Guy Fluty v. Kentucky National Insurance Company

RENDERED: OCTOBER 30, 2020; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2019-CA-1471-MR
APPELLANTS
GUY FLUTY AND MARSHA FLUTY
APPEAL FROM LAWRENCE CIRCUIT COURT
v. HONORABLE JOHN DAVID PRESTON, JUDGE
ACTION NO. 19-CI-00155
KENTUCKY NATIONAL
INSURANCE COMPANY APPELLEE
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: COMBS, DIXON, AND MAZE, JUDGES.
DIXON, JUDGE: Guy and Marsha Fluty appeal from the order dismissing their
claims entered on September 16, 2019, by the Lawrence Circuit Court. Following
a careful review of the briefs, record, and applicable law, we reverse.
FACTS AND PROCEDURAL BACKGROUND
On February 12, 2017,1 the Flutys were injured in an automobile
accident. They were insured by Kentucky National Insurance Company
(“Kentucky National”). By letter dated May 21, 2018, the Flutys requested that
Kentucky National pay each of them $10,000 in Personal Injury Protection (“PIP”)
benefits to cover outstanding medical bills incurred for treatment following the
accident; however, no medical bills were provided with this initial correspondence.
On June 27, 2018, Kentucky National responded to the Flutys’ letter asserting they
had not demonstrated an accrued economic loss as there was no proof of payment
of any medical expenses. The Flutys did not respond until March 19, 2019, when
they sent a letter enclosing outstanding medical bills and documentation of a lien
from Anthem for payment of Marsha’s medical bills. On March 20, 2019,
Kentucky National replied that no claim for payment of PIP benefits (at least no
claim accompanied by corresponding medical bills) was made prior to the
expiration of the two-year statute of limitations. Consequently, Kentucky National
denied the Flutys’ claims.
On June 20, 2019, the Flutys sued Kentucky National for payment of
PIP benefits under their policy, as well as violation of the Unfair Claims
Settlement Practices Act. Kentucky National moved the trial court to dismiss the
1
The Flutys’ complaint erroneously alleges that the date of the accident was February 12, 2019.
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Flutys’ complaint for failure to file same within the two-year statute of limitations.
The trial court subsequently dismissed the Flutys’ claims pursuant to KRS2 304.39-
230(6). This appeal followed.
STANDARD OF REVIEW
A trial court should only grant a motion to dismiss if “it appears the
pleading party would not be entitled to relief under any set of facts which could be
proved in support of his claim.” Benningfield v. Petit Envtl., Inc., 183 S.W.3d 567,
570 (Ky. App. 2005) (citation omitted). In considering the motion to dismiss, the
truth of the allegations in the amended complaint is assumed, and the pleadings are
to be liberally construed in a light most favorable to the plaintiff. Id. This
determination requires no factual findings and is purely a question of law. Id.
STATUTE OF LIMITATIONS
This action involves the no-fault provisions of KRS 304.39-010 et
seq., also known as the Motor Vehicle Reparations Act (“MVRA”), and the
application of the limitation of action provisions in Section 230. The Flutys
contend the trial court erred by applying the (incorrect) statute of limitations found
in KRS 304.39-230(6) as opposed to the (correct) statute of limitations found in
KRS 304.39-230(1).
2
Kentucky Revised Statutes.
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KRS 304.39-230(6) provides, in pertinent part, that “[a]n action for
tort liability not abolished by KRS 304.39-060 may be commenced not later than
two (2) years after the injury, or the death, or the date of issuance of the last basic
or added reparation payment made by any reparation obligor, whichever later
occurs.” (Emphasis added.) Since no basic or added reparation payment was
made following the accident and the complaint was filed more than two years after
the accident, the trial court found that the Flutys’ complaint was barred by this
statute of limitations. It is undisputed that this subsection applies to tort actions;3
however, review of the Flutys’ complaint reveals they did not allege an action for
tort liability but, rather, sought a declaration of their rights to benefits under their
insurance policy with Kentucky National—a contract action.4
KRS 304.39-230(1) provides that “[i]f no basic or added reparation
benefits have been paid for loss arising otherwise than from death, an action
therefor may be commenced not later than two (2) years after the injured person
3
“It is reasonable to assume that the legislature intended exactly what it said when it made the
two[-]year statute for ‘an action for tort liability’ prescribed in KRS 304.39-230(6) part of the
Motor Vehicle Reparations Act, that two years applies to all tort actions not abolished by the
Act.” Goodin v. Overnight Transp. Co., 701 S.W.2d 131, 133 (Ky. 1985) (emphasis added)
(footnote omitted). “This Court agrees . . . that KRS 304.39-230(6) does not purport to limit
actions on contracts, but by its very terms limits an action for tort liability not abolished by KRS
304.39-060.” Gordon v. Kentucky Farm Bureau Ins. Co., 914 S.W.2d 331, 332 (Ky. 1995)
(emphasis added) (internal quotation marks omitted).
4
“Neither the result nor the rationale of Elkins [v. Kentucky Farm Bureau Mutual Ins. Co., 844
S.W.2d 423 (Ky. App. 1992)] requires application of the MVRA statute of limitations to an
action on a first-party insurance contract, nor is it necessarily controlling that the alleged tort-
feasor is not a party to the action.” Gordon, 914 S.W.2d at 332.
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suffers the loss and either knows, or in the exercise of reasonable diligence should
know, that the loss was caused by the accident, or not later than four (4) years after
the accident, whichever is earlier.” Because KRS 304.39-230(1) deals with
instances, such as the one herein, where no basic reparation benefits (“BRB”) have
been paid and a party seeks payment of such benefits, it contains the applicable
statute of limitations. (“KRS 304.39-230(1) [is] the subsection of the MVRA
covering the time bar for ‘reparation benefits.’” Crenshaw v. Weinberg, 805
S.W.2d 129, 130 (Ky. 1991)).
KRS 304.39-230(1) has two triggering events in determining the time
limits on actions for reparation benefits. The first is two years from the date of loss
and the second is four years from the date of accident. The actual limit is
whichever first occurs. KRS 304.39-020(5) defines loss as an “accrued economic
loss consisting only of medical expense, work loss, replacement services loss, and,
if injury causes death, survivor’s economic loss and survivor’s replacement
services loss. Noneconomic detriment is not loss. However, economic loss is loss
although caused by pain and suffering or physical impairment.” Kentucky
National acknowledged in its letter dated June 27, 2018, that the Flutys had not
demonstrated an accrued economic loss at that time as they had not produced proof
of out-of-pocket payment of any medical bills.
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“It is clear from this subsection (KRS 304.39-230(1)) that the time bar
for seeking no-fault benefits is not tied to the date of the accident until ‘four (4)
years’ has expired. Until then the time bar is tied to the date of the ‘loss,’ meaning
the date the lost wages or medical expenses are incurred.” Crenshaw, 805 S.W.2d
at 130. In Crenshaw, “[n]o claim was made nor benefits paid until over two years
after the date of the accident.” Id. The trial court in Crenshaw dismissed the
action under KRS 304.39-230(6) but was reversed by another panel of our Court,
which held:
Considering both 230(1) and (6), the plain meaning of
the statute is that a person entitled to receive no-fault
benefits has two years after the last payment of benefits
in which to file an action for tort liability without regard
to whether such benefits were first claimed or first paid
within two years of the date of injury.
Id. at 133 (emphasis added). Crenshaw clearly contemplates instances, such as the
one at hand, where benefits are not claimed within two years of the date of the
injury or accident.
The case herein is also similar to State Automobile Insurance Co. v.
Lange, 697 S.W.2d 167 (Ky. App. 1985). In Lange, it was almost three years after
the accident before the insured—still suffering the effects of the accident—notified
her insurer of her claim for BRB. Id. at 168-69. The insurer denied the insured’s
claim as barred by the statute of limitations. The insured then sued the insurer, and
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the trial court found the insured’s claim was not time-barred. On appeal, that panel
of our Court held:
[T]he rule is that when no BRB have been paid, an
injured party has two years in which to file an action for
a loss as defined in KRS 304.39-020(5). The statute
begins to run when the loss is accrued; in no event may
an action be commenced more than four years after the
date of accident.
. . . The recovery is not in tort, but rather on
contract—an executory contract mandated by statute.
Id. at 169 (emphasis added). Here, the trial court failed to consider the applicable
statute of limitations for this action contained in KRS 304.39-230(1).
Under KRS 304.39-230(1), the Flutys’ two-year statute of limitations
did not begin running until they suffered loss as defined by the MVRA. Therefore,
establishing the date of loss is critical in determining whether the Flutys’ claim was
timely filed. Another panel of our Court observed:
The reference to Milby [v. Wright, 952 S.W.2d 202
(Ky. 1997)] convinces us. In that case the Supreme
Court was referring to the submission of claims to the
insurer, not the filing of a lawsuit, when it said, “[T]he
claim for payment is subject to the limitation set forth in
KRS 304.39-230(1).” [Id.] at 204. The rationale given
was avoidance of fact patterns such as now before this
Court. If the BRB claimant was not required to present
proof of loss to the reparations obligor under the time
restrictions of KRS 304.39-230(1), “the potential plaintiff
[could] hold the alleged tortfeasor hostage by the leisured
submission of medical claims, thereby forestalling the
running of the statute of limitations” and that would be
contrary to one of the purposes of the MVRA. Id.
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 We do not interpret the circuit court’s reference to
the statute as a legal determination that Joiner failed to
file a timely lawsuit. Clearly, the circuit court concluded
KRS 304.39-230(1) was a legal bar to Joiner’s claim
because he failed to submit proof of loss, under MVRA,
to Farm Bureau within two years of the accident.
....
KRS 304.39-040(2) obligates an insurer to “pay
basic reparation benefits, under the terms and conditions
stated in this subtitle. . . .” The first of those terms and
conditions is expressed in KRS 304.39-210 which
“clearly places the burden on the reparations obligee to
furnish the obligor with reasonable proof of loss.”
Automobile Club Ins. Co. v. Lainhart, 609 S.W.2d 692,
694 (Ky. App. 1980).
. . . [T]his Court said long ago that “the statement
of the claimant alone would not, as a matter of law,
satisfy the statutory requirement of ‘reasonable proof of
the fact and amount of loss realized.’” State Auto. Mut.
Ins. Co. v. Outlaw, 575 S.W.2d 489, 493 (Ky. App.
1978). This also applies to statements of the claimant’s
lawyer, and perhaps more so. . . .
. . . Of course, a medical bill would suffice as
reasonable proof of loss.
Joiner v. Kentucky Farm Bureau Mut. Ins. Co., 582 S.W.3d 74, 79 (Ky. App.
2019). Here, the Flutys presented proof of loss with accompanying medical bills
on March 19, 2019. While this claim was not presented within two years of the
date of the accident, it is unclear from the record whether this submission occurred
within two years of the date of loss, as defined by the MVRA.
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In the record before us, it appears the earliest-dated medical bill sent
to the Flutys was June 3, 2017. However, it is unclear from the record what date
this bill was received by the Flutys. It is also unclear if the Flutys experienced
loss prior to that medical bill. If there was no loss prior to June 3, 2017, the Flutys’
claim was not barred by the applicable statute of limitations. Therefore, we must
reverse and remand so that the trial court may consider whether the Flutys filed
their action within two years of their loss, as defined by the MVRA.
Consequently, the trial court’s dismissal is reversed and remanded for further
proceedings consistent with this Opinion.
UNFAIR CLAIMS SETTLEMENT PRACTICES ACT
The Flutys also ask us to overturn Phoenix Healthcare of Kentucky,
L.L.C. v. Kentucky Farm Bureau Mutual Insurance Co., 120 S.W.3d 726 (Ky.
App. 2003), which held that the MVRA provides the exclusive remedy to such
claims and would preclude their claims under the Unfair Claims Settlement
Practices Act.5 The logic of that panel of our Court was sound, and the Flutys have
presented no compelling reason for departing from it. Hence, we decline to do so.
5
KRS 304.12-010 et seq.
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CONCLUSION
Therefore, and for the foregoing reasons, the order entered by the
Lawrence Circuit Court is REVERSED and remanded for further proceedings
consistent with this Opinion.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE:
Ryan D. Mosley David S. Strite
Ned Pillersdorf Rachel K. Dalton
Prestonsburg, Kentucky Louisville, Kentucky
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