RENDERED: AUGUST 24, 2017
TO BE PUBLISHED

Supreme Court of B{§H:N AL

2015-sc-000366-DG ©ATE . ” DC
wl&m.wo l

STATE FARM MUTUAL AUTOMOBILE APPELLANT
INSURANCE COMPANY

ON APPEAL FROM COURT OF APPEALS
CASE NO. 2013-CA-002152-MR
V. JEFFERSON CIRCUIT COURT NO. 12-CI-006500

RONIESHA ADAMS F/ K/A APPELLEES
RONIESHA SANDERS; AND

RONIESHA ADAMS, AS MOTHER AND

GUARDIAN OF B.A., A MINOR CHILD

OPINION OF THE COURT BY JUSTICE KELLER
REVERSING
State Farrn Mutual Automobile Insurance Company appeals from the
opinion of the Court of Appeals, Which reversed the circuit court’s declaratory
and summary judgment in favor of State Farm. The only issue before us is
whether State Farm is permitted unilaterally to require.that a person seeking
coverage undergo questioning under oath. Having reviewed the record, We

reverse the Court of Appeals and reinstate the circuit court’s judgment

I. BACKGROUND.

The underlying facts are not in dispute. Milton Mitchell owned a late
model KIA, which he insured through State Farm. The State Farm policy
provided basic reparation benefits (BRB) and uninsured motor vehicle
coverage.

On April 3, 2012, Roniesha Adams (Adams), her son, BA, and BAfs
father, Barry Adams, Sr. (Barry) were passengers in Mitchell’s car. While they
were stopped at a red light, another vehicle struck Mitchell’s car from the rear.
That vehicle, which no one in the Mitchell car could identify, fled the scene.
Following the accident, Adams, who Was pregnant, BA, and Barry were
transported to the hospital by ambulance. Mitchell and his three passengers
asserted claims against State Farm, seeking PIP and uninsured motorist
benefits. State Farm made initial payments of PIP benefits but, after an
investigator took recorded statements from Mitchell, Barry, and Adams, State
Farm suspended any additional payments. According to State Farm, Adams,
Barry, and Mitchell gave inconsistent statements about where they were going
that day, where they had been, and what happened When they were hit. State
Farm also perceived inconsistencies between the Statements and the police
report and noted that Adams and Barry had been involved in a number of
motor vehicle accidents in the preceding year. Because of these perceived
inconsistencies, State Farm identified four “substantive issues” that it needed
to clarify before it could continue to extend coverage:

Whether the bodily injury or property damage was caused by the
accident.

Whether the injury was caused by a hit-and-run motor vehicle, so
as to qualify as an uninsured motor vehicle under the Uninsured
Motor Vehicle coverage.

Whether the accident arose out of the ownership, maintenance, or
use of an uninsured motor vehicle as defined in the policy.

If [Mitchell, Adams, or Barry] . . . has made false statements with

the intent to conceal or misrepresent any material fact or

circumstance in connection with any claim under this policy.

In order to resolve these issues, State Farm advised Mitchell, Adams, and
Barry that, pursuant to a provision in the policy, they were required to submit
to questioning under oath.1 Mitchell submitted to questioning under oath and

State Farm extended coverage to him. However, Adams and Barry refused to

submit to questioning under oath and State Farm refused to pay any additional

 

1 The questioning under oath provision of the policy states:

Under:
a. Liability Coverage, each insured;
b. No-fault Coverage, Medical Payments Coverage, Uninsured

Motor Vehicle Coverage, Underinsured Motor Vehicle Coverage, or Death,
Dismemberment and Loss of Sight Coverage, each insured, or any other
person or organization making claim or seeking payment; and

c. Physical Damage Coverages, each insured or owner of a
covered vehicle, or any other person or organization making claim or
seeking payment;

must, at our option, submit to an examination under oath,
provide a statement under oath, or do both as reasonably often as we
require. Such person or organization must answer questions under
oath, asked by anyone we name, and sign copies of the answers, We
may require each person or organization answering questions under
oath to answer the questions with only that person’s or organization’s
legal representative, our representatives, any person or persons
designated by us to record the questions and answers, and no other
person present.

(Emphasis in original).

benefits. Adams and Barry then filed suit against State Farm, and State Farm
filed a counterclaim seeking a declaratory judgment that it did not have to
provide coverage because Barry and Adams failed to cooperate with its
investigation. Following discovery, which included the depositions of Adams
and Barry, each party moved for summary judgment. State Farm also moved
the court for a declaratory judgment that it had no obligation to extend
coverage to Adams or Barry. The circuit court granted State Farm’s motions
finding that “[u]nder the terms of the policy, the plaintiffs failed to cooperate in
the investigation of their claims, thus their claims for BRB and uninsured
motorist benefits are barred.”

Adams, in her individual capacity, and as mother and guardian of BA,
appealed to the Court of Appeals. For reasons that are not clear in the record,
Barry did not appeal. The Court of Appeals reversed, holding that State Farm
had to obtain a court order before it could require Adams to submit to
questioning under oath. State Farm sought discretionary review, which we
granted.

II. STANDARD OF REVIEW.

The issue before us is one of law, which we review de novo. Cumberland

Valley Contractors, Inc. v. Bell Cnty Coal Corp., 238 S.W.3d 644, 647 (Ky. 2007).
III. ANALYSIS.

At the outset, We note that Adams sought coverage under the BRB and

uninsured motor vehicle provisions of State Farm’s policy. Those types of

coverage are governed by separate statutory provisions; however, KRS 304.20-

4

020, the uninsured motor vehicle coverage statute, “must be construed in light
of and in accord with” KRS 304.39-010, et seq., the Motor Vehicle Reparations
Act (the MVRA). Countryway Ins. Co. v. United Fin. Cas. Ins. Co., 496 S.W.3d
424, 434 (Ky. 2016). Therefore, although governed separately, we believe that
the same analysis applies equally to each provision.

We begin by briefly reviewing KRS 304.20-020 and pertinent sections of
the MVRA. KRS 304.20-020(1), which is not part of the MVRA, provides that
motor vehicle insurers must offer uninsured vehicle coverage, “provided the
named insured shall have the right to reject in writing such coverage.” The
MVRA is more comprehensive and is intended:

1) To require owners, registrants and operators of motor vehicles in
the Commonwealth to procure insurance covering basic reparation
benefits and legal liability arising out of ownership, operation or
use of such motor vehicles;

(2) 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;

(3) To encourage prompt medical treatment and rehabilitation of
the motor vehicle accident victim by providing for prompt payment
of needed medical care and rehabilitation;

(4) To permit more liberal wage loss and medical benefits by
allowing claims for intangible loss only when their determination is
reasonable and appropriate;

(5) To reduce the need to resort to bargaining and litigation
through a system which can pay victims of motor vehicle accidents
without the delay, expense, aggravation, inconvenience, inequities
and uncertainties of the liability system;

(6) To help guarantee the continued availability of motor vehicle
insurance at reasonable prices by a more efficient, economical and
equitable system of motor vehicle accident reparations;

5

(7) To create an insurance system which can more adequately be
regulated; and

(8) To correct the inadequacies of the present reparation system,

recognizing that it Was devised and our present Constitution

adopted prior to the development of the internal combustion motor

vehicle.
KRS 304.39-010.

To accomplish those goals, the MVRA provides that “every person
suffering loss from injury arising out of maintenance or use of a motor vehicle
has a right to” BRB. KRS 304.39-030(1). BRB provide “reimbursement for net
loss suffered through injury arising out of the operation, maintenance, or use
of a motor vehicle . . . .” KRS 304.39-020(2). “Basic reparation obligors . . .
shall pay [BRB], under the terms and conditions stated in this subtitle, for loss
from injury arising out of maintenance or use of a motor vehicle.” KRS 304.39-
040(2). Subject to certain exceptions, BRB are payable monthly unless a
reparation obligor rejects the claim and gives written notice with an
explanation for rejection. KRS 304.39-210(1) and (5). Thus, the MVRA is
designed to ensure that victims of motor vehicle accidents promptly receive
BRB for losses arising from those accidents without unnecessarily involving the
courts. Because a claimant is only entitled to receive BRB for motor vehicle
accident-related losses, reparation obligors are entitled to conduct a reasonable
investigation to determine if such a relationship exists.

In order to expedite that investigation, the MVRA provides for the

disclosure of certain information by BRB claimants Upon request,

[t]he claimant shall deliver to the reparation obligor a copy of every

written report . . . relevant to the claim, and available to him,

concerning any medical treatment or examination of a person upon

whose injury the claim is based and the names and addresses of

physicians and medical care facilities rendering diagnoses or

treatment in regard to the injury or to a relevant past injury, and

the claimant shall authorize the reparation obligor to inspect and

copy relevant records of physicians and of hospitals, clinics, and

other medical facilities.
KRS 304.39-280(1)(b).2 If a dispute arises between the claimant and the
reparation obligor regarding “information required to be disclosed, the claimant
or reparation obligor may petition the Circuit Court . . . for an order for
discovery including the right to take written or oral depositions.” KRS 304.39-
280(3). Furthermore, “[i]f the mental or physical condition of a [claimant] is
material to a claim for past or future basic or added reparation benefits, the
reparation obligor may petition the circuit court for an order directing the
person to submit to . . . examination by a physician.” KRS 304.39-270(1).
Thus, the MVRA provides for the disclosure of medical information, and it
v provides a method to obtain that information if it is not forthcoming and a
method to resolve disputes regarding a claimant’s physical and mental
condition. However, the MVRA does not specifically provide for the disclosure
of information regarding the underlying motor vehicle accident, With this

background in mind, we look to the specific claims asserted by Adams and

State Farm.

 

2 KRS 304.39-280 provides for the mandatory disclosure of other information;
however, that information is not at issue herein.

7

As noted above, Adams sought coverage for both BRB and uninsured
motor vehicle benefits. As to uninsured motor vehicle benefits, this Court, in
1977, held that a policy provision requiring insureds to submit a sworn
statement was an enforceable condition precedent to coverage. Temple v. State
Farm Mut. Ins. Co., 548 S.W.2d 838 (Ky. 1977). In Temple, the insureds were
involved in a motor vehicle accident with an uninsured motor vehicle and
sought coverage for their injuries. Id. at 839. When State Farm asked the
insureds to provide “sworn statements,” on advice of counsel, they refused to
comply. Id. In the lawsuit that followed, State Farm argued that it was not
obligated to provide coverage because the insureds had violated a term of the
policy. Id. T his Court held that:

The basis of the Temples' rights against State Farm is contractual.
The terms and provisions of the policy require, as a condition
precedent to any action or right of recovery against State Farm,
that the Temples provide sworn statements to State Farm as often
as may be reasonably required. Although the Temples notified
State Farm of the accident and provided an accident report to State
Farm’s agent, such information was insufficient for State Farm to
evaluate the claim for settlement purposes. State Farm was
entitled not only to an explanation of the circumstances of the
accident contained in a police report, but was entitled also to the
sworn statements of its insureds as to the details of its occurrence
and, further, the “nature and extent of injuries, treatment, and
other'details entering the determination of the amounts payable.”
Such information, exclusively within the control of the Temples,
was essential for State Farm to fulfill its responsibilities under the
terms of the policy; and, provisions of the policy reasonably
designed to secure a truthful disclosure of such information are
valid and reasonable conditions precedent to an insuror's liability.

The ill-considered refusal of the Temples' attorney to allow their
statements to be taken, imposed upon State Farm considerable
expense and expenditure of time to obtain the information Which it
had the right to receive without any expense. The information

8

received nearly a year later through depositions did not so remedy

the Temples' breach nor the prejudice to State Farm as to enable

the Temples to avoid State Farm's denial of coverage.

Id. at 840.

The case herein differs from Temple because Adams is not the policy
holder, as the Temples were. Thus, Adams did not agree to the terms of the
State Farm policy under which she seeks coverage. However, that difference
does not negate the policy provision or the purpose for that provision -
permitting State Farm to obtain information regarding the details of the
accident. Furthermore, nothing in the MVRA prevents State Farm from
requiring a person seeking benefits under the policy to submit to a statement
under oath as to the circumstances surrounding the accident

However, the “MVRA is a comprehensive act which not only relates to
certain tort remedies, but also establishes the terms under which insurers pay
no-fault benefits, and provides for the penalties to which insurers are subjected
if they fail to properly pay no-fault benefits.” Foster v. Kentucky Farm Bureau
Mut. Ins. Co., 189 S.W.3d 553, 557 (Ky. 2006). Therefore, because the MVRA
specifically provides for the sharing of documentation regarding a claimant’s
medical condition and methods for resolving disputes regarding failure to
provide that documentation as well as for resolving disputes regarding a
claimant’s mental or physical condition, a reparation obligor must avail itself of
the provisions of the MVRA to resolve such issues. A reparation obligor cannot
attempt to resolve those issues through “questioning under oath” or any other

similar procedure that is outside the boundaries established by the MVRA.

9

As noted above, State Farm listed four issues as being problematic: (l)
whether the bodily injury or property damage was caused by the accident; (2)
whether the injury was caused by a hit-and-run vehicle; (3) whether the
accident arose out of the ownership, maintenance, or use of an uninsured
motor vehicle; and (4) whether Adams had made false statements in connection
with her claim. The first of these issues involves medical information and State
Farm should have pursued resolution of that issue through the provisions of
the MVRA. The second and third issues are related to the accident itself and
are proper subjects for questioning under oath. The fourth issue may involve
both medical and accident-related questions. As with the first issue, State
Farm should have pursued any medical-related questions through the
provisions of the MVRA. Because some of the issues listed by State Farm
involved the acquisition of accident-related information, the circuit court
correctly found that Adams was required to submit to questioning under oath
regarding those issues as a condition precedent to coverage. Therefore, the
Court of Appeals erred in reversing the circuit court’s judgment

Finally, we recognize that the distinction between issues involving
medical-related questions and issues involving accident-related questions may
not always be obvious and that those issues may sometimes be inter-related.
However, we have faith that our trial courts and the parties will be able to
perform the necessary analysis to make those distinctions until such time as

the General Assembly deems it appropriate to address this potential dilemma.

10

IV. CONCLUSION.

For the foregoing reasons, the Court of Appeals is reversed, and the
circuit court’s judgment is reinstated.

All sitting. Minton, C.J.; Cunningham, Hughes, Keller and VanMeter,
JJ., concur. Venters, J., dissents by separate opinion which Wright, J., joins.

VENTERS, J., DISSENTING: The majority opinion unnecessarily permits
motor vehicle reparation obligors (car insurance companies) to withhold
payments of basic reparation benefits (BRB) until passengers injured in
vehicular collisions agree to submit to a formal interrogation under oath. I
believe that is contrary to the letter and purpose of the Kentucky Motor Vehicle
Reparations Act and so I dissent

Of course, no one including myself suggests that State Farm should
accede to dubious claims without question. But the majority seems to have
overlooked the fact that several weeks after the alleged accident, long after
suspicions about the claims arose, and for more than an hour, Roniesha and
Barry Adams freely and comprehensively answered every question posed by
State Farm’s claims investigator; and, they did so knowing they Were being
recorded. The transcripts of those examinations cover twenty-nine pages in a
relatively small font Roniesha and Barry each attested on the recording to the
truthfulness of all their answers, satisfying any good faith need of State Farm’s
for any claims adjustment information possessed by the Adamses which could

not be otherwise obtained from medical records available to State Farm.

11

As passengers in a motor vehicle owned and insured by another person,
Roniesha and Barry Adams had a statutory right to the basic reparation
benefits created by the Kentucky General Assembly. KRS 304.39-030 provides
“every person suffering loss from injury arising out of maintenance or use of a
motor vehicle [who has not expressly rejected the protection of the statute] a
right to basic reparation benefits.” State Farm has no authority to subordinate
those statutory rights to a policy provision to which the Adamses never
assented. To the contrary, State Farm and the other insurance companies that
opt to sell motor vehicle insurance in Kentucky obligate themselves to provide
BRB without unreasonable interference T he Adamses did not Waive or forfeit
their statutory right to BRB by riding in a car insured by State Farm.

State Farm exercised its reasonable opportunity to question the Adamses
about the incident, and the Adamses fully cooperated. If doubts or suspicions
persisted about the validity of their claims, State Farm had every right to seek
the approval of a court to withhold payments or to authorize further
investigation, but it failed to do so. Instead, State Farm shifted the burden to
the injured claimant to sue for benefits or do without, an outcome the Motor
Vehicle Reparations Act was expressly designed to eliminate.

KRS 304.39-010 provides that the Motor Vehicle Reparations Act was

adopted to effect the following purposes:

(2) To provide prompt payment to victims of motor vehicle accidents
without regard to whose negligence caused the accident . . . ;

12

(3) To encourage prompt medical treatment and rehabilitation of the
motor vehicle accident victim by providing for prompt payment of needed
medical care and rehabilitation;

(5) To reduce the need to resort to bargaining and litigation through a
system which can pay victims of motor vehicle accidents Without the
delay, expense, aggravation, inconveniencej inequities and uncertainties
of the liability system,

As for the suspicions raised about their claims, it is worth noting that
after Milton Mitchell, the policyholder and driver of the Vehicle, submitted to
State Farm’s demand for a formal interrogation, as he was contractually bound
to do, State Farm resolved its suspicions in favor of coverage, and it paid
Mitchell’s claims. Since State Farm acknowledged its coverage obligation by
paying Mitchell, the only possible purpose for, and the certain effect of, State
Farm’s demand to further interrogate the Adamses was intimidation.

The majority opinion strays from the policy and purpose of the statutory
rights provided by the Kentucky Motor Vehicle Reparations Act and allows
automobile insurers to impose unauthorized barriers to payment of basic
reparation benefits. I would affirm the decision of the Court of Appeals.
Accordingly, l dissent

Wright, J ., joins.

13

COUNSEL FOR APPELLANT:

Raymond G. Smith

Richard W. Edwards

Jared Lee Downs

John Lott Hardesty

Boehl, Stopher &, Graves, LLP

COUNSEL FOR APPELLEES:

Aaron Michael Murphy
Murphy 85 Associates PLC

COUNSEL FOR AMICUS CURIAE, COALITION AGAINST INSURANCE FRAUD;
AND, NATIONAL INSURANCE CRIME BUREAU:
Matthew Jon Smith

Neil Baine
Smith Rolfes & Skavdahl, Co., LPA

14

