*1 368 Huber, M.D., (1983); Ky., in another under 648 861 property
inherit state S.W.2d Cabinet, child, Kentucky Transp. laws of which a v. adopted Wilson state, unper- or can 884 641 are cannot inherit inherit S.W.2d We by by foreign suaded authorities cited only to a limited extent. Pyles and Flowers. Pyles The authorities cited and Flow- earlier, unconvincing. ers are As stated IV.Equal Protection rights of grand- Hicks relates visitation Pyles deny 199.520 not KRS does Rowe, parents. Ky.App., Dotson v. 957 laws equal protection or Flowers Powell, (1997), Posey v. and S.W.2d under the federal or state constitutions. (1998), Ky.App., S.W.2d 836 involved Kentucky line of Individuals have one rights grandpar- of of expansion obligation it is not of inheritance and regard custody to visitation and ents this Court to ensure that such inheritance apply and do not to this situation and are Adopted in this equal persons is of value. King not this binding otherwise on Court. equal protection the law State deserve of Ky., 828 King, greatly v. S.W.2d judicial system apply when our is asked the right grandparent broadened of visita- It a inheritance statutes. is laws of apply tion but does not inheritance An harsh re simple proposition. apparent question presented Slattery here. v. parties involved sympathy sult Co., Trust Hartford-Connecticut clear place application have no of (1932), is unpersua- Conn. A. 79 and laws of inheritance. The unambiguous distinguishable sive this case. of known law inheritance should be well applied equal and con must be Chilling II.No Effect foreign to all. sistent manner The and Pyles argue Flowers by Pyles domestic citations and Flowers should be allowed to inherit from their unconvincing without merit. grandmother in to prevent maternal order Appeals decision Court of adopted chilling effect children affirmed. earlier, Kentucky. ap- As stated case long the law of inheritance plies has All concur. been established. We must observe that adoption we do not believe that should be
based financial considerations which
may be involved in inheritance. Family Concept
III.Creation Newof [6] Pyles Flowers argue that a FARMLAND MUTUAL INSURANCE COMPANY, Appellant, public policy creating family a new cutting family all ties with the natural does They in this cite a num- not exist matter. Johnson; JOHNSON, Virginia Lemuel jurisdictions of cases from other ber Distribution, and A.L. Johnson Certainly states. on the statutes of those Inc., Appellees. prerogative any it is within state No. 1998-SC-0938-DG. body relating laws legislative to establish adoption. to inheritance as well as Such Kentucky. Court Supreme legisla- come from the enactment laws Oct. body and not from decision of tive Rehearing As Modified on Denial of public policy court. enunciation Feb. Assembly. the domain the General We jurisdiction in propose to invade its do not interpret the law.
any respect. The courts legislation.
They do enact Schork *3 Proper- Business Property
1. Real ty the value of covered will determine
We damage in the event of loss or property time of cash value as of the at the actual pay damage. or We will the loss the least damage than more for loss of:
(b) lost repair replace The cost *4 prop- with similar damaged property or same func- erty perform the intended replacement with identical tion when unnecessary; impossible or property is (d) damaged property. The value DEFINITIONS POLICY VI. THE FOLLOWING DEFINITIONS Baker, Cook, P. Matthew J. Matthew A PART THIS POLI- ARE MADE OF Green, KY, Cole, Baker, Bowling &Moore CY appellant. for Steers, Steers, Jr., Roy & Lee Steers the re- 2. Actual cash value means Franklin, KY, appellees. damaged placement property cost the of loss, depreci- less destroyed at time of LAMBERT, Chief Justice. ation. litigation disputed This arises out of a added). (emphasis stipu- fire insurance claim. The insured fire, Farmland retained Craw- After the fairly lated that the amount of the loss was adjust claim. Company and the ford debatable, that a and the insurer contends the case Company assigned and Crawford it the against claim for bad under dispute A adjuster, to its Richard Shields. Kentucky Prac- Unfair Claims Settlement parties the as soon arose between (“KUCSPA”) thereby tices Act foreclos- repaired premises the should be whether multiplicity and a of issues ed. This other re-built, there was also completely judgment appeal are raised from a regarding value of the disagreement upon jury awarding plaintiffs verdict Farmland, took of Shields loss. On behalf million for of $2 structure could be position faith and violations and violations of the cash that the actual value repaired and KUCSPA. repair less property was the cost 22,1992, building April On a commercial offer, only one depreciation. He made Johnson, Virginia owned Lemuel $168,993.18, claim. The John- to settle the as A.L. Distribu- doing business Johnson building repairing sons insisted tion, destroyed by building fire. The in- assurance of structural with reasonable by Farmland Mutual Insur- it, was insured to rebuild cost more than tegrity would policy pro- Company. pertinent ance of- maintained that Shields’ also insurance contract were: visions of the too fer was low.
I. PROPERTY INSURANCE agreement with failing to reach an After property, value of the
Farmland on the Simpson Cir- complaint filed a Johnsons LOSS SETTLEMENT CLAUSE C. Farmland, against cuit Court Crawford claimed that “actual cash val- Shields Shields, Company, alleging breach repair deprecia- ue” meant the cost of less of the insurance contract and violations tion. expressly Yet fact the contract Kentucky Unfair Claims Settlement stated “actual cash was the value” theory Practices Act. The Johnsons’ basic replacement depreciation. cost of less of the case was that had misrepre- Shields granted trial court thus the Johnsons’ mo- pertinent provision, sented a contract re- partial summary judgment. tion for sulting significantly decreased amount issues, At trial on remaining contract, recovery under the insurance following presented. evidence was Two conspired and that he had also with Paul fire, days after the Shields met Johnson at (“PDS”), Systems Davis a fire restoration arrival, Shortly the fire site. after Shields service, contracting repair to create a esti- employee of PDS also arrived. Johnson mate that Shields knew was too low. told Shields that he did not intend to re- The trial court ordered severance that building build the had been. Thus the breach of contract and bad faith knew that it would ad- Shields cash trial, claims. In the breach of contract justment, and that the claim value here, is not at issue found marketplace. would never be tested in the building that the ex- repairing cost *5 later, Smith, days Larry A a local few replacement ceeded the cost and awarded contractor, building went to the fire site to $218,810 the Johnsons as the “actual cash prepare an estimate for Johnson. When premises. rep- value” of the amount This site, arrived at the fire em- Smith PDS resented what the believed to be the Smith, ployee arrived and said to “You cost, $251,541, replacement depreci- minus guys wasting your already time. I’ve ation. “actual cash value” job.” immediately got this Smith went to $45,000 approximately awarded was more employee’s Johnson ask the PDS only than the offer Shields had made to time, was At statement true. Johnson appealed the Johnsons. Farmland from began suspect collusion between Shields judgment, and the Johnsons took a and PDS. cross-appeal. Appeals af- Court fire, month About one after the Shields judgment Simpson firmed the of the Cir- phone message offering left a for Johnson cuit Court. $168,993.18. claim for It was settle the Thereafter, faith claim was later learned that this offer was based on alleged tried. The Johnsons that Farm- repair damaged property, the cost to land committed four violations of depreciation. less a deduction for Shields (1) misrepresentation perti- KUCSPA: first testified that he had based this one (2) policy provisions,1 nent failure to con- estimate, repair offer on his own (3) investigation,2 failure duct a reasonable admitted that but on cross examination he attempt bring equita- a fair and about repair had the offer on the he PDS claim,3 and com- ble settlement of the knew it too though estimate even he pelling litigation by to initiate the insureds repair estimate was low. Shields’ offering substantially an amount less than $220,000, repair and the estimate was PDS ultimately the amount recovered.4 Moreover, $203,000. Shields testified that summary judg- prototype for familiar with a of the The Johnsons moved he was issue, i.e., policy, that he had never ment on the first whether Johnsons’ but from misrepresented policy provi- copy policy obtained a of the issue Shields undisputed sions. From the record it was Farmland. 304.12-230(6). 304.12-230(1). 3. KRS
1. KRS 304.12-230(7). 304.12-230(4). 4. KRS 2. KRS paragraph Farmland opening had made its own internal to Johnson. The appraisal building stated, two be- months report fore the fire. Yet Shields never asked cost, compensation limit To Structural Farmland about the appraisal, and Linda (SII) Integrity, provide Inc. does not Dombkowski, managed who the claim for floor, ceiling, removal of or wall cover- Farmland, never told Shields she had ings. every The detailed examination of thought it. Johnson appraisal member, visible, structural even where represented the fair value of the claim. beyond autho- scope is also SII’s objected Farmland to the introduction of purpose rized work.... of this [T]he appraisal, ap- and the amount of the inspection to provide opinion SII’s praisal was excluded from evidence. How- concerning the conditions observed ever, existed, fact that appraisal based on a limited visual examination. the fact that Shields never asked about inspection, On the basis of Mitchell’s Farmland, any appraisal by and the fact “previous Shields advised Johnson that the pointed that Dombkowski never out the offer ... still stands.” company’s appraisal own to Shields were put jury. before the 3, 1992, August On Shields wrote John- 3, 1992,
On son as follows: June the Johnsons met with Shields Louisville. Mr. Johnson told reply you We would like to have a thought Shields he the cost of ade- bring within a week so that we can quate repairs would exceed the cost to claim to a conclusion repairs can replace demolish and building. John- begin. Additional that occur son insisted that the claim should be ad- delay beginning repairs result of justed based on the replacement cost of or additional loss of income as a result budding depreciation, less under sub- *6 not policy. covered under the (C)(1)(d), paragraph than repair rather letter, Upon receipt began of this Johnson cost, (C)(1)(b). subparagraph under Nev- demolishing building the in order to re- ertheless, at the meeting Louisville Shields business, sume which occurred on Septem- reiterated only Farmland’s first and offer ber September 1992. On $168,993.18. Mr. Johnson insisted that Shields restated Farmland’s offer and re- a structural engineer be retained. quested a response from Johnson. On Mitchell, Shields retained Bill a struc- 30, 1992, September Shields was told that engineer. tural Johnson hired his own completed Johnson had not his own inves- engineer. structural Shields never asked tigation accept reject and could neither nor Mitchell or PDS to determine whether the Farmland’s offer at that time. cost repair would exceed the cost to 28, 1992, On October Johnson informed replace, depreciation, less nor did he at- consultants, in a that Shields letter his tempt to do so himself. Mitchell rendered engineer building structural and a contrac report July his 1992. After Shields tor, opinion repair had confirmed his that report, received Mitchell’s he refused to cost, cost replacement would exceed provide a copy to Johnson unless and until building contractor had in a estimated position exchange Johnson was $304,444.5 engineering would be Johnson also in reports. receiving After a let- attorney, ter from the formed that com willing Johnsons’ Shield’s Shields he was agreed copy report $260,000.6 to send a promise Mitchell’s the entire claim for trial, proved subtracting undisputed 5. At the contract the Johnsons amount replacement building ($5,606.37) that the cost of the was for content and debris removal $304,440. They asserted that this amount ($4,320.00), building Johnson's offer for the by depreciation should be decreased $250,073.63. trial, equipment was At $45,666.60 for an actual cash value award of prepared Johnson claimed that he was $258,777.40. KUCSPA, seeing any from maining provisions Without documentation consultants, replied, Johnson’s Shields it that lacked reasonable basis law or “We feel that an assessment was conduct, accurate for its and that fact either made of the loss” restated Farmland’s basis for knew there was no reasonable its $168,993.18 policy offer of “made under the or acted disregard conduct with reckless clause, Clb, loss on settlement No. thereof. awarded Johnsons repairing proper damaged cost $71,013.47 in damages, in compensatory offer, above, ty.” This as included a stated attorneys nontaxable cluding fees and liti depreciation. deduction for gation expenses. It also assessed two mil in punitive damages against lion dollars 9,1992, requested On November Shields also Farmland. awarded reports from consul- written Johnson’s $1,100,000 in damages against Crawford time, At that had tants. Johnson adjuster, Shields, Company and its reports expenses. received verbal to save this claim has been settled and is not immediately requested reports He but written consultants, yet delay appeal. on pending his there was in providing reports On Shields. appealed judgment of Farmland 10, 1992, Johnson December Shields wrote Court, Simpson Circuit Court of asking reports about the and the Johnsons’ rejected Appeals all of Farmland’s claims on attorney responded December error, except for the trial court’s award There was no further contact between pre-judgment The result was interest. 10, 1993, parties March until when Shields judgment largely was affirmed. again inquired reports about the and reit- agreed Since the Johnsons with Farmland $168,993.13, erated Farmland’s offer of wrong that the trial court used the basis repair “based on the actual cost to interest, computing prejudgment applicable building, depreciation.” less presented appeal. not issue is on this 6, 1993, April reports On copies Farmland’s first claim is that the Shields, 20,1993, April were sent to and on bad faith claim should have been dismissed Shields admitted that “reflected some a matter of Mr. Johnson law because of hidden damage amount persons could stipulated reasonable us, and that be taken into visible will opinions have different as to value of Yet, 21, 1993, May consideration.” *7 damaged the loss and whether the struc restated Farmland’s offer Shields replaced. repaired should be or In $168,993.13. ture soon com- Johnsons contention, Farmland of its relies support litigation. menced Fire Ins. v. Empire on and Marine Co. claims, upon At trial of the bad faith the Service, Inc.,8 Simpsonville Wrecker evidence, the foregoing trial court submit states, ted the inter jury special the case to on “fairly particular debata- claim necessary [I]f el rogatories that reflected ble,” to is entitled debate by insurer required adopted test ements regardless of whether the de- Fund that claim Curry this v. Fireman’s Court fact or concerns a matter of one of Company7 found bate Insurance to chal- three re ... is entitled [A]n that Farmland had violated the law insurer disregard for had whether amount if Farmland acted reckless reduce this further Jones, existed); all. Ky, its offer at increased Wittmer such basis (1993); Kemper Federal (1989) (1. the 7. S.W.2d Hornback, Ky., Company Insurance obligated pay to the claim insurer must be (Leibson, J., dis S.W.2d 846-847 policy, 2. the insurer under the terms senting). fact for a reasonable basis in law or must lack claim, shown denying it must be Ky.App., 880 S.W.2d 886 was no insurer either knew there that the or denying the claim reasonable basis law, a claim lenge fairly regarding which is debatable the status of the and the or the pursuant the law facts. granted trial court should have a directed Curry, it is clear that for purposes on the faith claim.12 verdict bad law, Kentucky a tort claim for a bad Empire distinguishable Fire is thus faith pay refusal to must first be tested case, from the instant as it dealt with an to determine whether the insurer’s re- right bring insured’s case pay fusal to involves a claim which was against recovery, any, its insurer when if fairly debatable as to either the law depen under the insurance contract was If a genuine dispute the facts. does upon legal impression dent issue of first governing exist as to the state of the law Kentucky courts. There is no such coverage question, the insured’s Moreover, legal unresolved issue here. fairly claim is debatable and the tort Fire does not Empire propo stand for claim for bad faith upon the insur- sition, Farmland, suggested by that a dis pay may er’s refusal to the claim not be puted requires factual matter dismissal maintained.9 a bad faith claim as a Al matter of law. view, contends, Based Farmland though “an ... insurer is entitled to chal debate, it was engage entitled to in such a lenge litigate a claim and if it the claim is and was entitled to a directed verdict as fairly facts,”13 debatable on the law or the a matter of law. the existence of issues on the contract quotation appears While above preclude claim does not the bad faith support position, Farmland’s in fact it does claim.14 Fire, not. In Empire sought the insured position Farmland’s thus reflects reimbursement for occurring cargo loss an erroneous interpretation “fairly cargo, when carry- but not the vehicle language. Although debatable” matters ing cargo, highway struck a overpass. regarding investigation and of a payment The insurer pay refused to the claim be- debatable,” may “fairly claim be an insurer cause the insured not did have all-risk thereby duty relieved from its cargo insurance coverage, but limited comply with the mandates of the KUCS- coverage insurance for collisions between Although may PA. there differing be the insured vehicle and other vehicles and opinions as to the value of the loss objects.10 The Court of Appeals, decid- replacing repairing merits of ing whether a bad faith cause of action structure, damaged company insurance insurer, could be against maintained obligated still is under the KUCSPA to noted that the of cargo collision cov- issue investigate, negotiate, and erage yet attempt set had not been Ken- addressed tucky tle the claim in a fair and man yet courts reasonable majority of other words, jurisdictions although ner. other coverage held that no elements existed debatable,” may “fairly a claim cargo the insured’s but not an in *8 the carrier’s object fairly. vehicle struck another such an surer must debate the matter As a as result, overpass.11 the Farmland was not Appeals Court of entitled to dis held, company’s the insurance refusal to missal of the bad faith claim as a matter of pay upon was based legitimate dispute a law. (citations omitted). (1997);
9.
Id. at 889-890
As to the there whether the found ambiguous, trial court misrepresentation, the breach Farmland either that there was no knew lengthy argu contract trial there was a making reasonable basis fact for the ment the instructions as whether misrepresentation or acted with reckless depreciation was to be from re deducted disregard thereof. trial court noted The l(C)l(b) pair subparagraph cost under requires that the its belief law insur if policy determined that re company policy its ance know what than pair replacement cost was less cost. says, recognized and it the distinction be policy trial court found that the lan says knowing policy what the tween guage ambiguous was not and that knowing apply policy language how (b) plain language subparagraph did given agree. to a set facts. We Un call trial depreciation for a deduction. The certainty application insurance court ruled that found that thus coverage policy provisions, such as the is cost, repair was less than replacement cost Fire, Empire a reasonable and sue awarded amount to the Johnsons legitimate compa reason for an insurance repair jury, cost would be found Here, litigate a claim. there was no ny to a reduction for depreciation. without uncertainty, misrep blatant legal such but trial court’s instructions were affirmed resentation, intentionally made either judgment of the contract trial appeal rights to the with reckless indifference for became the of the case thus law claim the Johnsons. Farmland’s such, in purposes of the bad faith trial. As fail. must es proceedings, bad faith it had been tablished, law, as a matter of that Farm is that Farmland’s third claim land assert misrepresented policy its overruling trial court erred in motion ing depreciation should be deducted summary judgment based l(C)l(b). cost under repair subsection alleged to overcome the Johnsons’ failure In sup of the bad “directed test.” part
As second so-called verdict claim, test, there was no issue of of this Farmland maintains that genuine port Sons, Morganfield National v. Damien Eld- er and Bank *10 378 persons Byler reasonable could on a principal differ Andrew was the question fact on underlying contract fire-damaged contractor of the structure claim, judg- then the insurer is entitled to originally Byler when it was built. testi ment as matter of law on the bad faith fied at the contract claim trial that he argu- claim. continues Farmland’s completely could building have rebuilt the ment, the trial grant since court did not $182,724. testimony This was entered directed verdict in favor of the Johnsons into the record of the faith trial bad claim, on the underlying contract there can Byler’s avowal. The trial court excluded no finding regardless
be of bad faith testimony solely because it was directed handling Farmland’s conduct in claim. claim, the value of the Johnson’s and this argument closely This akin to Farm- fully adjudicated value had been during land’s claim first of error based trial. first “fairly language. debatable” As stated thereof, our earlier discussion this view is 702, governs KRE supported by Kentucky law and like- expert testimony, provides, admission of wise must fail. scientific, technical, If special- or other Farmland’s fourth claim is that knowledge ized will assist the trier of by excluding the trial court erred the testi fact to understand the evidence or to mony proffered of its witnesses Andrew issue, determine a qual- fact a witness latter, Byler and Michael Breen. The Mi skill, Breen, expert by knowledge, ified as an a practicing chael has been attor ney Kentucky education, since 1983. His focus is training, may testify there- litigation, and he has written a book on opinion the form of an or other- law this Commonwealth enti wise. tled, Kentucky: Bad Faith Law in A Application of KRE 702 is addressed to avowal, By Primer. Breen testified that the sound discretion of the trial court.20 in his opinion, giving consideration to the An abuse of discretion a “trial occurs when provisions terms and policy as those judge’s arbitrary, unreason- [is] decision terms applied industry, within the unfair, able, unsupported by legal sound interpretation policy Farmland’s of its re principles.”21 ruling A trial on the court’s garding taking of depreciation from qualifications expert of an should not repair costs was reasonable. He further timely testified that Farmland made ruling clearly overturned unless the er- reasonable settlement offer and also a rea roneous.22 sonable basis for the settlement offer it In Goodyear Tire and Rubber Co. made. In refusing to admit Breen’s testi Thompson,23 recently revisited Court mony, the trial court found that Breen had applicability expert of KRE 702 to no experience working the insurance testimony of a technical nature and held industry, experience adjusting no claims applies broadly that it to matters coming from the company’s perspective, insurance parameters within the of the rule. We experience adjust and no supervising also held that trial courts had broad dis ment of insurance claims. regard With proffered to determine whether ex cretion claims, experience fire Breen had no inves A pert qualified. proper witnesses were tigating practiced only fire claims and had attorney. summary holding one fire case as an of our is as follows: Rose, Commonwealth, Ky., Ky., 20. Ford v. 665 S.W.2d 22. Commonwealth v. 725 S.W.2d 588, (1987) (overruled grounds by (1983). on other Craig, Ky., Commonwealth v. 783 S.W.2d (1990).. Goodyear Thompson, Tire and Rubber Co. (2000). Ky., 11 S.W.3d *11 duty of asserting that the argument by trial court the discre- gives “KRE the to an imposed parties its faith on the tionary authority, good reviewable street,” abuse, admissibility of “two-way is a to determine contract insurance particu- testimony light of the expert being that the John- implication with partic- and circumstances of the lar facts amount in excess of the sons’ demands to a trial given ular case. The discretion that did awarded demonstrate admissibility of determining court in Farmland. good deal in faith with testimony to choose expert is ‘discretion point out two response, In the Johnsons excluding means of among reasonable First, the trial court did significant facts. junky.’1,24 is expertise fausse issue, at but limit- not exclude the evidence review, upon this standard of Based The evidence was admitted scope. ed its testimony trial court’s refusal to admit the showing specific purpose for the how an Byler and Breen did not constitute and re- conduct influenced Johnsons’ case, In Breen of discretion. this abuse of the defen- upon flected the state of mind qualified expert not to as an was found Second, Farmland’s regard with dants. experience in ad- upon paucity “two-way argument, propriety street” Moreover, damage claims.25 justing fire litigated conduct was of the Johnsons’ Byler’s testimony was not relevant to There, trial. the trial court sub- the first trial, although it issues in the bad faith all of Farmland’s claims mitted trial, in the and in that forum relevant first of the regarding the Johnsons’ violations duly trial court’s had been admitted. The terms, prevailed contract but the Johnsons exclusion of this evidence was thus not claim nevertheless. Farmland’s unfair, arbitrary but was based must fail. legal principles sound and well within its
discretion.26 sixth claim of error is Farmland’s fifth claim is that the trial Farmland’s § contrary 59 and that the KUCSPA by committed error ex- court reversible Kentucky, § of the Constitution cluding regarding the certain evidence prohibit special the enactment of during conduct the course of Johnsons’ legislation. support of its assertion negotiation of the claim. The evidence to unconstitutional, Farm the KUCSPA which Farmland refers is the Johnsons’ afforded a argues land insured is initial claim as to the of the loss and value KUCSPA, remedy right and under the trial position their initial at the first on the it follows that an insurer should be then underlying regarding contract the value of remedy in right afforded the same aforementioned, the loss. As the amount prohibition against spe order to avoid the Johnsons claimed was owed to them legislation. Although cial the duties of ultimately Farmland exceeded the amount con imposed by an insurance good on the contract claim. awarded points reciprocal, tract are as Farmland of this Farmland contends because out, recipro does not afford KUCSPA the door’ disparity, ‘opened the Johnsons also rights cal and remedies.27 Farmland regard- to inclusion at trial of all demands of the that since certain features by implies that were made ing the value loss Act have been Compensation the Johnsons. Farmland concludes Workers’ English, Ky., at 583. 26. Commonwealth Id. S.W.2d experience proffered Compare experi- expert Goodyear witness in "person” term in KRS 304.12-220 27. The possessing possessed by Despite ence Breen. exempts specifically an insured. experience, appeared to be abundant what proffered this Court affirmed exclusion of testimony Goodyear, relying expert on trial court discretion. *12 scope construed to be outside the of the only statute does not relate to KUCSPA, particular with persons things the result that workers’ in that class. compensation subject insurers are to dif- Insofar as the exclusion of the insureds insurers, ferent rules than other then the concerned, scope from the of KUCSPA is impermissible spe- KUCSPA amounts to legislative decision to exclude in- legislation. cial sured the class is reasonable and natural. One reason for this distinction is recently This Court reiterated the the insured not in is the insurance two-part determining standard for wheth A business. second reason is that a bad er a statute is special leg unconstitutional upon action is fiduciary legislative islation. A act does not consti duty by owed company insurance to its 1) “special legislation” tute applies if: it upon insured based the insurance con- 2) equally class, to all in a it has designed tract.32 The is “pro- KUCSPA inducing natural reasons distinct public tect practices from unfair trade supporting the classification.28 re With Furthermore, and fraud.”33 the disparate factor, gard to the first this Court has bargaining positions of an insured and an stated, general “A law persons relates to following insurer are loss sufficient to class, things special as a whereas a law justify treating the insureds aas different particular persons relates to or things of a purposes class for of inclusion within the regard class.”29 With to what constitutes scope of the act. classification, permissible this Court has persuaded We are not that this Court’s stated, “Classifications based reason holding in Windchy v. Friend34 and the able and natural distinctions that relate Appeals’ holding Court of in General Acci logically purpose to the of the Act do not Company dent Insurance v. Blank35 lend Kentucky
violate Section 59 of the
Consti
support
to Farmland’s claim. Workers’
30
tution.”
compensation insurance is different from
other
of liability
forms
insurance. The
of a
part
large
KUCSPA is
statuto-
Code,
part
KUCSPA is
of the Insurance
entitled,
ry scheme
the “Insurance Code.”
Compensation
whereas the Workers’
Act is
regulates
The Insurance Code
the insur-
part
rights
of the labor and human
stat
industry,
ance
and an
company
insurance
Moreover,
utes.
different commissioners
right
derives its
to do
business
Ken-
supervise the different areas of insurance
tucky from the Code. The Code and the
labor,
regulations
different
have
within it
KUCSPA
relate to a class encom-
adopted
been
for each.
passing
companies
all
doing
insurance
Kentucky
regulated
business in
by
Farmland’s seventh claim that
Kentucky
Insurance Commissioner.31 the trial court
instructing
erred
not
Co.,
Waggoner Waggoner, Ky.,
Casualty
28.
v.
Ky.App.,
846 S.W.2d
Farm Fire and
667
704,
(1992),
932,
693,
707
cert. denied
(1983)
510 U.S.
S.W.2d
696
{overruled
Federal
346,
(1993); citing
114 S.Ct.
do not “mirror” the July effective KRS 411.184 became requirement believes the to be.37 Such Curr before this Court’s decision reflection, however, precise re- *13 y38 three-part for a bad adopting the test 411.184(5) states, quired. KRS “This stat- in Federal faith claim from the dissent applicable puni- to all ute cases which Kemper.39 This Court has continued to damages sought supersedes tive are and recognize validity of this standard.40 any existing statutory judicial and all or given bad faith here were The instructions such as law is inconsistent law entirely consistent with Wittmer v. Jones41 insofar ” (em- provisions with the Curry statute v. Fireman’s Fund42 and were and added). phasis provision This does not presented by special interrogator means of mandate that the instruction be an exact ies.43 Wilson, Jones, 885, Ky., Ky.,
36.
In Williams v.
972 S.W.2d
40. Wittmer v.
864 S.W.2d
260,
(1998),
(1993); Guaranty
George,
262-265
this Court declared KRS
National Ins. Co. v.
411.184(l)(c)
946,
(1997);
Ky.,
unconstitutional as a violation
953 S.W.2d
948-949
see
jural rights
Empire
doctrine. For an award of
also
Fire
Marine Ins. Co.
Service,
411.184(l)(c)
Inc.,
punitive damages, KRS
re-
Simpsonville
Ky.App.,
Wrecker
quired
(1994).
a determination that the defendant act-
S.W.2d
"flagrant
rights
ed with
indifference to the
plaintiff
subjective
awith
awareness
(1993).
Ky.,
41.
award was based to
such an
STUMBO
WINTERSHEIMER,
JJ„
amount.
concur.
however,
court,
A reviewing
J.,
COOPER,
dissenting opinion
files
may
judgment
not substitute its
for that of
GRAVES, J., joins,
and in which
appropriate
as to the
amount of KELLER, J., joins only
pertains
as it
exemplary damages.44
question
testimony
the exclusion of the
jury’s
whether a
verdict
is excessive is witness, BYLER.
*15
discretion,
within the trial court’s
and an
GRAVES, J.,
dissenting opinion
files a
only
will
if
award
be overturned
there has
J.,
COOPER,
joins only
in which
as to Part
case,
been an abuse of discretion.45 In this
II and Part III.
purpose
there was no such abuse. The
punitive damages
punish
entity
is to
for
COOPER, Justice, dissenting.
impermissible
in
engaging
conduct46 At
agree
I
with Justice
that
Graves
trial,
presented
the Johnsons
a detailed
in failing
trial court erred
to instruct
argument
explaining,
amongst
other
411.184(2)
jury in
with KRS
accordance
things,
only
that
one out of one hundred
finding
and abused his discretion in
insureds would have had the motivation
Breen,
witness,
insufficiently qual-
Michael
strength
litigate disputed
and financial
expert
testimony on the
ified to render
claim
settling
insurance
rather
than
I
separately
issue of bad faith.1
write
case,
any punitive damage
and that
award
trial
because I believe the
court also erred
$4,455,000
statistically
of less than
made it
testimony
Byl-
in
of Andrew
excluding the
profitable
more
for Farmland and Shields
er.
to deal with other
in the same
insureds
finding
manner
dealt with the Johnsons rath
One of the bases for the
of bad
in a fair
in
of KRS
er than
manner. The two million faith
this case
violation
was
e.,
i.
304.12-230(6),
signifi
attempt
dollars awarded
was
failure
cantly
argued
good
prompt,
than that
faith to effectuate a
fair and
less
which was
(CHECK
ONE)
majority
ONLY
Yes
No
_
Contrary to the
in the
assertion
J
25,
opinion, slip op. at 18 note
at 379 the
v. American National Bank and
Hanson
testimony
proposed expert Goodyear
302,
Company, Ky.,
Trust
(1993).
865 S.W.2d
311
Thompson, Ky.,
v.
11
Tire and Rubber Co.
(2000)
suppressed be
S.W.3d 575
was not
any deficiency
cre
cause of
in the witness's
Graviss,
928,
Ky.,
45. Davis v.
672 S.W.2d
dentials,
subject matter of his
but because the
(1984).
932-933
testimony
satisfy
proposed
not
the test for
did
reliability established in Daubert v.
scientific
Pharmaceuticals,
579,
411.184(l)(f) (punitive damages
509 U.S.
KRS
Merrell Dow
46. See
(1993)
against person
punish
S.Ct.
equitable settlement of the
cial error.
adjuster offered the Johnsons
land’s claims
$168,993.18
their claim. The
to settle
holds
majority opinion essentially
The
trial found that the John-
the contract
of a settlement
the reasonableness
$213,810.00, repre-
sons were entitled
i.e.,
only by hindsight,
offer is measured
$251,541.00,
cost of
senting
replacement
and not
only against the ultimate verdict
Byler
principal
depreciation.
less
was
to the insurer
by the facts available
of the structure when it was
contractor
made;
and the settle
time the offer was
prepared
was
to testi-
originally built. He
equal
offer
or exceed the
ment
does
trial that he could have
fy in the bad faith
verdict,
made in
ipso
ultimate
it is
facto
building
up
from the slab
rebuilt
faith and the claimants are entitled
bad
$182,724.00.
That,
course, is a
punitive damages.
holding
significant departure from
Byl-
majority opinion
asserts
Jones,
Wittmer
testimony
irrelevant to the issue
er’s
was
faith occurs
when the
faith,
why.
explain
but does not
of bad
because
“outrageous,
insurer’s conduct is
testimony
Byler’s
trial court held that
evil motive or his reck
of the defendant’s
replace-
the actual
was irrelevant because
others.”
rights
less indifference
building
already
cost of the
had
been
ment
Kemper Ins.
(quoting
Id. at 890
Federal
trial.
I
established
the contract
While
Hornback,
Ky., 711 S.W.2d
Co. v.
replacement
actual
cost of
agree that the
(1986) (Leibson, J., dissenting) and Re
building was not the ultimate issue
909(2) (1979)).
(Second)
§
Torts
statement
trial,
Farmland’s
the bad faith
whether
Accordingly, I dissent.
$168,993.18
was fair
settlement offer
issue,
the ultimate
equitable
GRAVES, J., joins this dissent.
entirely
testimony was
Byler’s proposed
fact
to that determination. The
relevant
*16
J.,
KELLER,
joins
dissent
this
accepted
in
trial
that the
the contract
pertains
to the exclusion of
Byler’s replacement cost estimate
neither
witness, BYLER.
testimony of the
$168,993.18
expert’s
nor
re-
of
Johnsons’
GRAVES, Justice,
$304,440.00,
dissenting.
but
placement cost estimate
replacement cost to be
instead found the
I
Respectfully, dissent.
automatically mean
541 00 does not
$251
1992,
an
Appellant
In
issued
mid-March
made
that Farmland’s settlement offer was
cov-
Appellees,
which
policy
insurance
subtracting deprecia-
in
faith. After
ered,
One
among
things,
other
fire loss.
contract
required by
tion as
the insurance
later,
property was
the covered
month
in the contract trial was
jury’s
verdict
made a
Appellees
arson and
damaged
$213,810.00.
depre-
If
amount of
the same
policy. Appellant retained
claim under the
Byler’s replace-
ciation is subtracted
adjusters and
Company as
Crawford &
estimate,
that estimate would
ment cost
Richard Shields to
assigned
Crawford
a settlement offer
supported
have
eventually disputed the
parties
case. The
$24,000.00
$144,993.00,
less than Farm-
property
value of the loss and whether
land’s offer.
to be
reasonably repaired or had
could be
first
up.
In the
ground
from the
contractor who actual-
rebuilt
Evidence that the
trial,
Appellee
jury ultimately
awarded
building could have
ly
original
built
$213,810.00
as the actual cash value
$24,000.00
than Farm-
it for
less
replaced
trial,
In the second
a bad
premises.
depre-
offer before
gross
land’s
settlement
action,
verdict
returned
to a determina-
highly
ciation was
relevant
mil-
$71,013.47
attorneys fees and
in
$3.1
offer was a fair
Farmland’s
tion of whether
million
damages:
punitive
$2
the claim.
lion
equitable attempt to settle
385
(1995). Because common law devel-
against Appellant,
against
million
Craw-
105
$1
civil,
ford,
$100,000
branches,
against
oped
into
which focuses
Shields. While
two
settled,
criminal,
Appel-
fo-
compensation,
Crawford and Shields have
which
things,
appealed, among
longer
lant has
other
it no
needs
punishment,
cuses on
what it sees as an excessive verdict.
damages, hybrid category
punitive
imposes penalties
compensa-
excess of
Appellant is entitled to a
trial
While
new
tion on civil defendants.
grounds,
pro-
on other
the error with this
ceeding
desperately
which most
needs to
concept
accepted
most
While
availability
punitive
is the
be addressed
jurisdictions, including ours since the deci-
Kentucky’s
civil suits.
Drake,
(1859),
146
Ky.
sion in Chiles v.
some state courts realized well before
QUASI-
I.
ARE
PUNITIVE DAMAGES
century
something
wrong
20th
CRIMINAL PENALTIES WITH-
imposition
penalty
with the
of a
without
OUT SAFEGUARDS OF CRIMI-
protections
of a criminal trial. The
NAL TRIALS
Hampshire, one of
Supreme Court of New
Kentucky
General Assem-
so,
hold
the earliest American courts to
bly
misgivings
indicated its
about
stated,
wrong.
“The idea is
It is a mon-
damage
attempted
awards and
tort reform
heresy.
unsightly
It
an
and un-
strous
by enacting KRS 411.184. The statute
excrescence,
healthy
deforming
sym-
circumstances,
redefined
and increased the
Parker,
metry
body
Fay
of law.”
proof necessary
burden of
puni-
recover
58 N.H.
ultimately
tive damages. We
held some of
Supreme
While the United States
Court
legislation unconstitutional,
which will
awards,
regularly upholds such
see BMW
be discussed in more detail below. How-
Gore,
North America v.
517 U.S.
ever,
411.184(f),
under KRS
a section unaf-
134 L.Ed.2d
S.Ct.
fected
ruling
our
on the statute’s con-
(guidelines given
determining
ap-
stitutionality, punitive damages
include
award),
propriate
various members of that
“exemplary damages
damages,
and means
ap-
Court have voiced concerns about the
compensatory
other
than
and nominal
propriateness
punitive damages.
Jus-
damages,
against
person
awarded
espoused
tices O’Connor and Scalia
some
punish
discourage
and to
him and others
of these concerns
their dissent Bank-
from similar conduct in the future.” This
Crenshaw,
ers
and Cas. Co.
Life
punishment
focus on
and deterrence is in-
*17
71,
1645,
Railway Wis. worthy I think cess issue that C.J.). (conc.opinion, Ryan, appropriate Court’s attention ease. juries Mississippi gives law discretion damages jurors rely
Punitive invite any damages punitive award amount of private personal predilections. beliefs and any permitted tort case which defendant target unpopular Juries are defendants, my a certain mental penalize acts with state. unorthodox or contro- view, views, because of the character versial and redistribute wealth. awards, of such there is reason to think arguments against punitive for and may that this violate the Due Process damages that developed have over time Clause. lawyers are argue well-defined. Some (1) punitive damages: wholly serve a Punitive are not measured compensatory against injury, distinct function actual so there is no ob- jective in that punish awards deter and standard limits their (2) conduct; Hence, wrongful encourage impact the con- amount. “the of these development unpredictable tinued practices safer work windfall recoveries is (citation products; subject omit- potentially re- substantial.” ted). courts, reasons, by trial and has appellate view For these Court *19 jury’s punitive damages new as a on a award of trials viable check forbidden the brought by private of discretion or unreasonable in suits abuse defamation ... bearing relationship plaintiffs representa- awards little and in unfair compen- under brought against facts of the case or the award of tion suits unions (citations require at trial a reversal Railway Labor Act. omit- other issues ted). reasons, refusal to allow Court this case: the trial court’s For similar testimony proposed expert of witness carefully proce- scrutinize should Breen, jury and the failure of punitive damages under which are Mike dures punitive relevant instructions to mirror the awarded in civil lawsuits. damages statute. 87-88,108 at S.Ct. at 1655-56. 486 U.S. Indus. v. Kelco Browning-Ferris IN II. TRIAL ERRED COURT 2909, 106
Disposal, 492 U.S. 109 S.Ct. APPELLANT’S EXCLUDING (1989), Brennan, in his L.Ed.2d 219 Justice EXPERT WITNESS. concurrence, expressed pu concern about attorney Bowling is a Green Breen and stated: damages procedures nitive at trial as an Appellants whom offered (or com- statutory Without least expert on various bad faith witness issues. mon-law) the determina- standards for The trial court ruled that Breen was not punitive an large tion of how award competent testify because he did case, given in a appropriate litigation. experience have sufficient fire juries largely to themselves are left avowal, that Breen has By it was shown important, potentially making Kentucky practice licensed to law been Indeed, devastating, decision. practice and that his consists since was sent to the room this ease litigation, concentrat- primarily plaintiff following than the nothing with more litiga- injury and insurance ing personal on determining “In terse instruction: tion, At faith issues. particularly bad damages, you ... punitive amount of trial, on this witness had lectured time may take into account the character of topic, practiced occasions on this sever- six defendants, standing, their financial cases, numerous bad al bad faith reviewed App. nature of their acts.” claims, leading a treatise faith and written scarcely than Guidance like this is better Faith in Kentucky bad faith law. Bad on guidance suggest at all. I do not no avowal, By A Primer. Breen Kentucky: error; in- was in the instruction itself interpretation of Appellant’s testified that deed, a correct appears to have been offer, and the policy, its settlement is, point law. The statement Vermont reasonable, and that offer were basis of rather, the instruction reveals timely. response had been that its punitive fact that dam- deeper flaw: the argue that Breen Appellants rightfully by juries guided by ages imposed litigation in fire expert need not be an to do more than an admonition little expert, which qualified be they think is best. what litigation topics. encompasses range 280, 109 at 2923 Id. at S.Ct. admissibility governs KRE excessive and damages may
Punitive be testimony reads: by experts, especially punishment, akin to a criminal scientific, technical, special- If or other If a criminal fines. compared when assist the trier of knowledge ized will such exposed to be civil defendant is or to the evidence fact to understand should liability,” the defendant “criminal issue, qual- a fact in a witness determine procedural protec- entitled to criminal skill, knowledge, expert by an ified as (1) doubt” “beyond a reasonable tions: education, may training, experience, (3) (2) jury; a unanimous proof; burden of opinion of an testify thereto in the form punishment; limit upper an or otherwise. liability punitive bifurcation allowing expert wit the test for of the trial. damages portions testimony assist his would ness is whether held in Ken of fact. This Court dam- the trier my Aside from belief Kilbourn, Ky., 307 law, tucky Power Co. tort two place have no modern ages
389
9,12 (1957),
shrink,
S.W.2d
that no precise method
flecks would
while the holes would
obtaining expertise
“A
enlarge
exists.
witness
at 309-10.
S.W.2d
This Court
may
qualified by practice
become
or an in
Peay, Ky.,
Arndell v.
tion.” case, In this the trial court abused its
Breen is not out of line with other by ex- discretion not allowing Breen’s testimo- pert witnesses upheld. this court has In ny. Although he expertise had little Manchester Insurance Indemnity & litigation, Co. fire he a well-grounded had Grundy, Ky., (1975), knowledge of in- against bad-faith claims although we held attorneys that the two companies. surance expe- His lack of fire expert who acted as witnesses in a go only bad rience should to weight and he faith claim gave testimony, irrelevant we testify. should have been allowed to say they did not unqualified were to testi- III. JURY INSTRUCTIONS SHOULD
fy. Goodman, In Washington v. Ky.App., HAVE MIRRORED APPLICABLE (1992), 830 S.W.2d 398 an internist was STATUTE. qualified deemed to testify about the prob- ability and nature of infectious diseases. Appellant argues that the trial court er- Ford, In supra, a serotologist roneously give who identi- failed to an instruction on size, biological fied material quantity punitive damages which mirrored KRS quality 411.184, testify allowed to to the punitive damages statute. pieces Wilson, likelihood that of skin had come opinion Our Williams v. particular (1998), the holes in a hand. S.W.2d declared KRS 411.184(1)(c)1 that appellant unconstitutional, case the admitted he but stated knew of no one who was a expert constitutionality direct of KRS holes, 411.184(2) matching opposi- skin to while the properly was not before this physician objection tion’s testified that appeal. Appellant’s such match- Court on 411.184(2)2. ing impossible would be because the skin the instruction related to KRS " rights plaintiff subjective 'Malice' means either conduct which is and with a specifically awareness such conduct will result intended the defendant 411.184(l)(c) bodily death or harm.” KRS tangible intangible injury cause plaintiff or conduct is carried out plaintiff "A shall recover flagrant defendant both awith indifference to only upon proving, by convincing clear and *21 390 411.184(l)(c) stated, instructions,
In its the trial unconstitutional. We court used unimpressed by argument are three-part test enumerated in Justice ‘We ‘loosely interpret- in Federal In that the could be Kemper dissent statute Leibson’s Hornback, Ky., height duplicity v. 711 S.W.2d ed’.... It would be surance Co. (1986), constitutionality at of a accepted uphold which was as the once literally it not be Curry state law in v. Fireman’s statute and declare that Co., Williams, supra Fund 176 observed.” 264. Insurance S.W.2d (1989).3 also The trial court instructed Second, considering in timing 411.184(f), jury which defines using KRS enactment, cited statute’s cases and the 411.186(2), punitive damages, and KRS the statute controls. KRS 411.184 was appropriate which to con lists the factors Feathers, supra, enacted after between determining puni sider in the amount of Federal Kemper, supra, Curry, supra, tive damages. Williams, supra. and before The statute 411.184(5). provides lies in in “This statute trial court’s error the belief KRS in portions applicable punitive to all cases which it can choose which damages supersedes any jury sought in are statute to use instructions. judicial Appeals statutory all or law rely existing trial court and Court of on and in insofar as is inconsistent with the Justice Leibson’s statement Federal such law provisions he this statute.” Because of its Kemper, supra, where noted that this timing, supersede would equivalent punitive test of that for statute was Feathers, Federal supra, Kemper, described in su- damages that was Feathers Co., Kemper, supra, in as Casualty Ky. pra, State Farm Fire and much as Federal (1983), three-part noted test App., overruled that the enumerated 667 S.W.2d equivalent also for bad faith is the the test Kemper, supra. Appellees Federal Feathers, in requirement punitive damages supra. claim the scienter de- for 411.184(2)is incorporated scribed KRS Appellees argue that the Court had into parts three-part two and three to control in- meant for the statute arguments test. Both of these fail for two structions, Curry, in have said so it would reasons. Wittmer, supra, of which supra, both Williams, First, in after the statute’s enactment. supra, were decided this Court However, Curry, supra, stated, nothing in which applicable, statutes are “[W]here simply the dissent Federal statutory incorporated trial must instruct lan- courts Kemper, is inconsistent with guage.” Sorg supra, at 264. See also Id. Furthermore, Purvis, (1972), in considering statute. Jus- Ky., 487 S.W.2d Adm’r, in Federal Kem- Adm’r v. Abell’s 272 tice Leibson’s statement McCulloch’s similarity to the per three-prong about the Ky. (“Where punitive damages test of bad faith and speaks the statute no uncertain Feathers, terms, supra, the low- can said use considerations hardly be that the persuasive. are not On meaning holdings terms er courts’ an instruction of other not damages, Court of thing the issue of substantially prejudi- the same not Feathers, stated, error.”) “if supra, Appeals it is imperative cial Because justified in Farm its actions language in the exact of State was instruct the against tortious statutes, then its this Court found KRS conduct applicable evidence, must lack reasonable The insurer that the defendant from whom such sought plaintiff denying acted toward the or in fact for claim. basis in law KRS oppression, fraud malice.” be shown the insurer It must 411.184(2) was no reasonable basis either knew there denying or acted with reckless for the claim 3. These are: factors disregard a basis existed. whether such pay obligated be insurer must 1.The policy. terms the claim under the
3Q1 policyholder for consequential ENTERPRISES, LEE STEVEN
punitive damages may presented Appellant, added). (emphasis factfinder.” Id. at 697. *22 suggests
This statement not that the find- ing of equivalent is the direct VARNEY, Tressa Mother and Natural finding appropriateness Danielle Guardian Samantha Var damages, ney, Daughter Danny finding but of bad faith Infant Var ney, Deceased; Whittaker, Robert Di opens the door for puni- consideration of Special Fund; rector of Denis S. damages. tive trumps None of that Kline, Judge; Administrative Law statute which this court has not found to Compensation Board, Appel Workers’ Wittmer, supra, unconstitutional. lees. only this Court addressed its fear that the infringe upon jural statute would rights. later, years We acted on that fear five Whittaker, Robert L. Director of holding partially Special Fund, Appellant, the statute unconstitu- tional, but no time did that affect the given consideration to be to KRS Varney, Tressa Mother and Natural
411.184(2)in formulating jury instructions. Guardian Samantha Danielle Var ney, Daughter Danny Infant Var reasons, For the above I would reverse. ney, Deceased; Enterpris Steven Lee es; Kline, Denis S. Administrative COOPER, J., joins this dissent Judge; Compensa Law and Workers’ II to Part and Part Board, Appellees. III. tion 1999-SC-0129-WC,
No. 1999-SC-0165-W C. Supreme Kentucky. Court of Nov.
Rehearing Denied Feb.