Kentucky Supreme Court Changes the Law on Emotional Damages
Kentucky lenders are accustomed to facing an array of lender liability claims in actual and threatened litigation. But now our industry may face a new type of damage claim. For decades borrowers could not viably seek to recover emotional damages from lenders, as the key element of “physical impact” was almost always absent. However, Kentucky’s Supreme Court has recently modified this long-established legal requirement, and thus the “Impact Rule” is no longer the rule of law in Kentucky.
The Kentucky Supreme Court’s December 20, 2012 decision in Osborne v. Keeney, 2010-SC-000397-DG, eliminated the physical Impact Rule as a requirement for recovery of emotional damages in personal injury cases. A plaintiff seeking emotional damages in a negligence action now needs to prove a “severe or serious” emotional injury rather than physical impact. The emotional injury suffered must be greater than what a reasonable person is expected to endure in any given circumstance. An injured person must present expert or scientific proof of the emotional injury to recover.
Prior to this recent ruling by the Kentucky Supreme Court, the Commonwealth’s courts had long adhered to the Impact Rule for recovery of emotional damages as a means of preventing fraudulent lawsuits. Under the Impact Rule, a claimant could only recover for emotional distress if the claimant sustained some type of physical contact. “An action will not lie for fright, shock[,] or mental anguish which is unaccompanied by physical contact or injury.” Deutsch v. Shein, 597 S.W.2d 141 (Ky. 1980). Kentucky’s courts had long supported the Impact Rule because allowing claims without evidence of physical contact would “promote fraud and the presentation of claims for injuries beyond the capacity of juries properly to assess.” Louisville & N.R. Co. v. Roberts, 269 S.W. 333 (Ky. 1925). The recent ruling represents a fundamental change in Kentucky law.
The Supreme Court recognized Kentucky courts had “long been wed” to the Impact Rule. The Court noted, however, that legal scholars and jurists in other states have criticized the Impact Rule almost since the rule’s inception in the late 19th century. Kentucky was in a very limited minority of six states that continued to apply the Impact Rule. Although the Supreme Court endorses the rationale for the Rule—to avoid specious claims—it nonetheless retreated from the position it had held for over a century. The Supreme Court stated that the Impact Rule appears to provide a bright-line rule, but in practice “what constitutes a sufficient impact for purposes of liability is not an easy determination for courts.” Id. at *20-21.
The Supreme Court also felt medical science had progressed to the point where medical professionals can now determine if a person has, in fact, sustained severe or serious emotional injury. As a result, the Supreme Court held that the need for a bright-line rule, which the Court does not believe is actually bright, no longer exists. .
The Supreme Court also ruled in Osborne that punitive damages flowing from an underlying tortfeasor’s actions were not recoverable in a subsequent legal malpractice action. The purpose of punitive damages is to punish a wrongdoer and to prevent future similar conduct. But in the context of a subsequent malpractice claim, the Supreme Court held that punishing an attorney for the conduct of an underlying tortfeasor would not advance that policy. .
Additionally, the Supreme Court in Osborne addressed the manner in which parties conduct a legal malpractice trial. A plaintiff in a legal malpractice action has the same burden as the plaintiff in an underlying matter, and the attorney-defendant in a legal malpractice action has the same defenses as the defendant in the underlying matter. The Court held that the proper jury instruction in a suit-within-a-suit malpractice action is to ask if “the client would have been successful in the underlying claim,” and then and only then, whether the attorney-defendant was negligent. Osborne, 2010-SC-000397-DG at *13-15..
The Osborne opinion presents new legal challenges for companies and individuals defending personal injury claims. This new rule of law for emotional injuries applies retroactively, so any defendant in any pending personal injury lawsuit (even those lawsuits currently on appeal) may have additional emotional claims to defend.
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William T. Repasky practices with the Litigation Department at Frost Brown Todd. He focuses on lending and commercial services; banking litigation and financial institutions.