Robin Slone v. Kentucky Farm Bureau Mutual Insurance Company

RENDERED: FEBRUARY 25, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0185-MR
ROBIN SLONE APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE BRIAN C. EDWARDS, JUDGE
ACTION NO. 20-CI-004828
KENTUCKY FARM BUREAU MUTUAL
INSURANCE COMPANY APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; DIXON AND JONES, JUDGES.
CLAYTON, CHIEF JUDGE: Robin Slone (“Slone”) appeals from the Jefferson
Circuit Court’s order granting Kentucky Farm Bureau Mutual Insurance
Company’s (“KFB”) motion to dismiss Slone’s complaint. The complaint
requested a declaratory judgment regarding Slone’s underinsured motorist
(“UIM”) coverage with KFB. Finding no error, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Slone and Michael Conley were involved in a motor vehicle collision
on March 4, 2018, in Johnson County, Kentucky, in which Slone sustained
injuries. KFB insured Slone’s vehicle. Slone settled her third-party claims against
Conley and then asserted a claim for UIM coverage against KFB under Slone’s
policy.
Under the heading “General Policy Coverages,” Slone’s policy stated
that her UIM coverage was $100,000 per person and $300,000 per accident. Slone
paid a single premium amount of $101.70.
During the negotiation of Slone’s UIM claims, Slone argued that she
was entitled to “stack” her UIM coverage in the amount of $300,000 because KFB
insured three vehicles under Slone’s policy. KFB agreed to settle the claim for
$100,000, arguing that one UIM coverage limit existed regardless of the number of
vehicles listed on the policy.
Upon KFB’s payment of the $100,000 to Slone, Slone signed a
release agreement acknowledging receipt of $100,000 from KFB (the “Release
Agreement”). The Release Agreement contained language that it did not release
any other claims that either party may have against the other, including any claims
Slone may have for the additional “stacked” UIM coverage.
-2-
Moreover, the Release Agreement stated that both parties mutually
understood that the claim was “disputed” and that KFB was making no “admission
of liability” for even the $100,000 paid by KFB. Additionally, the Release
Agreement stated that Slone did:
declare and represent that the injuries sustained, and that
recovery therefrom, is uncertain and indefinite, and in
making this release and agreement it is understood and
agreed that [Slone relied] wholly upon [her] own
judgment, belief, and knowledge of the nature, extent,
and duration of said injuries, and that [Slone had] not
been influenced to any extent whatsoever in making this
release by any representations or statements regarding
said injuries, or regarding any other matters, made by the
persons, firms or corporations who are hereby released,
or by any person or persons representing them, or by any
physician or surgeon employed by them.
Slone subsequently filed a complaint against KFB on August 19,
2020, requesting a declaratory judgment from the circuit court that her KFB policy
provided $300,000 in UIM coverage. Slone made no claim in her complaint that
the value of her bodily injury damages following the collision exceeded $135,000,
which represented the sum of the personal injury protection (“PIP”) benefits paid
to her by KFB, the settlement amount she had reached with Conley, and the
$100,000 in UIM coverage amounts KFB paid to her.
Thereafter, KFB filed a motion to dismiss Slone’s complaint, or in the
alternative, to bifurcate and stay Slone’s claim for declaratory judgment. The
circuit court held a hearing and ultimately granted KFB’s motion to dismiss.
-3-
Specifically, the circuit court determined that declaratory relief was not available
in this matter because, under Coots v. Allstate Insurance Company, 853 S.W.2d
895 (Ky. 1993), no actual, justiciable controversy existed but rather “simply a
request for an advisory opinion.” Id. at 904. The circuit court held that Slone was
first required to establish that her compensable damages exceeded the settlement
funds already received for the court to issue a declaratory judgment.
The circuit court further held that, in this case, the UIM coverage was
not appropriate for “stacking,” as the policy’s language indicated that it was not a
case of separate premiums under the guise of one premium, as in Estate of Swartz
v. Metropolitan Property & Casualty Company, 949 S.W.2d 72 (Ky. App. 1997),
but instead one premium providing coverage. This appeal followed.
ANALYSIS
a. Standard of Review
As stated by the Kentucky Supreme Court, because “a motion to
dismiss for failure to state a claim upon which relief may be granted is a pure
question of law, a reviewing court owes no deference to a trial court’s
determination; instead, an appellate court reviews the issue de novo.” Fox v.
Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (citation omitted).
-4-
b. Discussion
Slone first argues that the case presents an “actual controversy,” and
consequently, that the circuit court erred in its determination that declaratory relief
was inappropriate. Kentucky Revised Statutes (“KRS”) 418.040 states that a
“plaintiff may ask for a declaration of rights” when “it is made to appear that an
actual controversy exists[.]” (Emphasis added.) Accordingly, the first question
one must ask in a declaratory judgment case is not whether any “present
controversy” exists between the parties, but rather whether the claim represents “a
justiciable controversy over present rights, duties or liabilities.” Dravo v. Liberty
Nat’l Bank & Trust Co., 267 S.W.2d 95, 97 (Ky. 1954) (emphasis added).
Thus, the focus is on whether the claim involves a “justiciable
controversy” concerning a “present right.” Id. A “justiciable controversy” does
not include questions “which may never arise or which are merely advisory, or are
academic, hypothetical, incidental or remote, or which will not be decisive of any
present controversy.” Id. (citations omitted). Further, the definition of a “present
right” varies depending on the type of declaratory actions.
Nevertheless, in a UIM case, the Kentucky Supreme Court has made
clear that benefits only become payable – and a right to payment only exists –
when the value of the underlying claim is established. State Farm Mutual
Automobile Insurance Company v. Riggs, 484 S.W.3d 724, 729 (Ky. 2016).
-5-
Indeed, “the liability of the tortfeasor and the amount of damages sustained are
elements that must be established in measuring the UIM carrier’s obligation[.]” Id.We agree with the circuit court that, as was the situation in Coots, in
this case, it had “yet to be factually determined that the damages sustained [were]
in an amount that exhaust[ed] and exceed[ed] the limits on [the] UIM policies so as
to raise the question of additional coverage to the level of a case in controversy
rather than simply a request for an advisory opinion.” Coots, 853 S.W.2d at 904.
Therefore, before Slone could establish a “present right” to compensation above
the insurance proceeds that she had already received, any opinion on the potential
availability of additional “stacked” insurance would be “advisory” only. Bank One
Kentucky NA v. Woodfield Financial Consortium LP, 957 S.W.2d 276, 279 (Ky.
App. 1997). Until Slone demanded a fixed value implicating the additional UIM
benefits, no “present actual controversy” existed for the court to decide. Black v.
Elkhorn Coal Corp., 233 Ky. 588, 26 S.W.2d 481, 483 (1930).
In this case, the record reflects that Slone has not established any
“present right” to additional UIM coverage. Indeed, KFB never stipulated or
agreed to the amount of Slone’s tort or UIM claims in any way or at any point
during the litigation. Moreover, nowhere in the Release Agreement did KFB
acknowledge Slone’s evaluation of her claim, in fact stating that KFB believed the
claim to be “disputed” and that there was “no admission of liability” for even the
-6-
amounts that KFB paid to Slone. In the end, to empower a court to consider issues
of “stacking,” a present right to the contested benefits must be established – either
by stipulation, agreement, or litigation. Consequently, we affirm the circuit court’s
decision to dismiss the case based on the lack of an actual controversy.
However, as already discussed, the circuit court in this case also found
in its opinion that stacking was not applicable to the UIM coverage in this case.
Thus, we will also address Slone’s claim that the circuit court erred in deciding the
stacking issue against Slone. We find Adkins v. Kentucky National Insurance
Company to be dispositive of the issue. 220 S.W.3d 296 (Ky. App. 2007). While
Adkins deals with uninsured motorist (“UM”) coverage rather than UIM coverage,
“[b]ecause there is no rational distinction between UM and UIM coverage for
purposes of aggregation or stacking,” we find both its analysis and its holding to
apply to the case sub judice. Id. at 299. In Adkins, Kathleen Adkins was killed in
an automobile collision. Id. at 297. The at-fault driver was not insured at the time
of the accident. Id. Kathleen and her husband had UM coverage via a policy
issued by Kentucky National. Id.At the time of issuance, the Adkins’s UM policy provided insurance
coverage for two vehicles. Id. Sometime thereafter, the Adkinses added an
additional vehicle to their coverage. Id. After adding the third vehicle, the
Adkinses began paying three separate premiums for UM coverage, representing
-7-
one unit of coverage per vehicle. Id. Each UM coverage premium cost $32 for
$50,000 of UM coverage, for a total of $96 in premium payments representing
$150,000 of stacked coverage. Id.Before the policy’s renewal date, Kentucky National mailed to the
Adkinses renewal materials, including a written notice of changes to their
coverage. Id. Specifically, Kentucky National stated that it would begin charging
a single UM premium for the three units of coverage on the three vehicles rather
than three distinct premiums as had previously been done. Id. As noted by the
Court, “[t]he apparent purpose of this change–though not stated in the notice–was
to prevent the stacking of the three units of UM coverage.” Id. The Adkinses
accepted the new coverage and began paying premiums according to its terms. Id.After Kathleen’s death, Kathleen’s estate sought payment from
Kentucky National of $150,000. Id. Kentucky National offered to pay a non-
aggregate – or “non-stacked” – coverage limit of $50,000. Id. Rejecting the offer,
Kathleen’s estate filed an action. Id.The circuit court ultimately granted summary judgment in favor of
Kentucky National, finding that it had given the Adkinses proper notice of the
policy change affecting the UM coverage, that the Adkinses had accepted the
change when they renewed the policy, and that Kathleen’s estate was entitled to
one unit of UM coverage, or $50,000. Id.-8-
On appeal, the Court determined that there was no basis to overturn
the summary judgment on appeal. Id. at 298. Specifically, the Court pointed to the
notice sent to the Adkinses, which contained language identical to the language in
the notice in this case. Id. Moreover, the Court highlighted the following language
in the notice provided by Kentucky National: “Only one charge is made for this
coverage per policy and coverage is limited to the coverage limits shown on the
declarations page.” Id. (Emphasis in original.) Based on this “clear and
unambiguous” language, the Court found that the record supported the circuit
court’s conclusion that the Adkinses received notice of the change in UM coverage
and consented to the change by accepting the new policy and tendering the
premiums. Id. at 298-99.
Moreover, the Court, after discussing Marcum v. Rice, 987 S.W.2d
789 (Ky. 1999) and Swartz, 949 S.W.2d 72, held that “an insurer is not required to
stack multiple units of UM coverage which have been paid by a single premium, if
that premium is not based on the number of vehicles insured” and is actuarially
based. Adkins, 220 S.W.3d at 299-300.
Specifically, a panel of this Court in Swartz made clear that “an
insurance company could, through the calculation and adoption of an actuarially
appropriate premium, charge an insured a single UIM fee regardless of the number
of vehicles covered under the policy, entitling that insured to only one unit of UIM
-9-
protection[.]” 949 S.W.2d at 77 (original emphasis omitted, new emphasis added).
However, because the insurer in Swartz did not base its premium on an actuarial
calculation of risk but rather multiplied its single-vehicle premium rate by the
number of insured vehicles, Swartz therefore stands for the proposition that this
“simple multiplication” approach necessitates stacking. Id.The Court’s conclusion in Swartz that insurance companies may
account for risk when setting UIM premium rates was affirmed by the Kentucky
Supreme Court in Marcum. 987 S.W.2d at 790-91. Although the insurance
company in Marcum did not charge its insureds multiple premiums for UIM
coverage on different vehicles, it allowed them to purchase UIM coverage for any
individual in an amount of up to $1 million. Id. The Court found that because the
UIM premium was based on an assessment of the risk of loss incurred by the
insurance company and did not “vary according to the number of vehicles covered
by the policy[,]” stacking was inappropriate. Id.
In this case, based on the pleadings, it is uncontroverted that Slone
received the notice from KFB indicating that KFB was no longer calculating UIM
coverage on a per-vehicle basis, that Slone was being charged one premium for
UIM coverage, that coverage was limited to the coverage limits shown on the
declarations page, and that the UIM premium being charged was based on actuarial
calculations of risk and not based on the number of vehicles insured. Thus, we
-10-
affirm the circuit court’s conclusion that stacking was not applicable in this
situation.
CONCLUSION
We affirm the order of the Jefferson Circuit Court.
DIXON, JUDGE, CONCURS.
JONES, JUDGE, CONCURS IN RESULT ONLY.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Kirk Hoskins Valerie W. Herbert
Louisville, Kentucky Brian D. Stempien
Louisville, Kentucky
-11-