Erie Insurance Exchange v. Megan Johnson

Opinion

RENDERED: JUNE 16, 2022 TO BE PUBLISHED

Supreme Court of Kentucky 2021-SC-0312-DG

ERIE INSURANCE EXCHANGE APPELLANT

ON REVIEW FROM COURT OF APPEALS V. NO. 2019-CA-1449 FLOYD CIRCUIT COURT NO. 19-CI-00059

MEGAN JOHNSON AND TERRI REED APPELLEES

OPINION AND ORDER OF THE COURT

VACATING AND DISMISSING

Erie Insurance Exchange appeals the decision of the Court of Appeals

affirming the summary judgment and fees ordered by the trial court in favor of

appellees Megan Johnson and Terri Reed’s right to direct payment of basic

reparation benefits within an element of loss under Kentucky’s Motor Vehicle

Reparations Act (MVRA). For the reasons stated below, we vacate and dismiss

for lack of subject matter jurisdiction.

I. BACKGROUND

On October 14, 2018, Megan Johnson and Terri Reed were involved in a

collision while in Johnson’s vehicle. That vehicle was insured by Erie Insurance

Exchange (Erie). The day after the crash, on October 15, 2018, Johnson and

Reed sought medical attention at ARH Hospital in Floyd County, Kentucky, incurring costs from the hospital, a radiologist, and an osteologist. The day

after this treatment, on October 16, 2018, Johnson and Reed submitted no-

fault benefits applications to Erie for payment of medical bills under their Basic

Reparation Benefits (BRB) coverage. Bills from ARH Hospital, the radiologist,

and the osteologist were promptly and correctly submitted to Erie. Thereafter,

Johnson and Reed sought treatment from a chiropractor for their injuries. The

only element of loss requiring payment of BRB resulting from the accident was

medical expenses from the three hospital-related parties and the chiropractor.

On October 23, 2018, counsel for Johnson and Reed sent a letter to Erie

instructing it to withhold all no-fault benefits until further direction pursuant

to Kentucky Revised Statute (KRS) 304.39-241. Erie complied. On January 16,

2019, counsel for Johnson and Reed sent another letter to Erie. This letter

instructed Erie to pay Johnson’s and Reed’s chiropractic bills before paying

any other medical expenses. Erie refused, asserting that it was required to pay

medical bills in the order they are received regardless of other directives from

insureds. Erie had already received the filed bills from ARH Hospital, the

radiologist, and the osteologist for Johnson and Reed, and it intended to pay

those bills before paying for the later chiropractic care.

In response to this dispute, Erie filed a declaratory judgment action on

January 25, 2019, to determine whether it was required to pay bills within an

element of loss in the order directed by the secured persons. In response,

Johnson and Reed filed a counterclaim on February 15, 2019, seeking the

award of an attorney’s fee under KRS 304.39-220(1) and excess interest for the

2 unreasonable delay of the payment of their bills caused by Erie. On April 11,

2019, Erie moved for summary judgment. In that motion, Erie set out

arguments in favor of its interpretation of the MVRA and against an award of

an attorney’s fee and excess interest. Johnson and Reed filed a countermotion

for summary judgment on May 7, 2019, but that motion did not include an

argument regarding the MVRA (instead, it argued about unreasonable delay

warranting an attorney’s fee award and excess interest). On May 9, 2019, only

two days after filing a summary judgment motion and before the court ruled on

either summary judgment motion, Johnson and Reed moved the court for a

reasonable attorney’s fee.

On May 30, 2019, the trial court denied Erie’s motion for summary

judgment. In its denial, the trial court made findings favorable to Johnson and

Reed’s position. The order denying summary judgment also included a finding

that the suit was “beyond reason.” However, the court never granted Johnson

and Reed’s motion for summary judgment. On June 14, 2019, after its

summary judgment was denied, Erie moved for summary judgment on count II

of Johnson and Reed’s counterclaim,1 and moved to alter or amend the trial

court’s May 30th denial of summary judgment. Erie wanted the trial court to

change the language of its prior order regarding the schedule and mechanism

for bill payment, and also wanted the trial court to add language indicating

that it granted Johnson and Reed’s summary judgment motion. Then, Johnson

1 Count II was ultimately dismissed by agreement of the parties.

3 and Reed renewed their motion for summary judgment on July 10, 2019; Erie

filed a response to that motion on July 29, 2019.

Following these filings, the trial court issued three orders: first, on

August 9, 2019, it granted Johnson and Reed’s motion for an attorney’s fee;

then, on the same day, it denied Erie’s second summary judgment motion, but

agreed to amend the first order denying Erie’s summary judgment motion to

rephrase its language regarding the timing of payment of medical bills; finally,

on September 20, 2019, the trial court ordered an attorney’s fee totaling

$14,383. The first order for attorney’s fee contained finality language but no

amount; the second order contained the amount but no finality language. The

trial court appears to never have ruled on Johnson and Reed’s summary

judgment motions, nor at all regarding excess interest to be applied to medical

bill payment. The trial court did not ultimately amend its order to indicate that

it granted Johnson and Reed’s summary judgment motion as requested by

Erie, nor did it ever make an explicit finding on or order regarding excess

interest to be paid on medical bills.

Erie appealed to the Court of Appeals, arguing that the trial court erred

by awarding summary judgment and awarding an attorney’s fee plus excess

interest on medical bills. Regarding appealability, Erie stated in a footnote on

page seven of its brief to the Court of Appeals that the trial court’s order

awarding an attorney’s fee from August 9, 2019, was intended to grant

summary judgment, and therefore the decision was final and appealable as to

4 the MVRA issue. The Court of Appeals affirmed the trial court. We granted

Erie’s subsequent motion for discretionary review.

II. ANALYSIS

“A judgment is a written order of a court adjudicating a claim or claims

in an action or proceeding.” CR 54.01. Only final judgments are appealable.

See CR 54.01, 54.02. “A final or appealable judgment is a final order

adjudicating all the rights of all the parties in an action or proceeding, or a

judgment made final under Rule 54.02.” CR 54.01. When multiple claims are

presented in an action, the trial court may make the resolution of one such

claim final by including language of finality and that there be “no just reason

for delay.” CR 54.02. As noted above, Erie appeals on three issues: the MVRA,

attorney’s fee, and excess interest. We address each issue in turn.

A. Summary Judgment on the Direction of Payment

When we review an order for summary judgment, “we determine whether

the record supports the trial court’s conclusion that there is ‘no genuine issue

as to any material fact and the [sic] moving party is entitled to judgment as a

matter of law.’” Foreman v. Auto Club Prop. Cas. Ins. Co., 617 S.W.3d 345, 349

(Ky. 2021) (quoting CR 56.03). Outside of the context of immunity, appellate

courts only have jurisdiction to review grants of summary judgment; a denial of

summary judgment is in most cases unreviewable until a final judgment is

rendered at the trial court. Auslander Props., LLC v. Nalley, 558 S.W.3d 457,

462 (Ky. 2018) (“An order denying a motion for summary judgment is not

appealable.”) (citations omitted). There is an exception to this rule where “(1)

5 the facts are not in dispute, (2) the only basis of the ruling is a matter of law,

(3) there is a denial of the motion, and (4) there is an entry of a final judgment

with an appeal therefrom.” Id. (citing Abbott v. Chesley, 413 S.W.3d 589, 602

(Ky. 2013); Transp. Cabinet, Bureau of Highways v. Leneave, 751 S.W.2d 36, 37

(Ky. App. 1988)).

We cannot review this denial of summary judgment under any exception.

Although the facts are not in dispute, the only basis of the ruling is a matter of

law, and there is a denial of the motion, Erie lacks an entry of a final judgment

on appeal to which it can attach its appeal of the summary judgment denial.

See id. Because Erie seeks review of a denial of summary judgment outside of

an exception, it is outside the Court’s jurisdiction for review.

In Erie’s briefs to this Court and the Court of Appeals, it claims that the

trial court “effectively granted” Johnson and Reed’s summary judgment motion

in its denial of Erie’s. It supports this contention by the content of the order: it

is, by and large, conclusions of law in support of Johnson and Reed. However,

Johnson and Reed never explicitly argued for an interpretation of the MVRA

counter to that of Erie’s. Instead, they argued in their motion for summary

judgment solely about the award of an attorney’s fee, excess interest, and the

presence of an unreasonable delay. That summary judgment motion was never

ruled upon.

In a footnote in its brief to the Court of Appeals, perhaps anticipating a

reviewability issue, Erie claims that the trial court intended to grant Johnson

and Reed’s summary judgment motion in its order granting an attorney’s fee.

6 That order states that it grants the “Defendant’s Motion to Reconsider.” The

defense made no such motion; however, prior to the order, Johnson and Reed

did move for an attorney’s fee after moving for summary judgment. Regardless,

the order does not purport to grant Johnson and Reed’s summary judgment

motion. “Courts of record speak only by their orders duly entered and signed in

the books provided for that purpose.” Equitable Trust Co. v. Bayes, 190 Ky. 91,

226 S.W. 390, 391 (1920); see also Glogower v. Crawford, 2 S.W.3d 784, 785–

86 (Ky. 1999) (“In Kentucky, a court speaks through the language of its orders

and judgments.”) (citations omitted). This Court cannot infer rulings not made

explicit by the trial court. That is true especially where an order, such as the

one Erie would have this Court consider to have granted summary judgment,

makes no findings of fact or conclusions of law indicating otherwise.

B. Award of Attorney’s Fee

We review the trial court’s award of an attorney’s fee for an abuse of

discretion. Banker v. Univ. of Louisville, 466 S.W.3d 456, 465 (Ky. 2015)

(citations omitted). To amount to an abuse of discretion, the trial court’s

decision must be “arbitrary, unreasonable, unfair, or unsupported by sound

legal principles.” Clark v. Commonwealth, 223 S.W.3d 90, 95 (Ky. 2007)

(quoting Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999)). The Court

of Appeals incorrectly conflated the issues of a reasonable attorney’s fee and

excess interest. We consider the two separately, starting with the attorney’s fee.

Here, the trial court issued two separate orders regarding an attorney’s

fee. First, the trial court ordered the payment of an attorney’s fee. That order

7 did not contain any findings regarding the reasonableness of the suit, nor did it

state upon which statute the trial court relied. It did, however, contain

language that the order was final and appealable, and that there was no just

cause for delay, as required by CR 54.02. Later, the trial court separately

ordered—without any finality language—that an attorney’s fee be paid

pursuant to KRS 304.39-220(1). In doing so, the trial court applied the

incorrect statute to the issue of attorney’s fees. Subsection (1) of KRS 304.39-

220 only applies “if overdue benefits are recovered in an action against the

reparation obligor or paid by the reparation obligor after receipt of notice of the

attorney’s representation . . . if the denial or delay was without reasonable

foundation.” (Emphasis added). Neither is the case here. Instead, subsection (2)

applies. That statute reads: “In any action brought against the insured by the

reparation obligor, the court may award the insured’s attorney a reasonable

attorney’s fee for defending the action.” KRS 304.39-220(2) (emphasis added).

Here, an action was brought by Erie against insureds Johnson and Reed.

Therefore, according to statute, the trial court was plainly within its discretion

to award a reasonable attorney’s fee. However, these circumstances do not

make the order appealable.

Although the first order contained the necessary language for appeal, “a

judgment, to be final, must not merely decide that one of the parties is entitled

to relief of a final character, but must give that relief by its own force, or be

enforceable for that purpose without further action by the court or by process

for contempt.” Elkhorn Land & Improvements Co. v. Ratliffe, 181 Ky. 603, 205

8 S.W. 687, 688 (1918) (citation omitted). The first order on the attorney’s fee was

not “enforceable for that purpose without further action by the court,” as

evidenced by the court’s subsequent order specifying an amount to be paid.

The second order, while enforceable on its own, did not include the necessary

language required under CR 54.02 in order to be final and appealable in a suit

involving multiple claims. Each order is therefore deficient for the purposes of

appeal.

C. Excess Interest Perhaps most perplexingly, in spite of the trial court never ruling on the

matter, Erie also appealed on the imposition of excess interest to be applied to

the delayed repayment of medical bills. When medical bill payments by a

reparation obligor are delayed by the reparation obligor, they “bear interest at

the rate of [12%] per annum, except that if the delay was without reasonable

foundation the rate of interest shall be [18%] per annum.” KRS 304.39-210(2).

Through this provision, the MVRA “provides an exclusive remedy where an

insurance company wrongfully delays or denies payment of no-fault benefits.”

Foster v. Kentucky Farm Bureau Mut. Ins. Co., 189 S.W.3d 553, 557 (Ky. 2006).

Erie argues that because the trial court made a finding that the suit was

“beyond reason” in its order denying summary judgment, and that it cited

subsection (1) of the attorney’s fee statute in its first order for an attorney’s fee,

it made an “implicit ruling” that Erie must pay the 18% interest. The Court of

Appeals, absent an actual ruling or order stating as such, affirmed that Erie

must pay the higher interest.

9 The trial court never mentioned—no less ordered—either excess interest

to be paid or the statute that would require it. Through the trial court’s award

of an attorney’s fee, Erie argues to this Court that the trial court implicitly

ordered that excess interest be paid on medical bills. The basis of this

argument is that because KRS 304.39-220(1), the subsection incorrectly stated

in the order, requires that the litigation causing delay lack a “reasonable

foundation” for an attorney’s fee to be awarded. That same requirement—lack

of a reasonable foundation—is also a requirement for a higher interest rate to

be paid on overdue medical bills. Erie further supports its assertion by arguing

that the trial court’s finding that the suit was “beyond reason” in its denial of

Erie’s summary judgment was, in effect, a finding that the suit lacked a

reasonable foundation for the purposes of the two statutes.

As we noted above, this Court can find no order compelling Erie to pay

the higher interest rate. Neither can we find the statute governing such interest

cited by the trial court in other related orders. Additionally, after a review of the

caselaw regarding KRS 304.39-210(2), this Court cannot find an appeal for

excess interest in which the application of such interest was not specifically

ordered.2 Since the trial court did not order excess interest, this Court has no

subject matter jurisdiction over the issue.

2See, e.g., Foster, 189 S.W.3d at 556; Auto. Club Ins. Co. v. Lainhart, 609 S.W.2d 692, 695 (Ky. App. 1980); Trent v. Bierlen, CIV.A. No. 2012-236 WOB, 2014 WL 108314, at *8 (E.D. Ky. Jan. 9, 2014).

10 III. CONCLUSION The case at bar affects potentially millions of Kentuckians, and yet is an

issue of first impression in the Commonwealth. The Court may yet consider the

matter in the future. To do so, however, the question must be properly before

the Court. Although the issue must await a future, proper appeal, this case

gives us the opportunity to emphasize, yet again, the necessity of appealing

from a final judgment. The absence of a final and appealable judgment is fatal

to an appeal no matter how fully and competently the underlying substantive

issues are briefed. Because no final and appealable orders are before us, this

Court has no jurisdiction over the appeal and must dismiss it. The Court of

Appeals similarly lacked subject matter jurisdiction to review these claims; we

thus vacate its opinion affirming the trial court. Accordingly, we hereby order

the Court of Appeals’ opinion be vacated and the appeal to this Court be

dismissed.

All sitting. All concur.

ENTERED: June 16, 2022.

__________________________________ CHIEF JUSTICE MINTON

11 COUNSEL FOR APPELLANT, ERIE INSURANCE EXCHANGE:

Mark A. Osbourn John Marr Bush Bush & Osbourn PLLC

COUNSEL FOR APPELLEES, MEGAN JOHNSON AND TERRI REED:

Michael Shane Hall Kolbe Aaron Page

COUNSEL FOR AMICUS, INSURANCE INSTITUTE OF KENTUCKY:

Susan L. Maines

COUNSEL FOR AMICUS, KENTUCKY DEFENSE COUNSEL, INC.:

Ryan Daniel Nafziger Phillips Parker Orberson & Arnett, PLC

COUNSEL FOR AMICUS, KENTUCKY HOSPITAL ASSOCIATION:

Kimberly Goetz DeSimone Barnett, Benvenuti & Butler PLLC

COUNSEL FOR AMICUS, KENTUCKY JUSTICE ASSOCIATION:

Damon Blake Willis