Court Opinion

ID: 9722578
Source: CourtListenerOpinion
Date Created: 2023-08-26 09:39:52.601856+00
Date Added: 2024-06-11T18:24:37.335862
License: Public Domain

COOPER, Justice,
dissenting.
Today, the majority of this Court holds that it is reversible error to deny a plaintiff in a tort action arising out of a vehicular accident the right to inform the jury that the defendant is covered by a policy of liability insurance. Because that decision abrogates generations of common law decisions to the contrary in this and every other jurisdiction in the United States save one (Florida), I dissent.
I. FACTS.
On February 17, 1998, Bonita Earle was injured when her automobile collided with an automobile owned and operated by Alice S. Cobb. Cobb, a retired schoolteacher, was exiting a high school parking lot when she failed to yield the right-of-way to Earle’s vehicle. The trial court ruled that Cobb’s negligence was the sole cause of the collision, and that issue is not pursued on this appeal. Cobb was insured by a policy of insurance issued by the Hartford *263Insurance Company (“Hartford”) with liability coverage limits of $25,000 per person and $50,000 per accident. KRS 304.39-110(l)(a)(l). Earle was insured by a policy of insurance issued by Indiana Insurance Company (“Indiana”) with underinsured motorist (UIM) coverage limits of $200,000. KRS 304.39-320(2). Earle brought an action in tort against Cobb and in contract against Indiana Insurance. Indiana filed a cross-claim against Cobb for indemnity for any amounts it might be required to pay under its insurance contract with Earle because of Cobb’s negligence.
Cobb’s insurer, Hartford, offered to pay Earle its $25,000 liability limit to settle her claim against Cobb. Pursuant to Coots v. Allstate Ins. Co., Ky., 853 S.W.2d 895, 902-03 (1993),1 Indiana substituted $25,000 of its own money for Hartford’s settlement offer. Earle accepted Hartford’s settlement offer and Indiana’s $25,000, thus precluding any additional recovery by Earle against Cobb. True v. Raines, Ky., 99 S.W.3d 439, 448 (2003). However, Indiana’s substitution of its money for Hartford’s preserved its subrogation claim against Cobb. Id.; Coots, 853 S.W.2d at 902. After the settlement, Earle had a contractual right to collect any judgment in excess of $25,000 from Indiana, Indiana had a right of indemnity against Cobb for any such sums it was required to pay Earle, and Cobb thus remained personally hable for any amounts payable to Earle in excess of $25,000. Assuming Cobb was solvent and able to pay any excess judgment (and no one in this case suggests otherwise), Indiana’s role in the case was merely that of a conduit — Indiana would pay Earle any part of a judgment against Cobb that exceeded $25,000 and would be reimbursed by Cobb for any such payment made. In that scenario, Cobb was the real party in interest with respect to any judgment in tort rendered in favor of Earle in excess of $25,000.
Prior to trial, Cobb (not Indiana) filed a motion in limine to bifurcate the issue of her tort liability from the issue of Indiana’s contractual liability to Earle. The logic of her motion is inescapable; for if the jury knew that Indiana was an undeñnsured motorist carrier, they would ipso facto know that Cobb was insured by a policy of liability insurance — though undeñnsured in Earle’s view. The trial court sustained Cobb’s motion to bifurcate and ruled that Earle’s contractual claim against Indiana “shall be handled post verdict.” The trial court’s order also prohibited Indiana from participating in the trial or in any depositions that might be used at trial. In compliance with this order, Indiana’s attorney did not participate in the trial in any respect and did not ask any questions of the medical witnesses during their pretrial depositions.
During the course of deliberating their verdict, the jury sent Judge Jernigan a note inquiring, “Is insurance involved or is it coming from Ms. Cobb?” (Emphasis added.) The judge appropriately replied that he could not answer the question. The jury returned a verdict awarding Earle $500 for pain and suffering, $500 for medical bills, and $500 for lost wages, for a total of $1,500. The trial court entered judgment against Cobb in accordance with the verdict, and Earle has not asked for a new trial on grounds that the verdict was inadequate. Since Earle had already settled with Cobb for $25,000, and since the verdict did not exceed the amount of Hartford’s liability policy limits, the verdict and *264judgment exonerated Indiana and relieved Cobb from any potential indemnity liability.
II. PREJUDICE.
The majority of this Court now reverses and remands this case for a new trial, holding that it was reversible error to preclude Earle from informing the jury that she had sued both Cobb and her own underinsurance carrier, thereby also informing the jury (1) that Cobb was covered by a policy of liability insurance, and (2) that any verdict rendered against Cobb would be paid by either or both insurance companies. Ante, at 261. Of course, Indiana can inform the jury that Cobb must reimburse Indiana for any money that Indiana is required to pay Earle. That, however, will not eliminate the prejudice to Cobb stemming from the jury’s knowledge that she is covered by a policy of liability insurance. And, of course, since the majority’s holding will apply to every case in which a plaintiff sues both the tortfeasor and the plaintiffs UIM carrier — whether or not a Coots settlement has occurred — the effect of today’s holding is that every juror in every vehicular tort action where the defendant is insured and the plaintiff has a policy providing UIM coverage will be informed that the defendant is covered by a policy of liability insurance. After all, what sane plaintiff would not join his or her UIM carrier, regardless of the limits of the defendant’s liability coverage, in order to prejudice the jurors by informing them that the defendant is covered by a policy of liability insurance?
Every jurisdiction in the United States, including ours, recognizes the inherent and pervasive prejudice that results from informing a jury in a tort action that any verdict rendered against the defendant will be paid by an insurance company. See generally J.B. Glen, Annotation, Admissibility of Evidence, and Propriety and Effect of Questions, Statements, Comments, Etc., Tending to Show that Defendant in Personal Injury or Death Action Carries Liability Insurance, 4 A.L.R.2d 761 (1949 and Supp.2004) (citing literally thousands of cases). Of all of those cases, however, none has better or more colorfully explained the prejudicial effect of exposing jurors to such information than did our predecessor court in Star Furniture Co. v. Holland, 273 Ky. 617, 117 S.W.2d 603 (1938):
It would be difficult — even beyond the power of overcoming — to conclude that such reference to the question of insurance did not have the desired effect to give the case an “insurance” coating, and to sprinkle it with an “insurance” perfume — all of which we have said in numerous cases was calculated to influence the jury in arriving at its verdict, both upon the issue of culpable negligence, as well as the amount of remuneration.
... [W]e, as well as all courts, have held that the average juror is either unconsciously or otherwise influenced by the fact that the alleged negligent actor carries insurance. Such average juror, it has been found, is frequently led astray and returns an unauthorized verdict because he concludes that the defendant against whom it is rendered will not be required to pay it out of his individual funds because of indemnity insurance carried by him. Knowing that fact counsel representing injured plaintiffs frequently seek to get before the jury the fact of such indemnity insurance being carried by the defendant in such tort actions, and we, as well as other courts, have never failed to condemn it.... The consequence of such information is well known, and is sufficient to require a new trial. It is useless for counsel to talk of the innocuous character of this *265evidence, when they at the same time, in order to get the information before the jury, are willing to imperil any verdict which might be rendered. All lawyers know the rule in regard to such evidence, and they must not expect the court to establish a rule, and then wink at its violation....
... The combined efforts to get before the jury the fact of indemnity insurance undoubtedly had the effect to create in the minds of the jury that defendants were indemnified by a contract of insurance so as to lead its members to conclude that the burden of any verdict rendered would not have to be borne by the local corporate defendant, or by the driver of its truck, but that it would be borne exclusively by the indemnifying corporation.... Therefore, the allegation in the petition, as well as the statement of counsel, was clearly intended to accomplish no other purpose than the one we have so often condemned, i.e., of wrongfully influencing the jury to return a verdict that, perhaps, it would not otherwise have done. The argument of counsel, supra, in avoidance of this error, we conclude, is insufficient for that purpose, since it did not remove the “insurance paint” nor the “perfumed insurance odor” referred to, supra, from the case.
Id. at 606-07. See also Turpin v. Scrivner, 297 Ky. 365, 178 S.W.2d 971, 974 (1944) (“[T]he effect of bringing to the knowledge of the jury the fact of defendant’s indemnity against such accidents permeates the case as thoroughly and completely as dissolved sugar in hot liquid, and cannot be more easily separated or eradicated.”). Even indirect references to the existence of liability insurance have been condemned. See e.g., Bybee v. Shanks, Ky., 253 S.W.2d 257, 260 (1952) (statement in closing argument that “I am satisfied [the named defendants] think [the plaintiff] ought to be paid,” implying that defendants were insured, thus would not have to pay the verdict); Randle v. Mitchell, 283 Ky. 501, 142 S.W.2d 124, 125 (1940) (statement in closing argument that, “It does not make a great deal of difference what the amount of your verdict is, because it won’t hurt the taxi company very much any way.”).
The jury’s inquiry in the case sub judice as to whether the judgment would be paid by insurance or by Cobb clearly indicates that the prejudice resulting from the interjection of insurance into a tort case has not diminished in the sixty-six years since Holland was decided. The jury’s inquiry obviously indicates that the verdict would have been different if the jurors had known that the judgment would be paid by insurance rather than by Cobb, and the inquiry reinforces the universally recognized truism that a jury’s knowledge that any verdict will be paid by insurance and not the tortfeasor will poison the verdict.
As exemplified by Holland, some personal injury lawyers will employ any device and risk any penalty to administer that poison. Consider White v. Piles, Ky. App., 589 S.W.2d 220 (1979), in which the plaintiff was injured in a collision between an uninsured vehicle and an insured vehicle in which she was a passenger. The plaintiff sued the uninsured motorist, the insured vehicle’s uninsured motorist (UM) insurance carrier, and the driver of the insured vehicle. At the conclusion of the evidence, the trial court directed a verdict in favor of the uninsured motorist on the issue of liability, dismissing the complaint against him and the UM carrier,2 and directed a verdict in favor of the plaintiff *266against the insured driver, requiring the jury to decide only the issue of damages. Id. at 221. In closing argument, the plaintiffs attorney remarked that the judge had simplified matters for the jury by throwing out the 11 only uninsured motorist in here.” Id. at 222. The jury’s verdict for $24,812 was set aside because of that remark and, upon a retrial at which insurance was not mentioned, the plaintiff received a verdict for only $10,000. Id. at 221. After today, of course, plaintiffs attorneys need not fear the consequences of poisoning the verdict by “sneaking in” evidence that the defendant is covered by a policy of liability insurance. Now, a UIM-covered plaintiff is absolutely entitled to inform the jury of that fact.
III. THE MISREPRESENTATION OF PRECEDENTS.
In holding that a UIM-covered plaintiff is entitled to a prejudiced jury and a poisoned verdict, the majority opinion has seriously misstated and/or misrepresented the holdings of our own precedents and those of other jurisdictions. That, of course, will not surprise anyone familiar with the anti-business, anti-insurance opinions of this Court over the past fifteen years. See, e.g., Nationwide Mut. Ins. Co. v. Hatfield, Ky., 122 S.W.3d 36, 44-61 (2008) (Cooper, J., dissenting).
In Wheeler v. Creekmore, Ky., 469 S.W.2d 559 (1971), our predecessor court did not, as the majority asserts, hold that a UM carrier must be identified to the jury “where a direct contractual relationship exists between a plaintiff and a defendant insurance company.” Ante, at 259. Wheeler only held that the UM carrier must be identified when the carrier’s counsel actively participates in the trial.
Otherwise the jury would be left to speculate as to the interest represented by an attorney participating in the trial who had no apparent connection ivith any of the parties. It is our opinion that the considerations which have prompted the rule against mention of ordinary liability insurance in an automobile negligence case must yield in uninsured-motorist cases to the procedural desirability of letting the jury know who are the parties to the litigation where the uninsured motorist carrier elects to participate actively in the trial.
Id. at 563 (emphasis added). Of course, as has been noted by other courts, infra, in an uninsured motorist case, the UM carrier generally will participate actively at trial because the uninsured motorist usually does not have the financial means to retain counsel or to mount a defense. The same is not true in an underinsured motorist case where the defendant will be represented by counsel provided by the defendant’s liability insurer.
And, contrary to the representation in the majority opinion that Coots v. Allstate Insurance Co. somehow supports today’s decision, ante at 261, Coots did not hold that the UIM insurer must be named as a party defendant at trial. Coots only held that the UIM insurer cannot defend the case in the tortfeasor’s name (as can the tortfeasor’s liability insurer).
The UIM carriers have raised as a collateral issue whether they should be able to defend before the jury in a suit against the UIM carrier in the name of the tortfeasor rather than in their own name, claiming that it is fundamentally unfair to take aim against them as a target defendant....
There is no more reason to create a legal fiction by substituting the name of the tortfeasor for the UIM carrier, when the carrier alone is the real party in interest in UIM cases, than there is reason to do so when dealing with UM *267coverage.... Underinsured and uninsured earners should be treated similarly, as their purpose and the intent of their coverage is similar.
Coots, 853 S.W.2d at 903 (emphasis added). Of course, the carrier is not the only real party in interest in this UIM case. Cobb is not a “fictitious presence,” ante at 261; she is the real party in interest because she -will have to pay any judgment rendered in favor of Earle.
Nor do any of the foreign cases cited in the majority opinion support the result reached in this case. In King v. State Farm Mutual Automobile Insurance Co., 157 Md.App. 287, 850 A.2d 428 (2004), the plaintiff brought a separate action against the UIM insurer after settling with the underinsured tortfeasor. Id. at 430. The UIM carrier waived its subrogation rights against the tortfeasor, id. at 430 n. 1, and the tortfeasor was never a party to the action against the UIM carrier; thus the “carrier alone [was] the real party in interest.” Coots, 853 S.W.2d at 903. The issue in King was whether the UIM carrier could defend the action anonymously, i.e., without being identified to the jury as an insurance company. Thus, the issue in King was factually identical to that in Wheeler v. Creekmore, and bore no factual resemblance to the case sub judice.
State ex rel. State Farm Mutual Automobile Insurance Co. v. Canady, 197 W.Va. 107, 475 S.E.2d 107 (1996), was not an action in which the insurer sought to conceal its identity from the jury. It was an original action in an appellate court in which the UM insurer petitioned for a writ to require the trial court to allow it to intervene in its insured’s tort action against an uninsured motorist so that the insurer could mount a defense in its own name and with its own counsel. Id. at 109, 475 S.E.2d 107. A West Virginia statute, W. Va.Code § 33-6-31(d), permits a UM or UIM carrier to defend an action brought against an uninsured or underin-sured tortfeasor in the name of the tortfea-sor, in its own name, or in the names of both. See Tilley v. Allstate Ins. Co., 40 F.Supp.2d 809, 812 (S.D.W.Va.1999) (interpreting West Virginia law and granting motion to join underinsured tortfeasor so that UIM carrier could defend in tortfea-sor’s name, even though plaintiff had settled with tortfeasor and UIM carrier had waived subrogation rights against tortfea-sor).
In defending against the petition for a writ, the plaintiff in Canady relied on State ex rel. Allstate Ins. Co. v. Karl, 190 W.Va. 176, 437 S.E.2d 749 (1993), which had suggested that the insurer could raise only policy defenses in its own name and must otherwise defend in the name of the alleged tortfeasor. Id. at 759. Canady, a UM case, distinguished Karl, a UIM case, as holding only that (1) a UIM carrier could not assume the defense of an under-insured tort defendant who was already represented by his or her own liability carrier, Karl, 437 S.E.2d at 758; and (2) a UIM carrier could not defend in its own name if the tort defendant was being defended by a liability carrier, presumably because of the prejudice flowing to the tort defendant from informing the jury that he was insured, id. at 759. Canady, 475 S.E.2d at 110-11. In Canady, the uninsured motorist was not represented by counsel, but the UM carrier wanted to distance itself from him. Id. at 111. Ca-nady held that the UM carrier could intervene, noting that one purpose of the statute was to prevent prejudice against insurance companies and that the UIM carrier had waived its right not to have insurance mentioned in the negligence case. Id. at 114. Since the tortfeasor was uninsured, identifying the UM carrier to the jury did not prejudice him.
*268Canady also noted that UM coverage, like liability coverage, is primary coverage while UIM coverage is only secondary coverage, analogous to excess liability insurance. Canady, 475 S.E.2d at 111 n. 4. That analogy comports with our own characterization of UIM coverage as conceptually permitting the insured, to purchase additional liability coverage for the vehicle of a prospective underinsured tortfeasor. LaFrange v. United Serv. Auto. Ass’n, 700 S.W.2d 411, 414 (1985). Canady further noted that in a UIM case, the tort defendant generally has counsel provided by the liability insurer, so there is no need for the UIM carrier to participate, whereas in a UM case, the tortfeasor often does not have private counsel, so the UM carrier has no choice but to actively participate to protect its interests. See Canady, 475 S.E.2d at 112 n. 8. All of these points contradict the majority opinion’s reasoning in the case sub judice.
Lima v. Chambers, 657 P.2d 279 (Utah 1982), was similar to Canady in that a UM carrier had unsuccessfully sought to intervene and defend in its own name a tort action brought by its insured against an uninsured motorist. The plaintiff did not Sue the UM carrier and had obtained an uncounselled affidavit from the defendant in which he admitted liability. The plaintiff had used this affidavit to obtain a summary judgment on the issue of liability. ‘ The UM carrier sought to intervene to defend against the issue of damages, arguing that the defendant was unrepresented and unlikely to provide an adequate defense to the issue. The plaintiff asserted that its relationship to the UM carrier was contractual, i.e., the UM carrier was obligated to pay any judgment obtained against the uninsured motorist, but had no right to participate in the plaintiffs tort action. Id. at 280. Relying on Utah’s equivalent of CR 24.01, Lima held that the UM carrier could intervene as a matter of right, overruling two prior cases holding otherwise. Id. at 284. Those prior cases had held that a UM carrier could not be a party to a tort action against an uninsured motorist because of the prejudice resulting from the interjection of insurance into the case. Kesler v. Tate, 28 Utah 2d 355, 502 P.2d 565, 566 (1972) (denying intervention); Christensen v. Peterson, 25 Utah 2d 411, 483 P.2d 447, 448 (1971) (denying joinder).
In Tucker v. McQuery, 107 Ohio Misc.2d 38, 736 N.E.2d 574 (Com.Pl.1999), the tort-feasor was no longer a party to the action, so the UIM carrier was the only party in interest. Id. at 575 n. 1.
In Lamz v. Geico General Insurance Co., 803 So.2d 593 (Fla.2001), the Court noted that “Geico [the UIM carrier] participated at trial as a party defendant, represented by its own attorney,” id. at 594, and held that the “jury should be made aware of the precise identity of an uninsured or underinsured insurance carrier if it is a party at trial.” Id. at 595 (emphasis added). Thus, Lamz, like King v. State Farm, was factually akin to Wheeler v. Creekmore, but bore no factual resemblance to the case sub judice.
Medina v. Peralta, 724 So.2d 1188 (Fla.1999), indeed held that the UM/UIM carrier must be joined as a party and identified specifically to the jury by its status as a UM or UIM carrier. Id. at 1190. However, that case turned on the fact that under Florida law, a UM/UIM carrier is a “necessary party” to the action. Id. (citing Government Employees Ins. Co. v. Krawzak, 675 So.2d 115, 118 n. 3 (Fla.1996), which held that a 1992 amendment of Fla. Stat. Ann. § 627.727(6) required that an action for UIM coverage be brought solely against the UIM insurer). Under Kentucky law, a UIM carrier is a real party in interest to an action against an underin-*269sured motorist but is not a “necessary party” to such an action. See CR 19.01. While an action must be prosecuted by a real party in interest, CR 17.01, no provision requires that an action be prosecuted against or defended by a real party in interest — especially where that interest is identical at trial to that of another real party in interest who is providing an adequate defense. I would note in passing that the Court in Medina v. Peralta did not address what, if any, prejudice might flow to the tort defendant from identifying the plaintiffs UIM insurer as such at trial.
To summarize, no case cited in the majority opinion supports the majority’s conclusion that a plaintiff has a right to inform the jury in a UIM case that the tort defendant is covered by a policy of liability insurance. All of our own precedents hold otherwise and, except for Medina v. Peral-ta, which turned on the language of a local statute, no case is found where a court has held that a UIM carrier that is potentially liable for an excess verdict must participate in the trial and must be identified to the jury.
IV. BIFURCATION NOT ONLY PERMITTED, BUT REQUIRED.
Generally, whether to bifurcate issues for purposes of trial is within the sound discretion of the trial court. CR 42.02 (“If the court determines that separate trials will be in furtherance of convenience or will avoid prejudice, or will be conducive to expedition and economy, it shall order a separate trial of any ... separate issue ... or issues.”) (Emphasis added.). That is especially true when the purpose of bifurcation or separation is to avoid the prejudice associated with the interjection of insurance. Gray v. Bailey, Ky., 299 S.W.2d 126 (1957). See also Fid. & Cas. Co. of N.Y. v. Mills, 319 F.2d 68 (1963) (interpreting Fed.R.Civ.P. 42(b)); Tilley, 40 F.Supp.2d at 815-16 (same). If that were the issue, I would conclude that Judge Jernigan did not abuse his discretion in bifurcating the negligence and damages issues from the insurance issue for purposes of trial.
However, in Wittmer v. Jones, Ky., 864 S.W.2d 885 (1993), we held that it was reversible error not to bifurcate a direct action against an insurance company from the underlying negligence claim:
While we see no impediment to joinder of the claims in a single action, at trial the underlying negligence claim should first be adjudicated. Only then should the direct action against the insurer be presented. Liability insurance should not be interjected needlessly into the trial of a negligence case. Here failure to bifurcate was prejudicial error but for the fact that no actual prejudice resulted. If we were going to reverse this case for a new trial, we would order bifurcation.
Id. at 891 (emphasis added).3 Wittmer was a direct action against an insurer claiming a violation of the Unfair Claims Settlement Practices Act. KRS 304.12-230. The case sub judice is a direct action against an insurer on a contractual obligation. The prejudice to the tort defendant is the same. Absent bifurcation, the jury will be informed that the tort defendant is insured by a policy of liability *270insurance. The prejudice flowing from that knowledge was exemplified when the jury inquired of the trial judge whether the verdict would be paid by insurance or by Ms. Cobb, obviously indicating that the amount of the verdict would depend upon who would be required to pay it.
Under Wittmer v. Jones, Judge Jernigan was required to bifurcate the contractual issue from the underlying negligence case. Under CR 42.02, he at least did not abuse his discretion in doing so. If Indiana had asserted its right to participate and defend against Earle’s claim in its own name, he would have been required to balance that right against the prejudice to Cobb from the jury’s knowledge that she was covered by a policy of liability insurance. Here, the only person asserting a right to prejudice the jury and poison the verdict is Earle. Remarkably, the majority of this Court has concluded that she has an absolute right to do so.
Accordingly, I dissent.
JOHNSTONE, J., joins this dissenting opinion.

. This accident occurred before the 1998 amendment of KRS 304.39-320(3), (4) and (5) that codified the Coots procedure.

. Coincidentally, the author of this opinion was the trial attorney for the UM carrier in White — one of the rare occasions when I was on the positive end of a directed verdict.

. In support of this holding, Justice Leibson cited his own dissenting opinion in Federal Kemper Insurance Co. v. Hornback, Ky., 711 S.W.2d 844, 847 (1986), incorporated by reference in Curry v. Fireman’s Fund Insurance Co., Ky., 784 S.W.2d 176, 178 (1989), in which he noted that "[t]he trial court elected to bifurcate the trial,” 711 S.W.2d at 847 and "[a] bifurcated procedure was the proper way to try the present case.” Id. at 849. Coincidentally, the author of this opinion was the trial judge in Federal Kemper.