The Kentucky Supreme Court, reversing an appellate court's decision, has ruled that a two year “suit against us” provision in an automobile liability insurance policy, which tracked “nearly verbatim” Kentucky law, was not unreasonable and should be enforced.
The Case
Following an automobile accident, Lonnie Dale Riggs sued the other driver for negligence, but settled the claim for the other driver's automobile liability insurance policy limits. Before dismissing the suit, Mr. Riggs asserted a claim against his own automobile liability insurer, State Farm Mutual Automobile Insurance Company, for underinsured motorist benefits (“UIM”). Mr. Riggs filed his UIM claim three years to the day after the date of the automobile accident.
State Farm denied UIM liability because Mr. Riggs' insurance policy contained a limitation provision that gave him two years from the date of the accident or date of the last basic reparation benefit (“BRB”) payment, whichever occurred later, within which to make a UIM claim.
The trial court granted summary judgment for State Farm, but the court of appeals reversed, holding that the State Farm policy provision limiting the time for making the UIM claim was void because it was unreasonable.
The dispute reached the Kentucky Supreme Court.
Kentucky Law
Kentucky's Motor Vehicle Reparations Act (“KMVRA”) requires a tort action to:
be commenced not later than two (2) years after the injury or death, or the last basic or added reparation payment made by any reparation obligor, whichever later occurs.
KRS 304.39–230(6).
In addition, KRS 304.39–320(1) defines an:
underinsured motorist
as:
a party with motor vehicle liability insurance coverage in an amount less than a judgment recovered against that party for damages on account of injury due to a motor vehicle accident.
KRS 304.39–020(3) provides:
If an injured person or, in the case of death, the personal representative agrees to settle a claim with a liability insurer and its insured, and the settlement would not fully satisfy the claim for personal injuries or wrongful death so as to create an underinsured motorist claim….
The State Farm Policy
The State Farm policy provided:
2. Suits Against UsThe Kentucky Supreme Court's DecisionThere is no right of action against us:
….
d. under uninsured motor vehicle coverage and underinsured motor vehicle coverage unless such action is commenced no later than two (2) years after the injury, or death, or the last basic or added reparation payment made by any reparation obligor, whichever later occurs.
The court reversed the court of appeals and reinstated the trial court's decision.
The court found that the State Farm limitation provision, which tracked “nearly verbatim” the two-year statute of limitations for tort claims found in the KMVRA, was “not unreasonable.”
In the court's view, two years was “not an unreasonable period of time for an insured to discover whether a tortfeasor” was underinsured or uninsured.
The court rejected Mr. Riggs' argument that his action had to be deemed timely because a UIM claim did not exist without a judgment against the tortfeasor. The court reasoned that an insured “must prove the extent of the tortfeasor's liability in order to claim UIM benefits” and emphasized that an insured's UIM claim did “not spring to life only after a judgment against the tortfeasor.” An insured was “always in possession of the UIM claim because his contractual rights [were] independent of the tort judgment,” the court concluded.
The case is State Farm Mutual Automobile Ins. Co. v. Riggs, No. 2013–SC–000555–DG (Ky. March 17, 2016). Attorneys involved include: COUNSEL FOR APPELLANT: David T. Klapheke, Boehl Stopher & Graves, LLP; COUNSEL FOR APPELLEE: Timothy R. McCarthy, Nutt Law Office; COUNSEL FOR AMICUS CURIAE, KENTUCKY JUSTICE ASSOCIATION: Kevin Crosby Burke; COUNSEL FOR AMICI CURIAE, INSURANCE INSTITUTE OF KENTUCKY, NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES, AND KENTUCKY DEFENSE COUNSEL: Thomas Frederick Glassman, David V. Kramer.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].