Kentucky has a strong public policy preference for automobile insurance. Automobile insurance in Kentucky has been placed at a higher priority than in many of the neighboring states. In many states, insurers are allowed to place exclusions in policies which void insurance coverage. An exclusion is a clause in an insurance contract, which delineates situations in which insurance coverage will not apply. Such exclusions could be unlicensed drivers, intentional acts, automobile guest/family member, etc. And in each of those situations some insurance companies modify or deny coverage based on those exclusions. However, in Kentucky, the preference in favor of compulsory insurance coverage trumps those exclusions in favor of finding coverage – at least state minimum required coverage.
Kentucky’s core automobile insurance statute is referred to as the Motor Vehicle Reparations Act (“MVRA”) or as some call it, the Kentucky Motor Vehicle Reparations Act (“KMVRA”). This statue can be found at KRS 304.39. In KRS 304.39-010 the Policy and Purpose section spells out the public policy guidelines and underlying reasons for the KMVRA. The first enumerated purpose of the KMVRA is: 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 and use of such motor vehicles.
In a landmark decision, The Court of Appeals of Kentucky stated that minimum tort liability cannot be “diluted or eliminated by exclusions. An exclusionary clause in an insurance contract which reduces below minimum or eliminates either of these coverages effectively renders a driver uninsured to the extent of the reduction or elimination.” Mosley v. West American Ins. Co. 743 S.W.2d 854, (Ky. App. 1987).
This is not to say that there are never times when insurance coverage is voided, however, this happens less in Kentucky. When insurance policies from other states, or overlapping insurance policies in a Kentucky case (often in ridesharing or on-the-job auto collision scenarios) lead to a denial of coverage, in many cases, Mosley operates as a backstop to give driers at least minimum coverage. In Mosley an insurance claim was denied because the insurance company had an exclusion in its policy which stated it would not insure a vehicle if it was in an intentionally caused collision. The court however, held that there are no exceptions from minimum coverage required under the KMVRA. Therefore an insurer could possibly reduce the amount of coverage it offered. The court does not specifically address a reduction in coverage but the repeated defense of minimum coverage seems to leave that possibility open.
Looking to Bishop v. Allstate Insurance Co. 623 S.W.2d 865 (Ky. 1981), the court held that since the adoption of the KMVRA minimum coverage was mandatory. The Court in Bishop held, “When the legislature stated the policy behind the MVRA and set forth its requirements it specified no exclusions from minimum coverage.” Bishop at 866.
In an insurance denial situation where you feel that the insurance denial or the exceptions cited violate the rule in Mosley, an action for declaratory judgement is often the way to remedy the insurance company’s failure to extend coverage.
