"The second law of thermodynamics states that heat, on its own accord, flows from regions of high temperatures to regions of low temperatures". This basic law of physics is the key to the paradigm shift now taking place in personal injury law in the Commonwealth's courts following Earle v. Cobb, 2000-SC-000818-DG.pdf.
The KLB previously addressed this decision in a posting styled, Earle v. Cobb and the UIM Conundrum. However, this posting goes one step further and addresses the new dynamic from this decision. Many insurance lawyers have already told me that verdicts will go up because of the mention of insurance, but I submit that if verdicts go up it will be because of the way the insurance company treats its insured rather than its mere identification as a party to the lawsuit.
In Earle v. Cobb, the Kentucky Supreme Court acting like Toto in the Wizard of Oz brushed back the curtain of lies and identified for the jury and the world the insurance company's real participation in underinsured motorist cases. Following Coots v. Allstate Insurance Company (and KRS 304.39-320), the underinsured motorist carrier (UIM) must be notified and given the opportunity to advance the liability limits of the tortfeasor and preserve its subrogation rights against that tortfeasor whenever the tortfeasor's liability insurer offered the injured party their liability limits. If the UIM company did not advance those limits, then the claimant could accept the settlement, release the tortfeasor, and proceed directly on the contractual claim against the UIM carrier as a named party. [Now with the Supreme Court's decision in KFBM v. Ryan, it is now undisputed that this is obviously a contractual claim.]
Although the Coots notice was a rule of subrogation, it was often applied by the UIM carrier as a rule of stealth. By preserving its subrogation rights, the UIM advanced the liability insurer's offer to the claimaint and thus kept the tortfeasor in the lawsuit and fully exposed to the verdict. This was bad for the tortfeasor who would still be exposed at trial for a personal judgment for any verdict in excess of the limits (eg., liable to either the claimaint or the advancing UIM carrier) but good for the UIM carrier who thus had forced not only the continued exposure of the tortfeasor but the continued duties of the liability carrier to defend and indemnify its own insured for the claim. More importantly, the UIM carrier would not participate or be identified at trial, and thus hid under the defendant's skirts. 'Participation' was not always clear in some courts, eg. did participation include discovery (interrogatories, requests for documents, etc.), depositions of parties versus depositions for trial (and did it really make a difference since both can be used at trial anyway), motion practice....).
Earle v. Cobb changed all this. If the UIM carrier advances the liability limits offered, then the UIM carrier is the real party in interest for its claim and will be identified at trial. Thus the 'tipping pont' precipitating the paradigm shift.
In 1962, Thomas Kuhn wrote The Structure of Scientific Revolution, and fathered, defined and popularized the concept of "paradigm shift". Kuhn argued that scientific advancement was a "series of peaceful interludes punctuated by intellectually violent revolutions", and in those revolutions "one conceptual world view is replaced by another". To put it another way, think of a Pardigm Shift as a change from one way of thinking to another. The process may be evolutionary, but the individual shift or tipping point will be a revolution, a transformation, a sort of metamorphosis. It just does not happen, but rather it is driven by agents of change.
Earle v. Cobb was such a moment of change in our system. The simple outing of the underinsured motorist carrier is not a revelation of fact to the parties, the jurors, the courts, or our system of justice. But the rules did change on how the story unfolded in the judicial courtroom arena.
Every driver in the Commonwealth who passes his or her driving test knows that liability insurance is mandatory or they do not get an operator's license.
Every driver knows that insurance requires a premium be paid for that service.
Every driver knows that the cost of their premiums can increase as result of accidents, driving record, and claims made against them.
And effective January 1, 2006, every uninsured driver will be reported to the Department of Insurance. However, reporting requirements for insurance purposes is not the same as reporting the truth to the jury.
These basic premises existed before Earle v. Cobb and still exist today. So where is this paradigm shift? The shift is not in the existence or availability of insurance, but rather the actions or inactions of a party to a lawsuit. The plaintiff is always judged by his actions - the accident, the medical records and treatment, and finally the trial. I once heard the remark that no matter where you go, there you are. The plaintiff is on trial for his claim. So is the defendant tort feasor, and so is the defendant insurance company.
The insurance industry has advertised trust and responsibility that some have likened to a fiduciary relationship with their insured. The insured pays a premium, and the insurer will protect them and do them right. Phrases like - "You're in good hands" and "Like a good neighbor" transcend the marketing campaigns of the individual companies involved but earmark the trust of an industry who will bear your burden and not be the source of your pain.
With the curtain pulled back, then the insurer's actions in dealing with their insured are now exposed to the jury's prying eyes. Now the jurors realize that those good hands of that good neighbor are busily working in a business with obligations to make a profit for their shareholders and which may also be at odds with the insured who has paid a premium for a benefit that he is seeking to collect. The insured wants and is entitled to fair and reasonable compensation in any personal injury claim - to be made whole as well as a dollar can since that is the only medium of exchange permitteded in our tort system.
Now, the insurer understands that obligation but now will be judged on how they approach and deal with a vulnerable, injured and exposed insured who has paid a premium to be protected. You may want your insurance company to be a tiger when fighting for you, but when those claws are bared back at your when your hand is out for a payment that you believe you deserve. . . . . Now that is another story. What may appear acceptable in protecting the insured from the world is not acceptable when dealing with the insured. This has been the keystone to developing bad faith law in Kentucky and elsewhere. But normal business behavior and practices falling short of punitive bad faith may not be acceptable in dealing with their own insured in a claims process.
For years, the defense bar has put the plaintiff on trial by using his own words and complaints as contained in reams and reams of medical records. statements to police and others. A medical record in the harsh light of the courtroom under the glaring eyes of the jury now looks a little different. Most know that not all that is said or done in the doctor's office makes it into the written office note, but when addressed in the courtroom, the patient is made to appear untrustworthy.
But in this new day, the letters, pleadings, and dealings of the insurance company in doing its business may look differently in that same courtroom as "That's no way to treat your insured!"
That is the paradigm shift. The revelation of the existence of insurance in the form of the identification of the insurer at trial is now the tipping point for juries and increases in verdicts. These facts have been imbued on the collective conscience of jurors since the advent of compulsory insurance laws - knowledgeable jurors know that drivers are supposed to purchase liability insurance. Until now, the stealth rule of UIM insurance cases engendered a different conclusion as the jurors wondered about insurance and since there was no mention of insurance at trial, then there must not be any insurance.
By advancing the liability insurance limits, the UIM carrier had not only been able to hide its status as an insurer (irrelevant in the eyes of the jury) but also possibly benefit from an unintended favorable inference that the tortfeasor was not insured and personally liable for every penny of the verdit. Until Earle v. Cobb, insurance companies were able to shield their business practices and dealings with its own insured on a contractual claim for benefits from the eyes of the jury. Not any more. These dealings may fall short of bad faith law but not the bad smell test.
When you are listed as a party, welcome to the party. Any changes in verdicts will be affected not so much by the identity of the insurance company but rather the behavior of the insurance company in how they treat a paying customer.
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