United States District Court, E.D. Kentucky, Central Division, Lexington
LAURA N. WOODS, Plaintiff,
STANDARD FIRE INSURANCE COMPANY, Defendant.
MEMORANDUM OPINION AND ORDER
M. HOOD, SENIOR U.S. DISTRICT JUDGE
Woods, a Kentucky resident, was seriously injured in a
two-vehicle accident in Kentucky while driving a vehicle
belonging to her father, Dawson Newberry. After settling with
the other driver’s insurance company, Woods sought
under-insured motorist (“UIM”) benefits from an
insurance policy that was procured by Newberry, a Connecticut
resident. The policy was procured in Connecticut from
Standard Fire, a Connecticut insurance company.
Standard Fire insurance policy, which does not contain a
choice of law provision, includes a setoff provision, which
requires that any benefits received from other sources be
deducted or set off from the amount of UIM benefits that may
be recovered under the policy. As such, Standard Fire offered
to provide UIM benefits to Woods, but only after setting off
the amount that Woods had already recovered from other
present, the threshold dispute between the parties is whether
Connecticut or Kentucky law will apply to interpretation of
an insurance policy issued by Standard Fire. In determining
which jurisdiction’s law should apply to the policy
while sitting in diversity, this Court must apply the forum
state’s choice of law analysis.
Kentucky’s most significant relationship test,
Connecticut has the most significant relationship with the
insurance policy at issue here. Still, notwithstanding the
outcome of the most significant relationship analysis, the
Kentucky public policy exception applies and requires
application of Kentucky law because setoff provisions in
insurance policies violate the public policy of the
Commonwealth of Kentucky; and, as a result, application of
Connecticut law would result in enforcement of a contractual
provision that contravenes the public policy of Kentucky. As
a result, Standard Fire’s motion for summary judgment
[DE 8] is DENIED and Wood’s motion for
partial summary judgment [DE 9] is GRANTED.
Factual and Procedural Background
Laura Woods, a Kentucky resident, was seriously injured in a
two-vehicle collision in Woodford County, Kentucky. [DE 9-1
at 2, Pg ID 115]. Woods incurred expenses in excess of
$250,000 as a result of the accident. [Id.].
driver of the other vehicle involved in the accident was
insured by USAA. [Id.]. Woods settled her personal
injury claim with USAA for $50,000. [DE 8-1 at 2, Pg ID 54].
time of the accident, Woods was driving a vehicle owned by
her father, Dawson Newberry, a Connecticut resident. [DE 9-1
at 3, Pg ID 116]. The vehicle was covered by an insurance
policy written by the Defendant, Standard Fire Insurance
Company. [Id.]. Woods received $11,000 in no-fault
benefits from Standard Fire. [Id.].
Fire is incorporated in Connecticut and has its principal
place of business in Hartford, Connecticut. [DE 1 at 2, Pg ID
2]. Newberry was the named insured on the Standard Fire
insurance policy. [See DE 8-5]. Woods is not a named
insured or a scheduled driver under the Standard Fire policy.
[See id.]. Even so, the Standard Fire policy
territory included the “United States, its territories
or possessions; Puerto Rico; or Canada.” [DE 8-5 at 16,
Pg ID 193].
September 2018, Woods demanded $100,000 from Standard Fire,
which was the policy limit for UIM benefits under the
Standard Fire policy. [DE 9-1 at 3, Pg ID 116].
response, Standard Fire offered to settle Woods’s claim
for $39,000 based on a limit of liability or setoff provision
in the policy. [DE 9-4]. Specifically, the relevant setoff
provision in the policy says: “The Limit of liability
will be reduced by all sums:  Paid to
‘insureds’ because of the ‘bodily
injury’ by or on behalf of persons or organizations who
may be legally responsible.” [DE 8-5 at 24, Pg ID 201].
The policy also states:
No one will be entitled to receive duplicate payments for the
same elements of loss under this Coverage Section and:
1. Any other Coverage Section of part of this policy; or
2. Any other personal auto policy issued to you by us or any
of our affiliates.
[Id.]. The policy contains no choice of law
refused Standard Fire’s offer and filed suit in Fayette
Circuit Court, seeking a declaration of benefits under the
policy and bringing claims for breach of contract, violations
of the Kentucky PIP statute and Motor Vehicle Reparations Act
(“MVRA”), and bad faith. [DE 1-2]. The action was
removed to this Court based on diversity of citizenship
jurisdiction. [DE 1].
parties agreed to bifurcate the bad faith claims from the
other claims in the action and to stay discovery until the
Court could resolve anticipated motions for summary judgment
on the amount of UIM benefits payable under the policy. [DE
6]. The Court granted the request to bifurcate and stay
discovery. [DE 7].
the parties filed cross motions for summary judgment. [DE 8;
DE 9]. These motions have been ...