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The Kentucky Court of Appeals granted summary judgment to an insurer, denying a passenger’s request for underinsured motorist (UIM) coverage due to an exclusion in the insured driver’s policy. The case is Peterson v. Grange Prop. & Cas., 568 S.W.3d 884 (Ky. Ct. App. 2018).
What happened
On February 13, 2016, Alicia L. Peterson, the plaintiff, was a passenger in Laura Zirnheld’s vehicle when it was involved in a collision with Mary Haeberlin’s vehicle. Peterson suffered severe injuries and sought recovery from Haeberlin in Jefferson Circuit Court.
She settled the claim with Haeberlin, then filed an amended complaint seeking underinsured motorist (UIM) coverage against Zirnheld’s auto insurer, Grange Property & Casualty. Zirnheld’s auto policy under Grange had a $100,000 limit for UIM coverage.
Who is an insured?
To qualify for UIM coverage, you must be an insured. The Grange policy defined “insured” for the purposes of UIM coverage as “the named insured, any family member, and any other person while occupying the covered auto who is entitled to do so if that person is not insured for UIM coverage under another policy.”
Grange discovered that Peterson had UIM coverage under her own insurer, GEICO, and moved for a summary judgment. Peterson acknowledged that she had UIM under her own policy but sought to recover under both policies since her injuries were severe and she would not be fully compensated under her own policy. The trial court ruled in favor of Grange. Peterson appealed.
Violation of public policy
While it may be evident that the definition of an insured found in the policy would preclude coverage, Peterson further contended that the policy’s definition of an insured is a standard escape clause and thus violated Kentucky public policy and should be unenforceable. Grange asserted that public policy was not violated since Peterson had her own UIM coverage.
How the court ruled
The appellate court took into consideration that UIM coverage is distinct from other motorist insurance coverage that is mandated under the Motor Vehicle Reparations Act (MVRA). Kentucky statutes mandate that auto liability policies include uninsured motorist (UM) coverage, in contrast with UIM coverage, which is not mandated but should be made available if requested by an insured.
In Philadelphia Indemnity Ins. Co., Inc. v. Tryon, 502 S.W.3d 585, 588-92 (Ky. 2016), the Kentucky Supreme Court contrasted UIM coverage with UM coverage, showing that the MVRA forbids insurance contracts that do not include UM coverage, while UIM coverage is optional. The court held that reasonable UIM coverage exclusions are permissible and do not violate Kentucky public policy.
In James v. James, 25 S.W.3d 110, 114 (Ky. 2000), the Kentucky Supreme Court held that anti-stacking exclusions to second-class insureds were permissible in UIM coverage since the injured parties would have had no expectation of UIM coverage prior to the accident.
The court ultimately held that the exclusion was reasonable because it only applied when there was other primary coverage available. The court affirmed the summary judgment to Grange.
Editor’s note: The Kentucky Court of Appeals denied Peterson’s claim because she did not qualify as an insured under the Grange policy and because the court determined the anti-stacking exclusion found in the policy was reasonable. To protect herself, Peterson could have added higher limits for UIM coverage under her own auto policy.
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