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Schwartz v. Hasty2/11/2005
REVERSING AND REMANDING
Robert Schwartz appeals from an order of the Garrard Circuit Court holding that the underinsured motorist (UIM) benefits received by him were not subject to the collateral source rule and could be credited against the tort damages awarded to him in determining the damages recoverable from Billy Hasty, the tortfeasor. This is apparently an issue of first impression in Kentucky law. We reverse and remand.
On May 29, 2000, Schwartz was severely injured in a vehicular accident when a car driven by Hasty made a left turn into a driveway in front of him. Hasty had vehicle liability insurance coverage through a policy with Kentucky Farm Bureau Mutual Insurance Company (Farm Bureau). As the policy related to this accident, the liability limit was $100,000. Schwartz had two vehicle liability insurance policies, one with State Farm Insurance Company (State Farm) on his truck and the other with Progressive Northern Insurance Company (Progressive) on his motorcycle. As the policies were applicable to this accident, the State Farm policy had UIM coverage for $100,000 and the Progressive policy had UIM coverage for $25,000.
Schwartz filed a personal injury tort complaint against Hasty in the Garrard Circuit Court, seeking damages suffered as a result of the accident. Hasty filed an answer and counterclaim alleging contributory negligence. Schwartz later filed an amended complaint that added Farm Bureau, State Farm, and Progressive as parties. The amended complaint included a new claim of bad faith against Farm Bureau.
After conducting discovery, Farm Bureau, State Farm, and Progressive each elected not to participate in the trial. Schwartz and Farm Bureau also entered into an agreed order bifurcating the proceeding by first trying the original personal injury tort claim and reserving the bad faith settlement tort claim until resolution of the injury claim. Schwartz filed a pretrial motion asking the court to exclude any evidence of collateral source payments, and the court granted the motion.
The case was tried before a jury, and the jury found both parties contributorily negligent with Hasty 80% at fault and Schwartz 20% at fault. The jury found total damages of $248,313. Consistent with the jury's verdict assessing contributory fault, the trial court entered a judgment in favor of Schwartz for $198,650.40 plus costs and interest. Hasty then filed a notice of appeal of the trial court's judgment.
After Hasty filed a notice of appeal, Schwartz settled his claims against both of the UIM carriers. He recovered the policy limit of $25,000 from Progressive and also recovered $78,614.27 from State Farm. Schwartz subsequently filed a notice to take Hasty's deposition to inquire as to his financial assets in order to facilitate collection on the judgment.
In January 2003 Schwartz, Hasty, and Farm Bureau entered into a partial settlement whereby Farm Bureau paid Schwartz $160,000, $100,000 of which was related to Hasty's liability insurance coverage and $60,000 of which was related to Schwartz's bad faith claim against Farm Bureau. In return, Schwartz released and discharged Hasty and Farm Bureau from all actions or claims that arose from the accident. Schwartz also agreed to indemnify and hold Hasty harmless for any potential claim of Progressive for indemnity against Hasty for its payment of UIM benefits to Schwartz. The settlement agreement, however, stated that the parties disagreed as to the effect of the UIM payments, and it reserved the issue of whether these payments would offset the jury's verdict as collateral source payments. Farm Bureau agreed to be responsible for any additional payments to satisfy th
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