Kentucky School Boards Ins. Trust v. State Farm
| Decision Date | 14 November 1995 |
| Docket Number | Civ. A. No. 91-357. |
| Citation | 907 F. Supp. 1036 |
| Parties | KENTUCKY SCHOOL BOARDS INSURANCE TRUST, Plaintiff, v. STATE FARM MUTUAL INSURANCE, Defendant. |
| Court | U.S. District Court — Eastern District of Kentucky |
Robert Estes Stopher, Boehl, Stopher & Graves, Louisville, KY, for plaintiff.
Eugene C. Rice, Rice, Preston & Brown, Paintsville, KY, Max D. Picklesimer, Martin, Picklesimer, Justice & Vincent, Ashland, KY, J.K. Wells, Wells, Porter, Schmitt & Jones, Paintsville, KY, for defendant.
Pursuant to the direction of the Court, the parties have indicated the manner in which they contend the non-jury trial set in this matter should proceed.
State Farm Mutual Insurance State Farm maintains that this action must be tried as a case within a case in light of Barnes v. Pennsylvania Casualty Co., 306 Ky. 435, 208 S.W.2d 314 (1948), and the general framework set out in former Kentucky Supreme Court Justice Charles M. Leibson's article entitled Legal Malpractice Cases: Special Problems in Identifying Issues of Law and Fact and in the Use of Expert Testimony, 75 KY.L.J. 1 (1986).
In response, the Kentucky School Boards Insurance Trust KSBIT contends that proof should center on whether settlement was reasonable in light of the circumstances. KSBIT further maintains that a case within a case approach is untenable due to the fact that (1) the antecedent case was settled; (2) State Farm could be in the position of taking advantage of a case within a case discount but avoid such a premium; and (3) it would be impossible to recreate the outcome of a jury trial in Hindman, Kentucky through a non-jury trial in Frankfort.
On September 22, 1989, Kathy Hall and her son Jeff were struck by an automobile while near a school bus stop in Knott County, Kentucky. The school bus in which Jeff Hall had been riding was following its daily route south down Kentucky Highway 899. When the bus came to a stop with all warning lights activated, Kathy Hall was waiting to meet Jeff. Jeff exited the bus and he and his mother proceeded to cross the highway.
As the two came to the edge of the other side of the road, the driver of an automobile which was headed north rounded a curve located south of the bus stop and lost control of his automobile. The automobile left the roadway on the east side striking both Kathy Hall and Jeff at some point off of the highway. As a result, Kathy Hall died and Jeff was seriously injured.
An action was filed on behalf of the Halls in the Knott County Circuit Court against the driver of the automobile and the Knott County Board of Education School Board. The School Board had two insurance policies covering its vehicles, a general liability insurance policy with KSBIT and an automobile liability insurance policy with State Farm. State Farm denied that its policy covered this occurrence and refused to defend the School Board.
KSBIT stepped into the breach and obtained counsel to defend the School Board. Without the approval of State Farm, KSBIT settled the matter for $179,583 on November 23, 1990. KSBIT then filed this action to recover all or part of the settlement amount as well as the costs of defending the School Board.1
Having considered the parties' contentions, the Court concludes that the nonjury trial must proceed as a case within a case in accordance with Barnes v. Pennsylvania Casualty Co., 306 Ky. 435, 208 S.W.2d 314 (1948). In Barnes, R.R. Barnes Barnes brought an action against his insurance company to recover $800 he had paid to settle a claim brought after one of his trucks collided with a bus. Barnes maintained that because the insurance company had denied coverage he was entitled to reimbursement for a reasonable settlement of the claim. The action proceeded to trial and when Barnes failed to put on any evidence to prove that the accident was caused by the negligence of the driver of his truck the trial court directed a verdict for his insurance company. The Kentucky Court of Appeals affirmed the decision of the trial court holding that in order to recover from his insurance company Barnes was required to show that he was legally liable due to his or his agent's negligence.
It is clear from Barnes and the two decisions cited therein2 that Kentucky law requires that evidence of negligence and causation be presented by KSBIT in asserting the rights of the School Board against State Farm at the non-jury trial.3 In order for KSBIT to succeed on its subrogated claim, it must show that the School Board had a legally enforceable claim against State Farm.4 That is, there must have been liability of the School Board to the Halls in the antecedent case and such liability must have been covered by the State Farm policy. Merely proving that the settlement was reasonable in light of...
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