Lauren Savage Individually v. Allstate Insurance Company

RENDERED: JANUARY 15, 2021; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2017-CA-0615-MR
LAUREN SAVAGE, INDIVIDUALLY
AND AS ADMINISTRATRIX OF THE
ESTATE OF JAMES SAVAGE APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE FREDERIC J. COWAN, SPECIAL JUDGE
ACTION NO. 12-CI-006824
ALLSTATE INSURANCE COMPANY;
PROPERTY & CASUALTY INSURANCE
COMPANY OF HARTFORD;
CO-PART OF CONNECTICUT, INC.;
D/B/A CO-PART AUTO AUCTIONS;
WILLIS JOHNSON; PAUL STYER;
WILLIAM FRANKLIN; TOM TAYLOR;
DANIEL BOND; CHAPA, INC. D/B/A
CHAPA AUTO SALES; MARGARITA CHAPA;
OSCAR RAMOS; LIBERTY MUTUAL FIRE
INSURANCE COMPANY;
VENTURA FELIX BARRAZA; AND
AUTOS USADOS FELIX APPELLEES
OPINION
AFFIRMING IN PART,
REVERSING IN PART,
AND REMANDING
** ** ** ** **
BEFORE: COMBS, DIXON, AND MAZE, JUDGES.
MAZE, JUDGE: Lauren Savage, individually and as Administratrix of the Estate
of James Savage (collectively, “the Estate”) appeals from a judgment of the
Jefferson Circuit Court confirming a jury verdict. The Estate raises multiple issues
involving quashing of service on a defendant who is a foreign national; dismissal
of its claims against the insurance companies; dismissal of several statutory claims
against Co-part of Connecticut, Inc., d/b/a Co-part Auto Auctions (Co-part);
denials of motions to file amended complaints; various evidentiary rulings; the
denial of its motion for a directed verdict against Co-part; and the granting of a
directed verdict on its claim for punitive damages. For the reasons that follow, we
affirm the orders and judgment on all matters except as to the claims against Co-
part. We conclude that the trial court erred by dismissing several statutory claims
and abused its discretion in several evidentiary rulings. Hence, we reverse the
judgment in favor of Co-part with respect to those matters, and we remand for a
new trial against Co-part.
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I. FACTUAL HISTORY
This is a multi-party action relating to an automobile accident that
occurred on March 6, 2012. The underlying facts and relationships among the
parties are unique and defy simple explanation. Likewise, the procedural history
and complex issues presented would be difficult to imagine if presented as a fact-
pattern for an essay question on the bar examination. Therefore, we shall first set
out the parties and the factual history of this matter, followed by the procedural
history of this action.
Co-part provides online motor vehicle auction services. It maintains
facilities throughout the country, and most relevant to this case, has locations in
Finksburg, Maryland and Louisville, Kentucky. Co-part is a licensed motor
vehicle dealer and auction dealer in both Maryland and Kentucky. Among other
things, Co-part contracts to store and sell salvage vehicles on behalf of insurance
companies who have acquired them after declaring them a total loss.
Prior to the accident, Allstate Insurance Company (Allstate) acquired
title to a totaled 2003 Toyota Tacoma from an insured. Thereafter, Allstate
obtained a Maryland salvage title and delivered the vehicle to Co-part’s Maryland
location. Similarly, Property and Casualty Insurance Company of Hartford
(Hartford) acquired title to a totaled 2004 Jeep Wrangler from an insured. Hartford
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delivered the Jeep and the Kentucky salvage title documents to the Co-part
location in Louisville.
Under its service agreements with insurance companies, Co-part is
required to do a “run and drive” verification and to state in its auction description
whether the vehicles are drivable or towable. The service agreements also required
Co-part to maintain tires on all vehicles where practicable. The agreements
permitted Co-part to refuse to release any vehicle for any reason. Co-part
advertised the Toyota as drivable but determined that the Jeep was in a non-run
and non-towable condition. Co-part included these descriptions in its online
advertising of the vehicles.
Sales and delivery of vehicles are limited only to paid Co-part
“members.” Members receive a number, which is used to access Co-part auctions.
Members also use the number to fund a credit balance for payment of online
auction purchases. Co-part facilitates the transfer of title from the insurer to the
buyer. Co-part either offers to deliver a purchased vehicle to the buyer for a fee or
releases the vehicle to an authorized representative of the buyer. In the case of the
latter, the representative must present the buyer identification number and the lot
number of the specific vehicle. Upon receipt of this information, Co-part would
deliver the vehicle to the buyer at a “bullpen” within Co-part’s compound. In the
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case of a salvage or non-drivable vehicle, Co-part would deliver the vehicle to the
bullpen using a forklift.
In February, the vehicles were sold to Ventura Felix Barraza d/b/a
Autos Usados Felix (AUF), a used auto and parts dealer located in Los Mochis,
Sinaloa, Mexico.1 AUF sent Oscar Ayon Ramos (Ramos) to pick up the vehicles.
On his way to pick up the vehicles, Ramos obtained two Arizona Restricted Use
Three-Day Permits2 through Chapa Auto Sales (Chapa), a used car-dealer located
in El Paso, Texas. Ramos then proceeded to Maryland to pick up the Toyota.
1
The record indicates that Barraza is an individual who operates AUF as a sole proprietorship.
Unless the context requires otherwise, we will refer to both as “AUF.”
2
The website of the Arizona Department of Transportation, Motor Vehicle Department,
describes the Permit as follows:
A Restricted Use 3-Day Permit allows a person to operate an
unregistered vehicle or a vehicle with a suspended registration
from the present location of the vehicle to a specified destination.
The Restricted Use 3-Day Permit is valid only for the following
purposes only:
• Emissions Testing
• Vehicle Inspection
• Application for Title and/or Registration
• Vehicle repair to comply with Emissions or Inspection
The Restricted Use 3-Day Permit is valid only for these stated
purposes. Travel for any other purpose, including commercial
interstate movement, is strictly prohibited.
Customer Advisory: misuse of this permit is a violation of
Arizona Revised Statutes, Title 28, Chapter 7, Article 16,
subjecting the violator to civil and/or criminal penalties.
https://servicearizona.com/applicationFAQ/3day (last accessed October 16, 2020).
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Following the online sales, Co-part, on Allstate’s behalf, executed an
assignment and warranty of title on the Toyota’s Certificate of Salvage in favor of
AUF. Similarly, Co-part, on Hartford’s behalf, executed a transfer of the Jeep’s
Kentucky Salvage title to AUF. AUF directed Co-part to deliver the title
document to the Jeep to “Ramon Martar Bubio,” and Co-part’s records indicate
that it did so on March 2, 2012.
On March 5, 2012, Ramos appeared at Co-part’s Maryland facility.
He provided the AUF member number and lot number of the Toyota. Co-part then
delivered the Toyota to Ramos. Co-part also gave Ramos the Toyota’s Certificate
of Salvage, which it had executed on behalf of Allstate.
Ramos then affixed the Arizona Permit to the Toyota and drove the
vehicle to Co-part’s Louisville facility. On March 6, he arrived at the Louisville
facility, where he presented the AUF member number and lot number of the Jeep.
As with the Toyota, Co-part executed the dealer assignment portion of the Jeep’s
title on Hartford’s behalf. At the direction of AUF, the title was delivered to Bubio
on March 2.
Upon receipt of the documentation, Co-part delivered the Jeep to
Ramos. Ramos then affixed the Arizona Permit to the Jeep and attached a tow bar
between the Toyota and the Jeep. Ramos then left the Co-part facility with the
Jeep being towed by the Toyota.
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Several hours later,3 while driving on I-65 in Louisville, Ramos lost
control of the vehicles while changing lanes. James Savage was riding a
motorcycle in the same vicinity. There was testimony that another vehicle had lost
a load of wooden pallets, requiring other drivers to swerve to avoid them. There
was also testimony that Savage struck one of the pallets and was thrown from his
motorcycle. Ramos’ vehicles side-swiped a tractor-trailer truck, and then ran over
Savage, who was lying in the roadway. Savage was killed at the scene. Additional
facts will be set forth below as necessary.
II. PROCEDURAL HISTORY
Subsequently, Lauren Savage qualified as Administratrix of the Estate
of James Savage. On December 27, 2012, the Estate and Lauren Savage
individually filed a complaint asserting claims arising from the accident. The
complaint named: (1) Allstate, as owner of the Toyota; (2) Hartford, as owner of
the Jeep; (3) Ramos; (4) Co-part; (5) Co-part founder and Chief Executive Officer
Willis Johnson; (6) Co-part general counsel and Executive Vice-President Paul
Styer; (7) Co-part Chief Financial Officer and Executive Vice-President William
Franklin; (8) Tom Taylor, manager of Co-part’s Louisville facility; (9) Daniel
3
Approximately five and a half hours lapsed between Co-part’s release of the Jeep at the
Louisville facility and the accident. Furthermore, the accident occurred only a few miles away
from Co-part’s facility. There was no evidence concerning the location of Ramos or the vehicles
during this period.
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Bond, employee of Co-part’s Louisville facility; and (10) Chapa, Inc. d/b/a Chapa
Auto Sales, the El Paso dealership which obtained the Restricted Use Permits for
Ramos, and Margarita Chapa, owner of Chapa Auto Sales (collectively, “Chapa”).
The Estate attempted to serve Ramos through the Kentucky Secretary
of State’s office, using the address listed on Ramos’ Mexican driver’s license.
Ramos appeared specially to contest the sufficiency of service on him, arguing that
he was not properly served as a foreign national. The trial court agreed and
entered an order on September 24, 2013, quashing service on Ramos. As
discussed below, the Estate attempted a second service on Ramos through Chapa
after the trial in this matter.
Subsequently, Co-part filed a third-party complaint naming AUF and
Ramos. Service of that complaint was never effected on Ramos. Barraza, on
behalf of AUF, filed a pro se response using an address in Mooresville, Indiana.
However, all subsequent attempts at service using that address were returned as
undeliverable.
Margarita Chapa filed an answer to the complaint but did not
otherwise participate in the proceedings. Since Chapa did not respond to any of
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the requests for admission, they were deemed admitted. Among these included an
admission that Ramos was acting as an employee or agent of Chapa. 4
The Estate asserted that Allstate remained the owner of the Toyota
and Hartford remained the owner of the Jeep for insurance purposes. The Estate
also asserted that Co-part should be considered an owner of both the Toyota and
the Jeep for insurance purposes because it failed to obtain proof of insurance prior
to releasing the vehicles to Ramos.
Separately, the Estate asserted claims against Co-part for negligence,
negligent entrustment, and violations of its statutory duties as an auto dealer. The
Estate also asserted claims against Co-part executives Johnson, Styer, and Franklin
for negligent hiring, supervision, and training of Co-part employees. And the
Estate asserted claims against Louisville Co-part employees Taylor and Bond for
their actions in releasing the Jeep to Ramos. Liberty Mutual, the insurance carrier
for Co-part, provided a defense for Co-part, its officers and employees. However,
Liberty Mutual did not provide a defense for Chapa or the absent defendants AUF
and Ramos.
4
In the pro se pleading, Margarita Chapa asserted that Ramos was never an employee of Chapa.
This assertion was properly disregarded for several reasons. First, Margarita Chapa had no
authority to file pleadings on behalf of the purported corporate entity, Chapa, Inc. Second and
more importantly, Margarita Chapa and Chapa Auto Sales failed to respond to any additional
pleadings and did not further participate in the action. Thus, the Estate’s claim that Ramos was
acting as an employee or agent of Chapa was deemed admitted.
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In 2014, the Estate filed a motion for leave to file an amended
complaint asserting that Allstate, Hartford, and Co-part were engaged in a joint
venture, joint enterprise, or partnership. The trial court denied the Estate’s motion
to file the amended complaint.
Later in 2014, Allstate, Hartford, and Co-part each filed motions for
summary judgment. Allstate and Hartford each argued that any ownership interest
in the vehicles passed to AUF upon transfer and delivery of the titles. The
insurance companies separately moved for a judgment finding that they had no
obligation to insure either the Toyota or the Jeep.
Similarly, Co-part moved for summary judgment on the Estate’s claim
that it had an ownership interest which obligated it to insure the vehicles. Co-part
and Hartford each moved for a judgment finding that the Jeep was not being
operated so as to require insurance coverage. Co-part also moved for summary
judgment on the negligent entrustment claims and to dismiss the claims against its
executives. And the Estate also filed a motion for partial summary judgment
regarding insurance coverage on the vehicles.
Thereafter, the trial court issued a series of orders addressing the
motions. On October 29, 2014, the trial court granted Allstate’s motion for
summary judgment. The court found that Allstate had properly transferred the
Certificate of Salvage to AUF under Maryland law prior to the transfer of
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possession of the Toyota vehicle. Consequently, the court concluded that Allstate
had no duty to maintain or insure the vehicle after the sale. Accordingly, the trial
court dismissed the claims against Allstate.
On the other hand, the trial court denied Hartford’s motion for
summary judgment. While the court concluded that Hartford had properly
transferred title to the Jeep under Kentucky law, the court also found that there
were issues of fact concerning the extent of the agency relationship between
Hartford and Co-part. Because these issues implicated Hartford’s liability for Co-
part’s alleged negligence, the court concluded that Hartford was not entitled to be
dismissed at that point in the proceedings.
The trial court next denied the Estate’s motions for partial summary
judgment on the issues of insurance coverage of both vehicles and “operation” of
the Jeep. Because both vehicles had salvage titles, neither vehicle could be
lawfully operated on Kentucky highways. Even though the Toyota was being
unlawfully operated, the court determined that it was not subject to the mandatory
insurance requirement at the time of transfer. The court also held that the Jeep was
not being “operated” within the meaning of KRS5 186A.520(6) because it was
5
Kentucky Revised Statutes.
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being towed by the Toyota. Therefore, the court determined that the Jeep was not
subject to the mandatory insurance requirement at the time of transfer.
On January 6, 2015, the trial court granted Co-part’s motion for
summary judgment on the Estate’s claims for violations of KRS 186A.065,
186A.100, 186A.520, 186A.540, 189.020, 189.100 and 189.290. The court
determined that these sections were not applicable because the titles to the vehicles
had been transferred before delivery to Ramos, the transfer of the Toyota was not
subject to Kentucky law, and neither vehicle was subject to the mandatory
insurance and verification requirements. However, the court denied the motion for
summary judgment with respect to the Estate’s claims against Co-part for
negligence, negligent entrustment and violations of KRS 189.224 and 189.226.
Following entry of these orders, Hartford filed a motion to reconsider
the denial of its motion for summary judgment. On June 11, 2015, the trial court
granted Hartford’s motion, finding that “a closer review of the agreement between
Co-part and Hartford limits the agency relationship between them such that
Hartford would not have control over Co-part’s agreements with its buyers.” In
the absence of any evidence that Hartford exercised control over Co-part’s sale and
delivery of the Jeep, the court determined that it could not be liable for any
negligence by Co-part. In the same order, the court denied the motion to
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reconsider its denial of summary judgment on the Estate’s remaining claims
against Co-part and its employees, Taylor and Bond.
Co-part then filed motions for summary judgment on the Estate’s
claims for punitive damages and pain and suffering. Co-part also moved to limit
the Estate’s evidence of Savage’s loss of power to earn money. And Co-part filed
a motion to reconsider the partial denial of its motion for summary judgment on
the Estate’s claims against it and its executives Johnson, Styer, and Franklin.
On November 10, 2015, the trial court entered orders on the motions.
The court denied Co-part’s motion for summary judgment on punitive damages but
granted it on the Estate’s claims for Savage’s pain and suffering. On the latter
issue, the court found no evidence to dispute the allegation that Savage was
unconscious from the point of impact until his death.
Separately, the court granted Co-part’s motion to exclude evidence of
Savage’s receipt of Social Security Disability (SSD) benefits and his loss of
earning capacity. The court found that Savage’s permanent disability at the time of
death left him without the power to labor and that disability benefits do not
constitute the power to earn. However, the court found that evidence of Savage’s
potential pension benefits was admissible.
Finally, the trial court granted Co-part’s motion to reconsider its
denial of summary judgment on the claims against Johnson, Styer, and Franklin.
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The court determined that that the executives could not be individually liable for
negligence of the corporation or its agents. Therefore, the court dismissed these
claims.
During the lead-up to trial, the parties filed several motions on
evidentiary and procedural issues. Co-part filed motions to exclude or limit the
testimony of the Estate’s experts. Co-part also moved to exclude testimony or
evidence concerning its duties as a used car dealer. In addition, Co-part sought to
withdraw or amend its prior admission that Ramos “drove out” the Toyota from the
Maryland facility. Co-part also filed objections to the testimony of the Estate’s
experts and moved to exclude any reference to Allstate, Hartford, or Liberty
Mutual.
For its part, the Estate also filed objections to the testimony of Co-
part’s experts. Similarly, the Estate moved to exclude evidence that Savage was
not wearing a helmet, as well as any evidence of his prior medical history and use
of pain medication.
In orders entered on December 1, 2015, the trial court ruled on the
objections to the deposition testimony and Co-part’s motion to withdraw its
admission. In pertinent part, the trial court granted Co-part’s motions to exclude
testimony concerning the insurance carriers and to limit testimony offered by the
Estate’s experts. Separately, the court denied the Estate’s motion to limit
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introduction of bulk medical records. The court also denied the Estate’s motions to
exclude testimony offered by Co-part’s accident-reconstruction experts. And the
court denied the Estate’s motion to exclude testimony that Savage was not wearing
a helmet and his prior use of pain medication. However, the court granted the
Estate’s motion to exclude any reference to Savage’s prior criminal history.
On December 8, 2015, the trial court entered an order granting Co-
part’s motion to exclude the testimony of the Estate’s expert, Larry Craig. The
court also granted Co-part’s motion to limit the testimony of Officer Samuel
Cromity as only a fact witness and not an expert. Finally, the court granted Co-
part’s motion to exclude any evidence concerning Co-part’s transfer of the Toyota
but held that the Estate could present circumstantial evidence that Ramos drove the
Toyota from Maryland to Kentucky.6
The Estate then moved to file an amended complaint against Liberty
Mutual to extend coverage under Co-part’s policy to Chapa, Ramos, and AUF.
The amended complaint also sought to add AUF and Barraza as defendants. The
trial court denied the motion to file an amended complaint as untimely.
6
Following entry of these orders, the trial judge recused herself after learning of a previously-
undisclosed relation to the Estate’s administrator. The case was reassigned to a different division
of the Jefferson Circuit Court. However, the judge of that division was unable to hear the case,
leading to the assignment of a special judge, who handled the pre-trial motions, jury trial, and
post-trial motions.
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Heading into 2016, the parties continued to file motions on
evidentiary issues. The court addressed these motions in an order entered on May
20, 2016. In relevant part, the court denied the Estate’s motion to introduce
evidence of payments by Liberty Mutual to Co-part’s experts. Similarly, the court
declined to revisit its prior rulings concerning the admissibility of the testimony of
the Estate’s experts, Samuel Cromity, Scott Borrows, Sonny Cease, and Larry
Craig.
The court also denied the Estate’s motion to refer to Co-part as a used
car dealer in Kentucky Motor Vehicle Commission (MVC) documents and to
introduce regulations and documents from the MVC outlining Co-part’s duties as a
used car dealer. Finally, the trial court denied the Estate’s motion to reconsider its
prior order granting Co-part’s motion to withdraw its admission. The court found
that the Estate was not unfairly prejudiced by the withdrawal. The court noted that
the Estate was aware of factual issues regarding whether Ramos drove the Toyota
out of the Maryland facility since at least April 2014, but the Estate chose not to
pursue any discovery on the issue.
The case then proceeded to a jury trial in late May and early June of
2016. At the close of proof, the Estate moved for a directed verdict on liability
against Co-part, Taylor and Bond on the claims for negligent entrustment, training,
and supervision. The trial court denied the motion. Co-part, Taylor, and Bond
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also moved for a directed verdict on punitive damages, which the trial court
granted.
The trial court then instructed the jury on the remaining claims against
Co-part, Taylor, Bond and the defaulting Chapa. The jury found no negligence on
the part of Co-part, Taylor or Bond. Rather, the jury determined that Chapa,
through its agent Ramos, was solely at fault for the damages. The jury awarded the
Estate a total of $75,164.00 in compensatory damages and $5,000,000.00 in
punitive damages. The jury also awarded Lauren Savage $500,000.00 for her loss-
of-consortium claims.
Following the trial, the Estate filed an amended complaint against
Liberty Mutual, asserting claims for the liability of Chapa and Ramos under Co-
part’s policy. The Estate also issued an alias summons to Ramos at Chapa’s Texas
address. The Estate asserted that service at that address was proper because Chapa
had admitted that Ramos was acting as its agent or employee. Based upon this
service, the Estate also sought a default judgment against Ramos.
Liberty Mutual objected to the filing of the amended complaint,
stating that it did not have notice of any claims against Chapa and Ramos under
Co-part’s policy. Thus, Liberty Mutual argued that it was unfairly prejudiced by
the amended complaint because it never undertook to provide a defense to those
parties. Separately, the Estate filed motions to reconsider the court’s prior rulings
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regarding Allstate’s ownership of the Toyota and Hartford’s ownership of the Jeep.
In an order entered on October 18, 2016, the trial court denied the motions to
reconsider.
Following briefing and oral arguments on the remaining issues, the
trial court entered its trial verdict and judgment on January 9, 2017. The trial court
confirmed the jury verdict against Chapa alone. In a separate order entered on
January 19, 2017, the trial court: (1) quashed the service of the amended
complaint against Ramos; (2) denied the motion for a directed verdict against
Ramos; and (3) dismissed the amended complaint against Liberty Mutual.
Shortly after entry of this order, the Estate filed motions to alter,
amend or vacate, for a judgment notwithstanding the verdict,7 or for a new trial.8
The trial court denied these motions on March 9, 2017. This appeal followed.
Additional procedural history will be set forth below as necessary.
III. ISSUES
The Estate’s brief identifies twenty-four separate issues on appeal.
These issues may be grouped as follows: (1) sufficiency of service on Ramos; (2)
Allstate’s ownership of the Toyota; (3) Hartford’s ownership of the Jeep; (4) the
insurers’ liability for negligence, negligent entrustment, and statutory violations;
7
Kentucky Rules of Civil Procedure (CR) 59.05.
8
CR 59.01.
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(5) Co-part’s obligation to provide insurance coverage on the vehicles; (6) the
denial of the Estate’s motions to file an amended complaints; (7) scope of Co-
part’s liability for statutory violations; (8) dismissal of the Estate’s claims against
Johnson, Styer, and Franklin; (9) evidentiary and trial issues; (10) directed verdict
issues; and (11) modification of the judgment against Chapa. We will address
these issues in order.
IV. SUFFICIENCY OF SERVICE ON RAMOS
The Estate first challenges the trial court’s decisions to quash the
service of process on Ramos twice. Because the accident occurred in Kentucky,
Ramos was subject to personal jurisdiction for “[c]ausing tortious injury by an act
or omission in this Commonwealth . . . .” KRS 454.210(2)(a)3. The Estate further
relies on KRS 188.020, which provides that:
Any nonresident operator or owner of any motor vehicle
who accepts the privilege extended by the laws of this
state to nonresidents to operate motor vehicles or have
them operated within state shall, by such acceptance and
by the operation of such motor vehicle within this state,
make the Secretary of State the agent of himself or his
personal representative for the service of process in any
civil action instituted in the courts of this state against the
operator or owner, or the personal representative of the
operator or owner, arising out of or by reason of any
accident or collision or damage occurring within this
state in which the motor vehicle is involved.
Pursuant to this section, the Estate served its initial complaint on the Kentucky
Secretary of State’s office. That office then forwarded it to the address listed on
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Ramos’ Mexican driver’s license, which he provided to the police at the scene of
the accident.
Appearing specially, Ramos argued that service of process on a
foreign national is subject to the requirements of the Hague Convention on the
Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial
Matters (the Hague Convention). The trial court agreed and quashed the service,
concluding that the Estate failed to comply with the requirements of the Hague
Convention. The Estate argues that the Hague Convention is not applicable
because service on the statutorily-designated agent was sufficient to bring Ramos
before the court.
The application of the Hague Convention is an issue of law, which we
review de novo. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky. App. 1998). The
Hague Convention is a multilateral treaty “intended to provide a simpler way to
serve process abroad, to assure that defendants sued in foreign jurisdictions would
receive actual and timely notice of suit, and to facilitate proof of service abroad.”
Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698, 108 S. Ct.
2104, 2108, 100 L. Ed. 2d 722 (1988). The treaty requires each signatory to
establish a central authority that receives international service requests and
thereafter serves documents “by a method prescribed by the internal law of the
receiving state or by a method designated by the requester and compatible with that
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law.” Id. at 699, 108 S. Ct. at 2107. By virtue of the Supremacy Clause of the
Constitution of the United States, Article VI, the Convention “preempts
inconsistent methods of service prescribed by state law in all cases in which it
applies.” Id. at 699, 108 S. Ct. at 2108.
The parties agree that Ramos is a citizen of Mexico. The United
States and Mexico are signatories of the Hague Convention. Service through
Mexico’s Central Authority is the exclusive method of service of process on
parties in Mexico under the Hague Convention. Compass Bank v. Katz, 287
F.R.D. 392, 397 (S.D. Tex. 2012) (citing Opella v. Rullan, No. 10-21134-CIV,
2011 WL 2600707, at *5 (S.D. Fla. 2011) (unpublished)) (some citations omitted).9
In Volkswagenwerk, the United States Supreme Court, applying
Illinois’ general long-arm statute, held that whether there is occasion to transmit
documents abroad must be determined by reference to the forum state’s law. 486
U.S. at 700-01, 108 S. Ct. at 2108-09. “If the internal law of the forum state
defines the applicable method of serving process as requiring the transmittal of
documents abroad, then the Hague Service Convention applies.” Id. at 700, 108 S.
9
At oral argument, the Estate argued, for the first time, that Mexico has never formally objected
to direct service by mail on an individual, citing Unite National Retirement Fund v. Ariela, Inc,
643 F. Supp. 2d 328, 334 (S.D.N.Y. 2008). This argument was not raised below and is deemed
waived. Furthermore, as a general rule, a party should request leave to cite additional authority
which was not cited in the appellate briefs. And finally, that case was based on a mistranslation
of the Mexican Declaration. The prevailing interpretation is that Mexico has objected to service
on individuals through postal channels. See, e.g., Mitchell v. Volkswagen Grp. of Am., Inc., 753
F. Supp. 2d 1264, 1271 (N.D. Ga. 2010).
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Ct. at 2108. The Illinois long-arm statute authorized a plaintiff to serve the
defendant’s domestic subsidiary without sending the documents to the foreign
corporation. Consequently, the Court held that “[w]here service on a domestic
agent is valid and complete under both state law and the Due Process Clause, our
inquiry ends and the Convention has no further implications.” Id. at 707, 108 S.
Ct. at 2112.
In the current case, KRS 188.020 authorizes service on a non-resident
motorist through the Secretary of State. Nevertheless, such service is subject to the
provisions of KRS 454.210(3)(c). That section requires the Secretary of State to,
“within seven (7) days of receipt thereof in his office, mail a copy of the summons
and complaint to the defendant at the address given in the complaint.” Id. Unlike
in Volkswagenwerk, service upon the statutorily-designated agent does not
constitute complete service. Rather, the statute requires an additional mailing to
the nonresident defendant. That requirement implicates the provisions of the
Hague Convention. See Quinn v. Keinicke, 700 A.2d 147, 154 (Del. Super. Ct.
1996).
Consequently, we agree with the trial court that the Estate was
obligated to comply with the provisions of the Hague Convention to effect
complete service on Ramos. Since it did not, the trial court properly quashed the
initial service of process on him. Therefore, Ramos was not before the court.
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The Estate further notes that Chapa was later deemed to have admitted
that Ramos was acting as its employee or agent. The Estate later attempted to
serve Ramos at Chapa’s Texas address. As a result, the Estate maintains that this
service was sufficient to bring Ramos before the court. However, the admission
can only be binding as to Chapa and was not sufficient to establish Ramos’
residency in Texas or excuse compliance with the provisions of the Hague
Convention. Under the circumstances, we agree that the trial court properly
quashed this service on Ramos as well.
V. ALLSTATE’S OWNERSHIP OF THE TOYOTA
The Estate next challenges the trial court’s summary judgments on the
issues relating to the insurers’ ownership of the vehicles. “[T]he proper function of
summary judgment is to terminate litigation when, as a matter of law, it appears
that it would be impossible for the respondent to produce evidence at the trial
warranting a judgment in his favor.” Steelvest, Inc. v. Scansteel Serv. Ctr., Inc.,
807 S.W.2d 476, 480 (Ky. 1991). Summary judgment is appropriate “if the
pleadings, depositions, answers to interrogatories, stipulations, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of
law.” CR 56.03.
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“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, 807 S.W.2d at 480. “The trial court must examine the evidence,
not to decide any issue of fact, but to discover if a real issue exists.” Id. 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 481. Since a summary
judgment involves no fact-finding, this Court’s review is de novo, in the sense that
we owe no deference to the conclusions of the trial court. Scifres v. Kraft, 916
S.W.2d 779, 781 (Ky. App. 1996).
The Estate argues that Allstate, Hartford, and Co-part failed to comply
with their respective statutory duties prior to transferring the titles of the vehicles
to AUF and giving possession of the vehicles to Ramos. Consequently, the Estate
maintains that each remained responsible for insuring the vehicles at the time of
the accident. With respect to the Toyota, the Estate contends that Allstate failed to
comply with Maryland law in transferring title and possession of the vehicle.
Consequently, the Estate argues that Allstate was still the owner of the Toyota and
was required to provide insurance coverage.
The parties agree that the transfer of the Toyota’s title is governed by
Maryland law. There is also no dispute that the Toyota met the definition of
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“salvage” under MD. CODE ANN., TRANSP. § 11-152(a)(2) (West 2021); that the
title was properly transferred to Allstate from its insured pursuant to Section 13-
112(a); and that Allstate properly applied for and obtained a Certificate of Salvage
pursuant to Section 13-506.1. Rather, the issue is whether Allstate properly
transferred the title to AUF.
The procedures for obtaining a Maryland Certificate of Salvage are set
out in Section 13-506.1, but that section does not address the procedure required to
transfer title of a salvage vehicle. The Estate points to Section 13-507, which
addresses the issuance of a certificate of title of a vehicle for which a salvage
certificate has been issued. The Estate argues that Allstate was required to obtain a
certificate of title under this section prior to transferring the vehicle to AUF.
However, Section 13-507 includes provisions requiring the inspection
of the vehicle prior to issuance of a new certificate of title and a notation on the
certificate that it is a rebuilt salvage vehicle. Consequently, this section only
applies prior to the transfer of a rebuilt salvage vehicle and not to all transfers of
salvage vehicles. Furthermore, we agree with the trial court that the assignment of
the certificate is governed by Section 13-112. That section requires that the seller
execute the “Assignment of Ownership” section on the certificate and deliver the
certificate to the buyer at the time of delivery of the vehicle.
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As discussed above, Allstate followed this process in its sale of the
Toyota. It executed the “Assignment of Ownership” section on the back of the
Certificate of Salvage. Allstate then delivered the certificate to AUF’s designated
agent, Bubio, and possession of the vehicle to its designated agent, Ramos.
Therefore, we agree with the trial court that Allstate’s obligation to insure the
Toyota ended at that point.
VI. HARTFORD’S OWNERSHIP OF THE JEEP
Similarly, the Estate argues that Hartford remained the owner of the
Jeep for insurance purposes. The parties agree that the transfer of the Jeep was
subject to Kentucky law. And as with the Toyota, there is no dispute that Hartford
was issued a salvage title to the Jeep upon exchanging the title, which it received
from its insured.
Hartford alleges that it transferred the Jeep’s salvage title to Co-part.
But the record reflects only that Co-part executed the dealer assignment on the
certificate of title. Co-part was authorized to execute the title based on the limited
power of attorney which Hartford had granted it. The power of attorney would not
have been necessary if Hartford had transferred to title to Co-part. Thus, the
salvage title remained in Hartford’s name until the transfer to AUF on March 2,
2012.
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“Kentucky is a certificate of title state for the purposes of determining
ownership of a motor vehicle and requiring liability insurance coverage.” Potts v.
Draper, 864 S.W.2d 896, 898 (Ky. 1993). See also KRS 186.010(7)(a), defining
“owner” to mean “a person who holds the legal title of a vehicle or a person who
pursuant to a bona fide sale has received physical possession of the vehicle subject
to any applicable security interest.” However, KRS 186A.220(5) “created an
exception to the general statutory scheme that makes the title holder the owner of a
vehicle for insurance purposes.” Auto Acceptance Corp. v. T.I.G. Ins. Co., 89
S.W.3d 398, 401 (Ky. 2002). Specifically, if the dealer chooses to retain the title
documents and deliver them directly to the county clerk, then “the dealer shall
require from the purchaser proof of insurance as mandated by KRS 304.39-080
before delivering possession of the vehicle.” KRS 186A.220(5)(b). See also
Travelers Indem. Co. v. Armstrong, 565 S.W.3d 550 (Ky. 2018).
The issue in this case is whether Hartford, or its agent Co-part, was
required to obtain proof of insurance prior to delivering possession of the Jeep to
Ramos. As noted, Hartford chose to deliver the title documents to AUF’s agent,
Bubio, prior to delivering possession of the vehicle to Ramos. Consequently,
neither Hartford nor Co-part was subject to the insurance-verification requirement.
The Estate separately argues that neither Allstate nor Hartford ever
verified that Ramos was acting as an agent for AUF. The Estate points to Chapa’s
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deemed admission that Ramos was acting as its agent, suggesting that such an
admission would preclude a finding that Ramos was also acting as AUF’s agent.
In such circumstances, the Estate suggests that Allstate and Hartford would be
liable for negligent entrustment of the vehicles to an individual who was not an
authorized agent of the title holder.
We disagree that these facts are relevant. Ramos’ status as an agent
for Chapa would not preclude a finding that he was also acting as an agent for
AUF. Furthermore, Ramos provided AUF’s member number and the lot number
of both the Toyota and the Jeep prior to delivery of the vehicles. There is no
suggestion in the record that Ramos was not authorized to take possession of the
vehicles on AUF’s behalf.
VII. INSURERS’ LIABILITY FOR NEGLIGENCE AND NEGLIGENT
ENTRUSTMENT
For similar reasons, we conclude that Co-part was not obligated to
obtain proof of insurance from Ramos prior to releasing the vehicles to him. The
insurance-verification requirement of KRS 186A.220(5)(b) only applies if a dealer
wishes to effectively transfer ownership of a vehicle without simultaneously
transferring possession of the certificate of title. See Gainsco Companies v.
Gentry, 191 S.W.3d 633, 636 (Ky. 2006). The requirement does not apply where,
as here, Allstate and Hartford transferred the titles to AUF prior to Co-part
releasing possession of the vehicles to Ramos.
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However, the trial court found that there were genuine issues of
material fact whether Co-part negligently entrusted the vehicles to Ramos. The
Estate argues that, since Co-part was acting as an agent of Allstate and Hartford,
respectively, any negligence by Co-part should be imputed to the insurers. Under
the circumstances presented in this case, we disagree.
“The common law theory of negligent entrustment is that one who
entrusts his vehicle to another whom he knows to be inexperienced, careless, or
reckless . . . is liable for the natural and probable consequences of the
entrustment.” McGrew v. Stone, 998 S.W.2d 5, 9 (Ky. 1999) (Cooper, J.,
dissenting). Logically, one cannot maintain a negligent entrustment suit against
the former owner of a vehicle who properly transferred ownership of the subject
vehicle. See Graham v. Rogers, 277 S.W.3d 251 (Ky. App. 2008). Since Co-part
sold and delivered the vehicles as an agent for Allstate and Hartford, the Estate
argues that the insurers remain liable for any negligence by Co-part.
The Estate’s claims against Allstate arise out of actions taken by Co-
part at its Maryland facility. The Estate does not point to any significant nexus
which would support applying the Kentucky law of negligent entrustment to
Allstate. Furthermore, the Estate did not attempt to assert a claim for negligent
entrustment under Maryland law. Consequently, we have no basis to assign
liability to Allstate for any negligence by Co-part occurring in Maryland.
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Hartford responds that Co-part was only operating as its agent for the
limited purpose of executing the title transfer documents. In all other respects,
Hartford asserts that Co-part was functioning as an independent contractor. We
agree.
A principal is liable for the negligent acts of its agent “but generally is
not held liable for the conduct of an independent contractor.” Nazar v. Branham,
291 S.W.3d 599, 606 (Ky. 2009).
An individual is the agent of another if the principal has
the power or responsibility to control the method,
manner, and details of the agent’s work. If, however, an
individual is free to determine how work is done and the
principal cares only about the end result, then that
individual is an independent contractor.
Id. at 606-07 (citations omitted). Factors the court should consider include the
following:
(a) the extent of control which, by the agreement, the
master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a
distinct occupation or business;
(c) the kind of occupation, with reference to whether, in
the locality, the work is usually done under the direction
of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the
instrumentalities, tools, and the place of work for the
person doing the work;
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(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the
job;
(h) whether or not the work is a part of the regular
business of the employer;
(i) whether or not the parties believe they are creating the
relation of master and servant; and
(j) whether the principal is or is not in business.
Kentucky Unemployment Ins. Comm’n v. Landmark Cmty. Newspapers of
Kentucky, Inc., 91 S.W.3d 575, 579 (Ky. 2002). Although the “chief criterion is
the right to control the details of the work[,]” no single factor is determinative. Id.
at 580 (citations omitted). Each case must be decided on its own facts. Id.
Under the terms of its contract with Hartford, Co-part had sole control
over the sale and delivery of the vehicle. As a result, Harford had no ability to
determine whether Ramos intended to safely transport the salvage vehicles.
Therefore, we conclude that Co-part was functioning as an independent contractor,
and Hartford is not liable for any negligence by Co-part.
With respect to Co-part, the trial court found that “it is not
unreasonable to expect a dealer to do more than simply deliver a vehicle that has
been marked as ‘not drivable’ or ‘not towable’ to a ‘bullpen’ for the buyer to
remove from the premises without some verification of the method of removal.”
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There were significant issues of fact whether Co-part knew or should have known
how Ramos intended to transport the Jeep. As a result, the negligence and
negligent entrustment claims against Co-part were properly submitted to the jury.
VIII. DENIAL OF MOTIONS TO FILE AMENDED COMPLAINTS
A. Amended complaint against Allstate, Hartford, and Co-part alleging joint
liability
Along similar lines, the Estate argues that the trial court abused its
discretion by denying its May 2014 motion to file an amended complaint. In that
complaint, the Estate alleged that Co-part, Allstate, and Hartford were engaged in a
joint venture, joint enterprise, or partnership. Based on this arrangement, the
Estate asserts that the amended complaint properly stated a claim for joint and
several liability between and among Co-part, Allstate and Hartford. See Abbott v.
Chesley, 413 S.W.3d 589, 604 (Ky. 2013). The Estate further maintains that none
of the named parties would have been prejudiced by allowing the amended
complaint because discovery was still ongoing at that point.
Kentucky law is clear that the decision to amend a complaint falls
within the trial court’s discretion. Kenney v. Hanger Prosthetics & Orthotics, Inc.,
269 S.W.3d 866, 869-70 (Ky. App. 2007). CR 15.01 provides that “a party may
amend his pleading only by leave of court or by written consent of the adverse
party; and leave shall be freely given when justice so requires.” In determining
whether to grant a motion to amend a party’s complaint, a trial court “may consider
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such factors as the failure to cure deficiencies by amendment or the futility of the
amendment itself.” First Nat’l Bank of Cincinnati v. Hartman, 747 S.W.2d 614,
616 (Ky. App. 1988). Other factors include whether amendment would prejudice
the opposing party or would work an injustice. See Shah v. Am. Synthetic Rubber
Corp., 655 S.W.2d 489, 493 (Ky. 1983). Ultimately, whether a party may amend
his complaint is discretionary with the trial court, and we will not disturb its ruling
unless it has abused its discretion. Kenney, 269 S.W.3d at 869-70.
Under the circumstances, we find no abuse of discretion. Although
the amended complaint was not untimely, we conclude that the Estate failed to
assert a viable claim that the parties were engaged in a joint venture or partnership.
Allstate and Hartford separately contracted with Co-part to facilitate the sale of
damaged vehicles. As discussed above, Co-part functioned as an independent
contractor in the sale of such vehicles with a limited agency to execute the title
documents. Unlike in Abbott v. Chesley, supra, there is no allegation that they
shared the common pecuniary purpose of the venture; that they shared the work
and profits of the enterprise; or that each maintained a voice in the managerial
control of the enterprise. 413 S.W.3d at 604. In the absence of such allegations,
the trial court was not obligated to allow filing of the amended complaint.
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B. Amended complaint against Liberty Mutual
Following the trial in this matter, the Estate attempted to file an
amended complaint against Liberty Mutual. The Estate sought a declaratory
judgment that Co-part’s insurance policy covered the liabilities of Chapa, Ramos,
and AUF. The trial court denied the motion, holding that Liberty Mutual was
never on notice that it would be required to provide a defense for these parties. We
agree.
As discussed above, Ramos was never properly served and was not
before the court. As a non-settling non-party, he was not subject to any
apportionment of fault. KRS 411.182. But since he was deemed to be an agent of
Chapa, his negligence was properly considered to the extent that Chapa is
vicariously liable for his actions. However, the Estate has not identified any basis
to extend Co-part’s liability insurance to cover the actions of Chapa or its agents.
Even if it had, we agree with the trial court that Liberty Mutual had no reasonable
expectation that it would be required to assert a defense for Chapa or Ramos under
its policy with Co-part.
We also note that the Estate did not attempt to assert its own claim
against AUF until after the trial. AUF was only before the court on Co-part’s
third-party complaint. Consequently, AUF can only be liable for its own share of
damages attributable to Co-part’s negligence. In light of the untimely filing and
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the lack of any basis to assert liability against Liberty Mutual, the trial court did
not abuse its discretion by denying the Estate’s motion to file an amended
complaint.
IX. SCOPE OF CO-PART’S LIABILITY FOR STATUTORY
VIOLATIONS
In addition to the negligence and negligent entrustment claims, the
Estate further argues that Co-part was subject to liability for violations of statutory
duties. It is well-settled that the interpretation of a statute presents an issue of law
for the court, and our review proceeds de novo. City of Worthington Hills v.
Worthington Fire Prot. Dist., 140 S.W.3d 584, 591 (Ky. App. 2004). “When
interpreting a statute, the intent of the legislature is paramount and controls[,]” and
“words are afforded their ordinary meaning unless a contrary intent is apparent.”
Wahlke v. Pierce, 392 S.W.3d 426, 430 (Ky. App. 2013) (citing Old Lewis Hunter
Distillery Co. v. Ky. Tax Comm’n, 302 Ky. 68, 193 S.W.2d 464 (1945)).
A. Statutory duties applying to “owners” and “operators”
The duties imposed under KRS 186A.065 and 189.100 apply to
“owners” of motor vehicles. Since Co-part was never an owner of either the
Toyota or the Jeep, it cannot be liable for violations of these sections. Likewise,
the duties imposed under KRS 186A.065 and 189.290 apply to an operator of a
motor vehicle. Co-part was not an operator of either the Toyota or the Jeep within
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the meaning of KRS 186.010(6). Therefore, the trial court did not err by granting
summary judgment and dismissing the Estate’s claims based on these statutes.
B. Statutory duties applying to dealers
As discussed above, KRS 186A.220(5) did not obligate Co-part to
obtain proof of insurance when it transferred possession of the Jeep to Ramos.
However, the authority interpreting KRS 186A.220(5) is relevant to the Estate’s
claim that Co-part violated KRS 186A.100. That section requires a motor vehicle
dealer licensed to sell a vehicle for use upon the highways of this state to equip the
vehicle with a temporary tag. The trial court took the position that, since the
vehicles had salvage titles and could not lawfully be operated on the highways,
AUF was not a “purchaser for use” within the meaning of KRS 186A.220(5).
Similarly, Co-part argues that KRS 186A.100 was not applicable because it did not
sell the Jeep “for use.”
In Travelers, 565 S.W.3d 550, the Supreme Court interpreted the
meaning of a purchaser “for use” with regard to the insurance-verification
requirement. The Court found that the meaning of that term is unclear, as “[i]t
could mean an active ‘use’ as in driving; it could mean a passive ‘use’ as in buying
for investment purposes.” Id. at 559. However, the Court also concluded that the
term must be interpreted in light of the legislature’s intent to establish an efficient
system of sale and registration, while still protecting operators from uninsured
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drivers. Id. at 559-60. Based upon the statutory scheme, the Court concluded that
the term “purchaser for use” means “consumer,” but not a “purchaser for resale,”
such as a dealer-to-dealer transaction. Id. at 562-63.
For purposes of the statute, AUF must be considered a consumer and
thus a purchaser for use. While there is some indication that AUF operates as a
salvage and parts dealer in Mexico, there is no evidence that AUF is licensed to
operate as a motor vehicle dealer anywhere in the United States. AUF only
purchased the vehicles as an individual.
Nevertheless, Co-part is liable for violation of this section only to the
extent that the Jeep was required to display a license plate. The trial court took the
position that, since a license plate is not issued for a vehicle with a salvage title,
such a vehicle need not display a plate as long as it is in tow. Furthermore, Co-part
required purchasers to obtain license plates for any vehicles which were intended
to be operated on the highways. Although the three-day permits obtained by
Ramos did not authorize him to operate the vehicles on the highway outside of
Arizona, there is at least a factual question whether Co-part reasonably believed
the permits were sufficient. Likewise, there is a factual issue whether Co-part was
aware or should have been aware that Ramos intended to use the Jeep in a manner
requiring the display of a valid license plate. For these reasons, we conclude that
the Estate was entitled to submit this statutory claim to the jury.
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C. Whether Ramos “operated” the Jeep on Kentucky highways
This leads us to the Estate’s claim that Co-part is liable for violation
of KRS 189.224, which provides that it is unlawful for an owner, or any other
person “to require or knowingly to permit the operation of such vehicle upon a
highway in any manner contrary to law.”10 Although the trial court initially denied
Co-part’s motion for summary judgment on the application of KRS 189.224, it
eventually declined to instruct the jury on the statutory violation. The court
concluded that a towed vehicle was not being “operated” for purposes of the
statute. The Estate argues that it is entitled to assert this claim because Ramos was
operating both the Jeep and the Toyota.
For purposes of this section, the relevant inquiry is whether Co-part
knowingly permitted the operation of the Jeep on the highway. KRS 186.010(6)
defines “operator” as “any person in actual control of a motor vehicle upon a
highway.” Under this definition, Ramos was clearly the “operator” of the Toyota-
Jeep combination, since he was the only person in actual control of both vehicles.
It is undisputed that neither the Toyota nor the Jeep could be lawfully “operated”
10
The Estate also asserts Co-part is subject to liability under KRS 189.226. However, that
section imposes criminal penalties for violation of KRS 189.221 to 189.228. Because the statute
is silent as to civil liability, we conclude that violations of these sections are relevant only to
establish a statutory duty under which a person may liable.
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on the highways in Kentucky. The question, however, is whether the Jeep was
being “operated” on the highway in violation of KRS 186A.520.
The question is relevant because Co-part’s liability is founded upon
whether it knowingly permitted Ramos to operate the Jeep on the highways of the
Commonwealth. The trial court concluded that the plain meaning of the term
“operated” requires “more affirmative action than just connecting it by means of a
tow bar to another vehicle.”
We disagree with the trial court’s reasoning. The Toyota and the
towed Jeep constituted a single unit, and both were being “operated” for purposes
of KRS 189.224 and 186A.520(6). See also KRS 189.060 (setting forth
requirements for vehicles used as a towing unit). Furthermore, such vehicle
combinations are generally considered a single unit for purposes of insurance
coverage. See State Auto. Mut. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 456
F.2d 238 (6th Cir. 1972). Co-part argues that interpreting “operated” in this
manner would reach an absurd result – prohibiting any salvage vehicle from being
towed and requiring all such vehicles to be transported off the roadway, such as via
a car carrier, flatbed, or trailer.
However, we do not need to determine whether all vehicles being
towed are “operated” on the highways within the meaning of the statute. Co-part’s
statutory duties do not require it to prevent salvage vehicles from being operated
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on the roadways. Those duties only require that it not knowingly permit vehicles
to be operated in a manner contrary to law. We do not believe that every vehicle
being towed by another vehicle is being “operated” for purposes of KRS 189.224.
However, the tow-bar combination employed by Ramos clearly falls within the
meaning of “operating” both vehicles. Under the circumstances, we conclude that
the Estate was entitled to a jury instruction on this statutory claim.
X. DISMISSAL OF ESTATE’S CLAIM AGAINST CO-PART’S
EXECUTIVES
As noted above, the Estate asserted claims against Johnson, Styer, and
Franklin for negligent hiring, supervision and training of Co-part’s employees. As
a general rule, a director or officer is not personally liable for the torts of a
corporation merely by reason of his official character. Smith v. Isaacs, 777 S.W.2d
912, 913-14 (Ky. 1989). Nevertheless, an agent of a corporation may be
personally liable for a tort committed by him although he was acting for the
corporation. Id. at 914 (citing Peters v. Frey, 429 S.W.2d 847, 849 (Ky. 1968)).
The trial court dismissed the claims, holding that they were not liable individually
for corporate negligence.
The Estate argues that Johnson, Styer, and Franklin are personally
liable for negligent supervision and training of the Louisville Co-part employees.
The Estate asserts that the corporate officers breached their duties to train the
Louisville Co-part employees to make sure that vehicles left the facility in a safe
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and legal manner. However, the Estate does not point to any evidence that
Johnson, Styer, or Franklin were actively involved in the hiring or training of the
Louisville employees. Furthermore, the Estate does not show that the corporate
officers breached duties which they owed in their individual capacities. Therefore,
the trial court did not err in granting summary judgment on this issue.
XI. EVIDENTIARY AND TRIAL ISSUES
The Estate focuses on several evidentiary issues which arose both
before and during trial and which affected its claims against Co-part. The Estate
challenges the trial court’s rulings to admit or exclude certain evidence at trial. We
review the trial court’s decision to admit or to exclude evidence for abuse of
discretion. Goodyear Tire and Rubber Co. v. Thompson, 11 S.W.3d 575, 577 (Ky.
2000). The trial court abuses its discretion when its decision is “arbitrary,
unreasonable, unfair, or unsupported by sound legal principles.” Id. at 581.
A. Co-part’s withdrawal of admission that Ramos “drove out” the Toyota
from the Maryland facility
The most significant evidentiary issue concerns the trial court’s
December 1, 2015 order allowing Co-part to withdraw and amend an admission.
During the early stages of discovery, Co-part responded to the Estate’s requests for
admission, admitting that Ramos “drove out” the Toyota from its Maryland
facility. After the completion of discovery, Co-part moved to withdraw the
admission, arguing that it had made the admission in error. The trial court allowed
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Co-part to withdraw the admission. The Estate argues that it was prejudiced by the
untimely withdrawal of the admission because it was unable to conduct additional
discovery on the matter prior to trial.
A judicial admission “is a formal act by a party in the course of a
judicial proceeding which has the effect of waiving or dispensing with the
necessity of producing evidence by the opponent and bars a party from disputing a
proposition in question.” Nolin Production Credit Ass’n v. Canmer Deposit Bank,
726 S.W.2d 693, 701 (Ky. App. 1986). A court may permit withdrawal or
amendment when the presentation of the merits of the action will be subserved
thereby and the party who obtained the admission fails to satisfy the court that
withdrawal or amendment will prejudice him in maintaining his action or defense
on the merits. CR 36.02. The party who obtained the mistaken admission has the
burden of proving prejudice. Buridi v. Leasing Grp. Pool II, LLC, 447 S.W.3d
157, 176 (Ky. App. 2014). “The necessity of having to convince the trier of fact of
the truth of a matter erroneously admitted is not sufficient.” Id. (citation omitted).
Co-part correctly notes that it retained the right under CR 36.01 to
explain or clarify its response concerning the subject matter. Berrier v. Bizer, 57
S.W.3d 271, 280 (Ky. 2001). However, that right is generally exercised after a
jury has been informed of the admission by the examination or cross-examination
-42-
of witnesses produced at trial. Id. Here, the trial court allowed Co-part to
withdraw the admission, so it could not have been introduced at trial.
The Estate argues that it was prejudiced by Co-part’s withdrawal of
the admission because the discovery deadline had already passed. The Estate
asserted that it relied on that admission by declining to conduct additional
discovery on the issue. In rejecting this claim of prejudice, the trial court pointed
to the April 17, 2014 deposition of Co-part’s corporate representative, Aron
Rosenfield. Rosenfield stated that he believed the term “drove out” on the receipt
for the Toyota indicated that a Co-part employee had driven the Toyota to the
delivery area, rather than using a forklift to bring it. He did not believe that the
receipt supported an inference that Ramos had driven the Toyota away from the
Co-part facility.
Based upon this deposition testimony, the trial court found that the
Estate was on notice since at least April 2014 that there was a dispute whether
Ramos physically drove the Toyota from the Maryland facility. The trial court
concluded that the Estate would not be unfairly prejudiced by withdrawal of the
admission because the Estate had the opportunity to seek discovery on that issue
prior to that time. We disagree.
First, although the Estate may have been on notice that Co-part would
dispute the meaning of the term “drove out” on the Toyota receipt, it was entitled
-43-
to rely on the contrary admission at least until Co-part made the motion. By
waiting until the discovery deadline had passed to make this motion, Co-part
severely limited the Estate’s options to conduct additional discovery on the issue.
At the very least, the trial court failed to address the prejudice caused by Co-part’s
failure to seek an earlier withdrawal of the admission.
Furthermore, we conclude that the admission was relevant to the
Estate’s claims for negligence and negligent entrustment and to its statutory claim
under KRS 189.224. We agree with the trial court that Co-part’s conduct in
Maryland is not actionable in this case. However, that conduct remained relevant
to determine Co-part’s knowledge that Ramos intended to operate the Toyota/Jeep
combination illegally on Kentucky highways. Consequently, the withdrawal of the
admission clearly impacted the Estate’s negligence claims, and its statutory claim
under KRS 189.224, which we have found that the trial court erred by dismissing.
Under the circumstances, we conclude that the trial court abused its discretion by
allowing Co-part’s untimely motion to withdraw the admission.
However, the remedy for this error is to remand the matter for a new
trial. Co-part’s withdrawal of the admission is significant only to the extent that
the Estate was unable to seek additional discovery on the issue. In addition, the
trial court must also evaluate whether “the presentation of the merits of the action
will be subserved” by withdrawal or amendment. Buridi, 447 S.W.3d at 175
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(citing CR 36.02). Upon remand, the trial court may again consider whether the
interests of justice would be served by allowing Co-part to withdraw the
admission. But if it does so, then it must allow the Estate to conduct limited
discovery on this issue prior to retrial.
B. Exclusion of evidence of Savage’s SSD benefits as part of the Estate’s
claim for destruction of his power to earn money
Because we are remanding this matter for a new trial, we will address
the remaining issues only to the extent that they remain at issue. The trial court
held that the Estate could not present evidence of Savage’s receipt of SSD benefits
as part of its claim for the destruction of Savage’s power to earn money. At the
time of his death, Savage was suffering from degenerative disk disease and
osteoarthritis. He was unable to work outside the home, and he had been receiving
SSD benefits since 2008. Co-part moved to exclude any evidence of those
benefits, arguing that, since Savage was unable to work outside the home, the
Estate could not claim that he had lost any future income. The trial court agreed
and excluded the evidence.
In support of this conclusion, Co-part points to Aull v. Houston, 345
S.W.3d 232 (Ky. App. 2010), in which a panel of this Court noted that “[t]he
measure of damages in a wrongful death action . . . is the damage to the estate by
the destruction of the decedent’s power to labor and earn money.” Id. at 235
(citation and emphasis omitted). In a case where the decedent was totally disabled
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and had no power to earn money, the Court concluded that the measure of damages
would be zero. Id. at 236. Thus, the Court held that the jury was not authorized to
consider the decedent’s eligibility to receive SSD benefits. Id. at 236-37.
We question whether Aull should be broadly read to exclude receipt of
SSD benefits from economic losses in all wrongful death actions. Aull involved
the alleged wrongful death of a child who received immunizations at the age of
five which purportedly caused his death. Notably, the child had earlier been
diagnosed with a profoundly disabling condition with a poor prognosis. The trial
court granted a partial summary judgment ruling that damages could not be
recovered for the destruction of power to earn money because the evidence was
undisputed that the child was incapable of ever earning money from his own labor.
Id. at 234. This Court affirmed, holding, “the inference that [the child], someday,
would have the ability to ‘earn’ money is simply, and sadly, unreasonable. It was
not error for the trial court to conclude that [the child] was unable to earn money”
by his own labor. Id.
Unlike in Aull, Savage’s receipt of SSD benefits was not merely
speculative. His benefits were based upon his actual work history and loss of
earning capacity. Furthermore, while Savage was totally disabled from his prior
employment, he was not entirely disabled as was the child in Aull. Indeed, the
Estate points to evidence that Savage was able to do extensive work around the
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house, which would be indicative of at least some earning capacity. Finally, in
other contexts, SSD benefits replace income which is lost before retirement and are
treated in the same manner as income. See Holman v. Holman, 84 S.W.3d 903,
910 (Ky. 2002) (treating disability benefits as a replacement for lost future income
and thus not divisible as marital property). For these reasons, we believe that the
holding of Aull should be limited to the factual circumstances presented in that
case.
Nevertheless, the Court in Aull did not limit its holding to the facts of
the case. Rather, the Court held that damages in a wrongful death claim must be
based on the destruction of the decedent’s power to labor and earn money. Aull,
345 S.W.3d at 236-37. The Court also broadly stated that, since a person does not
“earn” disability benefits, the loss of such benefits is not the equivalent of a
destruction of the decedent’s power to labor and earn money. Id. at 236-37. This
holding was consistent with earlier Kentucky authority holding that where a
decedent had no capacity to earn money at the time of his death, there is no
economic loss to recover. See Turfway Park Racing Ass’n v. Griffin, 834 S.W.2d
667, 671 (Ky. 1992) and Smith v. McCurdy, 269 S.W.3d 876, 882 (Ky. App.
2008).
Unless the Supreme Court decides to modify this categorical rule, we
must conclude that the trial court did not abuse its discretion by excluding evidence
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of Savage’s SSD benefits from the Estate’s wrongful death claim. Thus, on
remand, the jury is not entitled to consider evidence of those benefits. However,
we disagree with the trial court that the receipt of SSD benefits necessarily requires
a finding that Savage was totally disabled from any employment at the time of his
death. Consequently, the jury may consider other evidence of Savage’s residual
earning capacity. Furthermore, the trial court may again allow the jury to consider
evidence of the value of household services which Savage provided.
C. Exclusion of evidence of payments made by Liberty Mutual to Co-part’s
expert to show bias
The Estate next argues that the trial court improperly excluded
evidence that Co-part’s experts, Sayre, Hawes, and Kirk, were paid by its insurer,
Liberty Mutual. Although evidence of liability insurance is not admissible to
prove negligence, it is admissible for other reasons, including to show the bias or
prejudice of a witness. KRE11 411. Thus, as a general rule, evidence that an expert
witness has been employed by an insurance company is admissible to show bias of
the witness. Woolum v. Hillman, 329 S.W.3d 283, 287 (Ky. 2010). See also
Hedger v. Davis, 236 Ky. 432, 33 S.W.2d 310, 311 (1930).
But in the current case, the evidence showed that the experts were
retained and paid by Co-part through its counsel. While the evidence of their
11
Kentucky Rules of Evidence.
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pecuniary interest was relevant to show bias, the ultimate source of the funds was
not. Moreover, the witnesses were subject to cross-examination to determine that
they were retained on Co-part’s behalf, without any need to mention a possible
involvement by Liberty Mutual. Therefore, we agree with Co-part that any
relevance of Liberty Mutual’s involvement in compensating the expert witnesses
was far outweighed by the unfairly prejudicial effect. KRE 403. On remand, the
Estate is entitled to cross-examine the witnesses about their compensation for their
testimony but not about any involvement by Liberty Mutual.
D. Exclusion of evidence of Hartford’s and Allstate’s roles in the vehicle sales
The Estate next contends that the trial court abused its discretion by
excluding evidence of Allstate’s and Hartford’s roles in the vehicle sales. But
since the trial court correctly found that Hartford and Allstate were not liable for
their own negligence or for Co-part’s alleged negligence, that evidence was not
relevant to the issues at trial. Therefore, we find no abuse of discretion.
E. Exclusion of the MVC Dealer Handbook and Advice to Newly Licensed
Dealers
In its pre-trial order, the trial court denied the Estate’s motion to
permit introduction of information from the MVC’s Dealer Handbook and Advice
to Newly Licensed Dealers. The Estate argues that the documents were admissible
to explain Co-part’s duties as a used car dealer. The trial court disagreed, holding
that the documents were not admissible because “salvage vehicles by definition are
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not used cars since they are not intended to be driven on the road, and not intended
to place any person in danger of injury or damage.”
We disagree with the trial court’s reasoning that the Jeep’s salvage
title was the sole basis to determine whether Co-part’s duties as a used car dealer
were implicated. As discussed above, the controlling issue is whether Co-part
negligently entrusted the Jeep to Ramos or knowingly permitted Ramos to operate
the Jeep on Kentucky highways. But while these issues encompass some of Co-
part’s duties as a used car dealer, Co-part’s alleged negligence does not arise
directly from its statutory duties as a used car dealer. Given the likelihood for
confusion of issues, the trial court did not abuse its discretion by excluding the
MVC documents.12 But on remand, the Estate should be permitted to introduce
expert testimony concerning the full extent of Co-part’s applicable duties, whether
common-law or statutory.
12
We also note the MVC Handbook and Advice are only intended as a guide to automobile
dealers rather than a primary authority establishing statutory duties. Expert testimony is
necessary to establish those duties and the breach thereof. And even supplemented by expert
testimony, these publications are not authoritative to establish the underlying duties.
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F. Trial court’s rulings regarding admissibility of testimony by expert
witnesses
1. Exclusion or limitation of the Estate’s experts
The Estate raises several issues relating to the admission of the
testimony of Co-part’s expert witnesses and the exclusion or limitation on the
testimony of its expert witnesses. The Estate first argues that the trial court
improperly excluded or limited the testimony by its experts, Larry Craig, Scott
Burrows, Sam Cromity, and Sonny Cease. The admission of expert testimony is
governed by KRE 702 and the standard adopted by the United States Supreme
Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct.
2786, 125 L. Ed. 2d 469 (1993), in evaluating the testimony of expert witnesses.
West v. KKI, LLC, 300 S.W.3d 184, 193 (Ky. App. 2008). The Daubert decision
established a procedure in which the trial court acts as a gatekeeper, ensuring that
an expert’s testimony both rests on a reliable foundation and is relevant to the task
at hand. Daubert, 509 U.S. at 597, 113 S. Ct. at 2798. See also Mitchell v.
Commonwealth, 908 S.W.2d 100 (Ky. 1995), overruled on other grounds by
Fugate v. Commonwealth, 993 S.W.2d 931 (Ky. 1999).
The Estate argues that the trial court failed to conduct a Daubert
hearing on the qualifications of the witnesses prior to excluding their testimony.
Co-part responds that Daubert findings were unnecessary because the trial court
excluded the experts based upon factors not related to their qualifications as
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experts. In determining whether to admit expert testimony, a trial court must
consider “whether the testimony is reliable, a factual determination, and whether
the testimony will assist the trier of fact in understanding or determining a fact in
issue, an admissibility determination.” Oliphant v. Ries, 460 S.W.3d 889, 897 (Ky.
2015). We review the reliability determination for clear error and the admissibility
determination for abuse of discretion. Id. We will address the trial court’s rulings
regarding each of the experts at issue.
a. Larry Craig
First, the Estate sought to introduce the testimony of Larry Craig, who
serves on the MVC and has experience as a motor vehicle and used car dealer.
Craig’s testimony would have served as a foundation for the introduction of the
MVC documents. He also would have testified about Co-part’s duties as a used
car dealer. Since we agree with the trial court that Co-part’s duties as a used car
dealer were not directly implicated, his testimony was not relevant to the matters at
issue. The trial court also noted that the Estate’s disclosures relating to Craig were
inadequate under CR 26.02 because they failed to state the basis for his opinions.
See Clephas v. Garlock, Inc., 168 S.W.3d 389, 393 (Ky. App. 2004). Upon review
of the record, we find that the trial court’s conclusions did not amount to an abuse
of its discretion.
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b. Scott Burrows
Second, the Estate planned to introduce Burrows’ testimony to
establish the standard of care with respect to towing vehicles. Burrows owns a
garage and wrecker service, and he served in various positions of the Towing &
Recovery Association of Kentucky. Based on this experience, Burrows was of the
opinion that the Jeep was not towable. He also opined that the Jeep exceeded the
safe towing capacity of the Toyota even without the pre-existing damage. Finally,
he expressed the opinion that the towing apparatus used by Ramos was improperly
installed and should not have been used to tow the Jeep. In light of the damage to
both vehicles, Burrows stated that the towing arrangement and the condition of the
vehicles was a substantial factor in causing the accident.
Co-part raised several objections to Burrows’ testimony, which the
trial court adopted. First, Co-part challenged Burrows’ testimony about the safe
towing capacity of the Toyota because he did not know the exact weight or engine
capacities of either vehicle. However, Burrows’ disclosure states the he relied
upon the manufacturers’ specifications for each vehicle. We disagree with the trial
court’s reasoning that this rendered Burrows’ testimony speculative. Co-part raises
no objection to Burrows’ qualification to express an opinion on the matter.
Furthermore, Co-part does not argue that Burrows lacked a proper foundation to
rely on the specifications. Consequently, Burrows’ uncertainty about the exact
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weights of the vehicles goes to the weight and credibility of his testimony, not its
admissibility.
Second, the trial court excluded Burrows’ testimony about the best
practice guidelines for towing storage and impound lots because he failed to
provide copies of the organizations’ published guidelines. However, the purpose
of disclosure under CR 26.02(4)(a) is to sufficiently apprise the opposing party of
the substance of an expert witness’ expected testimony. Full disclosure is essential
to trial preparation. Clephas, 168 S.W.3d 389, 393-94. Here, Burrows provided
his report as part of the CR 26.02(4) disclosure. He fully stated his qualifications
and the bases for his opinions. We conclude that the failure to produce the
guidelines at the discovery phase does not affect the admissibility of Burrows’
testimony. Therefore, the trial court abused its discretion by excluding his
testimony for this reason.
Finally, the trial court found that Burrows’ testimony about the duties
owed by towing and impound storage lots were not relevant to the issues at trial.
But as discussed above, we conclude that the trial court erred by dismissing the
Estate’s statutory claims under KRS 186A.100 and 189.224. Burrows’ testimony
about the duties and standard of care owed by towing storage and impound lots
concerning the release of vehicles were clearly relevant to those claims.
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Consequently, the trial court abused its discretion by excluding these portions of
his testimony.
On the other hand, his testimony about particular duties, such as the
duty to ascertain that the operator of the motor vehicle to be removed is not under
the influence of alcohol or drugs, may not be relevant based on the other evidence
presented. Upon re-trial, the Estate must introduce the guidelines to the extent that
Burrows intends to rely upon them. Furthermore, the trial court shall allow
Burrows’ testimony on these matters unless no adequate foundation is provided, or
Co-part establishes that specific duties are not relevant to these claims, or such
evidence would confuse the jury with matters not at issue.
c. Samuel Cromity
Third, the Estate sought to introduce the testimony of Samuel
Cromity, a Louisville Metro Police officer who went to the scene of the accident to
investigate. The trial court found that he could testify as a fact witness but had not
been timely identified as an expert witness. The Estate takes issue with the lack of
Daubert findings but does not identify what testimony of Cromity was improperly
excluded.
d. Henry C. “Sonny” Cease
Finally, the Estate sought to introduce the testimony of Sonny Cease,
a retired Kentucky State Police Major. He has testified in other cases as an
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accident reconstructionist. The Estate intended to introduce his expert opinion that
the tow-bar combination was unsafe and was a substantial factor in causing the
accident.
The trial court excluded Cease’s testimony that he “agreed” with
Burrows’ report and conclusions. Rather, the court held that Cease’s opinions
must be based upon his independent review and analysis. The Estate does not
explain why this ruling was erroneous.
In its December 1, 2015, order, the trial court held that the Estate had
not established Cease’s qualifications to testify as an expert in the field of accident
reconstruction or on safe towing of vehicles. In its May 20, 2016, order, the court
declined to revisit this ruling but stated that it would revisit this conclusion at trial
if the Estate “establishes Cease’s expertise in specific areas such as towing and
towed vehicles . . . .” The Estate provides no specific references to the record
showing that it established Cease’s qualifications in these areas. Therefore, we
find no abuse of discretion.
2. Admission of testimony by Co-part’s expert witnesses
The Estate next argues that the trial court should have excluded the
testimony of Co-part’s experts, Vince Sayre and Van Kirk, who both testified as
experts in accident reconstruction. The Estate first argues that the trial court
improperly allowed hearsay testimony to be used in the direct examination of
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Sayre and Kirk and in the cross-examination of Cromity. In a related argument,
the Estate argues that Sayre should have been excluded as an expert due to his
reliance on this hearsay evidence.
The evidence at issue includes police photographs of the accident
scene and witness statements included in the police report. The Estate contends
that hearsay evidence consisted of witness statements in the police report. The
Estate contends that Sayre’s testimony can only be based on his personal
observation and investigation and that his opinions are not admissible to the extent
he relied upon facts or data outside of the direct scope of his knowledge.
Co-part responds that KRE 703 permits an expert to rely “on facts or
data, including hearsay which would otherwise not be admissible into evidence,
provided that it is of a type reasonably relied upon by experts in that field.” Combs
v. Stortz, 276 S.W.3d 282, 293 (Ky. App. 2009) (citing Alexander v. Swearer, 642
S.W.2d 896 (Ky. 1982)). In this case, Sayre testified that he visited the accident
scene, viewed police photographs, personally inspected both the Toyota and the
Jeep, and mapped the scene using the Total Station data points recorded by the
investigating officers, including Cromity. The Estate fails to identify any improper
assumptions included in Sayre’s testimony. Likewise, the Estate does not show
that the witness statements were used without a proper foundation. Therefore, we
find no abuse of discretion.
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The Estate also argues that the trial court should not have allowed
Kirk to testify as an expert in the field of accident reconstruction. Kirk was
qualified as an expert in the field of forensic mechanics. He expressed his opinion
that the tow bar connecting the Toyota and the Jeep did not cause Ramos to lose
control of the vehicles. He also stated that he did not find any problems with either
the Toyota or the Jeep which contributed to the accident.
However, Kirk admitted that he had not performed a collision
reconstruction in this case. The trial court admonished the jury to disregard any
statements from Kirk concerning the cause of the accident to the extent that it
relied upon witness statements about the movement of the vehicles. Since we are
remanding this matter for a new trial, we direct the trial court to exclude any
testimony which is outside of the scope of the area in which he was qualified as an
expert.
G. Admission of bulk medical records
The Estate contends that the trial court erroneously allowed Co-part to
introduce “bulk medical records” regarding Savage without testimony by a medical
doctor. But other than including a preservation statement, the Estate does not
explain what medical records were introduced or how it was prejudiced as a result.
Given the Estate’s failure to develop this argument, we decline to address the issue
further.
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H. Admission of evidence regarding James Savage
The Estate next argues that the trial court abused its discretion by
allowing Co-part to introduce evidence that Savage was not wearing a helmet at
the time of the accident. The Estate also objects to introduction of evidence that
Savage was taking prescription medication and a toxicology report showing that he
had hydrocodone in his system at the time of his death. Co-part contends that the
jury could consider this evidence to determine whether Savage’s failure to wear a
helmet contributed to his injuries or whether he could have been impaired at the
time of the accident. However, the trial court did not include an instruction
apportioning any fault to Savage. Thus, we fail to see how this evidence was
relevant to the matters at issue at trial. On remand, this evidence should be
excluded unless Co-part establishes its relevance to the issues before the jury.
The Estate also objects to the introduction of evidence of Savage’s
prior accidents, his medical history, and drug use. Co-part argues this evidence
was relevant to Lauren Savage’s claim for loss of consortium. While we are
concerned that such evidence could have been used as improper character
evidence, the Estate does not point to anywhere in the record where Co-part
attempted to use the evidence for an improper purpose. Under the circumstances,
we conclude that this evidence was properly admitted.
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XII. DIRECTED VERDICT ISSUES
The Estate also argues that the trial court erred by denying its motion
for a directed verdict on liability against Co-part and by granting Co-part’s motion
for a directed verdict on its claims for punitive damages.
When a directed verdict is appealed, the standard of
review on appeal consists of two prongs. The prongs are:
‘[A] trial judge cannot enter a directed verdict unless
there is a complete absence of proof on a material issue
or if no disputed issues of fact exist upon which
reasonable minds could differ.’ Bierman v. Klapheke,
967 S.W.2d 16, 18-19 (Ky. 1998). “A motion for
directed verdict admits the truth of all evidence which is
favorable to the party against whom the motion is made.”
National Collegiate Athletic Ass’n By and Through
Bellarmine College v. Hornung, 754 S.W.2d 855, 860
(Ky. 1988), citing Kentucky & Indiana Terminal R. Co.
v. Cantrell, 298 Ky. 743, 184 S.W.2d 111 (1944).
Daniels v. CDB Bell, LLC, 300 S.W.3d 204, 215 (Ky. App. 2009).
A. Denial of directed verdict on negligence and negligent entrustment claims
against Co-part
In its first argument, the Estate contends that Co-part and its
employees were negligent as a matter of law in turning over salvage vehicles to
buyers without determining whether the individual had a safe means of
transporting them. As a result, the Estate argues that it was entitled to a directed
verdict as to liability on its negligence and negligent-entrustment claims. Although
we are remanding this matter for a new trial, we find that the Estate has not
established Co-part’s liability as to be entitled to a directed verdict on these claims.
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It is well-established that a plaintiff seeking to prove a cause of action
for negligence in Kentucky must show the existence of a duty, breach thereof,
proximate causation, and damages. Boland-Maloney Lumber Co., Inc. v. Burnett,
302 S.W.3d 680, 686 (Ky. App. 2009) (citing Illinois Central R.R. v. Vincent, 412
S.W.2d 874, 876 (Ky. 1967); Mullins v. Commonwealth Life Ins. Co., 839 S.W.2d
245, 247 (Ky. 1992)). The existence of a duty is a question of law for the court,
while breach and injury are questions of fact for the jury. Pathways, Inc. v.
Hammons, 113 S.W.3d 85, 89 (Ky. 2003). Causation presents a mixed question of
law and fact. Id.
There are significant questions of fact whether Co-part breached any
duties in Kentucky. In particular, the Estate is required to prove that Co-part and
its employees entrusted the Jeep to Ramos knowing that he intended to tow it in the
manner in which he did. In addition, the Estate must also prove that any
negligence by Co-part was the proximate cause of Savage’s injuries and death. If
the same evidence is presented at retrial, the Estate has not shown it would be
entitled to a directed verdict against Co-part on these claims.
The Estate also maintains that Co-part is subject to strict liability for
any statutory violations. As discussed above, we conclude that there were issues of
fact concerning the extent of Co-part’s violations of its statutory duties.
Furthermore, violation of a statute does not necessary create liability. Hargis v.
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Baize, 168 S.W.3d 36, 46 (Ky. 2005). The statute must have been specifically
intended to prevent the type of occurrence that took place, and the violation must
have been a substantial factor in causing the result. Isaacs v. Smith, 5 S.W.3d 500,
502 (Ky. 1999). The Estate makes no showing that the legislature intended to
impose strict civil liability for violations of the applicable statutory duties. As a
result, the Estate remains obligated to prove that Savage’s injuries and death
resulted from Co-part’s violations of the statutory duties.
B. Granting of directed verdict on the estate’s claim for punitive damages
The Estate also argues that the trial court erred by granting a directed
verdict on its punitive damages claim against Co-part and by excluding any
evidence relating to that claim. The Estate also asserts that trial court improperly
excluded evidence of Co-part’s prior practices, including evidence of the size and
scope of its operations, its relationship with the insurers, its prior dealings with
AUF, and its financial incentives to conduct business in the manner it does. The
Estate maintains that the jury should have been allowed to consider this evidence
to determine the appropriate amount of punitive damages.
An instruction on punitive damages is warranted if there is evidence
that the defendant acted with oppression, fraud, malice, or was grossly negligent by
acting with wanton or reckless disregard for the lives, safety or property of others.
Phelps v. Louisville Water Co., 103 S.W.3d 46, 51-52 (Ky. 2003). A party is
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entitled to have the jury instructed on the issue of punitive damages “if there was
any evidence to support an award of punitive damages[.]” Shortridge v. Rice, 929
S.W.2d 194, 197 (Ky. App. 1996) (emphasis omitted). The threshold for the award
of punitive damages is whether the misconduct was “outrageous” in character, not
whether the injury was intentionally or negligently inflicted. Horton v. Union
Light, Heat & Power Co., 690 S.W.2d 382, 389 (Ky. 1985).
In a case where gross negligence is used as the basis for punitive
damages, gross negligence has the same character of outrage justifying punitive
damages as willful and malicious misconduct in torts where the injury is
intentionally inflicted. Just as malice need not be expressed and may be implied
from outrageous conduct, so too may wanton or reckless disregard for the rights of
others be implied from the nature of the misconduct. Id. at 389-90. However, a
finding of gross negligence clearly requires more than a failure to exercise ordinary
care. It requires a finding of a failure to exercise even slight care such as to
demonstrate a wanton or reckless disregard for the rights of others. Id. See also
Phelps, 103 S.W.3d at 51-52. In other words, gross negligence requires “a finding
of failure to exercise reasonable care, and then an additional finding that this
negligence was accompanied by wanton or reckless disregard for the lives, safety
or property of others.” Gibson v. Fuel Transp., Inc., 410 S.W.3d 56, 59 (Ky. 2013)
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(citing Horton, 690 S.W.2d at 389-90). See also Nissan Motor Co., Ltd. v.
Maddox, 486 S.W.3d 838, 840 (Ky. 2015).
In this case, the Estate has not alleged any conduct by Co-part rising
to the level of fraud, oppression, or malice. The Estate merely alleged that Co-
part’s actions violated its common law and statutory duties of care, which would
amount to negligence. Further, the Estate does not allege that Co-part failed to
exercise even slight care such as to demonstrate a wanton or reckless disregard for
the rights of others. Therefore, the trial court did not clearly err in granting a
directed verdict on this claim or by excluding evidence of Co-part’s prior practices.
XIII. AMENDMENT OF FINAL JUDGMENT
Lastly, the Estate argues that the judgment should be amended to
contain language to facilitate enforcement against Chapa in Texas. In particular,
the Estate contends that Texas law requires the judgment to recite, “This is a final
and appealable judgment for which execution may be had, and there is no just
cause for delay.” This language is essentially the same as is required under CR
54.02 to grant a final judgment on less than all of the claims in an action.
In this case, however, the judgment conclusively disposed of all the
pending claims. Consequently, the judgment was final as a matter of law and the
finality language was not required. CR 54.01. In its pleadings to the trial court,
the Estate did not argue that the language was necessary to facilitate enforcement
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of the judgment in Texas. Therefore, we conclude that this error is not preserved.
However, the Estate may be entitled to ask the trial court to modify the judgment
pursuant to CR 60.02.
The Estate also argues that the judgment incorrectly states that AUF
was not before the court. For purposes of this action, Barraza and AUF were
before the trial court for purposes of Co-part’s third-party complaint. But as
discussed above, the Estate never asserted a claim against AUF directly.
Consequently, AUF’s liability could only be derivative of any liability by Co-part.
Since the jury did not return a judgment against Co-part, the judgment did not
apply to AUF. Nevertheless, since we are remanding for a new trial on the claims
against Co-part, any question concerning the language of the judgment with
respect to AUF or Barraza is moot.
XIV. CONCLUSION
In conclusion, the trial court correctly found that the Estate was
required to comply with the requirements of the Hague Convention to obtain
service of the complaint on Ramos. Since the Estate failed to comply with those
requirements, the trial court properly quashed the service of the complaint on him.
We also hold that Allstate and Hartford were not obligated to maintain insurance
coverage on the Toyota or the Jeep after the titles were delivered to AUF’s agent.
In addition, the Estate has failed to show that Allstate and Hartford remained liable
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for any negligence or statutory violations by Co-part. Therefore, the trial court
properly granted summary judgment for Allstate and Hartford on these claims.
For similar reasons, we also conclude that Co-part was not obligated
to maintain insurance coverage on the vehicles following delivery of the titles to
AUF’s agent. Consequently, the trial court properly granted summary judgment on
these claims. We also hold that the trial court properly granted summary judgment
on the claims against the Co-part executives and the statutory claims against Co-
part under KRS 186A.065 and 189.100. We further conclude that the trial court
did not abuse its discretion by denying the Estate’s motions to file the amended
complaints.
However, we disagree with the trial court that AUF was not a
purchaser “for use” within the meaning of KRS 186A.100. Similarly, we also
disagree with the trial court that Ramos was not operating the Jeep within the
meaning of KRS 189.224. Therefore, the trial court erred by granting summary
judgment on these claims. We also conclude that the trial court abused its
discretion by allowing Co-part to withdraw an admission after the discovery period
had ended.
Since the Estate was prejudiced by the failure to instruct on the
statutory claims, withdrawal of the admission and several evidentiary rulings
flowing therefrom, we must reverse the jury verdict and judgment on the claims
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against Co-part and remand this matter for a new trial on the negligence, negligent
entrustment, and remaining statutory claims. However, the Estate has failed to
show gross negligence by Co-part. Therefore, the trial court properly granted a
directed verdict for Co-part on the claim for punitive damages. Finally, we note
that Chapa has not appealed the adverse jury verdict in this case. Therefore, the
judgment against Chapa shall remain undisturbed.
Accordingly, the judgment of the Jefferson Circuit Court is affirmed
in part, reversed in part, and remanded for a new trial as set forth in this opinion.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE
ALLSTATE INSURANCE
G. Adam Redden COMPANY:
Richard Breen
Louisville, Kentucky Robert E. Stopher
Robert D. Bobrow
ORAL ARGUMENT FOR Louisville, Kentucky
APPELLANT:
ORAL ARGUMENT FOR
Richard Breen ALLSTATE INSURANCE
Louisville, Kentucky COMPANY:
Robert E. Stopher
Louisville, Kentucky
-67-
BRIEF FOR APPELLEE
PROPERTY & CASUALTY
INSURANCE COMPANY OF
HARTFORD:
R. Craig Reinhart
Neal J. Manor
Lexington, Kentucky
ORAL ARGUMENT FOR
APPELLEE PROPERTY &
CASUALTY INSURANCE
COMPANY OF HARTFORD:
R. Craig Reinhart
Lexington, Kentucky
BRIEF FOR APPELLEES CO-PART
OF CONNECTICUT D/B/A CO-
PART AUTO AUCTIONS, WILLIS
JOHNSON, PAUL STYER,
WILLIAM FRANKLIN, TOM
TAYLOR, AND DANIEL BOND:
Michael E. Hammond
J. Lacey Fiorella
Lexington, Kentucky
ORAL ARGUMENT FOR
APPELLEES CO-PART OF
CONNECTICUT D/B/A CO-PART
AUTO AUCTIONS, WILLIS
JOHNSON, PAUL STYER,
WILLIAM FRANKLIN, TOM
TAYLOR, AND DANIEL BOND:
Michael E. Hammond
Lexington, Kentucky
-68-
BRIEF FOR APPELLEE LIBERTY
MUTUAL FIRE INSURANCE CO.:
Charles H. Cassis
Aaron J. Silletto
Prospect, Kentucky
ORAL ARGUMENT FOR
APPELLEE LIBERTY MUTUAL
FIRE INSURANCE CO.:
Charles H. Cassis
Prospect, Kentucky
BRIEF AND ORAL ARGUMENT
FOR OSCAR RAMOS:
Edward H. Bartenstein
Louisville, Kentucky
-69-