445 S.W.3d 51
Ky. Ct. App.2014Background
- December 27, 2010 collision in Pike County, KY: Ferlin Pruitt (driving employer’s vehicle) injured by uninsured motorist Allison Comer.
- Vehicle owned/insured by Drill Steel Services under Grange policy (UM limits $1,000,000). Pruitt also had a personal Tennessee Farmers UM policy (limits $100,000).
- Pruitt sued Grange and Tennessee Farmers for UM benefits; Grange settled with Pruitt after paying its UM limits but continued cross-claim against Tennessee Farmers for contribution/priority.
- Both policies contained "other insurance" clauses; Grange argued Kentucky pro rata rule applied, Tennessee Farmers relied on Tennessee statutes and its policy language making its coverage excess.
- Trial court applied the Restatement (Second) §188 choice‑of‑law test, held Tennessee law governed, ruled Grange primary and Tennessee Farmers secondary, and that Tennessee Farmers’ secondary obligation was extinguished by Pruitt’s >$100,000 workers’ compensation benefits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which state’s law governs priority of UM coverage | Grange: Kentucky law applies (accident occurred in KY; pro rata rule) | Tennessee Farmers: Tennessee law applies (policy negotiated, issued, and governed in TN) | Tennessee law governs under Restatement §188; TN has most significant relationship |
| Priority between employer’s auto policy and personal policy | Grange: its policy is primary or policies are co‑insurers under KY law | Tennessee Farmers: TN statute and policy make vehicle’s UM primary and personal policy excess | Grange (employer’s Grange policy) is primary; Tennessee Farmers is secondary under TN law |
| Effect of workers’ compensation on UM excess recovery | Grange: seeks contribution from Tennessee Farmers for amounts Grange paid | Tennessee Farmers: may offset/exclude benefits under TN law and its policy (no duplication) | Tennessee Farmers’ secondary obligation extinguished/offset by Pruitt’s >$100,000 workers’ compensation benefits |
| Relevance of insured’s class status (first vs. second class insured) | Grange: Pruitt is second‑class under employer policy and first‑class under personal policy (argument for recovery) | Tennessee Farmers: Pruitt is first‑class insured under both | Court: Did not decide class issue; unnecessary under TN law choice and statutory priority rule |
Key Cases Cited
- Lewis v. American Family Ins. Group, 555 S.W.2d 579 (Ky. 1977) (adopts Restatement §188 most‑significant‑relationship approach for contract choice‑of‑law)
- State Farm Mut. Auto. Ins. Co. v. Hodgkiss‑Warrick, 413 S.W.3d 875 (Ky. 2013) (discusses choice‑of‑law principles in insurance disputes)
- Hamilton Mut. Ins. Co. v. U.S. Fidelity and Guar. Co., 926 S.W.2d 466 (Ky. Ct. App. 1996) (Kentucky case applying pro rata/co‑insurer treatment for conflicting other‑insurance clauses)
- W.R. Grace & Co. v. Continental Casualty Co., 896 F.2d 865 (5th Cir. 1990) (analyzes choice‑of‑law by identifying state with most significant relationship in insurance priority disputes)
- St. Paul Mercury Ins. Co. v. Lexington Ins. Co., 888 F. Supp. 1872 (S.D. Tex. 1995) (explains that relevant parties in insurance priority disputes are the insurers and focuses choice‑of‑law on formation/delivery of the policy)