Which state’s laws apply in Uninsured Motorists provisions? Grange vs. Tennessee Farmers Mutual

by Mandy Hicks

2014-10-17 11.08.20

State laws vary when it comes to uninsured motorists coverage. Our personal injury attorneys are licensed to practice in both Kentucky and Tennessee and see these type of cases often.In a case decided by the Kentucky Court of Appeals recently, the issue of which state laws applied in an uninsured motorist case was handled by the court. The case is Grange Property and Casualty Company vs. Tennessee Farmers Mutual Insurance Company. The dispute arose after two motorists were in an accident in Pike County, which is in Eastern Kentucky. Grange Ferlin Pruitt, the operator of one of the vehicles, was driving a vehicle owned by his employer, Drill Steel Services. The other driver,  Allison Comer, had no insurance. Drill Steel Services insured Pruitt’s vehicle with Grange Property and Casualty Company, which had policy limits for Uninsured Motorists of $1 million. Pruitt also had a personal insurance policy from Tennessee Farmers, which provided coverage of up to $100,000 for accidents involving uninsured motorists. Allison Comer died as a result of the accident. Pruitt was injured.

Comer had crossed the center line and struck Pruitt’s vehicle and was responsible for the injuries he suffered, but because Comer was not insured, the only payout he could receive was from his own insurance company’s uninsured or underinsured motorists provisions. He settled with Grange, and Grange sought to recover the $100,000 policy limit from Tennessee Mutual, arguing that the company was responsible for the payment under Kentucky’s pro-rata law. Tennessee Mutual argued that Tennessee law applied, and Pike County Circuit Court agreed with Tennessee Mutual.

Grange appealed the case to the Kentucky Court of Appeals, which affirmed the lower court’s decision. The court agreed that Grange had the greater duty to cover Pruitt, and argued that Grange’s policy should pay out first, and Tennessee Mutual’s policy would only kick in if damages exceeded $1 million. Drill Steel Services is a Kentucky-based corporation.

In making its ruling, the justices for the Kentucky Court of Appeals wrote the Kentucky courts have looked at the issue of which state’s laws apply many times, and in most cases, the state that has the strongest relationship with the party in the dispute is the law that applies. The opinion reads: “Among the factors a court uses to make such a determination are: the place or places of negotiating and contracting; the place of performance; the location of the contract’s subject matter; and the domicile, residence, place of incorporation and place of business of the parties.” In this case, Pruitt lives in Tennessee and his insurance policy is with Tennessee Mutual, which only offers insurance coverage in Tennessee. His employer is also based in Tennessee. Furthermore, his Tennessee Mutual insurance policy even states that in cases in which there is a dispute, Tennessee law applies.

Because Tennessee law applies, the justices next looked at what Tennessee law states about the priority of insurance coverage when there is more than one insurance policy available. Tennessee law clearly states that the policy that covers the vehicle the person is driving has first priority, and only if that policy is exhausted does the other policy kick in.

Also, the court opinion notes that Grange’s own policy language indicates that Grange’s policy is the primary insurer for any business vehicles it insures. As part of its argument, Grange asserted that the company, Drill Steel Services, was insured, not Pruitt, so the coverage was only available for Drill, not for Pruitt. The court did not agree.

The court opinion also indicates that if Kentucky law was considered to be applicable in this case, the question of whether Pruitt was the first-class insured or second-class insured would be significant. But Kentucky law did not apply in this case.

Cases involving insurance are often complicated for those who are insured to handle on their own. We highly recommend asking an attorney to review your policy and any settlement documents provided to you by an insurance company before accepting any settlement offer. If you need the assistance of an attorney, please consider contacting the experienced attorneys of English, Lucas, Priest & Owsley, LLP. You can reach us at (270) 781-6500 or through the contact form on our web site.

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