Cantrell Supply, Inc. v. Liberty Mut. Ins.

Decision Date27 December 2002
Docket NumberNo. 2001-CA-002146-MR.,2001-CA-002146-MR.
Citation94 S.W.3d 381
CourtKentucky Court of Appeals

Leslie Rosenbaum, Lexington, KY, for appellant.

James R. Wagoner, Louisville, KY, for appellee.




Cantrell Supply, Inc., appeals from a judgment of the Clark Circuit Court in favor of Daniel W. Lockridge and from the denial of its CR1 59 motion to alter, amend, or vacate the judgment, seeking to have Liberty Mutual Insurance Company pay a portion of the judgment based on a pretrial settlement agreement between Cantrell and Liberty Mutual. We affirm.

In the course of his employment as a delivery driver for United Parcel Service (UPS), on October 8, 1996, Lockridge injured his back while lifting a heavy package being shipped by Cantrell2. Due to the injury, Lockridge was unable to work for a period of time, incurred medical expenses for treatment, and experienced pain and suffering. Following Lockridge's filing of a workers' compensation claim, Liberty Mutual paid him benefits on the claim as UPS's workers' compensation insurance carrier.

In August 1997, Lockridge filed a civil complaint in the Clark Circuit Court against Cantrell for negligence in misrepresenting the weight of the package. In September 1998, the trial court granted Liberty Mutual's motion to file an intervening complaint for indemnity and subrogation pursuant to KRS3 342.700 related to its payment of $86,554.91 in workers' compensation benefits to Lockridge. On September 11, 2000, just prior to trial, Cantrell and Liberty Mutual reached a settlement of Liberty's claim and executed a written agreement.

After conducting a three-day trial between September 15-19, 2000, the jury rendered a verdict finding Lockridge and Cantrell each 50% at fault and awarding Lockridge the following damages:

                Past Medical Expenses          $  63,224.48
                Past Lost Wages                $ 149,643.65
                Loss of Lifetime Earning
                Capacity                       $  43,565.94
                Future Medical Expenses        $  43,565.93
                Past and Future Pain and
                Suffering                      $       0
                Total Damages                  $ 300,000.00

Both Lockridge and Cantrell submitted proposed judgments with varying total damages awards. Lockridge requested an award of $150,000 without reduction or set-off attributed to Liberty Mutual's subrogation claim because of the settlement agreement between Liberty Mutual and Cantrell. On the other hand, Cantrell maintained Lockridge should recover a total of $84,939.58 based on exclusion of Liberty Mutual's claim due to the settlement and Lockridge's degree of fault. Under Cantrell's approach, the $150,000 attributable to Cantrell's fault should be reduced by $43,277.45 (50% of the amount Liberty Mutual had already paid Lockridge for past medical expenses and past lost wages), $21,782.97 (50% of the impairment of lifetime earning capacity), and $21,782.96 (50% of the future medical expenses).

On July 26, 2001, the trial court entered an order and judgment awarding Lockridge $106,722.55 consistent with the formula delineated in the case of Great American Insurance Co. v. Witt, Ky.App., 964 S.W.2d 428 (1998), since overruled by AIK Selective Self Ins. Fund v. Bush, Ky., 74 S.W.3d 251 (2002). The judgment first excluded the $86,554.91 Liberty Mutual had already paid Lockridge on his workers' compensation claim from the gross award of $300,000, and it then reduced the remaining $213,445.09 by 50% based on Lockridge's degree of fault.4 The court held that the remaining $43,277.45, which otherwise would have been applied to Liberty Mutual's subrogation claim, would not be awarded to either Lockridge or Liberty Mutual because of Liberty Mutual's release of its claims under the settlement agreement with Cantrell.

Because there is no existing Kentucky case law involving allocation of a tort judgment where an intervening workers' compensation insurance carrier has settled its indemnity and subrogation claim with the third-party tortfeasor, the trial court applied the reasoning expressed in Folstad v. Eder, 467 N.W.2d 608 (Minn.1991), in deciding that neither Lockridge nor Liberty Mutual could recover the remaining $43,277.55. The court indicated that the settlement agreement constituted a waiver of all rights Liberty Mutual had to Lockridge's subsequent recovery as part of its subrogation claim.

On August 6, 2001, Cantrell filed a CR 59.05 motion to alter, amend, or vacate the judgment with respect to the award of future medical expenses. Cantrell maintained that the judgment for Lockridge should be reduced by $21,782.96 (50% of the $43,565.93 jury award for future medical expenses) because Liberty Mutual was obligated under the workers' compensation law to pay that amount to Lockridge "should Plaintiff incur medical expenses in that amount." Cantrell argued in the alternative for an order requiring Liberty Mutual to pay, either to or on behalf of Cantrell, the amount of $21,782.96 under paragraph 2 of the settlement agreement. Lockridge filed a response to the motion objecting to any reduction in the judgment based on any potential payment or obligation of Liberty Mutual to pay his future medical expenses. After a hearing, the trial court summarily denied the motion. Cantrell then filed a Notice document in the circuit court stating it was withdrawing its CR 59.05 motion with respect to reduction of the judgment and would pay the judgment in favor of Lockridge, but it did not withdraw that portion seeking alternative relief through reimbursement from Liberty Mutual of the amount awarded to Lockridge for future medical expenses.5 This appeal followed.

Cantrell argues that it is entitled to reimbursement of the future medical expenses recovered by Lockridge under the judgment based on its settlement agreement with Liberty Mutual. The relevant portions of the settlement agreement provide as follows:

1. There will be paid to Liberty Mutual Insurance Co. on behalf of Cantrell Supply, Inc. the sum of $24,966.47 which is in full and complete satisfaction and release of any claims which Liberty Mutual Insurance Co. raised against Cantrell Supply, Inc. or could have raised against Cantrell Supply, Inc. in the Clark Circuit Court in Clark County, Kentucky.

2 Liberty Mutual Insurance Co. shall also resolve with Daniel W. Lockridge any claims which Daniel W. Lockridge has against Cantrell Supply, Inc. for money which would be duplicative of money which Daniel W. Lockridge receives or would be entitled to receive from Liberty Mutual Insurance Co. as a result of the above-mentioned workers' compensation case involving the injury occurring on or about October 8, 1996. As to any of these claims asserted by Daniel W. Lockridge against Cantrell Supply, Inc., Cantrell Supply Inc. shall forward those claims to Liberty Mutual Insurance Co. which shall then resolve any liability of Cantrell Supply, Inc. for payment of those claims without a monetary contribution by or on behalf of Cantrell Supply, Inc.

An agreement to settle legal claims is essentially a contract subject to the rules of contract interpretation. It is valid if it satisfies the requirements associated with contracts generally, i.e., offer and acceptance, full and complete terms, and consideration. See, e.g., Hines v. Thomas Jefferson Fire Ins. Co., Ky., 267 S.W.2d 709 (1953); Huff Contracting v. Sark, Ky.App., 12 S.W.3d 704 (2000)(involving settlement of claim to future medical benefits under workers' compensation law); Old Republic Ins. Co. v. Ashley, Ky.App., 722 S.W.2d 55 (1986)(same). The primary object in construing a contract or compromise settlement agreement is to effectuate the intentions of the parties. See Withers v. Commonwealth, Department of Transportation, Ky.App., 656 S.W.2d 747, 749 (1983); Wilcox v. Wilcox, Ky., 406 S.W.2d 152, 153 (1966). "Any contract or agreement must be construed as a whole, giving effect to all parts and every word in it if possible." City of Louisa v. Newland, Ky., 705 S.W.2d 916, 919 (1986).

Where a contract is ambiguous or silent on a vital matter, a court may consider parol and extrinsic evidence involving the circumstances surrounding execution of the contract, the subject matter of the contract, the objects to be accomplished, and the conduct of the parties. See, e.g., Reynolds Metals Co. v. Barker, Ky., 256 S.W.2d 17, 18 (1953); Dennis v. Watson, Ky., 264 S.W.2d 858, 860 (1953); L.K Comstock & Co., Inc. v. Becon Const. Co., 932 F.Supp. 948, 965 (E.D.Ky.1993). Absent an ambiguity in the contract, the parties' intentions must be discerned from the four corners of the instrument without resort to extrinsic evidence. Hoheimer v. Hoheimer, Ky., 30 S.W.3d 176, 178 (2000); L.K Comstock, 932 F.Supp. at 964. A contract is ambiguous if a reasonable person would find it susceptible to different or inconsistent interpretations. Transport Ins. Co. v. Ford, Ky.App., 886 S.W.2d 901, 905 (1994); Luttrell v. Cooper Industries, Inc., 60 F.Supp.2d 629, 631 (E.D.Ky.1998). The fact that one party may have intended different results, however, is insufficient to construe a contract at variance with its plain and unambiguous terms. Green v. McGrath, 662 F.Supp. 337, 342 (E.D.Ky. 1986). Generally, the interpretation of a contract, including determining whether a contract is ambiguous, is a question of law for the courts and is subject to de novo review. First Commonwealth Bank of Prestonsburg v. West, Ky.App., 55 S.W.3d 829, 835 (2000); Morganfield Nat'l Bank v. Damien Elder & Sons, Ky., 836 S.W.2d 893, 895 (1992); Fay E. Sams Money Purchase Pension Plan v. Jansen, Ky.App., 3 S.W.3d 753, 757 (1999). However, once a court determines that a contract is ambiguous, areas of dispute concerning the extrinsic evidence are factual issues and construction of the contract become subject to...

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