Cincinnati Ins. Co. v. Samples

• Court: Supreme Court of Kentucky
• Citation: Cincinnati Ins. Co. v. Samples, 192 S.W.3d 311 (Ky. 2006)
• Decision Date: 18 May 2006
• Docket Number: No. 2004-SC-0005-DG, 2004-SC-0680-DG.,2004-SC-0005-DG, 2004-SC-0680-DG.
• Parties: CINCINNATI INSURANCE COMPANY, Appellant/Cross-Appellee v. Raymond SAMPLES, Appellee/Cross-Appellant.

192 S.W.3d 311

CINCINNATI INSURANCE COMPANY, Appellant/Cross-Appellee v. Raymond SAMPLES, Appellee/Cross-Appellant.

No. 2004-SC-0005-DG, 2004-SC-0680-DG.

Supreme Court of Kentucky.

May 18, 2006.

Daniel E. Mumer, Michael Earl Hammond, Andrew Nathan Moore, Douglas L. Hoots, Landrum & Shouse, Lexington, Counsel for Appellant/Cross-Appellee Cincinnati Insurance Company.

David B. Allen, Versailles, Counsel for Appellee/Cross-Appellant Raymond Samples.

Opinion of the Court by Justice COOPER.

Appellee, Raymond Samples, was injured in a two-vehicle accident on August 11, 1997. At the time of the accident, Samples was operating a motor vehicle owned by his employer, BGM Equipment Co., Inc. ("BGM"), and insured by Appellant, Cincinnati Insurance Co. ("Cincinnati"). The accident occurred when Samples's vehicle was struck by a vehicle owned and operated by Michael Howton and insured by Direct General Agency, Inc. ("Direct General"). Howton's negligence was the sole cause of the accident. Cincinnati paid Samples $10,000.00 in basic reparation benefits ("BRB"), KRS 304.39-020(2), -030(1), and -040(2), and Direct General settled Samples's claim against Howton for its policy's liability limits of $25,000.00. Samples then filed this action against Cincinnati for payment from its underinsured motorist ("UIM") coverage of damages in excess of $35,000.00.¹ KRS 304.39-320.

Meanwhile, because he was injured while in the course and scope of his employment with BGM, Samples also filed a workers' compensation claim for his injuries, for which he was ultimately awarded benefits paid or payable by BGM's self-insurance fund as follows:

$ 42,240.10 — Medical costs already incurred. 28,541.47 — Temporary total disability ("TTD") benefits (lost wages). 85,501.50 — Permanent partial disability ("PPD") benefits (permanent impairment) ($201.18 X 425 weeks). ___________ $156,183.07

In addition, BGM is obligated to pay as workers' compensation benefits the cost of all additional medical treatment reasonably required for the cure and relief of the injuries Samples sustained as a result of this accident in an unlimited amount. KRS 342.020(1).

At the conclusion of the trial of Samples's UIM action against Cincinnati, a Fayette Circuit Court jury awarded him damages as follows $ 50,330.55 — Medical expenses. 50,000.00 — Lost wages. 25,000.00 — Future medical expenses. 100,000.00 — Impairment of power to earn money. 75,000.00 — Pain and suffering. ___________ $300,330.55

The trial court first set off against the verdict the amounts paid or payable as workers' compensation:

$ 50,330.55 — Medical expenses verdict. - 42,140.10 — Medical expenses paid by workers' comp ___________ $ 8,190.45 — Judgment for medical expenses.² $ 50,000.00 — Lost wages verdict. 28,541.47 — TTD benefits. ___________ $ 21,458.53 — Judgment for lost wages. $100,000.00 — Future impairment. - 85,501.50 — PPD benefits. ___________ $ 14,498.50 — Judgment for future impairment.

In addition, the trial court deleted the award for future medical expenses because all future medical expenses will be paid by BGM, leaving a subtotal of $119,147.68:

$ 8,190.45 — Medical expenses. 21,458.73 — Lost wages. 14,498.50 — Future impairment. 75,000.00 — Pain and suffering. ___________ $119,147.68

Finally, the trial court subtracted the $10,000.00 that Samples received in BRB payments from Cincinnati and the $25,000.00 liability coverage payments from Direct General, leaving a net judgment of $84,147.68. Samples does not contest the deductions for the BRB and liability insurance payments. He does, however, contest the deductions for workers' compensation benefits paid to him by BGM. Samples appealed, and the Court of Appeals reversed, perceiving that our decision in Philadelphia Indemnity Insurance Co. v. Morris, 990 S.W.2d 621 (Ky. 1999), precluded application of KRS 342.700(1)'s proscription against double recovery to an action for UIM benefits. We granted discretionary review and now affirm in part and reverse in part.

In Philadelphia Indemnity, we held that the exclusive remedy provision of the Kentucky Workers' Compensation Act, KRS 342.690(1), did not preclude an employee injured in a work-related automobile accident from recovering against both the workers' compensation insurance and the UIM insurance coverages provided by his employer. 990 S.W.2d at 625. However, because the employee in that case sought to collect UIM benefits only insofar as his damages exceeded both his workers' compensation benefits and the tortfeasor's liability limits, id. at 624, we did not reach the issue of whether KRS 342.700(1) precluded him from double recovery of workers' compensation benefits and UIM benefits for identical categories of loss. Id. at 628. A provision of the UIM endorsement in Philadelphia Indemnity required that workers' compensation benefits be offset against the UIM policy limits, id. at 625, and it was that policy provision that we declared invalid in that case. Id. at 627 ("[W]e now hold that an insurance carrier cannot set off workers' compensation benefits against the policy's face amount of UIM coverage."). Although the Court of Appeals had held in Philadelphia Indemnity that the plaintiff could not receive double recovery for identical categories of loss, 995 S.W.2d at 628, that issue was not raised on discretionary review, thus was not addressed by this Court. Id.

KRS 342.700(1) provides in part:

Whenever an injury for which compensation is payable under this chapter has been sustained under circumstances creating in some other person than the employer a legal liability to pay damages, the injured employee may either claim compensation or proceed at law by civil action against the other person to recover damages, or proceed both against the employer for compensation and the other person to recover damages, but he shall not collect from both.

(Emphasis added.)

The statute "expresses a clear legislative intent that an injured employee should not be allowed to recover from both the compensation carrier and a third-party tortfeasor." Davis v. Buley, 634 S.W.2d 161, 163 (Ky.App.1982); see also Old Republic Ins. Co. v. Ashley, 722 S.W.2d 55, 59 (Ky.App. 1986) ("The policy behind KRS 342.700(1), that an injured employee should not recover from both the workers' compensation carrier and a third-party tortfeasor, has long been recognized by Kentucky courts."); 6 Arthur Larson & Lex K. Larson, Larson's Workers' Compensation Law § 110.02, at 110-3 (Matthew Bender 2004) ("It is equally elementary that the claimant should not be allowed to keep the entire amount both of his or her compensation award and of the common law damage recovery.") (footnotes omitted).

In Krahwinkel v. Commonwealth Aluminum Corp., 183 S.W.3d 154 (Ky. 2005), we held that KRS 342.700(1) precludes a civil plaintiff from recovering from a tortfeasor the same elements of damages for which he had already been compensated by way of workers' compensation benefits; and that the tortfeasor is entitled to an offset or credit against the judgment for those damages awarded by the jury that duplicate workers' compensation benefits. 183 S.W.3d at 160. The issue in this case is whether the same principle applies to a civil plaintiff seeking to recover damages, duplicative of workers' compensation benefits, against a UIM (or for that matter uninsured motorist ("UM")) carrier who is sued for damages otherwise payable by the underinsured (or uninsured) tortfeasor.

We start with the proposition that KRS 342.700(1) is a workers' compensation statute, not an insurance statute; thus, its mandate that "he shall not collect from both" is a limitation on the rights of the worker that is attendant to his right to collect workers' compensation benefits. It is not a defense personal to the tortfeasor, but would also apply to any attempt to recover damages against, e.g., the tortfeasor's employer (if applicable), his parent (if he is a minor and the parent had signed for his driver's license), his insurer (if permitted), or anyone else who could be held liable because of the tortfeasor's negligence.

The UIM statute, KRS 304.39-320, conceptually gives the insured the right to purchase additional liability coverage for the vehicle of a prospective underinsured tortfeasor. LaFrange v. United Servs. Auto. Ass'n, 700 S.W.2d 411, 414 (Ky.1985); see also Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 448-49 (Ky. 1997). The tortfeasor's liability insurance is the primary coverage, and the UIM insurance is the secondary or excess coverage. Ky. Farm Bureau Mut. Ins. Co. v. Rodgers, 179 S.W.3d 815, 818 (Ky.2005). The UIM carrier and the tortfeasor are "codebtors in solido," Coots v. Allstate Ins. Co., 853 S.W.2d 895, 902 (Ky.1993), i.e., they are jointly and severally liable for damages recoverable as a result of the tortfeasor's negligence. Black's Law Dictionary 799 (7th ed.1999) (defining "in solido"). The UIM carrier's liability is measured by the liability of the tortfeasor and the amount of the tortfeasor's insurance or lack thereof. Coots, 853 S.W.2d at 902.

[T]he purpose and intent of the uninsured [and underinsured] motorist statute is to treat the insured victim as if the tortfeasor is insured. Hence, the UM [and UIM] carrier stands in the wrongdoer's shoes for purposes of paying damages . . . .

Robertson v. Vinson, 58 S.W.3d 432, 434 (Ky.2001)³ (citations and quotations omitted). Thus, in Kentucky Farm Bureau Mutual Insurance Co. v. Ryan, 177 S.W.3d 797 (Ky.2005), where liability was apportioned 50% against an underinsured motorist and 50% against an unidentified motorist, the UIM carrier was liable for only 50% of the excess damages over and above the underinsured motorist's liability policy limits. Id. at 804. KRS 304.39-320(2) requires "every insurer" to make available upon request UIM coverage to pay "for such uncompensated damages as he may recover on account of injury due to a motor vehicle accident...