Ms. Bartley's personal vehicle was insured by Countryway Insurance Company under a policy that also included UM coverage, the limits of which were $100,000 per person/$300,000 per accident. As the family member and spouse of the policy's named insured, Ms. Bartley was an insured under this portion of Countryway's policy.

Although neither insurer denied that Ms. Bartley was an insured under its respective policy, both denied her claim for UM benefits on the ground that the other company's liability came first.

United Financial insisted that the UM coverage provided to Ms. Bartley as a vehicle occupant was excess over other UM coverage. It reasoned that Ms. Bartley was not a named insured on her son's policy, and, because she did not reside with her son, was not his “relative” for policy purposes.

Coverage under both policies being “excess,” United Financial argued that the rule of “mutual repugnance” applied, leaving the two companies co-insurers with the obligation to provide pro rata coverage with respect to any remaining liability up to the policy limits.

Countryway contended that because Ms. Bartley had been injured while a passenger in a vehicle she did not own, its UM coverage also was “excess” according to its policy.

Countryway argued against the pro rata result on the ground that United Financial's attempt to limit its coverage of certain occupants of the insured vehicle to excess coverage was contrary to an established practice in Kentucky whereby vehicle insurers provided primary coverage to all vehicle occupants.

Countryway also maintained that the accident vehicle insurer should be deemed primarily liable to injured vehicle occupants for UM benefits.

Ms. Bartley sued the insurers, seeking a declaration as to which carrier's coverage should apply.

The trial court rejected Countryway's arguments and agreed with United Financial that the insurers' competing excess provisions essentially cancelled each other, leaving the companies liable for Ms. Bartley's damages on a pro rata basis.

Countryway appealed to the court of appeals, which held that primary UM coverage would be fixed on the “UM policy covering the injured person, in this case, Countryway's policy.”

The dispute reached the Kentucky Supreme Court.

The Policies

United Financial's policy provided:

If there is other applicable uninsured or underinsured motorist coverage, we will pay only our share of the damages. Our share is the proportion that our limit of liability bears to the total of all available coverage limits. However, any insurance we provide shall be excess over any other uninsured or underinsured motorist coverage, except for bodily injury to you [the named insured] and, if the named insured is a natural person, a relative when occupying an insured auto or temporary substitute auto.

(Emphasis in original.)

The policy defined:

relative

as:

any person living in the household in which the named insured resides who is related to the named insured by blood, marriage, or adoption, including a ward or foster child.

Countryway's policy provided that:

[i]f there is other applicable insurance similar to the insurance provided by this endorsement, we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance similar to the insurance provided by this endorsement.

The court reversed, finding that the court of appeals had erred by fixing primary liability for UM coverage on the accident victim's insurer instead of on the insurer of the accident vehicle.

In its decision, the court first ruled that the competing “other insurance” clauses should be disregarded, noting that both were designed to narrow the insurer's primary coverage and to broaden the circumstances in which its coverage would be excess.

It then declared that a bright line rule of primary coverage was appropriate, and ruled that in instances where both a vehicle owner and a non-owner passenger were separately insured with UM coverage, the vehicle owner's coverage “shall be primary.”

The case is Countryway Ins. Co. v. United Financial Cas. Ins. Co., No. 2014-SC-000265-DG (Ky. Aug. 25, 2016). Attorneys involved include: COUNSEL FOR APPELLANT: Brian Keith Pack, Herbert, Herbert & Pack; COUNSEL FOR APPELLEE, UNITED FINANCIAL CASUALTY, INSURANCE COMPANY: Tracey C. Smith, Gwin Steinmetz & Baird PLLC; COUNSEL FOR APPELLEE, SHARON BARTLEY: Brian M. P. Driver, Rogers & Driver, LLP.