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Auto-Owners Insurance Co. v. Spalding

Court of Appeals of Kentucky

January 18, 2019

AUTO-OWNERS INSURANCE COMPANY APPELLANT
v.
SHARON SPALDING APPELLEE

          APPEAL FROM MARION CIRCUIT COURT HONORABLE ALLAN RAY BERTRAM, JUDGE ACTION NOS. 12-CI-00312 & 13-CI-00096

          BRIEFS FOR APPELLANT STEVEN C. CALL CAMPBELLSVILLE, KENTUCKY

          BRIEF FOR APPELLEE SCOTT WHITE LEXINGTON, KENTUCKY

          BEFORE: COMBS, DIXON, AND TAYLOR, JUDGES.

          OPINION

          DIXON, JUDGE

         Appellant, Auto-Owners Insurance Company, appeals from an order of the Marion Circuit Court granting summary judgment in favor of Appellee, Sharon Spalding, in this Declaration of Rights action. For the reasons set forth herein, we reverse and remand for further proceedings.

         On April 19, 2011, a vehicle operated by Bashia Robinson struck a moped operated by Appellee. There is no dispute that Robinson was at fault in causing the accident. As a result, Appellee suffered a badly broken arm that required surgery, and she incurred substantial medical bills. According to the record, Appellee suffers from some degree of dementia and memory loss, which pre-existed the accident.

         Appellee subsequently retained attorney Dallas George to represent her in any claims arising from the accident. George investigated the matter and determined that Robinson had automobile insurance through Kentucky Farm Bureau with statutory limits of $25, 000/$50, 000. In addition, George learned that Appellee had motor vehicle insurance that had been purchased through Energy Insurance Agency of Lebanon ("Energy Insurance"), which is owned by Brenda Spalding.[1] Appellee's moped was insured under a policy issued by Progressive Insurance Company that did not provide Underinsured Motorist Coverage ("UIM"). George's paralegal, Gloria George, allegedly contacted Spalding to inquire as to whether Appellee had UIM coverage under any other policy. Gloria later testified that Spalding responded that Appellee did not have such coverage. Based upon that information, George secured a $25, 000 settlement with Kentucky Farm Bureau on the liability claim against Robinson. On September 6, 2011, Appellee signed a release in favor of Robinson in exchange for Kentucky Farm Bureau's policy limits.

         Sometime around the end of March 2012, over six months after the settlement agreement was signed, Appellee came to George's office to receive the settlement funds after resolution of several medical liens. Appellee was accompanied by her sister, Mary Lou Merrett, who expressed shock at the amount of the settlement and was adamant that there should have been additional coverage. Merrett thereafter went to Energy Insurance Agency and learned that Appellee had another policy issued by Appellant that provided UIM coverage limits of $100, 000/$300, 000.

         In April 2012, George submitted a claim for UIM coverage to Appellant. Shortly thereafter, Appellant's representative, Terry Harrison, sent a letter to George indicating that Appellant was investigating coverage and needed certain documentation concerning the moped. After receiving the required documentation, Harrison sent a second letter to George indicating that there would be coverage for a policyholder injured in a motor vehicle accident while occupying the moped because the operator of the moped would be considered a pedestrian. However, Appellant subsequently denied Appellee coverage on the grounds that upon reaching the settlement with Kentucky Farm Bureau, Appellee failed to give the required notice to Appellant as her UIM carrier. See Coots v. Allstate Insurance Company, 853 S.W.2d 895 (Ky. 1993).

         On October 2, 2012, Appellant filed the instant declaratory action against Appellee in the Marion Circuit Court seeking a ruling that it did not owe Appellee coverage pursuant to Coots and KRS 304.39-320(3). Thereafter, on April 2, 2013, Appellee filed a separate action against Energy Insurance Agency and Spalding, asserting claims of negligence, breach of contract and bad faith. The crux of Appellee's action was that she did not give the required Coots notice because Spalding, as Appellant's agent, provided misinformation to Gloria regarding the availability of any UIM coverage. Appellee claimed that such misinformation led her to settle her accident claim without further reviewing or inquiring about additional coverage. The two actions were later consolidated.

         At some point Energy Insurance Agency and Spalding moved to file a third-party complaint against George alleging that he had a professional obligation to request copies of the policies to make an independent coverage determination. Appellee chose not to pursue a legal malpractice claim against George and he was dismissed from the litigation. In the agreed order, the trial court did note that fault could be apportioned to George at trial.

         The parties thereafter filed cross-motions for summary judgment. On September 25, 2014, the trial court granted summary judgment in favor of Appellant, finding that "the notice requirements of the statute are mandatory" and that Appellant did not owe Appellee coverage under Coots. Appellee's separate claims against Energy Insurance Agency and Spalding were dismissed by agreed order in May 2015.

         Appellee thereafter appealed the trial court's decision to this Court. On January 29, 2016, we rendered an opinion reversing the summary judgment and remanding the matter for further proceedings. Spalding v. Auto-Owners InsuranceCompany, ...


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