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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2006

## Text

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
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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
ERI EREE SES Sima Ee eke MSR bry ERE SMO CORRE l
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

Vv
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_1125%3A1. Public record. Not legal advice.