Recent Updates in Kentucky and Indiana Law

March 2005
Frost Brown Todd LLC

Are you aware of these recent changes in Kentucky and Indiana law?

Negligence

In Regenstreif v. Phelps, 142 S.W.3d 1 (Ky. 2004), the Kentucky Supreme Court held the adoption of comparative negligence in Kentucky did not abolish the sudden emergency doctrine, overruling Bass v. Williams, 839 S.W.2d 559 (1992). The sudden emergency doctrine defines the conduct of an individual in an emergency as that of a reasonably prudent person during an emergency: “When a defendant is confronted with a condition he has had no reason to anticipate and has not brought on by his own fault, but which alters the duties he would otherwise have been bound to observe, then the effect of that circumstance upon these duties must be covered by the [jury] instructions.”

In Larkin v. Pfizer, Inc., No. 2002-SC-0746-CL (unpublished opinion), the Court held that the learned intermediary doctrine would be adopted. The doctrine holds that the duty of the manufacturer of a prescription drug to warn of its dangerous propensities does not run to the drug’s ultimate consumer. The manufacturer satisfies its duty to by warning the doctor that prescribes the drug. Three different rationales supported the adoption of the rule. First, the prescribing doctor is in a better position to make sure the patient understands the risks of taking the drug. Second, the manufacturer  lacks effective means to communicate the warning directly with each patient. Third, a duty to warn the ultimate consumer of the medicine would unduly interfere with the physician-patient relationship.

In Sufix, U.S.A., Inc. v. Cook, 128 S.W.3d 838 (Ky. App. 2004), the Court held that a manufacturer’s failure to test for defects that pose a risk of serious injury and that are susceptible to adequate pre-release testing can amount to a conscious or reckless disregard for the rights and safety of others and thus can justify an award of punitive damages. In this case the jury found that the manufacturer of a weed trimmer was grossly negligent because it did not test its weed trimmer prior to putting it on the market. Thus, the jury’s award of $3 million of punitive damages was affirmed.

In Toyota Motor Corp. v. Gregory, 136 S.W.3 35 (Ky. 2004), the Kentucky Supreme Court held that proof of design defect liability in a crashworthiness case requires proof of a feasible alternative design. The Plaintiff sued Toyota in Jefferson Curcuit Court alleging claims for strict liability based on design and manufacturing defects, misrepresentation, failure to warn, and breach of warranty. Her claims arose from an automobile accident. Her left arm was directly over the airbag when it deployed, resulting in severe injuries to her arms, torso, and face.

The Court held the trial court’s jury instruction, that liability required proof of a feasible alternative design, was proper. The Court adopted the elements of a crashworthiness claim established by the Second and Third Circuit Courts of Appeals: (1) an alternative safer design, practical under the circumstances; (2) proof of what injuries, if any, would have resulted had the alternative, safer design been used; and (3) some method of establishing the extent of enhanced injuries, attributable to the defective design.

In Young v. Tri-Etch, Inc., 790 N.E.2d 456 (Ind. 2003), Tri-Etch, Inc. provided security monitoring services pursuant to a contract with Muncie Liquors.  Young, an employee of Muncie Liquors, was kidnapped and beaten and eventually died as a result of injuries sustained during a robbery of the store during the closing shift.  Tri-Etch had not notified management that the alarm was not activated during this time. Tri-Etch moved for summary judgment in this wrongful death action on the basis that its contract with Muncie Liquors required that an action be brought within one year of the incident.  Summary judgment was granted.  However, the Supreme Court reversed the judgment for Tri-Etch, explaining that since Young was not a party to the contract, he never consented to the terms of the contract, and therefore, the contract did not impose any obligations or limitations on him.

In Rhodes v. Wright, 805 N.E.2d 382 (Ind. 2004), the plaintiff was a truck driver for Tyson Foods who was struck and killed by a forklift at Defendants’ farm.  The Plaintiff’s Estate brought an action against the Defendants, who owned the farm and raised chickens under a contract for Tyson, for failure to warn Plaintiff of known dangers on the property and failure to properly light the loading area.  Defendants argued that they did not owe a duty to Plaintiff because they did not have control over the area at the time the accident occurred, because Tyson employees had arrived to catch the chickens at that time.  Summary judgment was granted for Defendants.  The Supreme Court reversed, holding that there was a sufficient factual dispute about who controlled the premises at the time, and that a jury should decide the question.  The Court added that tort law duties to third parties cannot be limited by contract.

In Guy’s Concrete, Inc. v. Crawford, 793 N.E.2d 288 (Ind. Ct. App. 2003), the plaintiff was a prospective home buyer who was injured and paralyzed when she fell through insulation material that had been placed over a basement stairwell hole at a new home.  The Defendant concrete company had entered the property to place a heater in the basement and then placed the insulation material over the hole to retain the heat.  Two days later, the Defendant heating company removed the insulation to perform work in the basement and then replaced the insulation.  Plaintiff arrived as the heating company was leaving, but the company did not mention the insulation covering the opening.  Defendants filed for summary judgment, but both motions were denied.  The Court of Appeals held that the Defendants did not have a duty to Plaintiff based on premises liability principles, but did have a duty as contractors performing work to persons rightfully on the property.  The Court stated that independent contractors may be held liable for their negligence that results in injuries to another on the premises if the independent contractor is in control of the construction or the premises.  Therefore, the Court held that both defendants owed a duty of care to Plaintiff.

In Peters v. Forster, 804 N.E.2d 736 (Ind. 2004) the plaintiff slipped on a ramp at a residence owned by the Hamms.  The ramp had been transported and attached to the residence by Defendant Forster.  Defendant argued that he owed no duty to Plaintiff because the Hamms had accepted his work and reasserted control of the premises.  The trial court agreed, holding that the Defendant was relieved of any duty under the “Acceptance Rule.”  The Supreme Court, however, rejected the Acceptance Rule and announced a new rule, often referred to as the “foreseeability doctrine,” which provides that a builder or contractor will be liable for injury or damage due to the condition of the work, if it was reasonably foreseeable that a third party could be injured by such work.  Even under the new rule, however, the Court noted that the Defendant would not be liable unless it was foreseeable that a third person would be injured by the contractor’s action.  The Court remanded those questions of fact for a jury to resolve.

In Chaffee v. Seslar, 786 N.E.2d 705 (Ind. 2003), Dr. Chaffee performed an unsuccessful sterilization procedure on Plaintiff.  Plaintiff sued for malpractice when she became pregnant and delivered a healthy child.  The Supreme Court found that a plaintiff may only seek pregnancy and child-bearing costs after a failed sterilization and may not seek the costs for raising a normal, healthy child.

In Argrabright v. R.H. Marlin, Inc., 804 N.E.2d 1161 (Ind. Ct. App. 2004), an employee of Millgard, Plaintiff, was injured by a crane while working at a construction site.  Millgard contracted with Defendant Marlin for the crane, and Marlin hired Austin to operate it.  Defendant Marlin argued that Austin and Plaintiff were co-employees of Millgard and therefore Plaintiff’s claim was barred by the Indiana Worker’s Compensation Act.  The trial court granted Marlin’s motion to dismiss, and the Court of Appeals affirmed, applying the seven-factor “borrowed servant” test for determining whether a person is the employee of two employers:  (1) the right to discharge; (2) the mode of payment, (3) supplying equipment; (4) the parties’ belief in the employer-employee relationship; (5) control over the means used; (6) length of employment; and (7) establishment of work boundaries.  The Court stated that the greatest weight should be given to the employer’s right to exercise control over the employee.

In Fulton County Comm’rs v. Miller, 788 N.E.2d 1284 (Ind. Ct. App. 2003), the Plaintiff had rear-ended a street-sweeping vehicle owned and operated by the county.  Plaintiff sustained injuries in the accident and sued the county, alleging negligence in the county’s failure to post warning signs, signals, flagmen, or escort vehicles.  The Plaintiff introduced guidelines from a state manual on traffic control devices and expert testimony on the effect of dust stirred up by the street-sweeper on Plaintiff’s ability to see it.  After a jury awarded Plaintiff $50,000, the Defendants appealed.  The Court of Appeals affirmed, holding that although the manual did not establish the standard of care, it was not error to admit the manual as evidence of negligence as long as the jury was properly instructed.  The Court also held that the expert witness testimony was valid and that the facts underlying an expert’s opinion can be supplied in the form of a hypothetical question incorporating facts previously adduced at trial.

In Northern Ind.Pub. Serv. Co. v. Sharp, 790 N.E.2d 462 (Ind. 2003), a trucking company employee was electrocuted when his dump truck cam in contact with a power line.  The employee’s estate sued the electric company, alleging that the company was grossly negligent.  The jury found in favor the estate, returning a verdict for $750,000.  The Supreme Court affirmed both the trial court’s denial of Defendant’s Motion for Judgment on the Evidence and the jury verdict.  The Court held that the Estate had had the burden of proving the electric company failed to meet its duty to keep transmissions safely insulated by acting in conscious, voluntary act or omission or in reckless disregard of the consequences.  The Court found that reasonable people could reach different conclusions about whether Defendant’s action rose to the level of gross negligence.

Insurance Law

In Nationwide Mut. Ins. Co. v. Hatfield, 122 S.W.3d 36 (Ky. 2003), the Plaintiffs were injured when the vehicle in which they were traveling was struck by a fire-truck owned by the city of Montgomery, Missouri. The Court held that the exclusion in their underinsured motorist coverage for government-owned vehicles was void. This was so because KRS 304.39-320 required the insurance company to provide UIM coverage, and that coverage could not be so limited under the statute. The Court also held the Plaintiffs were not precluded from recovering UIM benefits because their policy limited the amount they were to be paid to the amount “due by law” or “legally entitled to recover” and the city of Montgomery had sovereign immunity. The policy stated “We will pay compensatory damages, including derivative claims, because of bodily injury suffered by you or a relative and due by law from the owner or driver of … and underinsured motor vehicle.” This language was not intended to exclude the application of UIM coverage, but rather simply required the insured to establish fault on the part of the underinsured motorist (in this case, the city of Montgomery).

In MGA Ins. Co., Inc. v. Glass, 131 S.W.3d 775 (Ky. App. 2004), the Court held that the son of a car dealer, who was test driving a vehicle at the time of an automobile accident, was an “insured” under the car dealer’s policy. The UIM provision at issue define an “Insured” as  “anyone else ‘occupying’ a covered ‘auto.’” Because the Plaintiff was “in” the car, he was “occupying” the vehicle at the time of the accident. Thus, under the policy, he was an “insured” entitled to coverage.

In Allstate Ins. Co. v. Tozer, 392 F.3d 950 (7th Cir. 2004) Allstate Insurance provided coverage to Mr. and Mrs. Tozer.  Their daughter, Lindsey, was driving the insured vehicle with three passengers when she lost control and struck a telephone pole.  One passenger died.  The remaining passengers, the brother and sister of the deceased, were uninjured but they witnessed their brother’s death.  The District Court for the Southern District of Indiana had found that emotional distress constituted “bodily injury” under the meaning of the insurance policy and that each emotional distress claim constituted a separate injury to a person.  However, the Seventh Circuit overturned that decision, holding that the term “bodily injury” does not include emotional damage that does not arise from bodily touching.  The Court did note that “bodily injury” as used in some insurance polices could include emotional harm, but only if that injury resulted from a direct physical impact upon the person.

In Midwestern Indem. Co. v. Systems Builders, Inc., 801 N.E.2d 661 (Ind. App. 2004), a project owner entered into an agreement with a subcontractor and signed a waiver of subrogation clause in which both parties agreed that their respective claims for any damages would be limited to the amount covered by their respective property insurance policies.  In interpreting the waiver of subrogation clause, the Court held that the clause applied to losses that occurred even after the work was completed, not just to work damaged during construction.  The Court also held that the subcontractor-defendant, as a third party beneficiary, was entitled to enforce the waiver of subrogation clause contained in the primary construction contract.

In MonroeGuar. Ins. Co. v. Magwerks Corp., 796 N.E.2d 326 (Ind. App. 2004),   Magwerks Corp. and Monroe Guaranty Insurance Co. disagreed about whether Magwerks was entitled to coverage for damage to the roof of a building resulting from a collapse.  Monroe Guaranty argued that the damages was excluded from coverage because it was caused by wear and tear, decay, defective design, and deterioration.  Magwerks took the position that the collapse was caused by the weight of snow and ice.  A jury awarded a $5.1 million verdict, $4 million of which was for punitive damages.  The Court of Appeals determined that “collapse” had not been defined in Indiana.  The Court defined “collapse” as “a substantial impairment of the structural integrity of the building or any part of the building.”  The Court therefore upheld the judgment for the collapse, but the punitive damages award was overturned, since there had been a good faith disagreement about the meaning of “collapse.”  Transfer has been granted by the Supreme Court, Monroe Guar. Ins. v. Magwerks Corp., 812 N.E.2d 795 (Ind. 2004)

In Midtown Chiropractic v. Illinois Farmers Insurance Company, 812 N.E.2d 851 (Ind. Ct. App. 2004), after Midtown treated a man, Sexton, for injuries from a car accident with a driver who was insured by Illinois Farmers, Sexton executed an assignment of rights to receive benefits and proceeds of any settlement or judgment to Midtown to be paid out of any settlement or proceeds for the injuries he suffered.  Illinois Farmers later entered into a settlement with Sexton and paid him to release all of his claims against the insurance company.  Midtown, which was not paid, sued.  The Court of Appeals held that Sexton made a valid equitable assignment to Midtown and that when an insurer pays a sum to the accident victim in disregard of an assignment to a health care provider, the health care provider may bring an action against the insurer.

Punitive Damages

In Sand Hill Energy, Inc. v. Smith, 142 S.W.3d 153 (Ky. 2004), the Kentucky Supreme Court held the jury could not consider the Defendant’s extraterritorial conduct when determining punitive damages. This case was handed down in the wake of the United States Supreme Court opinion in State Farm Mutual Ins. Co. v. Campbell, 538 U.S. 408 (2003), in which the Court held that the due process clause of the United States constitution limits the factors a jury may determine when awarding punitive damages. The Court said “Lawful out-of-state conduct may be probative when it demonstrates the deliberateness and culpability of the defendant’s action in the state here it is tortious, but that conduct must have a nexus to the specific harm suffered by the Plaintiff.” Id. at 422-423.

Thus, the Kentucky Supreme Court held that when a jury determines whether to award punitive damages, it may not consider evidence that is not directly related to the tortious conduct at issue in the case.

In Kinney v. Butcher., 131 S.W.3d 357 (Ky. App. 2004) the Kentucky Court of Appeals held that a jury may not award punitive damages in a case arising out of ordinary negligence. The case involved an automobile accident where the Defendant, while attempting to pass a slow moving car, crossed a solid yellow line and collided head on with the Plaintiff’s car. Punitive damages in cases involving malice and gross negligence are, in proper cases, appropriate. However, it would be a violation of the jural rights system to elevate that standard.

Products Liability

In Morgen v. Ford Motor Co., 797 N.E.2d 1146 (Ind. 2003), the Indiana Supreme Court, in vacating a Court of Appeals ruling and affirming the trial court, held that the fact that a passenger in the back seat of a vehicle failed to wear a seatbelt may constitute a defense of misuse under the Product Liability Act.  Despite this ruling, the Court did not give any indication that a person’s failure to wear a seat belt is evidence of fault in a comparative fault or negligence case.

In Williams v. Cingular Wireless, 809 N.E.2d 473 (Ind. Ct. App. 2004), the plaintiff driver sustained injuries in a collision with another driver who was allegedly using a Cingular cell phone.  Plaintiff argued Cingular was negligent in furnishing a cell phone to the other driver, in that it should have known that it would be used while the driver operated a motor vehicle.  The Court of Appeals upheld a trial court’s dismissal of the claim, stating that there as no relationship between Cingular and Plaintiff that would create a duty on Cingular’s part.  The Court noted that it is a driver’s inattention that causes accidents, not the cell phone itself.  The Court also concluded that many things could cause a driver to be less attentive, such as applying make up or eating food, but it would be unreasonable to impose a duty on a restaurant or cosmetics manufacturer for supplying those items.

Additional Documents:

Practices

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