Kenneth Longstreath v. American Family Insurance Company ( 2022 )

RENDERED: JULY 8, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1172-MR
KENNETH LONGSTREATH APPELLANT
APPEAL FROM KENTON CIRCUIT COURT
v. HONORABLE KATHLEEN LAPE, JUDGE
ACTION NO. 19-CI-00488
AMERICAN FAMILY
INSURANCE COMPANY APPELLEE
OPINION
AFFIRMING
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BEFORE: CLAYTON, CHIEF JUDGE; CALDWELL AND K. THOMPSON,
JUDGES.
CLAYTON, CHIEF JUDGE: Kenneth Longstreath appeals from a summary
judgment granted by the Kenton Circuit Court to American Family Insurance
Company (“American Family”). At issue is whether Ohio or Kentucky law
governs the amount of underinsured motorist (“UIM”) coverage available under
Longstreath’s automobile insurance policy with American Family. Longstreath
argues that the application of Kentucky law is required under the express terms of
the policy, under Kentucky’s choice of law test, and as a matter of public policy.
Upon review, we affirm.
Longstreath was injured in a two-vehicle accident in Kentucky. At
the time of the accident, he was a resident of Ohio, his car was registered in Ohio,
and his automobile insurance policy with American Family was issued in Ohio.
After filing suit in Kenton Circuit Court, he settled with the other motorist, Tess
Jones, a resident of Kentucky, and her insurer, Safe Auto, for her policy limits of
$25,000. He also sought UIM benefits from American Family. His policy with
American Family provides for UIM benefits in the amount of $100,000. The
parties agree that under Ohio law, these UIM benefits would be reduced by
$25,000, the amount Longstreath recovered from the other motorist, whereas under
Kentucky law, there would be no offset.1 American Family moved for summary
judgment, arguing that under Kentucky’s choice of law principles, Ohio law
applies to the interpretation of the policy. The trial court granted the motion on the
grounds that Ohio had the most significant relationship to the transaction and the
parties. This appeal by Longstreath followed.
1
Longstreath relies on Kentucky Revised Statutes (“KRS”) 304.39-320(5) which states that
nothing “reduces or affects the total amount of [UIM] coverage available to the injured party.”
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In reviewing a grant of summary judgment, our inquiry focuses on
“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); Kentucky Rules of
Civil Procedure (“CR”) 56.03. The trial court must view the record “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 Service Center,
Inc., 807 S.W.2d 476, 480 (Ky. 1991). On the other hand, “a party opposing a
properly supported summary judgment motion cannot defeat it without presenting
at least some affirmative evidence showing that there is a genuine issue of material
fact for trial.” Id. at 482. “An appellate court need not defer to the trial court’s
decision on summary judgment and will review the issue de novo because only
legal questions and no factual findings are involved.” Hallahan v. The Courier-
Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).
Longstreath argues that the application of Kentucky law is required
(1) under the express language of his policy with American Family; (2) under
Kentucky’s most significant relationship test for choice of law; and (3) as a matter
of public policy.
Longstreath’s family car policy with American Family is comprised
of PART I – LIABILITY COVERAGE, which contains Sections A. through F.;
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PART II – CAR DAMAGE COVERAGES, which contains Sections A. through
G.; a GENERAL CONDITIONS section containing twelve numbered paragraphs;
and the following five endorsements found under the heading OHIO CHANGES:
LEASE/LOAN COVERAGE; CANCELLATION AND NONRENEWAL
ENDORSEMENT – OHIO; UNINSURED MOTORIST COVERAGE – OHIO;
MEDICAL EXPENSE COVERAGE – OHIO; AND EMERGENCY ROAD
SERVICE COVERAGE.
The provision relied upon by Longstreath is found in PART I –
LIABILITY COVERAGE under Subsection F, which is entitled ADDITIONAL
CONDITIONS. Paragraph 1 of Subsection F provides as follows:
1. Out of State Coverage.
This policy conforms to any motor vehicle insurance law
to which an insured person is subject by using a car in
any state. But, any broader coverage so afforded shall be
reduced to the extent that other auto liability insurance
applies. In no event shall a person collect more than
once for the same element of loss.
(Emphasis in original.)
Longstreath claims that the first sentence of Paragraph 1 – “This
policy conforms to any motor vehicle insurance law to which an insured person is
subject by using a car in any state” – means that his policy must conform to
Kentucky’s motor vehicle insurance laws with the result that the offset against his
UIM coverage for the $25,000 settlement would not be permitted.
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“Any contract or agreement must be construed as a whole, giving
effect to all parts and every word in it if possible.” Cantrell Supply, Inc. v. Liberty
Mut. Ins. Co., 94 S.W.3d 381, 384-85 (Ky. App. 2002) (citation omitted). When
the insurance policy is viewed as a whole, it is clear that Paragraph 1 is intended to
apply only to liability coverage under PART I and not to the Ohio-specific UIM
coverage provided in the endorsement. PARTS I and II each contain discrete
provisions that are pertinent only to those parts. The language at issue is not
repeated in the GENERAL CONDITIONS section nor is it found in the UIM
endorsement. From its placement in the policy, this paragraph applies only to
liability coverage. This interpretation is confirmed by the express language of the
UIM endorsement which provides in part that “[t]he limits of liability of this
coverage will be reduced by . . . [a]ll sums paid because of bodily injury by or on
behalf of persons or organizations who may be legally responsible.” (Emphasis in
original.) The preface to the endorsements states: “With respect to the coverage
provided by this endorsement, the provisions of the policy apply unless modified
by this endorsement.” Thus, even if Paragraph 1 of Subsection F was intended to
apply to UIM coverage, it would be modified by the UIM endorsement.
Next, Longstreath argues that Kentucky law should apply because it is
the state with the most significant relationship “to the transaction and the parties.”
Lewis v. American Family Ins. Group, 555 S.W.2d 579, 581-82 (Ky. 1977)
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(quoting RESTATEMENT OF CONFLICT OF LAWS 2d, sec. 188 (1971)). The “most
significant relationship” test is preferred because the validity of a contract and “the
rights created thereby are determined by the local law of the state which the parties
understood was to be the principal location of the insured risk during the term of
the policy, unless with respect to the particular issue, some other state has a more
significant relationship” to the transaction and the parties. Id. at 582. “Using this
test, in most cases the law of the residence of the named insured will determine the
scope of his automobile liability insurance policy.” Id. The trial court held that
Ohio had the most significant relationship to this case because Longstreath “is a
resident of Ohio, his vehicle was registered in Ohio, the policy was written in
Ohio, and the only contact with Kentucky was the accident.” Longstreath does not
dispute these facts but contends that other facts should be given more weight,
namely, that the accident occurred in Kentucky, he was injured in Kentucky, and
he filed suit seeking monetary recovery in a Kentucky court against a citizen of
Kentucky. He points out that an automobile and the risks associated with it are
transitory in nature and that the UIM coverage travelled with the automobile.
In Lewis, the Kentucky Supreme Court addressed a similar fact
pattern involving a choice of law between Indiana and Kentucky in an auto
insurance dispute. It concluded: “Because the insurance contracts in this case
were entered into in Indiana between Indiana parties and concerned automobiles
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which were licensed and garaged in Indiana, we are of the opinion that Indiana law
should govern the rights and liabilities of the parties under these contracts.” 555
S.W.2d at 582. More recently, the Court held that Pennsylvania law should apply
to the insurance contract of a Pennsylvania resident involved in an automobile
accident in Kentucky:
[The appellee], a Pennsylvania resident, entered into an
auto insurance contract in Pennsylvania that makes
specific reference to Pennsylvania law and that covers,
primarily, the vehicle she registered, garaged, and used
exclusively in Pennsylvania. The fortuitous fact that the
accident occurred in Kentucky is far outweighed by the
significant relationship Pennsylvania has with the parties
and the insurance transaction, and so, absent some
compelling reason not to apply our general choice-of-law
rule, Pennsylvania law should control.
State Farm Mut. Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875, 879 (Ky.
2013) (footnote omitted).
Guided by this precedent, and given the factual similarities among
these cases, we agree with the trial court that Ohio had the most significant
relationship to the contract and the parties in this case. Consequently, Ohio law
shall apply to this insurance dispute.
Finally, Longstreath argues that Ohio law should not be applied
because it contravenes Kentucky public policy. He relies on Philadelphia
Indemnity Insurance Company v. Morris, 990 S.W.2d 621 (Ky. 1999), which held
that the exclusive remedy provision of the Kentucky Workers’ Compensation Act
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would not preclude a worker injured in automobile accident at work from
recovering UIM benefits from the employer’s motor vehicle insurance policy. The
Court held that the UIM endorsement in the policy requiring such a set off was in
direct opposition to Kentucky public policy regarding UIM coverage, which was to
provide full recovery to the injured party. Id. at 627. As evidence of this public
policy, the Court relied on a 1988 revision of KRS 304.39-320, which removed
language decreasing UIM benefits by the amount of the tortfeasor’s liability
coverage. Morris, 990 S.W.2d at 627.
More recently, the Kentucky Supreme Court specifically addressed
whether an out-of-state insurance policy that did not provide UIM coverage
contravened Kentucky public policy. It was argued that this exclusion, which
applied if the insured was injured in an underinsured vehicle owned or regularly
used by a resident relative, “contravenes a Kentucky public policy against family
or household exclusions from insurance coverage and in favor of ‘fully
compensating’ accident victims, and so should not be enforced in Kentucky
regardless of its legality in Pennsylvania.” Hodgkiss-Warrick, 413 S.W.3d at 880.
The Supreme Court rejected this argument, stating
the fact that a contract, if made in Kentucky, would not
be enforceable as a matter of public policy, does not
necessarily mean that it is against public policy to
enforce such a contract when valid where made. If the
mere fact that Kentucky law differed from a sister state’s
law were enough to require the application of Kentucky
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law, after all, then there would be no choice of law
question, for Kentucky law would always apply in
Kentucky courts. To bar enforcement in the case where
the contract was valid where made, the Kentucky public
policy against enforcement must be a substantial one, a
“well-founded rule of domestic policy established to
protect the morals, safety or welfare of our people.”
(emphasis supplied). Where no Kentucky resident has
been affected, rarely will that standard be met. It is not
met here where the competing public policies –
supposing a Kentucky policy against this UIM exclusion
– concern only the balance to be struck between required
insurance coverage and insurance affordability, a balance
different states have assessed differently. Since here no
Kentucky resident is affected, nothing requires a
Kentucky court to interfere with the balance
Pennsylvania has chosen for its citizens.
Id. at 882-83 (citations omitted).
Thus, although a provision limiting UIM coverage in an insurance
contract entered into in Kentucky by Kentucky parties might be found to be
unenforceable as against Kentucky public policy, a different standard is applied to
the terms of a valid out-of-state contract. Longstreath is not a Kentucky resident;
his contract with American Family is valid under Ohio law; and Ohio law
regarding the UIM offset represents a competing public policy which Ohio has
chosen for its citizens. In light of these facts, the high standard set for barring
enforcement of the provision in his insurance contract on the basis of public policy,
as set forth in Hodgkiss-Warrick, has not been met.
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For the foregoing reasons, the summary judgment granted by the
Kenton Circuit Court to American Family is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Louis C. Schneider David A. Shearer, Jr.
Cincinnati, Ohio David W. Zahniser
Fort Mitchell, Kentucky
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