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State Automobile Mutual Insurance Co. v. Empire Fire & Marine Insurance Co.5/9/1991
At issue in this case is whether appellant, State Automobile Mutual Insurance Company, may recover basic reparation benefits it paid its insured, Mrs. May, from appellee, Empire Fire & Marine Insurance Company, an insurance carrier which provided excess or "umbrella" liability coverage to the negligent party, Mrs. Goldberg. Said otherwise, is an excess liability insurance carrier required to reimburse a reparation obligor for sums paid in basic reparation benefits? As this question appears to be of first impression, we granted discretionary review.
The facts of this case are uncomplicated. Mrs. Goldberg negligently injured Mrs. May in an automobile accident. Mrs. May made a claim for basic reparation benefits against her reparation obligor, appellant State Auto, and it paid approximately $7,500 in medical expenses and lost wages. In addition, Mrs. May asserted a personal injury claim against Mrs. Goldberg, and on her behalf, Automobile Club Insurance Company paid its policy limits of $25,000. It is undisputed that the payment by Automobile Club of its policy limits was appropriate.
In addition to the primary liability coverage provided by Automobile Club, Mrs. Goldberg had an "umbrella" liability policy with appellee, Empire Fire & Marine Insurance Company. The parties have agreed that Empire is not a basic reparation obligor as defined by KRS 304.39, et seq. As the liability limits of Automobile Club, Mrs. Goldberg's basic reparation obligor, were exhausted by payment of the liability claim, appellant, State Auto, asserted a subrogation claim against Empire.
The trial court held that Empire was liable to State Auto pursuant to the provisions of KRS 304.39-070(2). On appeal to the Court of Appeals, the judgment was reversed. In an appropriate analysis of the statute, the Court of Appeals reasoned that as to any insurer or party other than a reparation obligor, the right of subrogation is derivative of the right of the injured person; and inasmuch as Mrs. May had no right to recover the items of damage paid by State Auto from Mrs. Goldberg, her excess carrier, Empire, had no duty to reimburse State Auto.
Our analysis of the applicable statutes begins by reviewing KRS 304.39-060(2). By this provision, "tort liability . . . is 'abolished' for damages . . . to the extent the basic reparation benefits provided in this subtitle are payable therefor . . . ." In Progressive Casualty Ins. Co. v. Kidd, Ky., 602 S.W.2d 416 (1980), we held:
"Under the Kentucky No-fault Act, an injured party is not entitled to an award of damages from the defendant in the trial on liability for any item of damages which was compensated by BRB. . . . ."
"It is clear that this section, taken together with KRS 304.39-070, means that the injured party may not assert a claim which includes benefits already paid by the insurer as BRB." Id. at 417.
See also Hargett v. Dodson, Ky.App., 597 S.W.2d 151 (1979), Gussler v. Damron, Ky.App., 599 S.W.2d 775 (1980), and Ammons v. Winklepleck, Ky.App., 570 S.W.2d 287 (1978). Under the Motor Vehicle Reparations Act and as these authorities demonstrate, by failing to preserve her tort rights by rejecting the provisions of the Act, Mrs. May had no claim against Mrs. Goldberg for those items of damage covered by basic reparation benefits; it had been abolished. Likewise, she had no right to recover such damages from Mrs. Goldberg's reparation obligor, Automobile Club Insurance Company, or her excess carrier, Empire.
Next we look to KRS 304.39-070(
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