uninsured motorist which gives rise to the damages and to prove the extent of those damages. Id. at 610. Of course, Winner , unlike the case sub judice, did not involve an immune tortfeasor, so the only issue affecting liability in that case was fault. Like Winner , no other case in the plurality's string cite involved an immune tortfeasor. In fact, Sahloff v. Western Casualty & Surety Co., 45 Wis.2d 60, 171 N.W.2d 914 (1969), in which the only issue was the applicable period of limitations, held that legally entitled to recover means that the insured must have a cause of action against the tortfeasor. Id. at 918. Obviously, an insured does not have a cause of action against an immune tortfeasor. Nor does Philadelphia Indemnity Insurance Co. v. Morris, Ky., 990 S.W.2d 621 (1999) (cited ante, at 40-41), provide any support for the plurality's conclusion in this case. In Morris , the tortfeasor was not immune from liability. The only issue was whether the claimant could recover both his employer's workers' compensation coverage and his employer's underinsured motorist coverage. Morris held that he could. Id. at 627. This is not, however, a case of first impression with respect to either facts or law. In Coleman v. American Manufacturers Mutual Insurance Co., 930 F.Supp. 252 (N.D.Miss.1995) (applying Mississippi law), where the claimant, as here, was injured in a collision with a municipal fire truck, it was held that a UM carrier has available to it all of the defenses that would be available to the tortfeasor, including sovereign immunity. Id. at 254. And in York v. State Farm Fire & Casualty Co., 64 Ohio St.2d 199, 414 N.E.2d 423 (1980), the Ohio Supreme Court held that the legally entitled to recover requirement precluded payment under the UM coverage to an insured who was injured in a collision with a municipal fire truck whose owner and driver both enjoyed statutory immunity. Id. at 425. The intent and thrust of [the UM statute] is not to provide coverage in all situations that might otherwise go uncompensated; rather, the uninsured motorist provision applies only when there is a lack of liability insurance. The insurance policy, and more importantly the statute, are not implemented when there is a lack of liability due to immunity. ... It is obvious from a reading of the statute that the insured must be an entity capable of collecting from an uninsured. The city, in the instant cause, is cloaked with immunity, and, therefore, the appellees are not legally entitled to recover damages from the city. It is the legal defense, and not the status of insurance, that warrants our decision herein. The uninsured motorist coverage is to apply only in those situations in which the lack of liability insurance is the reason the claim goes uncompensated, and not when the claim goes uncompensated because of the lack of liability due to the substantive laws of Ohio. Id. In Vega v. Farmers Insurance Co., 323 Or. 291, 918 P.2d 95 (1996), the Oregon Supreme Court interpreted the phrase legally entitled to recover to require the UM/UIM claimant to demonstrate not only fault on the part of the tortfeasor and consequent damages but also that the claimant had a viable tort claim against the tortfeasor and could have obtained a favorable judgment against that party. Id. at 103-04. Following the holding in Vega , the Oregon Court of Appeals held in Surface v. American Spirit Insurance Cos., 154 Or.App. 696, 962 P.2d 717 (1998), that where a tortfeasor was cloaked with sovereign immunity and the claimant had been paid the maximum limits under Oregon's Tort Claims Act, Ore.Rev.Stat. § 30.260, et seq., the tortfeasor was not an underinsured motorist. Id. at 719-20. See also Hanover Ins. Co. v. Gaudette, 408 Mass. 591, 562 N.E.2d 815, 817 (1990) (UIM coverage not payable where tortfeasor was cloaked with sovereign immunity and claimant had been paid the limit of liability allowed by state's partial-waiver statute); Cont'l W. Ins. Co. v. Conn, 262 Neb. 147, 629 N.W.2d 494, 502 (2001) (same); Francis v. Int'l Serv. Ins., 546 S.W.2d 57, 61 (Tex.1976) (The purpose of the Act is to protect insureds against negligent, financially irresponsible motorists. It was not designed as a system for giving relief to people who cannot recover from a tortfeasor because of sovereign immunity.); Sayan v. United Serv. Auto. Ass'n, 43 Wash.App. 148, 716 P.2d 895, 900 (1986) (legally entitled to recover requirement precluded payment of UM coverage where tortfeasor enjoyed absolute immunity under federal law because both he and the claimant were engaged in the performance of official military duties at the time of the accident). As the plurality opinion correctly notes, ante, at 40, the present author of Professor Widiss's treatise, Uninsured and Underinsured Motorist Coverage, does not agree with these cases. However, equally respected legal scholars do not agree with Widiss. [If] a cause of action is not created as a result of the tortfeasor's negligent conduct, the insured is not considered to be legally entitled within the contemplation of the policy, but if a cause of action is created, the Insured is considered legally entitled although a personal defense or procedural restriction bars its enforcement. 2 Irvin Schermer, Automobile Liability Insurance § 24.02, at 24-2 (rev.2d ed.1985) Fundamentally, ... modern uninsured motorist coverage provides a motorist who carries a standard automobile liability policy and who suffers personal injuries by reason of the negligence of an uninsured motorist, rights against his own insurance company co-extensive with those he would have had against the uninsured tortfeasor. Paul Pretzel, Uninsured Motorists § 1, at 5 (1972). Ordinarily, for the uninsured motorist clause to operate in the first place, the uninsured third person must be legally subject to liability. Thus, if the third person is specifically made immune to tort suit by the compensation act's exclusive remedy clause, the uninsured motorist provision does not come into play. In the familiar example of coemployee immunity, the issue thus becomes whether the accident was in the course of employment; if it was, the uninsured motorist carrier has no liability. 2A Arthur Larson, Workmen's Compensation Law § 71.23(j), at 14-37 (1983) (1987 Supp. at 14-44). If we go back to the statutory purpose examined earlier, it was to protect persons of the designated classes from economic loss resulting from injuries inflicted by financially irresponsible motorists. Unless we consider that the governments in question have indulged in fiscal policies so irresponsible as to be unable to satisfy claims made against them, they would not seem to be the type of entities contemplated by the law. While it may require a slightly different procedure to enforce such claims, since doctrines of governmental immunity have largely been abandoned, the victim is much better off than if confronted by a motorist carrying the bare minimum of coverage necessary to qualify under various financial responsibility laws. 8C John A. Appleman, Insurance Law and Practice § 5080.65, at 276 (1981). The logic of these conclusions is inescapable. The purpose of the legally entitled to recover requirement embodied in both the UM and UIM (per Coots ) statutes is to place the policyholder in the same position as if he or she had been injured by a fully insured tortfeasor against whom a judgment could be obtained. In Kentucky, an injured claimant cannot recover a judgment against a tortfeasor cloaked with sovereign immunity absent an explicit waiver of that immunity by the General Assembly even if the immune tortfeasor is fully insured. Withers v. Univ. of Ky., Ky., 939 S.W.2d 340, 346 (1997); cf. Reyes v. Hardin County, Ky., 55 S.W.3d 337, 342 (2001) (partial waiver found where General Assembly authorized both liability insurance for county hospitals and civil actions against counties to measure the extent of liability up to the limit of the policy). Absent a waiver, the injured party has no cause of action whatsoever against an immune tortfeasor. Under a partial waiver, the cause of action exists only to the limit of the waiver. Reyes, supra, at 342. The law of Missouri is the same. Mo.Rev.Stat. § 537.610.1, 2. Either way, a totally immune tortfeasor is not an uninsured motorist but an immune motorist, and a partially immune tortfeasor is not an underinsured motorist (assuming he or she is insured to the full limit of the partial waiver) but an immune motorist to the extent the claim exceeds the limit of the partial waiver. These cases do not leave an injured party without a remedy. Missouri's partial waiver of immunity is conceptually the same as our Board of Claims Act, KRS 44.070(5), which presently waives immunity up to a limit of $200,000 per person and $350,000 per accident. However, having been paid the limit of the partial waiver, Hatfield is not legally entitled to recover anything else from the immune tortfeasor. Thus, he is also precluded from recovering under the UIM coverage of Nationwide's policy.