Court Opinion

ID: 5285041
Source: CourtListenerOpinion
Date Created: 2022-01-07 06:07:40.881842+00
Date Added: 2024-06-11T08:28:35.143587
License: Public Domain

NOBLE, J.,
CONCURS:
Appellee Lonnie Dale Riggs was injured in an automobile accident while acting in the line of duty as a city police officer. His injuries were severe and permanent, and, being work related, were covered initially by Workers’ Compensation. He' received salary-continuation benefits, and thus was not eligible to receive basic reparation benefits from any motorvehicle insurance carrier. Consequently, the payment of reparations benefits' has no bearing on the limitations question at issue in this case.
Nearly two years after the accident occurred, Appellee filed a personal-injury action against the allegedly negligent driver. During discovery, Appellee learned that the limit of the defendant’s liability insurance policy was $100,000. He demanded the policy limit, which defendant’s carrier denied. Appellee then moved for a trial date and for léave to amend his complaint to bring in his UIM carrier, State Farm. The Court assigned a trial date, and al-lowéd the claim against State Farm. Around two months later, the tortfeasor’s carrier tendered policy limits. ■ '
. At that point, Appellee sent a Coots letter30 to State Farm, which waived sub-rogation. Appellee then accepted payment of the $100,000 policy limit from the tort-feasor’s carrier. State Farm had filed an answer when it was brought into the action denying that it owed any benefits to the Appellee, and subsequently engaged in written discovery with Appellee for approximately four months before bringing a summary judgment motion on December 2, 2011.
The basis for the summary judgment motion was the language in the limitation clause in the insurance policy between State Farm and Appellee stating that there was no right of action against State Farm for underinsured motor-vehicle coverage unless the action was commenced *732“no later than two (2) years after the injury .. or the last reparation payment made by any reparation obligor, whichever later occurs.” The policy language basically mirrors the language in KRS 304.39-230(6), which sets a time limitation for motor-vehicle torts. The trial court agreed with State Farm, but the Court of Appeals reversed, holding that parroting a tort limitation statute is unreasonable in a contract cause of action.
The Court of Appeals found this contractual provision to be unreasonable because it would require the premature filing of an underinsured-motorist (UIM) claim:
Until an injured party files suit against the alleged tortfeasor and engage^ in discovery to ascertain the limits of the tortfeasor’s liability insurance, the injured party cannot determine whether the tortfeasor is indeed an underinsured motorist. This is so.because the UIM carrier’s liability, and the amounts and limits of that liability, is predicated upon the prior determination of the shortfall between the insured’s claimed damages and the coverage of those damages available under the tortfeasor’s policy of insurance. Stated differently, the UIM carrier can only be held liable for those damages exceeding the limits of the tort-feasor’s insurance. Until' the' injured party discovers those limits, he or she cannot conclusively discern whethér the tortfeasor is underinsured. While, of course, a tortfeasor or his insurance carrier may freely notify the injured party of the tortfeasor’s liability policy limits, we know of no statute or procedural rule that compels a tortfeasor or his insurance company to do so absent a proper ■ discovery request.
(Citations omitted.)
This is certainly correct, as far as the statement goes. An underinsured-motorist carrier cannot be prematurely brought into an action against its will, and there is no statutory or procedural requirement that the carrier be given notice of a possible UIM claim. But that is not what this case is about.
Instead, this case involves the reasonableness of a contractual provision in an insurance policy accepted and paid for by the insured by which the carrier has, in essence, assented to being prematurely brought into the action, and has the right to be notified of the potential UIM claim. Here, the, agreement between State Farm and its insured in the policy provides that any underinsured-motorist claim action must commence no later than two (2) years after the injury. Nothing in the Court of Appeals decision demonstrates why it would be unreasonable to include such a provision in a policy.
It is true that an argument can'be made that it would be unreasonable to bring an underinsured-motorist claim against State Farm before the provisions of the policy are actually implemented by accepting payment of the tortfeasor’s policy limit (when the limit will not cover the existing damages). But we are not operating in a vacuum. Here, it is State Farm that is being brought into an action prematurely, and it is State Farm that has bargained for that very thing. The most that can be said from this scenario is that under this contract provision, a plaintiff must bring a claim against State Farm no later than two (2) years after the injury in order to. hold State Farm legally liable for the claim, whether State Farm has an obligation to páy at that time or not.' That, however, is to State Farm’s legal detriment, not the Appellee’s. State Farm is clearly an entity capable of understanding that it is net normally liable on a contract until there has been a breach, and that this provision waives that position.
*733It is obvious that State Farm sees value in being involved in a case in which it is at least potentially liable from the beginning of the action, even if that liability cannot fully be measured and established until later. Since State Farm, if it is held to have to pay under an uninsured-motorist policy, is actually adverse to the person who has paid the policy premiums, it is reasonable to see why State Farm is willing to waive any prematurity of the claim against it in order to .defend itself from any liability throughout discovery and motion practice on the tort liability and damages claim.
It is less obvious to see why this provision is also reasonable for the insured, because it is hard to overcome the natural dislike felt when an insured, who has paid premiums to the insurer, is treated as adverse by the insurer. But given their contractual relationship that is exactly the alignment when an underinsured carrier is asked to pay uninsured-motorist benefits to an insured. Insurance companies do not want to pay put benefits. Insureds want to be paid. The dispute can only be resolved by applying the terms of the agreement (the insurance policy) between the parties.
At argument, Appellee portrayed having to bring the underinsured-motorist claim no later than two years after the injury as placing an unreasonable burden on him, thus making this provision of the policy unreasonable. But as pointed out above, the party giving up a legal interest is State Farm. All the Appellant must do is simply bring the claim in a shorter time period than State Farm might be entitled to. This contractual provision is not primarily about the Appellant; it is a term State Farm bargained for. But the provision certainly does not fail for lack of consideration.
There is a reasonable benefit to an insured under this provision. The amount of insurance premiums paid by the insured is-based on the risk the insurer bears. By placing itself in the litigation from the beginning, State Farm can do cost management that decreases - the risk that comes from a longer exposure. Also, by not being involved early in the process, the risk to 'State Farm increases that it will be stuck with legal consequences caused by other parties to the litigation that are later unavoidable. Evidence can be lost, or memories fáde, making it harder for State Farm to defend against the claim and increasing the likelihood of a payout. This is an entirely mercenary read of this situation, but insurance companies are a business, not benevolent aid organizations.
And, the benefit to the insured from this reduced risk is reduced insurance'premiums, which are an ongoing expense, especially if he never has to make a claim.
Another benefit to the insured is that he is not required to bring successive litigation,. which’ he would have to do if a judgment were required before State Farm could be sued.' Under this provision, if State Farm is present early in the’ action, or at least within the agreed-upon time limit, as soon as policy limits are proffered an insured can proceed accordingly-against State Farm. Since this does not involve an out-of-court settlement for policy limits that could well leave the underinsured-motorist insurance carrier out of the loop, which is the usual Coots situation, State Farm would already be a party to the action, ready to proceed on- the remaining issues immediately, and thus avoid delaying resolution for the insured.
■ Perhaps most important to the reasonableness analysis, however, is 1¡hat it. is impossible to .show legal harm to the .insured in such a situation. Even if the claim against State Farm would not be *734“ripe,” State Farm has waived the right to raise this claim. Certainly, this waiver would prevent any Civil Rule 11 claim. Strategically, an insured might prefer not to have State Farm present within two years of the date of injury or last reparations benefit, whichever is later, but that does not equate to legal prejudice.
Consequently, I concur with Chief Justice Minton’s opinion.

. For the origin of such letters, see Coots v. Allstate Insurance Co., 853 S.W.2d 895 (Ky.1993):