Court Opinion

ID: 5285042
Source: CourtListenerOpinion
Date Created: 2022-01-07 06:07:40.886467+00
Date Added: 2024-06-11T08:28:35.145951
License: Public Domain

KELLER, J.
DISSENTING:
I respectfully dissent. In my view, under KRS 304.39-320 State Farm’s limitation provision is unenforceable and under general contract law it is unreasonable.31
KRS 304.39-320 provides that:
(2) Every insurer shall make available upon request to its insureds underin-sured motorist coverage, whereby subject to the terms and conditions of such coverage not inconsistent with this section the insurance company agrees to pay its own insured for such uncompensated damages as he may recover on account of injury due to a motor vehicle accident because the judgment recovered against the owner of the other vehicle exceeds the liability policy limits thereon, to the extent of the underinsurance policy limits on the vehicle of the party recovering,
(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....
(Emphasis added.) Thus, a UIM claim does not even exist until the injured person resolves his claim with the tortfeasor for less than the full value of the tort claim. State Farm’s limitation provision, which begins to run with the date of injury rather than the date of settlement, required Riggs to file suit before a UIM claim even existed.
The majority argues that this interpretation of the statute “lands wide of the mark” because a judgment is not a prerequisite to bringing a UIM claim. Furthermore, the majority notes that “[ojur case law ... is replete with examples” of insureds proceeding against the tortfeasor and UIM carrier simultaneously. I do not disagree with the majority’s reasoning but I do disagree with its conclusion. The issue is not when an insured may file suit, but when he must file suit. As noted above, KRS 304.39-320(2) provides that an insurer must offer “to its insureds underin-sured motorist coverage ... that is not inconsistent with” KRS 304.39-320. KRS 304.39.320(3) provides that a claim is not *735created until the insured settles his claim with the tortfeasor. I do not believe State Farm can make available a policy that requires its insured to file suit before a claim exists in direct derogation of the statute.
Furthermore, under general contract law, State Farm’s limitation provision is unreasonable. As the majority notes, “an insured’s action against the UIM carrier is appropriately labeled a breach-of-contract action.” “Under Kentucky law, in order to recover in any action based on breach of a contract, a plaintiff must show the existence and the breach of a contractually imposed duty.” Leming v. Commercial Union Ins. Co., 260 F.3d 574, 581 (6th Cir.2001) citing Strong v. Louisville & Nashville R. Co., 240 Ky. 781, 43 S.W.2d 11, 13 (1931).
The UIM policy, consistent with KRS 304.39-320(2), provides that State Farm is obligated to pay “the difference between the amount of the insured’s compensatory damages for bodily injury, and the total of the limits of all bodily injury liability policies or bonds of any person or organization who is or may be held liable for the bodily injuryU” (Emphasis in original.) State Farm does not become obligated to pay any amount until it and its insured can agree that the insured is entitled to collect compensatory damages from the tortfeasor and the amount of compensatory damages the insured “is legally entitled to collect.” If the parties cannot agree, then the policy requires the insured to file'suit to collect any benefits that may be due. Thus, before State Farm is obligated to perform under the contract the insured must, at a minimum, establish liability on the part of the tortfeasor and that the amount of damages exceeds the limits of the tortfeasor’s insurance.
State Farm’s limitation may (and I believe quite often will) force its insureds to sue before State Farm has any contractual duty to pay. In other words, the insureds will be put in a position of suing State Farm before State Farm has breached the contract and before the insureds have sufficient proof to establish that their claims exist. A period of limitation that expires before a breach of contract has occurred and before a claim exists is, I believe, per se unreasonable. I know of no other situation where the law in this Commonwealth forces a plaintiff to bring and a defendant to defend a cause of action before it exists.32
In this case, that is exactly what occurred. Riggs brought’ suit against the tortfeasor, who contested liability and the amount of damages up to the point that he settled Riggs’s claim.33 While Riggs may have been able to establish that he had some entitlement to compensatory damages from the tortfeasor before settlement, he could not establish the amount of compensatory damages to which he was “legally entitled” until settlement. Therefore, if he had adhered to State Farm’s limitation language, Riggs would have been forced to file a claim before he could provide State Farm with sufficient information to force it either to comply with the contract or breach it. The majority states that this problem can be solved by simply asking the trial court to stay the UIM claim pending the receipt of additional proof or resolution of the claim against the tortfeasor. *736However, this falls short of providing protection to the insured because-staying the UIM claim is discretionary, not mandatory. If the majority truly wants to protect the insured, it should mandate that the trial court stay the UIM claim if asked to do so.
Taking the majority’s opinion to its logical, conclusion, a UIM insured should sue his carrier immediately after any motor vehicle accident in the event damages, which are not fully known, exceed the limits of the other party’s insurance, the extent of which is also not yet known. The insured could then, as the majority and State Farm point out, “request the trial court to stay the proceedings until the tort lawsuit is completed and the tortfeasor’s policy limit is known....” That certainly does not, as the majority posits, force insurance claims “to progress through the court system in a more cohesive way — a way that insurance claims have proceeded through our court system for decades.”34 Nor does it “reduce the need to resort to bargaining and litigation,” one of the purposes of the MVRA. KRS 304.39-010(5).
Unfortunately, because State Farm’s limitation is unenforceable and unreasonable, the fail-back fifteen-year general contract statute of limitations applies. I recognize and agree with State Farm’s argument that this is an unreasonably long period of limitation, which could result in prejudice to both the UIM carrier and the tortfeasor. Certainly, if an insured waits several years after settlement to bring a claim against; the UIM carrier proof can be lost and will undoubtedly be stale. However, as pointed out by Riggs, it is unlikely that the majority of insureds, who were likely severely injured, will delay filing a claim in order to gain some possible tactical advantage. Thus, the likelihood of this prejudice befalling UIM carriers is limited. Furthermore, State Farm and other insurers can avoid this result by simply beginning any limitation period with the date of settlement between the insured and the tortfeasor.- That limitation could be less.than a year from settlement, as long as it gives the insured a reasonable period of time to file a claim thereafter.
Finally, State Farm argues that providing a longer limitation period for UIM claims will result in serial litigation of motor vehicle accident claims. According to State Farm, insureds will first try the underlying tort claim, then try the UIM claim, resulting in multiple trials of the same case. Setting aside my belief that insureds are no more interested in trying cases twice than insurers are, I note that State Farm and other UIM carriers are free to intervene in any suit filed by their insureds. Furthermore, as State Farm and the majority note, UIM carriers are almost always currently joined as parties by their insureds without the need to intervene. ,
Venters and Wright, JJ., join.

. I note that the majority's opinion is out of step with the majority of jurisdictions that have weighed in on this issue. While I do not believe that this Court should slavishly adhere to what the majority of other jurisdictions do, I also do not believe that we should ignore what I believe to be good law. See American States Ins. Co. v. LaFlam, 69 A.3d 831, 839 (R.I. 2013) (“The overwhelming majority of jurisdictions that have considered this issue have concluded that the limitations period begins to run on a UIM claim upon the insurer’s breach of the insurance contract rather than the date of the accident.”); Jeffrey A. Kelso and Matthew R. Drevlow, When Does the Clock Start Ticking? A Primer on Statutory and Contractual Time Limitation Issues Involved in Uninsured and Underinsured Motorist Claims, 47 Drake L. Rev. 689, 694 (1999) ("The most commonly held rule in UM/UIM cases is that the cause of action, because it is contractual in nature, accrues on the date the contract is breached.’’).

. Certainly, as the majority notes, nothing prevents the parties from pursuing claims before they contractually exist. However, as I previously noted, permitting the parties to proceed is different from forcing them to do so.

. A copy of the- settlement agreement between Riggs and the tortfeasor is not in the record. Therefore, it is unclear if-the tortfea-sor ever admitted liability.

. As I previously noted, the issue is not what is possible but what is‘mandatory. Furthermore, simply because claims have proceeded in a particular manner through the court system in one way "for decades” does not mean that way is necessarily "a more cohesive way.”