Henry v. Travelers Pers. Sec. Ins. Co.
| Decision Date | 02 February 2018 |
| Docket Number | NO. 2016-CA-001939-MR,2016-CA-001939-MR |
| Parties | ERIC HENRY, AS NEXT FRIEND FOR KELSEY HENRY AND AS ADMINISTRATOR OF THE ESTATE OF MARCUS HENRY APPELLANTS v. TRAVELERS PERSONAL SECURITY INSURANCE COMPANY APPELLEE |
| Court | Kentucky Court of Appeals |
NOT TO BE PUBLISHED
APPEAL FROM SIMPSON CIRCUIT COURT
The underlying facts of this case are not in dispute. On November 7, 2014, Eric Henry and his two children, Kelsey and Marcus Henry (collectively, the "Henrys"), were travelling through Kentucky to look at holiday decorations. While heading eastbound on Scottsville Road in Simpson County, Kentucky, the Henrys' vehicle was struck by a vehicle operated by Jarrette Sanders. As a result of the collision, both Kelsey and Marcus sustained devastating injuries. Marcus Henry ultimately succumbed to his injuries and passed away later that day. Neither Eric Henry nor Sanders maintained automobile liability insurance on their vehicles at the time of the accident.
The following November, Eric Henry, as next friend of Kelsey Henry and administrator of the Estate of Marcus Henry, filed suit against Sanders and Travelers Personal Security Insurance Company ("Travelers"). As relevant to Travelers, the complaint stated that the Henrys all resided in the same household in Tennessee with their mother-in-law/grandmother, Carmen Kirk. The complaint alleged that Kirk had an auto insurance policy with Travelers, which included uninsured motorist ("UM") coverage and extended to all of Kirk's household members. Because Sanders was uninsured at the time of the accident and Kirk'sUM coverage extended to the Henrys, the Henrys contended that Travelers was required to pay them damages resulting from the accident. Following its answer to the complaint, Travelers was granted leave to file a third-party complaint against Eric Henry by which it alleged that Eric was either partially or entirely at fault for the accident.
Following discovery, Travelers moved for summary judgment on all claims asserted against it by the Henrys. In its memorandum supporting that motion, Travelers acknowledged that Kirk maintained a policy with Travelers that included UM coverage. Further, Travelers stated that pursuant to the Tennessee endorsement on Kirk's UM coverage, the Henrys all met the definition of an "insured" under the policy and would be entitled to coverage unless an exclusion applied. Kirk's policy, however, contained the following exclusion:
There was no dispute that at the time of the accident, the Henrys were occupying a vehicle owned by Eric Henry - a "family member" - that was not insured under Kirk's policy. Therefore, Travelers argued that the exclusion should be enforced to bar any claims brought against it by the Henrys. Additionally,Travelers argued that because the Henrys and Kirk resided in Tennessee and the insurance policy at issue had been purchased in Tennessee, the law of Tennessee should govern interpretation of the policy language.
In response to Travelers' motion for summary judgment, the Henrys acknowledged that Kentucky courts apply the "most significant relationship" test to resolve which state's law should govern a contract dispute and that, utilizing that test alone, it would appear that Tennessee law governed. However, the Henrys further noted that, regardless of the result of the "most significant relationship" test, Kentucky courts will apply Kentucky law if the law of another state would violate a Kentucky public policy. The Henrys argued that Kentucky law should therefore apply because Kentucky has a strong policy prohibiting enforcement of "owned but not scheduled" exclusions, such as the exclusion asserted by Travelers. Further, the Henrys argued that Kentucky has a strong preference that accident victims injured by uninsured tortfeasors be compensated for their damages, which is evinced by the fact that Kentucky makes it mandatory for insurers to offer UM coverage to potential insureds.
Following a hearing, the trial court entered an order granting Travelers' motion for summary judgment and dismissing all claims by the Henrys against Travelers on November 18, 2016. Therein, the trial court made thefollowing findings: UM coverage is optional in Kentucky under KRS1 304.20-020(1); insureds have the option to reject UM coverage; Tennessee has the most significant contacts with the parties to the case and with the insurance contract transaction; and Kentucky has no applicable overriding public policy. Therefore, the trial court concluded that the law of Tennessee, not Kentucky, should apply to the insurance contract dispute. Because Tennessee law allows for enforcement of "owned but not scheduled" exclusions, the trial court concluded that the Henrys were not entitled to collect under Kirk's UM policy. On November 28, 2016, the trial court amended its order granting summary judgment to include language indicating that the order was final and appealable with no just cause for delay.
This appeal followed.
When reviewing orders granting summary judgment, we must determine "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). "The record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor." Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky. 1991). "Because thereare no factual disputes before us today and only review of questions of law," we review the trial court's order de novo. Philadelphia Indem. Ins. Co., Inc. v. Tryon, 502 S.W.3d 585, 588 (Ky. 2016).
On appeal, the Henrys contend that the trial court erred in finding that UM coverage is optional under Kentucky law based on the fact that an insured has the option to reject such coverage. Pointing to the Kentucky Supreme Court's opinion in State Farm Mut. Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875 (Ky. 2013), the Henrys contend that the crux of the determination of whether Kentucky public policy overrides the "most significant relationship" test is whether the coverage at issue is mandatory or optional. Travelers maintains that the trial court was correct in determining that Tennessee law should govern interpretation of the insurance contract. In responding to the Henrys' arguments regarding Kentucky public policy, Travelers argues that Kentucky's public policy of ensuring that victims of vehicular accidents are fully compensated only applies to the mandatory liability provisions of the Kentucky Motor Vehicle Reparations Act ("MVRA"),2 which does not include UM coverage. Additionally, Travelers contends that the exclusion would still be enforceable even if we determine that Kentucky law applies because the exclusion is clear and unambiguous.
Kentucky has adopted the "most significant relationship" test to resolve choice of law issues relating to contract disputes. Hodgkiss-Warrick, 413 S.W.3d at 878. Pursuant to that test, "[t]he rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties . . . ." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(1) (1971). The parties agree that, as the Henrys were all residents of Tennessee at the time of the accident and the insurance contract at issue was purchased in Tennessee, Tennessee law would apply under the "most significant relationship" test.
The choice of law analysis, however, does not end with application of the test. Kentucky will override the outcome of the "most significant relationship" test and apply its own laws if "a clear and certain statement of strong public policy in controlling laws or judicial precedent" would be violated in applying another state's laws. Hodgkiss-Warrick, 413 S.W.3d at 880. "[P]ublic policy, invoked to bar the enforcement of a contract, is not simply something courts establish from general considerations of supposed public interest, but rather something that must be found clearly expressed in the applicable law." Id. at 880-81 (citing Kentucky Farm Bureau Mut. Ins. Co. v. Thompson, 1 S.W.3d 475, 476-77 (Ky. 1999)). Absent an express prohibition, public policy will render contract termsunenforceable only if: (1) "the policy asserted against it is clearly manifested by legislation or judicial decision[;]" and (2) the policy "is sufficiently strong to override the very substantial policies in favor of the freedom of contract and the enforcement of private agreements." Id. at 880.
Because of our strong preference in upholding valid, private agreements, it is insufficient to merely find that there is a strong public policy to override the "most significant relationship" test. The critical question is "whether the public policy [is] so strong as to require a Kentucky court to interject Kentucky law into a dispute having none but a fortuitous connection with Kentucky." Id. at...
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