Court Opinion

ID: 9931590
Source: CourtListenerOpinion
Date Created: 2024-02-09 15:05:53.075614+00
Date Added: 2024-06-11T12:24:26.196481
License: Public Domain

RENDERED: FEBRUARY 2, 2024; 10:00 A.M.
                   NOT TO BE PUBLISHED

            Commonwealth of Kentucky
                   Court of Appeals
                     NO. 2023-CA-0280-MR

MARY FANT; HERMAN NORWOOD;
AND MILTON FANT                                      APPELLANTS

           APPEAL FROM JEFFERSON CIRCUIT COURT
v.         HONORABLE MELISSA L. BELLOWS, JUDGE
                   ACTION NO. 21-CI-006661

BEAMTEAM, INC.; BEARNO’S, INC.;
FRANK D. GRIDER; KENTUCKY
FARM BUREAU MUTUAL
INSURANCE COMPANY; LIBERTY
MUTUAL INSURANCE COMPANY;
OHIO SECURITY INSURANCE
COMPANY; THE OHIO CASUALTY
INSURANCE COMPANY; AND THE
UNDERWRITERS GROUP, INC.                              APPELLEES

AND

                     NO. 2023-CA-0294-MR

KENTUCKY FARM BUREAU
MUTUAL INSURANCE COMPANY                             APPELLANT

           APPEAL FROM JEFFERSON CIRCUIT COURT
v.         HONORABLE MELISSA L. BELLOWS, JUDGE
                   ACTION NO. 21-CI-006661
MARY FANT; BEAMTEAM, INC.;
BEARNO’S, INC.; FRANK D.
GRIDER; HERMAN NORWOOD;
LIBERTY MUTUAL INSURANCE
COMPANY; MILTON FANT; OHIO
SECURITY INSURANCE COMPANY;
THE OHIO CASUALITY
INSURANCE COMPANY; AND THE
UNDERWRITERS GROUP, INC.                                              APPELLEES

                                    OPINION
                                   AFFIRMING

                                  ** ** ** ** **

BEFORE: ACREE, CALDWELL, AND EASTON, JUDGES.

EASTON, JUDGE: While not consolidated, these appeals have been submitted to

the same panel of this Court. Both appeals will be addressed in this Opinion. In

both cases, the Appellants seek reversal of a summary judgment granted to the

Appellee, Bearno’s, Inc. (“Bearno’s”), on negligence claims in a personal injury

action arising from a motor vehicle accident. Concluding that the circuit court

correctly applied the law to undisputed facts, we affirm.

               FACTUAL AND PROCEDURAL BACKGROUND

             Bearno’s is a regional restaurant franchise in Kentucky and Indiana.

One of its franchisees is the Middletown, Kentucky location. The franchisee for

this location is Beamteam, Inc. (“Beamteam”). Frank Grider (“Grider”) was a

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delivery driver employed by Beamteam. Grider used his own car to deliver pizzas

and other food for Beamteam.

             On a rainy night in October of 2021, Grider was on the job driving on

Aiken Road in Louisville. He hydroplaned. His car struck the car driven by

Milton Fant with Mary Fant and Herman Norwood as passengers (collectively

“Fant”). The collision led to serious injuries which are the subject of this suit.

Fant sued Grider and his employer Beamteam as well as the franchisor Bearno’s.

Fant claimed Bearno’s should be vicariously liable for Grider’s negligence. Fant

also alleged direct negligence by Bearno’s.

             Insurance coverage became an issue. The Appellant, Kentucky Farm

Bureau Mutual Insurance Company (“Farm Bureau”), is the underinsured motorist

insurance carrier for Fant. Farm Bureau crossclaimed against Grider, Beamteam,

and Bearno’s to recover in the event Farm Bureau was called upon to pay to its

insured Fant.

             After substantial discovery by the parties, Bearno’s moved for

summary judgment on all claims against it, which the circuit court granted. This

partial summary judgment was made final and appealable. These appeals

followed. We will elaborate on further details of the case in our analysis.

                             STANDARD OF REVIEW

                     The proper standard of review on appeal when a
             trial judge has granted a motion for summary judgment is

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             whether the record, when examined in its entirety, shows
             there is no genuine issue as to any material fact and the
             moving party is entitled to a judgment as a matter of law.
             The trial judge must view the evidence in a light most
             favorable to the nonmoving party, resolving all doubts in
             its favor. Because summary judgment does not require
             findings of fact but only an examination of the record to
             determine whether material issues of fact exist, we
             generally review the grant of summary judgment without
             deference to either the trial court’s assessment of the
             record or its legal conclusions.

Phoenix American Adm’rs, LLC v. Lee, 670 S.W.3d 832, 838 (Ky. 2023) (citations

omitted).

                                     ANALYSIS

             To keep focus on the controlling issues, we start with recognition of

matters which have not been decided. Any liability of Grider for his hydroplaning

has not been determined. As a result, any vicarious or other liability of Beamteam

and Bearno’s has not been decided. For summary judgment purposes, we must

resolve any doubts in the Appellants’ favor and assume Fant will prove negligence

by Grider based on the information in this record. There is a jury question on

Grider’s negligence.

             Other matters are not pertinent to the question of negligence. Some

emphasis has been placed on a franchise provision calling for Beamteam to have a

certain amount of liability insurance. Beamteam may not have complied with this

provision, and this is the subject of other claims in this suit which are not ripe for

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decision. The potential absence of such coverage has nothing to do with liability

for negligence. Insurance coverage determines who will contractually pay

damages for such liability. Failure to have insurance is not a path to tort liability

itself. See Dale v. Commonwealth, 604 S.W.3d 281 (Ky. App. 2019).

                         THE FRANCHISE AGREEMENT

             The relationship among Bearno’s, Beamteam, and Grider is governed

by a written Franchise Agreement (“Agreement”). The Preamble of the

Agreement explains one of its purposes is to provide “a uniform method of

operating.” To achieve that purpose, Bearno’s has a Manual of Operations and a

Driver Safety Manual. After the Preamble, the Agreement goes on to address in

detail typical franchise issues such as use of Bearno’s name and requirements for

building a restaurant.

             As far as employees are concerned, Section 4.B. of the Agreement

makes it clear that Beamteam is the employer of all employees. Beamteam is

“exclusively responsible” for the terms of employment. Beamteam is also

responsible to “implement a training program” consistent with Bearno’s

requirements. Under Section 9.G., “[t]he restaurant shall at all time be under the

direct, day-to-day, full-time supervision of” Beamteam.

             Section 15.B. gives Bearno’s the right to terminate the franchise if

Beamteam violates its terms. Couched in terms of protecting Bearno’s brand,

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Section 9.E. includes the promise by Beamteam to follow the standards provided

by Bearno’s. This includes delivery of food outside the restaurant. Section

9.E.(3). Rather than terminate the franchise, Bearno’s apparently directed a

suspension of delivery services by Beamteam after the accident in question. It is

not clear if this was a temporary suspension (e.g., until insurance was obtained).

             Section 7. of the Agreement declares that Bearno’s and Beamteam are

independent contractors. This declaration is not controlling, but it does indicate

the intention of the parties. As to persons not party to the Agreement, another

provision leaves no doubt that “nothing in this Agreement is intended, nor shall be

deemed, to confer any rights or remedies upon any person or legal entity not a

party hereto.” Section 17.H.

                           THE NEGLIGENCE CLAIMS

             Fant and Farm Bureau both contend that Bearno’s should be

vicariously liable for Grider’s negligence due to the level of control Bearno’s had

over Beamteam and Grider. A separate claim of direct negligence is made. We

will address these claims in that order.

             Before we address these separate paths to liability, we take a moment

to explain that we are not required to agree with an expert witness expressing an

opinion about franchisor liability. We apply a legal standard provided by our

Kentucky Supreme Court. We are also not inclined to take a single statement in a

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deposition as creating a question of material fact. In response to leading questions,

Jeffrey Beam of Beamteam said the Driver Safety Manual sets out “a lot of control

[over] the day-to-day operations of your drivers[.]” Beam Depo. at 171-173.

Neither Mr. Beam nor the expert can determine the legal question of how the

proper standard is applied to all the circumstances of record in this case.

             Vicarious liability for Bearno’s would be under the legal umbrella of

respondeat superior (Latin for “let the master answer”). This is an aspect of

agency law. The Appellants suggest whether agency exists is a question of fact in

this case. This argument depends on the rule of agency law applicable to

franchisors in Kentucky. We agree with the circuit court that there is no genuine

issue of material fact when this standard is applied. See Nazar v. Branham, 291

S.W.3d 599 (Ky. 2009) (question of agency is a matter of law when the relevant

circumstances are not factually disputed). The actual terms of the Agreement and

what the parties did or did not do about delivery drivers pursuant to the Agreement

are not disputed.

             As to Beamteam’s liability, there is no question that Grider was its

employee and was acting within the course and scope of his employment when the

accident happened. Thus, Beamteam answers for Grider’s negligence. A

franchisor’s control of a franchisee’s employee is much more attenuated. With the

expansion of the franchise business model, courts were called upon to adjust the

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vicarious liability principle for a franchisor who is not the employer but may have

some level of control over employee behavior. The Kentucky Supreme Court

established the test for this vicarious liability in Papa John’s Intern., Inc. v.

McCoy, 244 S.W.3d 44 (Ky. 2008).

               “[W]e adopt a rule in which the franchisor is vicariously liable for

the tortious conduct of the franchisee when it, in fact, has control or right of control

over the daily operation of the specific aspect of the franchisee’s business that is

alleged to have caused the harm.” Id. at 47. Kentucky adopted this rule from the

leading case for this majority view in America: Kerl v. Dennis Rasmussen, Inc.,

682 N.W.2d 328 (Wis. 2004).

             Both Papa John’s and Kerl involved allegations of intentional torts

rather than negligence, but the general rule applies. We find particularly

significant that both courts in Papa John’s and Kerl cited a case with similar facts

to the present case, specifically a case involving pizza delivery by a franchisee.

Pizza K, Inc. v. Santagata, 547 S.E.2d 405 (Ga. App. 2001).

             Georgia law recognized that a franchisor could be liable if it assumed

an obligation to pay the franchisee’s debt (not a factor in this case). Otherwise, the

franchisor could be liable only if it acted as “a mere agent or alter ego” of the

franchisee. Id. at 406. The franchise agreement in Pizza K had “specific and even

strict requirements.” Id. But such requirements did not equate with an “agreement

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to exercise supervisory control over the daily activities” of the franchisee’s

employees. Id. at 407.

              The Appellants can credibly argue that Bearno’s had control or a right

to control to some degree and that this control even extended to the area of the

cause of harm (delivery). But we are not allowed to overlook the rest of the rule in

context. The level of control must be so great as to amount to a right to control not

with general rules but by oversight of daily activities. As stated in Pizza K, the

level of control must equate with the franchisee being nothing more than an alter

ego of the franchisor.

              The majority rule on the agency question presented here is restrictive

and favors the franchisor. Even in those states which have not adopted the same

rule, we find support for the proposition that a franchisor is not vicariously liable

for the negligence of its franchisee’s delivery employees. We will examine two

such cases.

              Maine’s highest court discussed vicarious liability of the Domino’s

pizza franchisor in Rainey v. Langen, 998 A.2d 342 (Me. 2010). The court called

the Kentucky rule the “instrumentality” rule. Id. at 348. The court chose not to

embrace this standard but instead relied upon the traditional “right to control” test.

Id. at 349. Even under this test, the court noted the need to show control over day-

to-day operations. The court noted the “numerous” requirements and standards in

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the franchise agreement but determined that “these controls fall short” of control

over day-to-day operations. Id. at 350.

             Another case applying the traditional rule is Viado v. Domino’s Pizza,

LLC, 217 P.3d 199 (Or. App. 2009). In this case, the court recognized that

Domino’s set forth standards and even directives for delivery drivers (follow rules

of the road, do not use cell phones while driving, wear seatbelts). “Setting those

standards for a franchisee’s employees and having the right to actually control how

the franchisee’s employees perform the physical details of driving are two different

things.” Id. at 211.

             Thus, we see that the controlling part of the rule announced in Papa

John’s is not right to control generally. Rather, the type of control must be over

the aspect of the business which caused the injury (here delivery drivers), and the

level of control must be supervision of daily activities. Being able to generally

control delivery by terminating the franchise or even a discontinuance of delivery

service is not the type of daily involvement contemplated by the instrumentality

test of Papa John’s. As the rule is applied in Pizza K, Bearno’s does not come

close to being a mere alter ego for Beamteam.

             We have reviewed cases cited by the Appellants which have found

vicarious liability for the franchisor. For example, the Appellants cite cases from

Florida. These cases are distinguishable in that the courts used traditional agency

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principles to the different circumstances of the cases presented to find the potential

for vicarious liability. The Florida courts did not apply Kentucky’s rule in those

cases. Parker v. Domino’s Pizza, Inc., 629 So. 2d 1026 (Fla. Dist. App. 1993).

See also Font v. Stanley Steemer Intern., Inc., 849 So. 2d 1214 (Fla. Dist. App.

2003).

             Under the terms of the Agreement between Beamteam and Bearno’s

and in the actual circumstances of what was and was not done by the parties in this

case, there can be no vicarious liability under Papa John’s. There is some level of

control in the Agreement and the manuals provided with it. The control is even

over the area of the cause of the harm, the delivery service provided by Beamteam.

But these circumstances do not equate with daily supervision by Bearno’s to such

an extent that Beamteam, Grider’s direct employer, was just an alter ego of

Bearno’s. Put succinctly, Bearno’s could only react to the actions of the franchisee

to protect the franchisor’s brand. Bearno’s did not actually have the right to come

in and run the place on a daily basis.

             The Appellants also claim direct negligence by Bearno’s. Essentially,

they argue Bearno’s assumed a duty toward Fant. Bearno’s had some level of

control, even if not enough for vicarious liability, and the failure to exercise that

control led to the accident in which Fant was injured.

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             Negligence law generally comes from an acknowledgment that “every

person owes a duty to every other person to exercise ordinary care in his activities

to prevent foreseeable injury.” Grayson Fraternal Order of Eagles, Aerie No.

3738, Inc. v. Claywell, 736 S.W.2d 328, 332 (Ky. 1987). But this does not mean

that every connection which can be made between actions or inactions and injury

can support a negligence claim. See Morgan v. Scott, 291 S.W.3d 622 (Ky. 2009)

(car dealership was not liable when driver of loaner car caused an accident even

though policy of having a dealership employee with the driver was violated;

dealership was not required to assess the suitability of the driver beyond making

sure he or she was not impaired).

             A contract may intend for third-party beneficiaries of its terms. In

such cases, duties may be assumed in favor of the third parties. In this case, the

intention was clearly to the contrary in the governing Agreement. The duties

between Beamteam and Bearno’s in how deliveries were to be accomplished do

not extend to Fant. These were contractual matters between them and do not give

rise to negligence claims by Fant or others. See Presnell Const. Managers, Inc. v.

EH Const., LLC, 134 S.W.3d 575 (Ky. 2004).

             We understand the cases cited by the Appellants finding direct

negligence based upon breach of an assumed duty. See, e.g., Bruntjen v. Bethalto

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Pizza, LLC, 18 N.E.3d 215 (Ill. App. 2014). Again, such cases are distinguishable

and do not apply Kentucky law on the issues presented.

             We also should not forget the component of a negligence claim of

proximate cause as opposed to mere cause in fact. See Lewis v. B & R

Corporation, 56 S.W.3d 432 (Ky. App. 2001). The Appellants insist that Bearno’s

should be liable because they could have prevented the accident from happening.

If it had followed up on contractual obligations between it and Beamteam, it would

have learned Beamteam was not having their drivers read the manual. Bearno’s

would have learned that Beamteam didn’t have the required insurance. Bearno’s

could have stopped Beamteam’s deliveries before this accident.

             Such a series of events may have in fact prevented Grider’s driving on

the night in question. We are dealing here though with proximate cause of

negligence in the operation of a vehicle on a specific occasion. This is the nature

of the negligence claim of breach of duty by Grider that proximately caused Fant’s

injuries.

             The record in this case raises more than doubt about how any failure

by Bearno’s could have been the proximate cause of the injuries claimed. The

Appellants point out that the Driver Safety Manual had provisions about

hydroplaning. They then simply assume Grider’s reading this manual might have

prevented the accident.

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             Grider was 51 years old at the time of the accident. He had been a

delivery driver for 25 years. As an experienced driver, he knew about the dangers

of hydroplaning. Grider stated in his deposition that there was nothing in the

manual about hydroplaning that he did not already understand.

             For any negligence eventually proven against Grider, Beamteam will

answer under respondeat superior. For the reasons we have indicated, there is

neither vicarious nor direct liability for negligence for Bearno’s due to Grider’s

negligence. As a result, all claims asserted by the Appellants against Bearno’s

were properly dismissed. This includes the derivative claims for loss of

consortium and the prospective insurance related claims of Farm Bureau to the

extent such claims are based upon any liability of Bearno’s. The Jefferson Circuit

Court properly granted summary judgment to Bearno’s and is AFFIRMED.

             ALL CONCUR.

                                         -14-
BRIEFS FOR APPELLANTS AND        BRIEFS FOR APPELLEE
APPELLEES MARY FANT, MILTON      BEARNO’S, INC.:
FANT, AND HERMAN NORWOOD:
                                 David J. Kellerman
Ronald E. Johnson, Jr.           Mark S. Fenzel
Louisville, Kentucky             McBrayer PLLC
                                 Louisville, Kentucky
BRIEF FOR APPELLANT
KENTUCKY FARM BUREAU
MUTUAL INSURANCE COMPANY:        BRIEF FOR APPELLEE
                                 FRANK D. GRIDER:
William B. Orberson
Ryan D. Nafziger                 John R. Martin, Jr.
Louisville, Kentucky             Hunter Rommelman
                                 Louisville, Kentucky

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