Petition for Writ of Certiorari — Pike v. Government Employees Insurance Co. (No. 06-13)

O6°13° JUN 26 2006

No.

—_—_——

eee: kT

In The

Supreme Court of the United States

WENDELL PIKE,

Petitioner,

v.

GOVERNMENT EMPLOYEES

INSURANCE COMPANY,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals from the Sixth Circuit

PETITION FOR WRIT OF CERTIORARI

JASON B. BELL

ERIC A. HAMILTON

KERRICK, STIVERS & COYLE, PLC

2819 RING ROAD

SUITE 200

ELIZABETHTOWN, KY 42701

(270) 737-9088

Counsel for Petitioner

i

Questions Presented

What is the appropriate period of limitations in

Kentucky for an insured’s contractual claim against his

or her own insurance company for underinsured

motorist [hereinafter “UIM”] benefits;

Can an insurance company contractually shorten the

applicable period of limitations with its insured by

inserting language in the policy to that effect;

If an insurance company can permissibly-contractually

limit the period of limitations by inserting language in

the policy, what period of limitations for UIM claims is

reasonable under Kentucky law;

Can an insurance company’s own actions after the

limitations period in the policy has allegedly expired

estop the insurance company from raising the

limitations issue as a defense and/or result in a waiver

of the limitations defense; and

In Kentucky, the payment of an insured’s medical bills

by his or her personal injury protection [hereinafter

“PIP” ] benefits carrier tolls the statue of limitations —

should the payment of an insured’s medical expenses

by a worker’s compensation carrier likewise toll the

limitations period.

il

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6, Petitioner states as follows:

The Petitioner is not a subsidiary or affiliate of a

publicly owned corporation.

There is not a publicly owned corporation that has a

financial interest in the outcome of this matter.

iil

TABLE OF CONTENTS

Question Presented iS SERS SI rea RA Ee Me tp Orc eee Cama PA i

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Opinions Below ................... : Bye Ta ASUS As poten Mi ACR RE FL an Ea OO l

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tatutory Provisions Involved oo. .i5.<.i6c..5-ccsccescsscsicossceveccesecosscensss I

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A. FCI TIO RNOIIE aiecic ev sivasivstcntiekesecerestaeed 3

B. PONS TIONG oo ae ics secs cscs prices eats, 5

Reasons for Granting the Petition. ...............ccccccssccsssssesssseesceeee 6

I, The fifteen (15) year period of limitation for

contracts applies to a first party claim for UIM

ESOT RMON OS WON ANC I a Se EERE OTE 6

II. GEICO’s unilateral attempt to limit the period

of limitations to two (2) years is unreasonable

ILI. GEICO is estopped by its own actions from

raising the period of limitations as a defense

IV

IV. | Equity and fairness warrant reversal................ 14

NOUN soo icin iin hak cin aids coca depucddanns paseoanbesd tenth sone oae es 16

Appendix

Appendix A — Sixth Circuit Opinion — 03/29/06......... la

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TABLE OF AUTHORITIES

CASES

Brown v. State Auto, 189 F.Supp.2d 665 (W.D. Ky. 2001)

PAREN ES ero te POURS eae sebvcveedly by Ay BAly: Bay ke Ae RO

Coots v. Allstate Ins. Co., 853 S.W.2d 895 (Ky. 1993)

Earle v. Cobb, 156 S.W.3d 257 (Ky. 2005) ..cscecssssseescsssssee 6

Elkins v. Kentucky Farm Bureau Mut. Ins. Co., 844 S.W.2d

EF BP Misisisriisnpercciscccontbegratocccions 7, 8,9, 11

Gordon v. Kentucky Farm Bureau Ins. Co., 914 S.W.2d

331, 333 CRY. ADDS) ccoscsvess 3, 7,9, 10, 11, 12, 13, 14, 16

Stewart v. Pantry, Inc., 715 F.Supp.1361 (W.D. Ky. 1988)

STATUTES “

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ae es Ne PE Pics cases besaneicciis ead onde iuusies sey eiesncnsenvetabeas 4,13

RE tI chido chnisdsuinvinidanhdebinkti eesdetveregs ents 2, 4,5, 14, 16

Me OS SAPP ssp cs itineck ccninginedanicttinartinocieniiessibe 6, 11, 13, 16

RULES

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|

OPINIONS BELOW

The Memorandum Opinion of the United States Court

of Appeals for the Sixth Circuit dated March 29, 2006,

affirming the decision of the District Court was not

recommended for full-text publication.

The Memorandum Opinion and Order of the United

States District Court for the Western District of Kentucky at

Louisville dated February 24, 2005, are not officially reported.

JURISDICTION

The Memorandum Opinion of the United States Court

of Appeals for the Sixth Circuit sought to be reviewed was

entered March 29, 2006. This petition is timely under 28

U.S.C. § 2101 and Supreme Court Rule 13.1 because it is being

filed within 90 days of the entry of the order sought to be

reviewed. This court has jurisdiction to review the order of the

United States Court of Appeals for the Sixth Circuit pursuant to

28 U.S.C. § 1254.

STATUTORY PROVISIONS INVOLVED

The relevant statutory provisions are 28 U.S.C. § 1441,

KRS 304.39-230, KRS 304.39-320, and KRS 413.090. 2

STATEMENT OF THE CASE

This is a contractual case for UIM benefits arising from

a motor vehicle collision. Initially, Petitioner, through his prior

counsel, the honorable Paul Musselwhite, made a personal

2

injury claim against Ms. Stear to obtain her liability insurance

proceeds with Sentry Insurance. Sentry promptly agreed to

settle that claim for the full amount of its policy limits of

$50,000.

As is required under Kentucky law, Petitioner, by

counsel, and pursuant to the Kentucky decision of Coots v.

Allstate, 853 S.W.2d 895 (Ky. 1993) and KRS 304.39-320, put

the Respondent on notice of the tentative settlement and sought

the Respondent's permission to effectuate the settlement.

Respondent elected to preserve its subrogation rights against

Ms. Stear for any UIM benefits that it may pay to Petitioner by

substituting payment and by sending the Petitioner a check for

the $50,000 as is required by KRS 304.39-320.

Petitioner then asserted a first-party contractual claim

for UIM benefits against the Respondent and attempted to

negotiate a settlement of his UIM claims. Respondent denied

his claim for UIM benefits on the grounds that the contractual

two-year period of limitations in its policy had expired.

Accordingly, Petitioner was forced to file a first party

contractual claim in the Hardin Circuit Court against the

Respondent to recover his UIM benefits. Pursuant to 28 U.S.C.

§ 1441, Respondent removed this action to the United States

District Court for the Western District of Kentucky at

Louisville since complete diversity of citizenship was present

and the amount in controversy exceeded $75,000.

Thereafter, pursuant to F.R.C.P. 12(b)(6), Respondent

moved the Western District Court to dismiss Petitioner’s

Complaint on limitations grounds based on the two (2) year

limitations provision in its policy. The Western District Court

granted Respondent's Motion to Dismiss without a hearing and

3

without allowing the parties to take any discovery whatsoever.

The Sixth Circuit Court of Appeals affirmed the dismissal.

Petitioner believes the District Court and Sixth Circuit

erred and failed to follow Kentucky law as set forth in Brown

v. State Auto, 189 F.Supp.2d 665 (W.D. Ky. 2001), and

Gordon v. Kentucky Farm Bureau Ins. Co., 914 S.W.2d 331,

333 (Ky. 1995), which together hold that the statutory 15-year

period of limitations for contracts actions applies to first party

contractual UIM claims

A. Factual Background

On November 21, 2000, Tammy Stear ran a stop sign

causing a severe and violent collision with Petitioner's United

States Postal Service truck at the intersection of 16th Street and

Rowan Street in Louisville, Jefferson County, Kentucky.

Petitioner sustained a serious back injury from the collision.

At the time of this collision, Petitioner was acting

within the course and scope of his employment as a mail

carrier with the United States Postal Service. Petitioner had

procured personal automobile insurance with the Respondent,

whose policy provided, among other benefits, UIM coverage.

Shortly after the collision, Petitioner began receiving

medical treatment. Due to the fact that he was "on the job" at

the time of the collision, his worker's compensation insurance

company had primary and exclusive responsibility for payment

of his medical bills and expenses. Ordinarily, an injured

motorist in Kentucky has his or her medical bills paid by a No-

Fault or "PIP" [personal injury protection] carrier, who in this

case would be the Respondent.

4

In fact, because Petitioner's worker’s compensation

insurance was primary, Respondent would not pay any PIP

benefits, and even today, Petitioner’s PIP carrier, GEICO has

never paid any amount of money to or on behalf of the

Petitioner under its PIP coverage.

Since there were no PIP payments in this case, the

period of limitations for filing a personal injury claim against

the tortfeasor was never extended beyond 2 years, as it would

have been if his medical expenses were paid by a PIP carrier

pursuant to KRS 304.39-230(6). Petitioner is still receiving

medical treatment and his worker's compensation insurer is still

paying his medical bills related to injuries sustained in this

motor vehicle accident.

The tortfeasor, Tammy Stear, had a policy of liability

insurance with Sentry Insurance Company, which policy

provided $50,000 in per person liability insurance coverage.

On or about May 15, 2003 (2 % years after the date of

the accident), Petitioner settled his personal injury claims

against Tammy Stear for the amount of her liability policy

limits of $50,000. Petitioner thereafter pursued contractual

claims for UIM benefits with his company, Respondent.

As is required by KRS 304.39-320, Kentucky’s UIM

Statute, Petitioner promptly and properly sent a letter to the

Respondent, advising them of the tentative settlement with the

tortfeasor Tammy Stear and providing the Respondent an

opportunity to protect its subrogation rights against Ms. Stear.

On or about June 19, 2003 (over 2 % years after the

period of limitations expired according to Respondent under its

policy), Respondent advised that it was electing to protect its

subrogation rights against Ms. Stear, pursuant to Coots _v.

5

Allstate, 853 S.W.2d 895 (Ky. 1993) and KRS 304.39-320, and

substituted payment by sending a check to the Petitioner in the

amount of $50,000.00. Respondent substituted the settlement

offer to protect its subrogation rights on Petitioner’s UIM claim

- aclaim it now says did not exist at the time.

On January 19, 2004, (7 months after Respondent

substituted its payment and 8 months after settling his claim

with the tortfeasor), Petitioner, by counsel, the honorable Paul

Musselwhite, filed a first-party contractual claim against

Respondent in the Hardin Circuit Court, Division II, Case No.

04-CI-00249, to recover UIM benefits under his policy of

insurance.

On or about March 3, 2004, Respondent removed the

action to the United States District Court for the Western

District of Kentucky, Louisville Division. Petitioner agrees

and stipulates that venue and jurisdiction are proper in federal

court since complete diversity of citizenship among the parties

exists and since his claim for damages under the contract of

insurance is in excess of the $75,000.00 jurisdictional

requirement.

B. Proceedings Below

On February 24, 2005, the United States District Court

for the Western District of Kentucky at Louisville entered a

Memorandum Opinion and Order dismissing the Petitioner's

Complaint.

On March 29, 2006, the United States Court of Appeals

for the Sixth Circuit affirmed the decision of the United States

District Court for the Western District of Louisville.

6

REASONS FOR GRANTING THE PETITION

This case presents an important question of Kentucky

law that has not been resolved but should be settled by this

Court.

I. THE FIFTEEN (15) YEAR PERIOD OF

LIMITATION FOR CONTRACTS APPLIES TO A

FIRST PARTY CLAIM FOR UIM BENEFITS.

7 Kentucky law mandates that the period of limitation for

a written contract, such as an insurance policy, is fifteen years

from the date of the loss. Specifically, KRS 413.090(2)

provides, in relevant part, as follows:

[T]he following actions shali be commenced

within fifteen (15) years after the cause of action

first accrued:

(2) An action upon a recognizance, bond

Or written contract.

KRS 413.090(2). A policy of insurance is a written contract

between the insured and the insurer. Under Kentucky law, a

first party claim for UIM benefits is contractual in nature.

Earle v. Cobb, 156 S.W.3d 257 (Ky. 2005).

Petitioner's claim for UIM benefits against Respondent

in this case sounds in contract, not tort. Accordingly, the

Kentucky General Assembly has set forth in KRS 413.090(2)

the applicable period of limitations for a claim for UIM

benefits, and that limitations period is fifteen (15) years.

7

Ii. GEICO’S UNILATERAL ATTEMPT TO LIMIT

THE PERIOD OF LIMITATIONS TO TWO (2)

YEARS IS UNREASONABLE.

There is some authority under Kentucky law that allows

an insurance company to insert language into their policy to

reduce the period of limitations, but the period of limitations

must be reasonable. See Brown v. State Auto, 189 F.Supp.2d

665 (W.D. Ky. 2001); Gordon v. Kentucky Farm Bureau Ins.

Co., 914 S.W.2d 331 (Ky. 1995); and Elkins v. Kentucky Farm

Bureau Mut. Ins. Co., 844 S.W.2d 423 (Ky. App. 1992).

The first of these three cases was rendered in 1992 by

the Kentucky Court of Appeals in Elkins v. Kentucky Farm

Bureau Mut. Ins. Co., 844 $.W.2d 423 (Ky. App. 1992). That

case was followed shortly thereafter in 1995 by the Kentucky

Supreme Court in Gordon v. Kentucky Farm Bureau Ins. Co.,

914 $.W.2d 331 (Ky. 1995). The most recent decision on this

issue came in 2001, some six years after the opinion in Gordon,

from the United States District Court for the Western District

of Kentucky in Brown v. State Auto, 189 F.Supp 2d 665

~ (W.D.Ky. 2001).

A. Elkins v. Kentucky Farm Bureau

In Elkins, Kentucky Farm Bureau ["KFB"] provided

automobile insurance coverage, including uninsured motorist

{"UM"] coverage, to Ronna Elkins. Elkins, 844 S.W.2d at

423-424. In that case, Ms. Elkins was involved in a motor

vehicle accident on April 29, 1989. Id. at 423. Approximately

two weeks later, the tortfeasor pled guilty to driving without

proper insurance and Elkins’ attorney notified KFB of her

intent to pursue a claim for UM benefits under her policy. Id.

at 423-424. Ms. Elkins continued to treat medically for more

8

than one year after the date of the accident as indicated by her

PIP log with KFB. Id. at 424.

In December of 1990, approximately 20 months after

the date of the accident, Ms. Elkins filed suit against the

tortfeasor and KFB. Id. Thereafter, KFB: ioved for summary

judgment on limitations grounds, which was granted by the

trial court who found that KFB’s policy required that a suit for

UM benefits be brought within twelve months of the date of

the loss. Id. at 423.

On appeal, the Kentucky Court of Appeals reversed that

decision finding that the terms of the contract unreasonably

restricted Ms. Elkins right to benefits she had bought and paid

premiums for under her own policy of insurance. Id. at 425. In

reaching its decision, the Elkins Court noted that pursuant to

the Kentucky Motor Vehicle Reparations Act [hereinafter

“MVRA”], KRS 304.39 et seg., the statute of limitations for

filing a personal injury claim related to a motor vehicle

accident was a minimum of two years from the date of the

accident. Id. at 424-425. _

[I]t makes no sense to allow two years (or more)

to file a suit against an uninsured or

underinsured tort-feasor and yet permit the

insurer to escape liability if the suit involving it

is not filed within one year. Such would not

only be an unreasonably short time, but it would

completely frustrate the no-fault insurance

scheme.

Id. at 424. As a result, the Court of Appeals held that KFB’s

period of limitation unreasonable and reversed the decision of

the trial court. Id. at 425.

9

Importantly, in the concurring opinion, Judge Witlhoit

addressed an issue that would be raised again in Gordon, in

stating that he was “unable to see how an action based on a

contract claim can ‘fall within the two-year limit allowed by

KRS 304.39-230(6),’ which deals with tort actions.” Id. at 425.

Thus, the Elkins decision noted the distinction that is crucial in

this case - the difference in applying a limitations defense in a

tort action versus a contract action.

B. Gordon v. Kentucky Farm Bureau

In Gordon, KFB was once again the focus of a decision

regarding an attempt to shorten an insured’s right to bring a

suit against his/her own insurance company for first party

benefits. Gordon, 914 S.W.2d 331. In Gordon, KFB provided

automobile insurance coverage, including UM coverage, to

Charles Gordon. Id. af 331.

On July 26, 1990;-Mr;--Gordon’s son, Robin, was

involved in a motorcycle accident while a passenger of

Michael Gilvin, an uninsured motorist. Id. Mr. Gordon’s

policy with KFB, despite the ruling in Elkins, several years

earlier, still contained a policy provision that any claim for UM

benefits be brought within one-year from the date of the loss.

Id.

On December 18, 1992, Gordon filed suit for UM

benefits under the policy naming KFB as a defendant.

Thereafter, the trial court granted summary judgment to KFB

on two grounds: [1] that the claim was barred by the two year

statute of limitations set forth in the MVRA in KRS 304.39-

230(6), and (2) that a two (2) year delay in notice had

prejudiced KFB. Id. at 332. That decision was then affirmed

by the Kentucky Court of Appeals. Id.

10

On further appeal to the Kentucky Supreme Court, that

Supreme Court stated, “[t]he primary issue before this Court is

what time limitation applies to a claim for uninsured motorist

benefits in view of the decision of the Kentucky Court of

Appeals in Elkins v. Kentucky Farm Bureau Mutual Insurance

Company, 844 S.W.2d 423 (Ky. App. 1992).” Id. at 332.

The Gordon Court then aptly discussed Judge Wilhoit’s

foresight regarding the use of a tort statute of limitation as

related to a contract claim. Id. The Kentucky Supreme Court

agreed with the dissenting opinion from the Kentucky Court of

Appeals and stated “KRS 304.39-230(6) does not purport to

limit actions on contracts...” Id. “[We] find it illogical to

adopt a general rule which would require a plaintiff to sue his

own insurer before discovering whether or not the tort-feasor is

in fact an uninsured motorist.” Id.

©. Brown vy. State Auto

In the most recent decision on this issue arising out of

federal court in the Western District of Kentucky, Brown,

Plaintiff Jeanne Brown was injured in a motor vehicle accident

and filed a contractual claim against her UIM carrier, State

Auto. Id. at 666. Ms. Brown's accident occurred June 23,

1996, and she did not bring her claim against her UIM carrier

until March 30, 2001, over four (4) years and nine (9) months

after the accident date. Id. at 667-668. It was undisputed in

that case that Brown filed her complaint after the expiration of

the 2 year limitations period in State Auto’s contract of

insurance and after the expiration date of 2 years from the date

of her last PIP payment. Id.

11

In Brown, the policy of insurance issued by State Auto

required the insured to file a claim for UM or UIM benefits

within two years from the date of the loss. Id. at 667. The

Court wrote, “if the two year contractual limitation in the

policy is reasonable, the Plaintiff's complaint is time barred and

must be dismissed. If the limitation is unreasonable, the fifteen

year statute of limitations governing actions on written

contracts applies and the Plaintiff's claims may proceed.” Id. at

668.

The Brown Court reviewed and analyzed the decisions of

Elkins and Gordon in reaching its decision and stated,

{t]he Court does not agree with the Defendants’

contention that Gordon "{held] that two years is

a ‘reasonable’ limitation for filmg a first party

contract action[.]" (Defs.' Reply, p. 2.) Gordon

contains no such holding. That court addressed

the issue of what limitations period to apply to

an uninsured motorist claim where a contractual

limitation had already been deemed

unreasonable pursuant to Elkins. The question

of reasonableness was not an issue before the

court.

Brown, at 670 [emphasis added]. In Brown, the Court found

State Auto’s 2-year period of limitation unreasonable and

therefore invalid. Id. at 671. As a result, the Court applied

the 15-year statute of limitations for contract actions, KRS

413.090(2), to Brown's first party contractual claim for

UIM benefits and held that her Complaint was timely filed.

Id. The Brown decision clearly and unequivocally stands for

the proposition that UIM claims in Kentucky are to be afforded

a 15-year limitations period since they are purely contractual

actions.

12

D. The Western District And The Sixth

Circuit Misapplied Kentucky Law

In deciding this case, the Western District Court and the

Sixth Circuit Court of Appeals misapplied Kentucky law as set

forth in Brown v. State Auto, 189 F.Supp.2d 665 (W.D. Ky.

2001) and Gordon v. Kentucky Farm Bureau Ins. Co., 914 |

S.W.2d 331 (Ky. 1995).

On Page 2 of the Memorandum Opinion, the Western

District Court states, “[u]nder Kentucky law, the period for

filing an action to recover UIM benefits is two years from the

date of the injury or from the last basic or added reparation

payment made by any reparation obligor, whichever last

occurs. KRS 304.39-230(6).” This is incorrect.

The Western District and Sixth Circuit are taking the

position of the Kentucky Court of Appeals before they were

reversed in Gordon v. Kentucky Farm Bureau Ins. Co., 914

S.W.2d 331 (Ky. 1995), in which the Kentucky Supreme Court

wrote: -

In the present case, the Court of Appeals,

referring to the dicta in Elkins, specifically held

that the two-year statute in the MVRA does

apply. This Court agrees with Judge

Huddleston's dissent, in which he notes that

KRS 304.39-230(6) does not purport to limit

actions on contracts, but by its «© terms

limits an action for tort liability not abu: ed by

KRS 304.39-060. " This Court finds it illogical

to adopt a general rule which would require a

plaintiff to sue his own insurer before

discovering whether or not the tort-feasor is in

fact an uninsured motorist.

13

Gordon, 914 S.W.2d at 332 [emphasis added]. The Gordon

Court specifically and emphatically stated that KRS 304.39-

230(6) does not govern contract claims such as UM and UIM

actions, and further states that it would be illogical to adopt

such a rule that “would require a plaintiff to sue his own

insurer before discovering whether or not the tort-feasor is in

fact an uninsured motorist.” Id.

This language clearly states that to adopt a rule similar

to the period of limitations within KRS 304.39-230(6) would

be illogical. Yet that is the very language used by the GEICO

policy in question, as set forth in the Memorandum Opinion on

Page 2, “[a]ny legal action to recover underinsured motorist

benefits must be commenced within the period prescribed by

Kentucky law for the filing of a personal injury action arising

out of a motor vehicle accident.”

The Western District Court noted that it was not

utilizing the period of limitations under the MVRA, but rather

a reasonableness inquiry that allows a flexible limitations

period. That approach is unprecedented and is not called for by

either Brown or Gordon.

The Sixth Circuit’s opinion held that GEICO’s period

of limitation, which is exactly that of the MVRA is

permissible, despite language to the contrary by the Kentucky

Supreme Court. As such, both lower courts erred in finding the

two year period of limitations within the GEICO policy

reasonable.

Since the period of limitation in Respondent's policy is

unreasonable, in Kentucky, the period of limitation for

Petitioner’s first party contractual claim for UIM_ benefits

reverts to the standard period of limitations of fifteen (15) years

for contracts as set forth in KRS 413.090(2). See Brown v.

14

State Auto, 189 F.Supp.2d 665 (W.D. Ky. 2001); Gordon _v.

Kentucky Farm Bureau Ins. Co., 914 S.W.2d 331, 332-333

(Ky. 1995).

il. FURTHERMORE, GEICO IS ESTOPPED BY ITS

OWN ACTIONS FROM RAISING THE PERIOD

OF LIMITATIONS AS A DEFENSE.

In a federal case arising from the Western District of

Kentucky, Stewart _v. Pantry, Inc., 715 F. Supp. 1361 (W. D.

Ky. 1988), a group of employees were dismissed from their job

based on results from their polygraph tests and subsequently

filed an action against their employer and the polygraph

administrators for wrongful discharge, infliction of severe

emotional distress, defamation, invasion of privacy and

negligence. Id. The Western District Court held that the

employees’ consent to the polygraph examination waived their

claims. Id.

Likewise, by its consent to the Wendell Pike-Tammy

Stear settlement and by its actions in substituting payment to

protect its subrogation rights pursuant to KRS 304.39-320,

Respondent has clearly waived its right to claim that its

limitations provision bars Petitioner's claims. Respondent's

own actions clearly operate as a waiver to their now tardy

raising of the defense of limitations.

~

—

IV. EQUITY AND FAIRNESS WARRANT

REVERSAL.

In addition to legal rationales set forth hereinabove,

equitable principles mandate that the Western District's

Memorandum Order and the Sixth Circuit's opinion be

_ 15

reversed and vacated. In this case, Petitioner was injured while

on-the-job for the U. S. Postal Service. Thus, his worker's

compensation insurance carrier has had the primary and

exclusive responsibility to pay his medical bills. Even if the

Petitioner now submitted his bills to his PIP carrier, GEICO,

they would be denied and rejected as untimely and since his

worker's compensation insurer has the sole responsibility for

payment of his medical bills.

If Petitioner had not been on-the-job, then his PIP

carrier, which is GEICO, would have paid his medical bills. In

addition, the statute of limitations would have been tolled by

each such PIP payment.

Equity and fundamental fairness demand that the.

Petitioner should not have his claims dismissed in this case

simply because his bills were paid by worker's compensation

rather than a PIP carrier. If this Court affirms the Western

District, the effect of that ruling would be that Petitioner, an

injured party who was working, would be prejudiced by a

shorter limitations period than an injured party who was not

working. This would be contrary to public policy in that it

would treat similarly situated injured parties differently

depending on the arbitrary and capricious distinction of

whether their medical bills were paid by a_ worker's

compensation carrier or a PIP carrier, or, whether they were”

working or were not working at the time of an accident.

The practical effect of affirming the Western District

would mean that plaintiffs would lose their UIM claims

because of something over which they have no control - which

insurance company has primary responsibility for payment of

his medical bills. It is manifestly unfair that Petitioner be

penalized and forfeit a very viable and valuable UIM claim, for

which he paid premiums for years, on limitations grounds

16

simply because worker's compensation paid his medical bills

rather than a PIP carrier.

CONCLUSION

KRS 413.090(2) sets forth a 15-year statute of

limitations for all claims based upon a writte» contract. |

Kentucky law is clear that an insurance policyholder's claim for

UIM benefits is contractual in nature.

In addition to the statute, there case law directly on

point. Pursuant to Brown v. State Auto, 189 F.Supp.2d 665

(W.D. Ky. 2001) and Gordon v. Kentucky Farm Bureau Ins.

Co., 914 S.W.2d 331 (Ky. 1995), an insurance company cannot

unreasonably unilaterally and without input from its insured

insert language into the policy to shorten the limitations period.

Respondent GEICO seeks to reduce a 15-year statute for

contracts down to a mere 2 years. A 13-year reduction is not

reasonable by any estimation. Brown holds that UIM claims in

Kentucky deserve a 15-year limitations period, and rightfully

SO.

In addition, GEICO’s payment of Tammy Stear and

Sentry Insurance Company's settlement offer of $50,000

pursuant to KRS 304.39-320, Kentucky's UIM statute, after —

_ their alleged limitations period had expired, equitably estops

GEICO from asserting a limitations defense in this case. Thus,

by its actions, GEICO has effectively waived its right to rely on

the limitations defense in its policy.

Equity and fairness dictate that Petitioner have his day

in court regarding insurance coverage for which he paid a

premium. While GEICO'S policy language, in theory, does

afford the potential of a period of limitations greater than the

17

minimum under the MVRA, when applied to Petitioner, his

period of limitation could never be greater than the minimum

under the MVRA because there was never any PIP paid, or to

be paid, due to his status as a federal employee whose medical

benefits where paid by federal worker’s compensation. PIP

payments would have tolled the statute of limitations; whereas,

worker's compensation payments did not. It is arbitrary to

punish the Petitioner with dismissal of his UIM claims simply

because he was not eligible for PIP payments due to his

employment status at the time of the wreck.

For the foregoing reasons, Petitioner Wendell Pike

respectfully submits that the decisions of the United States

District Court for the Western District of Kentucky and the

Sixth Circuit Court of Appeals should be reversed and this

matter should be remanded for further proceedings.

This the 26" day of June, 2006.

Bene

JASON'B. BELL

ERIC A. HAMILTON

KERRICK, STIVERS &

COYLE, PLC

2819 Ring Road

Suite 200

Elizabethtown, KY 42701

(270) 737-9088

Counsel for Petitioner

18

CERTIFICATE OF SERVICE

This is to certify that a true and exact copy of the

foregoing was this day faxed, hand-delivered or placed in the

U.S. Mail addressed as follows:

William Tinker

Spurgeon & Tinker, PSC

120 Prosperous Place

Suite 202

Lexington, KY 40509

859-263-1860

Counsel for Respondent

Paul Musselwhite |

Musslewhite, Meinhart & Staples, PSC

385 W. Lincoln Trail Boulevard

Radcliff, KY 41060

270-351-6032

Co-Counsel for Petitioner

This the 26" day of June, 2006.

Robt

Counsel for Petitioner

la

No. 05-5481

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

WENDELL PIKE Plaintiff-Appellant

V.

GOVERNMENT EMPLOYEES

INS. CO., Defendant-Appellee

APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE WESTERN DISTRICT OF

KENTUCKY

BEFORE: MOORE and McKEAGUE, Circuit Judges;

and POLSTER, District Judge.

Dan Aaron Polser, District Judge. Plaintiff Wendell

Pike appeals the district court’s dismissal of his underinsured

motorist (“UIM”) claim against his automobile insurance

carrier, Defendant Government Employees Insurance Co.

(“GEICO”). Pike was injured in a motor vehicle accident

caused by the negligence of an underinsured motorist. After

settling his claim against the tortfeasor’s insurance carrier for

the policy limits, Pike notified GEICO of the settlement and

made a demand for payment of damages in excess of the

settlement figure. GEICO denied Pike’s request, and Pike

brought a claim for UIM benefits against GEICO in state court.

GEICO removed the case to federal district court and promptly

moved to dismiss Pike’s claim on the basis that it was filed

after the limitation period contained in the policy expired. Pike

contended that the contractual limitation period was

unreasonable under Brown v. State Auto, 189 F.Supp.2d 665

2a

(W.D. Ky. 2001) and Gordon v. Kentucky Farm Bureau Ins.

Co., 914 $.W.2d 331 (Ky. 1995); thus, the 15-year statutory

limitation period for contract claims should apply to his claim.

The district court granted GEICO’s motion and

dismissed the case as time-barred. The court reviewed Brown

and Gordon, distinguished those cases and concluded that the

contractual limitation period set forth in the parties’ contract

was reasonable. For the following reasons, we AFFIRM.

I. BACKGROUND

This case arises from a motor vehicle accident that

occurred in Louisville, Kentucky on November 21, 2000

between Wendell Pike and Tammy Stear. The collision

occurred while Pike was working as a mail carrier for the

United States Postal Service. As a result of the collision, Pike

sustained serious injuries. Since he was working at the time of

the accident, his medical bills and associated expenses were

paid, and continue to be paid, by the Postal Service’s worker’s

compensation insurance carrier.

The tortfeasor, Tammy Stear, had a policy of liability

insurance which provided a maximum of $50,000. On or about

My 15, 2003, Pike settled his personal injury claim against

St -ar for the policy limits.

On May 21, 2003, Pike’s counsel sent a letter to

GEICO notifying it of the settlement and providing GEICO an

opportunity to protect its right of subrogation against Stear,

pursuant to K.R.S. 304.39-320 and Coots v. Allstate, 853

S.W.2d 895 (Ky. 1993). This is the first time GEICO was

informed that Pike was involved in a car accident. GEICO sent

notice of its election to protect its subrogation rights and its

intent to substitute payment of the policy limits of the

tortfeasor in the amount of $50,000. On September 25, 2003,

Pike demanded the full limit of GEICO’s UIM coverage.

3a

GEICO denied Pike’s claim because he failed to comply with

the policy’s notice provision and because he brought his claim

after the limitation period contained in the policy had expired.

Under the relevant policy provision,

[suit will not lie against [GEICO] unless the

insured and his legal representative have fully

complied with all the policy terms. Any legal

action to recover underinsured motorist

benefits must be commenced within the

period prescribed by Kentucky law for the

filing of a personal injury action arising out of

a motor vehicle accident.

JA. at 3. Under the Kentucky Motor Vehicle Reparations Act

(“MVRA”), any action brought in tort for injuries sustained in

a car accident must be commenced either within two years of

the date of the accident, or within two years of the date the

final basic or added reparation (“PIP”) benefit was paid,

whichever is later. Brown, 189 F.Supp.2d at 666 (citing K.R.S.

304.39-230).

On February 5, 2004, Pike sued GEICO in state court

for UIM coverage. GEICO removed the case to federal court

based on diversity jurisdiction and filed a motion to dismiss.

GEICO argued that Pike’s claim should be dismissed because

it was time-barred and because Pike failed to join an

indispensable party — presumably, Tammy Stear. Pike

countered that his claim was not time-barred because the

general, fifteen-year statute of limitations for contract claims

applied to his claim under the authority of Brown. Moreover,

equity and fairness dictated that his UIM claim should not be

dismissed simply because his medical bills were paid by

worker’s compensation and not his PIP carrier. Pike also

argued that Tammy Stear was not an indispensable party

4a

because this was a direct contract action against the insurance

company.

The district court granted GEICO’s motion based on the

expiration of the contractual limitation period, finding it

unnecessary to rule on the notice issue. The district court

contrasted the limitation period in GEICO’s policy, which was

a flexible period that dovetailed with the limitation period in

the MVRA, with the rigid two-year period in the policies

which the courts in Brown and Gordon deemed unreasonable.

The court below quoted the reasoning of the district court in

Brown:

This court believes that the fair reading of

Gordon demonstrates three key points: (1)

that the MVRA does not govern contract-

based actions seeking underinsured motorist

benefits; (2) that any contractual limitations

period must be reasonable; and (3) that it is

illogical — in other words, unreasonable — to

require a plaintiff to sue her own insurer for

underinsured motorist benefits before being

required to discover whether or not the

tortfeasor is in fact an uninsured motorist.

; This Court believes that the Kentucky

‘Supreme Court would not make any

distinction between uninsured motorist and

underinsured motorists in this context, and

would likewise find it unreasonable to require

an insured to sue her insurer for underinsured

motorist benefits prior to being required to sue

the tortfeasor and thus to determine whether

or not the tortfeasor is in fact underinsured.

J.A. at 3 (quoting Brown, 189 F.Supp.2d at 670-71). The court

below read Brown as holding that the fifteen-year statute of

Sa

limitation for bring contract claims governs a claim for UIM

benefits unless the insurance policy contains a reasonable

limitation period prescribing a shorter length of time. Because

the GEICO policy avoided the flaw in the policies analyzed by

the Brown court, it was reasonable and Pike’s lawsuit was

time-barred. Pike filed a timely notice of appeal.

Il.

A. Jurisdiction

The district court had jurisdiction over this diversity

case pursuant to 28 U.S.C. § 1332, because the parties are

citizens of different states and the amount in controversy

exceeds $75,000. See Lee-Lipstreu v. Chubb Group of Ins.

Cos., 329 F.3d 898, 899-900 (6 Cir. 2003). We have

jurisdiction over the district court’s final judgment pursuant to

28 U.S.C. § 1291.

¢ a ra ae

B. Standard of Review

A district court’s decision granting a motion to dismiss

based on the statute of limitations is reviewed de novo. Simon

v. Pfizer Inc., 398 F.3d 765, 772 (6 Cir. 2005); Hogan v.

United States, 42 Fed. Appx.-717, 721 6” Cir. 2002) (citing

Tolbert v. State of Ohio Dept. of Transp., 172 F.3d 934, 938

(6" Cir. 1999).

C. Merits

The issue on appeal is whether a contractual limitation

for bringing UIM claims that tracks the statutory MVRA

limitation period is unreasonable under Brown and Gordon. In

6a

Kentucky, the statutory period of limitation for a written

contract, such as an insurance policy, is fifteen years after the

cause of action accrued. K.R.S. 413.090(2). Parties to an

insurance contract may, however, limit the time in which to

bring a claim against an insurance carrier so long as the time

limit is reasonable. Webb v. Kentucky Farm Bureau Ins. Co.,

577 S.W.2d 17, 18 (Ky. Ct. App. 1978) (citing Riddlesbarger

v. Hartford Ins. Co., 74 U.S. 386 (1868); Lee v. Union Central

Life Ins. Co., 56 S.W. 724 (Ky. Ct. App. 1900)). See also

Brown, 189 F.Supp.2d at 670; Gordon, 914 S.W.2d at 333;

Elkins v. Kentucky Farm Bureau Ins, Co., 844 $.W.2d 423, 427

(Ky. Ct. App. 1992). Where a policy limitation is deemed

unreasonable, the fifteen-year statutory period for commencing

contract claims in Kentucky applies. Gordon, 914 S.W.2d at

332.

With respect to uninsured or UIM contracts, Kentucky

courts have held that a one-year policy limitation for bringing

UIM claims against one’s insurance carrier is unreasonable

because it would require the insured to sue his carrier for UIM

benefits long before he is required to sue the tortfeasor. Elkins,

844 §$.W.2d 423; Gordon, 914 S.W.2d 331. Also, a policy

limitation requiring an insured to sue his UIM insurance carrier

no later than two years from the date of the accident has been

deemed unreasonable because it would require the insured to

sue his carrier “before being required to discover whether or

not the tortfeasor is in fact an uninsured [or underinsuded]

motorist.” Brown, 189 F.Supp.2d at 671. This is presumably

because the insured has no reason to investigate the tortfeasor’s

insurance status so long as reparation benefits are being paid.’

‘A fundamental purpose of the {MVRA] is 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.” York v. Kentucky Farm Bureau Mut. Ins.

Co., 156 S.W.3d 291, 294-95 (Ky. Ct. App. 2005) (citing K.R.S. 304.39-

010 (2)). “the entire MVRA scheme reflects a zero-sum approach where

Ta

There is, however, no case where a Kentucky court analyzed

whether a policy limitation like the one in the instant case is

reasonable. The cases cited by Pike in support of his position

are distinguishable because none of those cases dealt with the

flexible policy limitation involved in this case, i.e, “the period

prescribed by Kentucky law for the filing of a personal injury

action arising out of a motor vehicle accident.” See Brown,

189 F.Supp.2d 665 (refusing to enforce a UIM policy

limitation of two years from the date of the accident); Gordon,

914 S.W.2d 331 (refusing to enforce a policy limitation of two

years from the date of the accident). See also Elkins, 844

S.W.2d 423 (refusing to enforce a policy limitation of one year

from date of accident). Furthermore, each of these decision

the injured persons’ losses are fully compensated by a combination of

reparation benefits, liability insurance and, if necessary, underinsured

motorist coverage.” Saxe v. State Farm Mutual Auto. Ins. Co., 955 S.W.2d

188, 191 (Ky. Ct. App. 1997); Kentucky Nat'l Ins. Co. v. Bottoms, No.

2002-CA-001767-MR, 2003 WL 22801196 at * 2 (Ky. Ct. App. Nov. 25,

2003). The Gordon court noted that,

{[a]ithough KRS 304.39-230 does not specifically refer

to suing one’s insurance carrier for uninsured or

underinsured benefits, it makes no sense io allow two

years (or more) to file a suit against an uninsured or

underinsured tortfeasor and yet permit the insurer to

escape liability if the suit involving it is not filed within

one year. Such would not only be an unreasonably

short time, but it would complete frustrate the no-fault

insurance scheme.

914 S.W.2d at 332.

*Pike repeatedly argues that the contractual limitation period in his

UIM policy is two years. That is simply incorrect. The contractual

limitation in his policy is a flexible one which coexists with the MVRA’s

limitation period. In the case before us, the limitation period amounts to

two years only because Pike did not receive any reparation benefits which

would have tolled the contractual limitation period.

8a

made clear that the rulings should not be construed to prohibit

insurance companies from contracting with their insureds for a

shorter period of time to file a contract claim. Brown, 189

F.Supp.2d at 670; Gordon, 914 S.W.2d at 333; Elkins, 844

S.W.2d at 425.

Having reviewed the relevant cases, the district court

concluded that the policy limitation in this case was reasonable.

The GEICO policy in issue here contains a

provision which looks to the tort liability

limitation in the MVRA. The MVRA

prescribes a period of two years which may be

extended by the payment of reparation

benefits. Thus the time limit in which the

claim for UIM benefits must be brought is

exactly the same time as that in which suit

must be filed against the tortfeasor, no less

than two and possibly more than two years

from the date of the injury. This period,

which dovetails with the tort liability period of

limitations, is reasonable inasmuch as it does

not require the insured under any

circumstance to file suit for UIM benefits

prior to the expiration of the limitation period

for filing suit against the tortfeasor.

J.A. at 4 (emphasis added). We agree. We also note that the

district court was careful to point out that its decision did not

contradict the ruling in Gordon, followed in Brown, that the

MVRA does not govern contract actions seeking UIM benefits.

Rather, it was the court’s reasonableness inquiry which led to

conclude that the flexible limitation period contained in Pike’s

policy, which period was coextensive with that contained in the

9a

MVRA, was reasonable.’ Nothing in Pike’s UIM policy

requires Pike to file a claim for UIM benefits prior to suing a

tortfeasor. Because the policy limitation does not conflict with

period of time prescribe by Kentucky law for filing a personal

injury claim arising from a motor vehicle accident, we

conclude that it is reasonable, and enforceable.

Pike also argues that GEICO is estopped from raising

the contractual limitation period as a defense because of its

conduct in advancing the tortfeasor’s $50,000 settlement offer

to Pike. However, GEICO was required by statute to substitute

payment or waive its right of subrogation against the tortfeasor.

K.R.S. 304.39-320(4). Additionally, to establish equitable

estoppel, a plaintiff must show that his insurer fraudulently

deceived or misléd him into believing that it had abandoned or

waived its limitation defense. Johnson v. Culvert Fire Ins. Co.,

183 S.W.2d.94] (Ky. Ct. App. 1944); National Surety Marine

Ins. Corp. v. Wheeler, 257 S.W.2d 573 (Ky. Ct. App. 1953).

Pike can make no such claim here since it is undisputed that the

first time he notified GEICO that he had been in an accident,

let alone asserted a UIM claim, was six months after the

contractual limitation period expired.

Finally, Pike contends that equity and fairness warrant a

reversal of the district court’s ruling and that the ruling violates

public policy. According to Pike,

[t]he practical effect of affirming the Western

District would mean that plaintiffs would lose —

their UIM claims because of something over

*Contrary to Pike’s assertions, the Gordon court addressed the

issue of which limitations period to apply to an uninsured motorist claim

where a policy limitation has already been deemed unreasonable — and

concluded that the statutory fifteen-year period for bring contract claims

applied. See Brown, 189 F.Supp.2d at 670. The district court in Brown

noted that “[t]he question of reasonableness was not an issue before the

[Gordon] court.”

10a

which they have no control — which insurance

company has primary responsibility for

payment of his medical bills. It is manifestly

unfair that [Pike] be penalized and forfeit a

very viable and valuable UIM claim, for

which he paid premiums for years, on

limitations grounds simply because worker’s

compensation paid his medical bills rather

than a PIP carrier.

Final Brief of Plaintiff-Appellant, at 24. This argument is

meritless. It has long been established that parties may

—contract for a shorter limitation period than that provided by

statute, and there is nothing sinister about the contractual

limitation in this case which relies on Kentucky law. The

district court did not dismiss Pike’s claim because his medical

bills were paid by the worker’s compensation carrter, but

because Pike failed to assert his claim for UIM benefits in a

timely manner. Consequently, no public policy has been

violated and there is no basis upon which to reverse the district

court’s ruling.

Iii. CONCLUSION

For the forego’ z reasons, we AFFIRM the district

court’s dismissal of t..s case on the ground that it was

commenced after the contractual limitation period expired.

Filed: March 29, 2006