PROGRESSIVE MAX INSURANCE COMPANY V. NATIONAL CAR RENTAL
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2009-SC-000577-DG
PROGRESSIVE MAX INSURANCE COMPANY
V.
APPELLANT
ON REVIEW FROM COURT OF APPEALS
CASE NO . 2007-CA-001800-MR
JEFFERSON CIRCUIT COURT NO. 04-CI-000472
NATIONAL CAR RENTAL SYSTEMS, INC .
APPELLEE
OPINION OF THE COURT BY JUSTICE SCOTT
REVERSING
This appeal arises from a subrogation dispute regarding basic
reparations benefits (BRB) paid by Appellee, National Car Rental Systems, Inc.
(National) to a passenger of one of its rental vehicles. After payment, National
sought full reimbursement against Appellant, Progressive Max (Progressive),
the insurer of the driver of National's vehicle.
After the Jefferson Circuit Court granted summary judgment in
National's favor, the Kentucky Court of Appeals affirmed, holding that (1)
Progressive was primarily liable for BRB ; and (2) National may pursue its claim
via KRS 304 .39-050 . We granted discretionary review to determine the
correctness of that opinion and now reverse .
I. Background
On October 26, 2001, Ed Jones rented a vehicle from National, but
declined to purchase any extended insurance coverage for the use of the rental
vehicle from the rental company .' Approximately six days later, Jones was
involved in a motor vehicle accident while driving National's vehicle, injuring
his passenger, Shannon Wilkerson . Wilkerson sought recovery from Jones and
Progressive (which provided coverage for Jones's liability for both the use of his
vehicle and the use of a rental vehicle) . At some point, Wilkerson received BRB
from National (the vehicle owner) in the amount of ten-thousand dollars .
Approximately thirty days after. Wilkerson filed suit against Jones and
Progressive, Wilkerson moved to dismiss her suit. She did not provide National
with notice regarding the existence of her suit or her motion to dismiss . After
learning that Wilkerson's claim had been dismissed, National filed suit against
Progressive under KRS 304 .39-070, 2 seeking reimbursement of the BRB that it
paid to Wilkerson as a result of the injury caused by Jones . Progressive
2
National is a self-insured rental car company.
KRS 304.39-070 provides in pertinent part:
A reparation obligor shall have the right to recover basic
reparation benefits paid to or for the benefit of a person suffering
the injury from the reparation obligor of a secured person as
provided in this subsection, except as provided in KRS 304 .39140(3) . The reparation obligor shall elect to assert its claim (i) by
joining as a party in an action that may be commenced by the
person suffering the injury, or (ii) to reimbursement, pursuant to
KRS 304.39-030, sixty (60) days after said claim has been
presented to the reparation obligor of secured persons. The right
to recover basic reparation benefits paid under (ii) shall be limited
to those instances established as applicable by the Kentucky
Insurance Arbitration Association as provided in KRS 304.39-290 .
defended on grounds that, under the clear dictates of KRS 304 .39-070,
National was required to either join in an existing action or submit to
arbitration . National later moved for summary judgment, alternatively
asserting its right to sue and recover under KRS 304 .39-050.3 Ruling on
National's motion for summary judgment, the trial court held that, as a matter
of law, National was entitled to recover the BRB paid to Wilkerson and awarded
ten-thousand dollars, plus costs and post judgment interest to National' 4
On direct appeal, Progressive unsuccessfully argued that the trial court
erred in granting summary judgment because : (1) National did not pursue its
reimbursement claim via the authorized avenues outlined in KRS 304 .39
070(3), i .e ., to join in an `existing action by the injured person or to submit its
claim to arbitration;5 and (2) because Progressive was not a reparations obligor.
3
KRS 304 .39-050 provides, in pertinent part:
The basic reparation insurance applicable to bodily injury to
which this subtitle applies is the security covering the vehicle
occupied by the injured person at the time of the accident or, if
the injured person is a pedestrian, the security covering the
vehicle which struck such pedestrian . If the reparation
obligor providing such insurance fails to make payment for
loss within thirty (30) days after receipt of reasonable proof
of the fact and the amount of loss sustained, the injured
person shall be entitled to payment under any contract of
basic reparation insurance under which he is a basic
reparation insured and the insurer making such payments
shall be entitled to full reimbursement from the reparation
obligor providing the security covering the vehicle . (emphasis
added)
4 The trial court cited no authority in its decision .
5
See KRS 304 .39-030 .
The Court of Appeals, applying Affiliated FM Ins. Companies v. Grange
Mut. Cas. Co., 641 S .W.2d 49, 50 (Ky. App. 1982), reasoned that National could
bring its action pursuant to KRS 304.39-050 and held that the procedures
outlined in KRS 304.39-070(3) did not apply to an action brought pursuant to
KRS 304 .39-050 . The court further held that because Jones refused to
purchase the coverage from National when he rented the vehicle, and because
his policy with Progressive covered his liability while using a rental vehicle, the
primary obligor in this case was indeed Progressive.
Progressive then petitioned this Court for discretionary review, arguing
that the Court of Appeals erred in determining that : (1) Progressive was a
reparations obligor; and (2) that National's claim could proceed under KRS
304 .39-050 regardless of the fact that it did not avail itself of the procedures
outlined in KRS 304.39-070.
II. Analysis
A. Primary Basic Reparations Obligor
In 1974, the General Assembly of Kentucky enacted the Motor Vehicle
Reparations Act (MVRA) in an attempt to effect, inter alia, the following
purposes :
(2) To provide prompt payment to victims of motor
vehicle accidents without regard to whose negligence
caused the accident in order to eliminate the inequities
which fault-determination has created ;
(3) To encourage prompt medical treatment and
rehabilitation of the motor vehicle accident victim by
providing for prompt payment of needed medical care
and rehabilitation ;
(5) To reduce the need to resort to bargaining and
litigation through a system which can pay victims of
motor vehicle accidents without the delay, expense,
aggravation, inconvenience, inequities and
uncertainties of the liability system;
(8) To correct the inadequacies of the present
reparation system, recognizing that it was devised and
our present Constitution adopted prior to the
development of the internal combustion motor vehicle .
KRS 304 .39-010 . Given these straight-forward purposes, it is apparent that
the General Assembly was principally concerned with the ability of motorvehicle-accident victims to promptly recover reparations . With this principle in
mind, this Court recently interpreted the MVRA so as to give effect to the
Legislature's desire that motor vehicle tort victims receive prompt payment in
the event that two insurance companies become entangled in a priority
dispute. Kentucky Farm Bureau Mut. Ins . Co. v. Shelter Mut. Ins. Co., --- S .W.3d
---, 2010 WL 4679698, * 3 (Ky. Nov. 18, 2010) . In Shelter, we held that where
both policies (one covering the vehicle and one covering the driver) claim to
provide only excess coverage, the spirit and intent of the MVRA mandates that
the policy covering the vehicle and vehicle owner take priority over that of the
permissive driver. Id. Our holding there reflected this Court's concern with
"uncertainty and potential delays" and more importantly the possibility that a
tort victim would not receive prompt reparations when two insurance
companies become embroiled in a priority dispute. Id. To hold otherwise in
that case would have confounded the clear legislative purpose of the MVRA.
Here, once again, we are asked to determine an issue of priority, but,
under different circumstances . Rather than addressing two excess clauses as
we did in Shelter, this Court now faces the question of whether the vehicle
owner's insurance should take priority over the driver's insurance when BRB
are owed to an injured third party. We again hold that, per the policies
established in the MVRA, priority lies with the vehicle owner.
This Court has consistently adhered to the maxim that a statute should
be read according to its plain meaning. Spencer v. Estate of Spencer, 313
S .W.3d 534, 541 (Ky. 2010) . Applying this rule to the case at bar, we conclude
that a plain reading of the MVRA-particularly a provision specifically relating
to priority (KRS 304 .39-050)-compels the conclusion that National is indeed
the primary obligor of basic reparations benefits . KRS 304.39-050 provides in
pertinent part:
Priority of applicability of security for payment of basic reparations
benefits
The basic reparation insurance applicable to bodily injury to
which this subtitle applies is the security covering the vehicle
occupied by the injured person at the time of the accident or, if
the injured person is a pedestrian, the security covering the
vehicle which struck such pedestrian . If the reparation
obligor providing such insurance fails to make payment for
loss within thirty (30) days after receipt of reasonable proof
of the fact and the amount of loss sustained, the injured
person shall be entitled to payment under any contract of
basic reparation insurance under which he is a basic
reparation insured and the insurer making such payments
shall be entitled to full reimbursement from the reparation
obligor providing the security covering the vehicle . (emphasis
added) .
As is clear, KRS 304 .39-050 contemplates the possibility of two insurers:
(1) those covering the vehicle ; and (2) all others . It is also clear that where a
vehicle is secured by an insurance policy, but operated at the time of injury by
a driver who is insured by a second policy-separate and apart from the
vehicle's insurance-the insurance "covering the vehicle occupied by the
injured person at the time of the accident" will take priority over other
insurance . Id; see Roth v. Old Republic Ins. Co., 269 So.2d 3, 5 (Fla. 1972) ; U.S.
Fidelity & Guaranty Co. v. Safeco Ins. Co. ofAmerica, 522 S .W .2d 809, 821 (Mo .
1975) (stating that the general rule places primary liability on the insurer of the
owner of the automobile) . Therefore, in this case, because National was the
insurer of "the vehicle occupied by the injured person at the time of the accident,"
we hold that National was indeed the primary obligor of BRB per the plain
instructions of KRS 304 .39-050 .
B . Subrogation
Notwithstanding the determination that National is the primary obligor in
this case, that is not to say that it may not recover the monies paid to
Wilkerson. Rather, what is next to be decided is how National may seek
reimbursement, i.e ., whether and how National may pursue its subrogation
rights under KRS 304.39-070 or KRS 304.39-050 .
As stated above, the purpose and policy section of the MVRA evinces the
General Assembly's concern with a motor vehicle accident victim's ability to
recover in a timely fashion . In an obvious attempt to further hasten and
encourage insurance companies to provide a victim's reparations, the
Legislature included in the MVRA two provisions equipping insurance
companies with the ability to seek reimbursement of BRB paid to injured
parties. These provisions, found in KRS 304.39-070 and KRS 304.39-050,
provide in pertinent part:
"Secured person"; obligor's rights to recovery
A reparation obligor shall have the right to recover basic
reparation benefits paid to or for . the benefit of a person
suffering the injury from the reparation obligor of a secured
person as provided in this subsection, except as provided in
KRS 304 .39-140(3) . The reparation obligor shall elect to
assert its claim (i) by joining as a party in an action that may
be commenced by the person suffering the injury, or (ii) to
reimbursement, pursuant to KRS 304.39-030, sixty (60) days
after said claim has been presented to the reparation obligor
of secured persons. The right to recover basic reparation
benefits paid under (ii) shall be limited to those instances
established as applicable by the Kentucky Insurance
Arbitration Association as provided in KRS 304 .39-290 .
KRS 304 .39-070 (emphasis added) ;
Priority of applicability of security for payment of basic reparations
benefits
The basic reparation insurance applicable to bodily injury to
which this subtitle applies is the security covering the
vehicle occupied by the injured person at the time of the
accident or, if the injured person is a pedestrian, the security
covering the vehicle which struck such pedestrian . If the
reparation obligor providing such insurance fails to make
payment for loss within thirty (30) days after receipt of
reasonable proof of the fact and the amount of loss
sustained, the injured person shall be entitled to payment
under any contract of basic reparation insurance under
which he is a basic reparation insured and the insurer
making such payments shall be entitled to full reimbursement
from the reparation obligor providing the security covering the
vehicle.
KRS 304 .39-050 . (emphasis added) .
As is clear from a plain reading of these statutes, both KRS 304 .39-070
and KRS 304 .39-050 allow for a reparations obligor to seek reimbursement of
BRB paid to an injured party, but vary in that each statute has specific
limitations controlling how and by whom an action may be brought. As
discussed below, KRS 304 .39-070, while more liberal on who may bring an
action, limits the forum in which the claim may be pursued . In contrast, KRS
304 .39-050 does not apply to all insurance companies, but rather only to
secondary insurers who have stepped forward and paid BRB in the place of the
vehicle insurer. Applying these obvious restrictions, we turn to the case at bar
and determine whether National may pursue its claim via KRS 304 .39-070 or
304 .39-050 .
1 . KRS 304.39-070
We first address the question of whether National may pursue its claim
via KRS 304.39-070, which provides in pertinent part:
A reparation obligor shall have the right to recover basic
reparation benefits paid to or for the benefit of a person
suffering the injury from the reparation obligor of a secured
person as provided in this subsection . . . .
The reparation obligor shall elect to assert its claim (i) by
joining as a party in an action that may be commenced by the
person suffering the injury, or (ii) to reimbursement, pursuant
to KRS 304.39-030 [Arbitration] . . . .
A plain reading of KRS 304 .39-070 reveals that in order for an insurer to
employ this statute for reimbursement it must have paid BRB to an injured
party and it must have either joined in an existing action by the person
suffering the injury or submitted its claim to arbitration . Applying these rules
to this case, we conclude that National, as a reparations obligor having paid
BRB, was entitled to employ this statute as a vehicle for recovery. However,
because National did not comply with the constraints on how an action under
KRS 304 .39-070 may be broughtthrough joinder or under arbitration-we
hold that its action must be dismissed .
In Progressive Cas. Ins. Co. v. Kidd, 602 S.W .2d 416, 417 (Ky. 1980), this
Court held that where a subrogation action is brought under KRS 304 .39-070,
a claimant's options "only include joinder as a party plaintiff and arbitration ."
We further opined that the statute plainly says that the "reparation obligor
shall elect to assert its claim in one of the two specified ways." Id. Applying
this rule to the case at bar, it is clear that National did not comply with the
dictates of KRS 304 .39-070 .
Here, National pursued its claim in an independent action outside the
lawsuit brought by Wilkerson, and did not pursue an action in arbitration.
Thus, because it defied the procedural dictates of KRS 304.39-070, we hold
that its claim was not properly asserted, and the case should be dismissed .
We are mindful, however, of National's argument that it never received
notice regarding Wilkerson's lawsuit, and further the challenge faced by
subrogees in similar circumstances. However, KRS 304 .39-070 did not entirely
foreclose National's ability to pursue its claim . The arbitration route was at all
times available. And with regard to National's argument that it is not a
member of the Kentucky Insurance Arbitration Association, and therefore
unable to bring an arbitration action, we consider that argument meritless. As
required by KRS 304 .39-290(2), "all basic reparation obligors shall be and
remain members of the association as a condition of their authority to transact
business in this Commonwealth ." As the record reveals, "the events which are
the subject of this action occurred in Jefferson County, Kentucky," and
National is a self-insured corporation registered with the Kentucky Department
of Insurance. Thus, National as a basic reparations obligor in this state, was
required to register under KRS 304 .39-290(2) . By neglecting to become a
member of the Kentucky Insurance Arbitration Association, National defied the
law of this Commonwealth . As a result, we hold that it may not now cry foul
because it is precluded from an avenue of recovery as a result of its own
inaction.
2. KRS 304.39-050
Having determined that National's claim may no longer be pursued
under KRS 304 .39-070 due to its failure to comply with the mandates of that
statute, we next turn to whether National may pursue its claim via KRS
304 .39-050 and conclude that it cannot.
A perusal of KRS 304 .39-050 reveals that the Legislature simply did not
provide vehicle insurers with the ability to recover BRB under this subsection .
The plain language of KRS 304 .39-050 provides,
The basic reparation insurance applicable to bodily injury to
which this subtitle applies is the security covering the vehicle
occupied by the injured person at the time of the accident . . . .
If the reparation obligorproviding such insurancefails to
make payment for loss within thirty (30) days after receipt of
reasonable proof of the fact and the amount of loss
sustained, the injured person shall be entitled to payment
under any contract of basic reparation insurance under
which he is a basic reparation insured and the insurer
making such payments shall be entitled to full
reimbursement from the reparation obligor providing the
security covering the vehicle. (emphasis added) .
Per the plain language of the statute, KRS 304 .39-050 only permits the
secondary insurer to employ KRS 304 .39-050 to recover BRB from the security
covering the vehicle (vehicle insurer) . That scenario, however, is in stark
contrast to the case sub judice. Here, National provided the security covering
the vehicle and now seeks reimbursement for BRB from a secondary insurer,
Progressive . This statute simply does not provide for such an action and no
reading of this subsection supports the proposition that the insurer of the
vehicle has a separate and independent right to bring the action to recover fees
that is has paid to an injured party.
National's reliance on Affiliated, 641 S.W.2d 49, for the opposite
proposition is misplaced . In Affiliated, the Court of Appeals addressed whether
the procedural mandates of KRS 304 .39-070 (to join in an existing action or to
arbitrate) applied to a subrogation action brought pursuant to KRS 304 .39-
050 . In distinguishing KRS 304 .39-050 from KRS 304.39-070, the court aptly
held,
KRS 304 .39-050 sets forth a remedy as well as a right. We do not
construe the statute [KRS 304 .39-050] as limiting a reparation
obligor's right to full reimbursement to situations in which it has
either intervened or submitted its claim to arbitration under the
guidelines set forth in KRS 304.39-070(3) . Intervention may be
impossible if-as is the instant case-no separate action has been
filed. And, if the insurer were .required to submit its claim for
reimbursement to the arbitration procedures set forth in KRS
304 .39-070(3), it would not obtain full reimbursement given the
minimum deductible requirement set forth in KRS 304 .39-290 .
Accordingly, the trial court acted correctly in ruling that the
appellee's claim was not barred by the provisions of KRS 304 .39070(3) . Cf. Riverside Insurance Co. v. McDowell, Ky. App ., 576
S .W.2d 268 (1979) .
641 S .W.2d at 51 . However, the facts before us are quite different than those
faced in Affiliated. In this case, National, the primary obligor argues its right to
subrogation under the auspices of KRS 304.39-050. Affiliated, on the other
hand, addressed whether a secondary insurer who asserts a claim under KRS
304 .39-050 is required to submit to the procedural requirements of KRS
304 .39-070 . Id. As stated above, KRS 304 .39-050 provides that opportunity to
a secondary insurer against a primary insurer, not vice versa.
We do, however, agree with Affiliated's proposition that KRS 304 .39-050
creates a separate and independent right outside the procedural mandates of
KRS 304 .39-070 . Furthermore, we agree that KRS 304 .39-050 is not confined
by the procedural dictates of KRS 304.39-070, i.e., to arbitrate or join in an
existing action . However, we do not agree with the Court of Appeals in this
case that
Af iliated supports the proposition that a vehicle insurer may employ
KRS 304.39-050 to assert a subrogation claim. A close reading of Affiliated
reveals that the question of whether the vehicle insurer may institute a
subrogation claim via KRS 304 .39-050 was simply not at issue in that case .
Rather, that court answered whether the procedural mandates in KRS 304 .39070 should be included in an action brought by a secondary insurer seeking
reimbursement from the vehicle insurer via KRS 304 .39-050. Here, the Court
of Appeals erred in interpreting Affiliated as holding otherwise .
III. Conclusion
For the foregoing reasons, the Court of Appeals is reversed and this case
is remanded to the Jefferson Circuit Court with instruction to enter summary
judgment in favor of Progressive.
All sitting. All concur.
COUNSEL FOR APPELLANT :
Robert Leo Steinmetz
Christopher M. Mussler
Gwin Steinmetz 8, Baird, PLLC
401 W. Main Street, 10th Floor
Louisville, KY 40202
COUNSEL FOR APPELLEE :
Michael Freeman Lawrence
440 S. 7th Street, Suite 200
Louisville, KY 40203-1967
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