Coleman v. Bee Line Courier Service, Inc.

284 S.W.3d 123

Myanh COLEMAN, Appellant, v. BEE LINE COURIER SERVICE, INC., Appellee.

No. 2007-SC-000628-DG.

Supreme Court of Kentucky.

May 21, 2009.

Kevin Crosby Burke, Louisville, KY, Grover Simpson Cox, Mussler & Associates, Louisville, KY, Counsel for Appellant.

Jeremiah A. Byrne, Frost Brown & Todd, LLC, Louisville, KY, Counsel for Appellee.

MEMORANDUM OPINION OF THE COURT

Myanh Coleman appeals from a Court of Appeals opinion affirming a summary judgment in favor of Appellee, Bee Line Courier Service, Inc., for indemnity of $4,737.00 in basic reparation benefits (BRB)¹ awarded after an automobile accident in which Coleman was the victim. Because the release Coleman signed to settle her personal injury claim with Bee Line was a release for settlement of her injury claim only and because she did not specifically agree to indemnify Bee Line for BRB recoupment, summary judgment against Coleman was improper. On discretionary review, we reverse the holding of the Court of Appeals on the indemnity issue and remand the case to the trial court with directions to enter summary judgment in favor of Coleman on the indemnity claim. The portion of the Court of Appeals decision affirming the dismissal of Coleman's counterclaims against Bee Line stands as the law of the case because of Coleman's failure to challenge that ruling in her motion for discretionary review.

I. BACKGROUND.

Coleman was injured in an automobile accident by a vehicle owned by Bee Line and operated by its employee. Coleman settled her property damage claim without the aid of counsel. She hired an attorney to represent her in her personal injury claim.

Under the Motor Vehicle Reparations Act, Coleman's insurance carrier, Nationwide Insurance Company, paid $5,737.00 of her medical expenses in the form of BRB. As for the remaining medical bills, Coleman made a settlement demand of $21,000.00 to the claims adjuster for Bee Line's third-party claims administrator. Coleman received a counteroffer of $6,500.00 via fax. She accepted the counteroffer via fax. Bee Line's claims adjuster then faxed Coleman a "Release of All Claims" (Bee Line Release), which she signed and returned. The release said that Coleman agreed "to hold the released parties harmless and indemnify them from any claims asserted by third parties ... including ... all medical providers and any other insurance carriers against the proceeds of this settlement."

Nationwide ultimately sought statutory reimbursement from Zurich American Insurance, Bee Line's insurance carrier. Citing the indemnity provision of the Bee Line Release, Bee Line demanded that Coleman defend it in the arbitration proceeding with Nationwide and make payment; but Coleman refused. Through arbitration, Bee Line settled and paid Nationwide $4,737.00. Bee Line then sought indemnity from Coleman. She refused to pay, and Bee Line filed this lawsuit.

The trial court ruled that although Coleman had no statutory obligation to reimburse Nationwide for the BRB payments it made to Bee Line under the Bee Line Release, Coleman had become contractually obligated. The court granted summary judgment for Bee Line on this issue. Based primarily on its finding that the Bee Line Release made Coleman liable for payment of her own BRB, the trial court further ruled that Coleman's counterclaims were without merit. It then granted Bee Line's motion to dismiss and denied Coleman's motion to reconsider.

The Court of Appeals reviewed the release de novo, found it to be clear and unambiguous, and affirmed the trial court's grant of summary judgment in favor of Bee Line. It also affirmed the dismissal of Coleman's counterclaims.

II. ANALYSIS.

"As a general rule, the construction and legal effect of an insurance contract is a matter of law for the court." Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 638 (Ky. 2007). Because "`the interpretation of a contract ... is a question of law for the courts [it] ... is subject to de novo review.'" Abney v. Nationwide Mut. Ins. Co., 215 S.W.3d 699, 703 (Ky.2006) (quoting Cantrell Supply, Inc. v. Liberty Mut. Ins. Co. 94 S.W.3d 381, 385 (Ky.App. 2002)). So we review the effect of the Bee Line Release de novo under applicable law.

A. Existence of a Contract.

Coleman argues that the release she signed did not include BRB as part of the contract. The claims adjuster for Bee Line faxed a settlement offer for $6,500.00. Coleman accepted, and the claims adjuster for Bee Line said he would send the check after Coleman signed a release. Coleman signed the release and returned it.

Here, the offer and acceptance were but one part of the contract; the release was the second part (full and complete terms), and the payment was the third part (consideration). See Cantrell Supply, 94 S.W.3d at 384. ("An agreement to settle claims is essentially a contract subject to the rules of contract interpretation. It is valid if it satisfies the requirements associated with contracts generally, i.e., offer and acceptance, full and complete terms, and consideration."). The issue is not whether there was a contract, but whether the release that is part of the contract requires Coleman to indemnify Bee Line for her carrier's BRB recoupment claims.

B. Right of Indemnity for Basic Reparation Benefits.

Bee Line has no right of indemnity for BRB from Coleman. Nationwide's claim is not against the "proceeds of the settlement"; it is instead for BRB recoupment, an independent and distinct method of recovery with additional requirements set out in the statute.

To settle her personal injury claim against Bee Line, Coleman signed a "Release of All Claims." This release provided:

This Indenture Witnesseth that I, Myanh Coleman, in consideration of the sum of $6,500.00, do hereby for my heirs, personal representatives and assigns, release and forever discharge Frank Huff, Bee Line Courier Service, Gallagher Bassett Services, Inc., Zurich Insurance and any other person, firm or corporation charged or chargeable with responsibility or liability, their heirs, representatives or assigns, from any and all claims, demands, damages, costs, expenses, loss of services, actions and causes of action arising from any act or occurrence up to the present time, and particularly on account of all personal injury, disability, property damages, loss or damages of any kind sustained or that I may hereafter sustain in consequence of an accident that occurred on or about the 11th day of December, 2003, at or near Louisville, KY.

... The undersigned agrees to hold the released parties harmless and indemnify them from any claims asserted by any third parties or lien holders, including but not limited to, all medical providers and any other insurance carriers against the proceeds of this settlement.

The Undersigned Agree(s), as a further consideration and inducement for this compromise settlement, that it shall apply to all unknown and unanticipated injuries and damages resulting from said accident, casualty or event, as well as to those now disclosed.

(Emphasis added.)

1. Effect of General Tort Settlement and Release on Contractual BRB.

Generally, a tort settlement and release does not affect the payment of BRB. A tort settlement and release and contractual BRB are distinct methods of recovery. See Ammons v. Winklepleck, 570 S.W.2d 287, 289 (Ky.App.1978) ("[Bodily injury] liability coverage and the BRB coverage do not overlap and do not provide duplicate benefits for the same elements of loss.") (internal quotation marks omitted). Dealing with the two methods of recovery is like "dealing with apples and oranges." Holzhauser v. West American Ins. Co., 772 S.W.2d 650, 651 (Ky.App.1989).

When the insured files suit against the tortfeasor, the "trial court is required by law" to permit the no-fault insurer to "piggyback" its claim against the tortfeasor's insurer, and, as the real party in interest, it is "the only party who could give the tortfeasor and his insurer a release for elements of damages covered by basic reparation benefits."

State Farm Mut. Auto. Ins. Co. v. Allstate Ins. Co., 684 S.W.2d 283, 285 (Ky.App. 1985) (quoting Grange Mut. Cas. Co. v. McDavid, 664 S.W.2d 931 (Ky.1984)). Therefore, "[a] release as to the tort-feasor has no effect on the contractual [BRB] claim." Holzhauser, 772 S.W.2d at 651.

Here, the claims adjuster for Bee Line described the settlement offer as an offer to resolve Coleman's "injury claim." Because the Bee Line Release only provides for indemnification "from any claims ... against the proceeds of this settlement[,]" which was a personal injury tort settlement, it was merely a general tort release.

2. The Rule in Ruschell.

Coleman also argues that she cannot be required to indemnify Bee Line under Ohio Casualty Ins. Co. v. Ruschell, 834 S.W.2d 166 (Ky.1992). In Ruschell, the Plaintiff, Ruschell, had settled with the tortfeasor and had given a general release and indemnification/hold harmless agreement. She then attempted to collect BRB from her no-fault carrier, Ohio Casualty. The carrier denied her claim, arguing that since Ruschell had released the tortfeasor under a general release, it had no further liability for BRB. The trial court agreed, but the Court of Appeals reversed.

This Court took review and affirmed the Court of Appeals. Pointing to the difference between contractual and tort claims, Justice Leibson wrote for the Court, "the reparations obligor is the only party who could give the tortfeasor and his insurer a release for elements of damages covered by basic reparations benefits.'" Id. at 168 (quoting Stovall v. Ford, 661 S.W.2d 467, 470 (Ky.1983)). So the general release to the tortfeasor does not address "those former elements of a tort claim now abolished by the no-fault act." Id. Therefore, in Ruschell, the plaintiff could pursue BRB from her own carrier despite her complete release of the tortfeasor.

It is important to note that in the case at hand, the parties align...