Suing the Wrong Party Hurts the Plaintiff, Defendant and the Court

Posted on February 2, 2021 by Barry Zalma

When an Insured Sues a Person Who Was Not Involved In the Purchase of Insurance the Suit Fails

Although it is common, when there is a serious injury, to sue every person and entity in sight who might have an obligation to the injured, it is counter productive to sue those not involved. Regardless, David and Margaret Warsow appealed from the summary judgment of the Graves Circuit Court entered in favor of Kentucky Farm Bureau Insurance Agency, Inc. (KFBIA) even though it proved it was not involved at all in the acquisition of insurance.

FACTS

In David Warsow And Margaret Warsow v. Kentucky Farm Bureau Insurance Agency, Inc., NO. 2019-CA-1859-MR, Commonwealth of Kentucky Court of Appeals (January 29, 2021) litigation began when David Warsow, while riding his motorcycle he was struck by lumber extending from the side of a trailer. The trailer was being towed behind a truck owned by Scott Yokley, which was driven by Scott’s son, Keith Yokley. The truck was insured under a policy issued by State Farm Mutual Automobile Insurance Company to Scott’s spouse, Patricia Yokley. The Warsows settled the claims for the State Farm policy limits. The Warsows, considering the bodily injuries required greater payment than State Farm’s limits, then sued American Modern Select Insurance; Kentucky Farm Bureau Mutual Insurance Company; and KFBIA seeking underinsured motorists benefits.

American Modern Select Insurance insured the motorcycle that David Warsow was riding at the time of the accident. The Warsows sought uninsured and underinsured motorist (UIM) coverage from American Modern – along with basic and added reparation benefits. American Modern was granted summary judgment because its policy did not provide the coverage for UIM benefits.

Kentucky Farm Bureau Mutual Insurance Company insured the Warsows’ automobiles. The Warsows sought uninsured and underinsured motorist coverage and added reparations benefits for the motorcycle accident under those policies.

The Warsows also alleged that the defendants, including KFBIA – by their errors and omissions – negligently failed to provide them with all the insurance coverage they sought when insuring David Warsow’s motorcycle. The Warsows alleged that prior to his visit to the Kentucky Farm Bureau office to obtain insurance coverage for his motorcycle, David requested added reparations benefits and underinsured motorist benefits in amounts equal to the amount of the bodily injury liability limits on other policies he had purchased from Kentucky Farm Bureau.

Based on their prior course of dealing, the Warsows alleged that the agent through whom they procured the motorcycle policy “knew or should have known that [they] wanted the benefits of added reparations coverage and underinsured motorist coverage in amounts matching the bodily liability limits.” With respect to KFBIA, the Warsows charged that they had “purchased motor vehicle coverage from Kentucky Farm Bureau Mutual Insurance Company through the office of [KFBIA] in Mayfield, Kentucky … for many years.”

On September 23, 2019, following a period of extensive discovery, KFBIA filed a duly supported motion for summary judgment. KFBIA argued that it was entitled to judgment as a matter of law because: it does not write motorcycle insurance; it did not offer advice or assistance to the Warsows; and it never sold any insurance of any kind to the Warsows. KFBIA also contended that the Warsows were aware that it would not be the underwriter for the insurance policy they purchased from the separate business entities, Graves County Farm Bureau, Inc. or Kentucky Farm Bureau Mutual Insurance Company.

The Graves Circuit Court granted KFBIA’s motion for summary judgment.

ANALYSIS

in Grigsby v. Mountain Valley Ins. Agency Inc., 795 S.W.2d 372 (Ky. 1990), the Supreme Court of Kentucky held that an applicant for insurance may have a claim against the insurance agent through which the applicant purchased the insurance if the agent does not procure the coverage requested by the applicant. the Warsows then filed an amended complaint naming Graves County Farm Bureau, Inc., as a party defendant. Michael Cartwright, agency manager of Graves County Farm Bureau, Inc., and Chris Mathis, the Warsows’ agent, were also added as defendants. These claims remain pending before the trial court.

On appeal, the Warsows argue that the trial court erred by concluding that KFBIA was entitled to judgment as a matter of law because there is evidence from which a jury could find that the Warsows had requested more coverage for the motorcycle than what they received and that KFBIA “was acting as an agent for American Modern in selling the applicable insurance to David Warsow.” KFBIA countered by explaining that the undisputed evidence established that the Warsows did not have communication with, give instructions to, or have any interaction whatsoever with KFBIA when David applied for the motorcycle insurance policy.

The court discerned no error in the granting of summary judgment in favor of KFBIA on the basis that the Warsows had no interaction whatsoever with KFBIA.

Summary judgment is appropriate where “the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”

The court found no genuine issues of material fact and that KFBIA was entitled to judgment as a matter of law. Discovery indicated that when David Warsow allegedly provided a Graves County Farm Bureau, Inc. representative with information relative to the coverage he sought for his motorcycle, he was not dealing with KFBIA, an entity that does not sell insurance, does not assist customers seeking to obtain insurance, and has no employees in Graves County.

The Warsows were unable to challenge the sworn testimony offered by KFBIA. Nor did they present contradictory testimony or argue the existence of any disputed issue of material fact. Therefore, summary judgment was proper.

Finally, the holding of the Supreme Court of Kentucky in Grigsby, supra, has no bearing on the issue raised on appeal because there was no dispute in that case that the plaintiff had dealt directly with Mountain Valley Insurance Agency. Grigsby created no cause of action for negligence against an entity with which the plaintiff had no contact.

ZALMA OPINION

Of course, a person can sue a person who takes on the fiduciary duty to obtain the appropriate insurance required or an agent who fails to acquire the insurance required. However, if a person is neither an insurance agent or broker; has no employees in the state, and did nothing with regard to the insurance needed by the Warsows, filing suit against KFBIA was simply a waste of the time of the plaintiffs, the defendants and the court. The plaintiffs are lucky that the court did not sanction them for bringing this action.

? 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at https://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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