Robin Slone v. Kentucky Farm Bureau Mutual Insurance Company

• Court: Court of Appeals of Kentucky
• Decided: February 24, 2022
• Docket: 2021 CA 000185
• Status: Unknown

Opinion

RENDERED: FEBRUARY 25, 2022; 10:00 A.M. NOT TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals

NO. 2021-CA-0185-MR

ROBIN SLONE APPELLANT

APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE BRIAN C. EDWARDS, JUDGE ACTION NO. 20-CI-004828

KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY APPELLEE

OPINION AFFIRMING

** ** ** ** **

BEFORE: CLAYTON, CHIEF JUDGE; DIXON AND JONES, JUDGES.

CLAYTON, CHIEF JUDGE: Robin Slone (“Slone”) appeals from the Jefferson

Circuit Court’s order granting Kentucky Farm Bureau Mutual Insurance

Company’s (“KFB”) motion to dismiss Slone’s complaint. The complaint

requested a declaratory judgment regarding Slone’s underinsured motorist

(“UIM”) coverage with KFB. Finding no error, we affirm. FACTUAL AND PROCEDURAL BACKGROUND

Slone and Michael Conley were involved in a motor vehicle collision

on March 4, 2018, in Johnson County, Kentucky, in which Slone sustained

injuries. KFB insured Slone’s vehicle. Slone settled her third-party claims against

Conley and then asserted a claim for UIM coverage against KFB under Slone’s

policy.

Under the heading “General Policy Coverages,” Slone’s policy stated

that her UIM coverage was $100,000 per person and $300,000 per accident. Slone

paid a single premium amount of $101.70.

During the negotiation of Slone’s UIM claims, Slone argued that she

was entitled to “stack” her UIM coverage in the amount of $300,000 because KFB

insured three vehicles under Slone’s policy. KFB agreed to settle the claim for

$100,000, arguing that one UIM coverage limit existed regardless of the number of

vehicles listed on the policy.

Upon KFB’s payment of the $100,000 to Slone, Slone signed a

release agreement acknowledging receipt of $100,000 from KFB (the “Release

Agreement”). The Release Agreement contained language that it did not release

any other claims that either party may have against the other, including any claims

Slone may have for the additional “stacked” UIM coverage.

-2- Moreover, the Release Agreement stated that both parties mutually

understood that the claim was “disputed” and that KFB was making no “admission

of liability” for even the $100,000 paid by KFB. Additionally, the Release

Agreement stated that Slone did:

declare and represent that the injuries sustained, and that recovery therefrom, is uncertain and indefinite, and in making this release and agreement it is understood and agreed that [Slone relied] wholly upon [her] own judgment, belief, and knowledge of the nature, extent, and duration of said injuries, and that [Slone had] not been influenced to any extent whatsoever in making this release by any representations or statements regarding said injuries, or regarding any other matters, made by the persons, firms or corporations who are hereby released, or by any person or persons representing them, or by any physician or surgeon employed by them.

Slone subsequently filed a complaint against KFB on August 19,

2020, requesting a declaratory judgment from the circuit court that her KFB policy

provided $300,000 in UIM coverage. Slone made no claim in her complaint that

the value of her bodily injury damages following the collision exceeded $135,000,

which represented the sum of the personal injury protection (“PIP”) benefits paid

to her by KFB, the settlement amount she had reached with Conley, and the

$100,000 in UIM coverage amounts KFB paid to her.

Thereafter, KFB filed a motion to dismiss Slone’s complaint, or in the

alternative, to bifurcate and stay Slone’s claim for declaratory judgment. The

circuit court held a hearing and ultimately granted KFB’s motion to dismiss.

-3- Specifically, the circuit court determined that declaratory relief was not available

in this matter because, under Coots v. Allstate Insurance Company, 853 S.W.2d

895 (Ky. 1993), no actual, justiciable controversy existed but rather “simply a

request for an advisory opinion.” Id. at 904. The circuit court held that Slone was

first required to establish that her compensable damages exceeded the settlement

funds already received for the court to issue a declaratory judgment.

The circuit court further held that, in this case, the UIM coverage was

not appropriate for “stacking,” as the policy’s language indicated that it was not a

case of separate premiums under the guise of one premium, as in Estate of Swartz

v. Metropolitan Property & Casualty Company, 949 S.W.2d 72 (Ky. App. 1997),

but instead one premium providing coverage. This appeal followed.

ANALYSIS

a. Standard of Review

As stated by the Kentucky Supreme Court, because “a motion to

dismiss for failure to state a claim upon which relief may be granted is a pure

question of law, a reviewing court owes no deference to a trial court’s

determination; instead, an appellate court reviews the issue de novo.” Fox v.

Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (citation omitted).

-4- b. Discussion

Slone first argues that the case presents an “actual controversy,” and

consequently, that the circuit court erred in its determination that declaratory relief

was inappropriate. Kentucky Revised Statutes (“KRS”) 418.040 states that a

“plaintiff may ask for a declaration of rights” when “it is made to appear that an

actual controversy exists[.]” (Emphasis added.) Accordingly, the first question

one must ask in a declaratory judgment case is not whether any “present

controversy” exists between the parties, but rather whether the claim represents “a

justiciable controversy over present rights, duties or liabilities.” Dravo v. Liberty

Nat’l Bank & Trust Co., 267 S.W.2d 95, 97 (Ky. 1954) (emphasis added).

Thus, the focus is on whether the claim involves a “justiciable

controversy” concerning a “present right.” Id. A “justiciable controversy” does

not include questions “which may never arise or which are merely advisory, or are

academic, hypothetical, incidental or remote, or which will not be decisive of any

present controversy.” Id. (citations omitted). Further, the definition of a “present

right” varies depending on the type of declaratory actions.

Nevertheless, in a UIM case, the Kentucky Supreme Court has made

clear that benefits only become payable – and a right to payment only exists –

when the value of the underlying claim is established. State Farm Mutual

Automobile Insurance Company v. Riggs, 484 S.W.3d 724, 729 (Ky. 2016).

-5- Indeed, “the liability of the tortfeasor and the amount of damages sustained are

elements that must be established in measuring the UIM carrier’s obligation[.]” Id.

We agree with the circuit court that, as was the situation in Coots, in

this case, it had “yet to be factually determined that the damages sustained [were]

in an amount that exhaust[ed] and exceed[ed] the limits on [the] UIM policies so as

to raise the question of additional coverage to the level of a case in controversy

rather than simply a request for an advisory opinion.” Coots, 853 S.W.2d at 904.

Therefore, before Slone could establish a “present right” to compensation above

the insurance proceeds that she had already received, any opinion on the potential

availability of additional “stacked” insurance would be “advisory” only. Bank One

Kentucky NA v. Woodfield Financial Consortium LP, 957 S.W.2d 276, 279 (Ky.

App. 1997). Until Slone demanded a fixed value implicating the additional UIM

benefits, no “present actual controversy” existed for the court to decide. Black v.

Elkhorn Coal Corp., 233 Ky. 588, 26 S.W.2d 481, 483 (1930).

In this case, the record reflects that Slone has not established any

“present right” to additional UIM coverage. Indeed, KFB never stipulated or

agreed to the amount of Slone’s tort or UIM claims in any way or at any point

during the litigation. Moreover, nowhere in the Release Agreement did KFB

acknowledge Slone’s evaluation of her claim, in fact stating that KFB believed the

claim to be “disputed” and that there was “no admission of liability” for even the

-6- amounts that KFB paid to Slone. In the end, to empower a court to consider issues

of “stacking,” a present right to the contested benefits must be established – either

by stipulation, agreement, or litigation. Consequently, we affirm the circuit court’s

decision to dismiss the case based on the lack of an actual controversy.

However, as already discussed, the circuit court in this case also found

in its opinion that stacking was not applicable to the UIM coverage in this case.

Thus, we will also address Slone’s claim that the circuit court erred in deciding the

stacking issue against Slone. We find Adkins v. Kentucky National Insurance

Company to be dispositive of the issue. 220 S.W.3d 296 (Ky. App. 2007). While

Adkins deals with uninsured motorist (“UM”) coverage rather than UIM coverage,

“[b]ecause there is no rational distinction between UM and UIM coverage for

purposes of aggregation or stacking,” we find both its analysis and its holding to

apply to the case sub judice. Id. at 299. In Adkins, Kathleen Adkins was killed in

an automobile collision. Id. at 297. The at-fault driver was not insured at the time

of the accident. Id. Kathleen and her husband had UM coverage via a policy

issued by Kentucky National. Id.

At the time of issuance, the Adkins’s UM policy provided insurance

coverage for two vehicles. Id. Sometime thereafter, the Adkinses added an

additional vehicle to their coverage. Id. After adding the third vehicle, the

Adkinses began paying three separate premiums for UM coverage, representing

-7- one unit of coverage per vehicle. Id. Each UM coverage premium cost $32 for

$50,000 of UM coverage, for a total of $96 in premium payments representing

$150,000 of stacked coverage. Id.

Before the policy’s renewal date, Kentucky National mailed to the

Adkinses renewal materials, including a written notice of changes to their

coverage. Id. Specifically, Kentucky National stated that it would begin charging

a single UM premium for the three units of coverage on the three vehicles rather

than three distinct premiums as had previously been done. Id. As noted by the

Court, “[t]he apparent purpose of this change–though not stated in the notice–was

to prevent the stacking of the three units of UM coverage.” Id. The Adkinses

accepted the new coverage and began paying premiums according to its terms. Id.

After Kathleen’s death, Kathleen’s estate sought payment from

Kentucky National of $150,000. Id. Kentucky National offered to pay a non-

aggregate – or “non-stacked” – coverage limit of $50,000. Id. Rejecting the offer,

Kathleen’s estate filed an action. Id.

The circuit court ultimately granted summary judgment in favor of

Kentucky National, finding that it had given the Adkinses proper notice of the

policy change affecting the UM coverage, that the Adkinses had accepted the

change when they renewed the policy, and that Kathleen’s estate was entitled to

one unit of UM coverage, or $50,000. Id.

-8- On appeal, the Court determined that there was no basis to overturn

the summary judgment on appeal. Id. at 298. Specifically, the Court pointed to the

notice sent to the Adkinses, which contained language identical to the language in

the notice in this case. Id. Moreover, the Court highlighted the following language

in the notice provided by Kentucky National: “Only one charge is made for this

coverage per policy and coverage is limited to the coverage limits shown on the

declarations page.” Id. (Emphasis in original.) Based on this “clear and

unambiguous” language, the Court found that the record supported the circuit

court’s conclusion that the Adkinses received notice of the change in UM coverage

and consented to the change by accepting the new policy and tendering the

premiums. Id. at 298-99.

Moreover, the Court, after discussing Marcum v. Rice, 987 S.W.2d

789 (Ky. 1999) and Swartz, 949 S.W.2d 72, held that “an insurer is not required to

stack multiple units of UM coverage which have been paid by a single premium, if

that premium is not based on the number of vehicles insured” and is actuarially

based. Adkins, 220 S.W.3d at 299-300.

Specifically, a panel of this Court in Swartz made clear that “an

insurance company could, through the calculation and adoption of an actuarially

appropriate premium, charge an insured a single UIM fee regardless of the number

of vehicles covered under the policy, entitling that insured to only one unit of UIM

-9- protection[.]” 949 S.W.2d at 77 (original emphasis omitted, new emphasis added).

However, because the insurer in Swartz did not base its premium on an actuarial

calculation of risk but rather multiplied its single-vehicle premium rate by the

number of insured vehicles, Swartz therefore stands for the proposition that this

“simple multiplication” approach necessitates stacking. Id.

The Court’s conclusion in Swartz that insurance companies may

account for risk when setting UIM premium rates was affirmed by the Kentucky

Supreme Court in Marcum. 987 S.W.2d at 790-91. Although the insurance

company in Marcum did not charge its insureds multiple premiums for UIM

coverage on different vehicles, it allowed them to purchase UIM coverage for any

individual in an amount of up to $1 million. Id. The Court found that because the

UIM premium was based on an assessment of the risk of loss incurred by the

insurance company and did not “vary according to the number of vehicles covered

by the policy[,]” stacking was inappropriate. Id.

In this case, based on the pleadings, it is uncontroverted that Slone

received the notice from KFB indicating that KFB was no longer calculating UIM

coverage on a per-vehicle basis, that Slone was being charged one premium for

UIM coverage, that coverage was limited to the coverage limits shown on the

declarations page, and that the UIM premium being charged was based on actuarial

calculations of risk and not based on the number of vehicles insured. Thus, we

-10- affirm the circuit court’s conclusion that stacking was not applicable in this

situation.

CONCLUSION

We affirm the order of the Jefferson Circuit Court.

DIXON, JUDGE, CONCURS.

JONES, JUDGE, CONCURS IN RESULT ONLY.

BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:

Kirk Hoskins Valerie W. Herbert Louisville, Kentucky Brian D. Stempien Louisville, Kentucky

-11-