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Kentucky makes its first appearance on the Judicial Hellholes® report’s Watch List in 2023 due to a handful of percolating issues. State courts have exposed those who report suspected fraudulent claims to liability, eliminated a critical screening mechanism for medical liability claims, and are experiencing larger verdicts. And to top things off, some lawyers have resorted to unethical measures to obtain wins. If the state continues this path, it may land among the hellhole ranks in coming years.

Employer Liability for Asbestos Take-Home Exposure

In July, the Kentucky Court of Appeals created a new tort duty for employers to prevent take-home asbestos exposure to household members of employees.

Shortly before the plaintiff died from mesothelioma, she sued her father’s prior employer, Square D, and a manufacturer of molding compounds, Union Carbide, for their roles in causing her illness. During the late 1960s to mid-1980s, the plaintiff was allegedly exposed to asbestos-containing dust from contact with her father’s work clothes, as well as during her own 3-month employment at Square D.

The Fayette Circuit Court found that there was no foreseeable risk that would impose a duty on the defendants to protect people beyond their own employees or those who use their products from exposure to asbestos, agreeing with the defendants. The court characterized the employee’s daughter as a “bystander of a bystander,” based on evidence that her father was a white-collar worker who spent more time in Square D’s offices than its molding rooms and her alleged exposure primarily stemmed from contact with his work clothes. “To hold otherwise,” the trial court observed, “would create an unlimited duty for product manufacturers to warn and/ or protect every person in the world from potential risks occurring on the premises of its customers, including those who may encounter employees of others after leaving the workplace.”

The Kentucky Court of Appeals, however, shot this reasoning down. Viewing the evidence in the plaintiff’s favor, the court found that the plaintiff’s father was in fact frequently exposed to asbestos on the job. The crux of the appellate court’s opinion, however, centered on the foreseeability which gives rise to a duty under Kentucky law. The court relied on the vague premise that “the danger [of take-home asbestos] was well known and generally accepted by the late 1960s,” to find that the harm to household members of employees was “reasonably foreseeable” to employers like Square D. As for Union Carbide, the court held the manufacturer strictly liable under state products liability law as a matter of public policy.

Additionally, Square D had argued that the Kentucky Workers’ Compensation Act provided the exclusive means of recovery for the plaintiff’s injuries, since the plaintiff had been a Square D employee herself. But according to the appellate court, her time at the company was not a significant source of exposure to asbestos, so it rejected this argument on “fundamental fairness” grounds.

Kentucky employers must now be wary of a new tort duty relating to second-hand exposure to asbestos or other potentially hazardous substances. This ruling could lead to an influx of companies being compelled to defend against asbestos-related claims dating back several decades.

Ability To Report Suspected Fraudulent Claims at Risk

A Kentucky trial court has punished a business for its conscientious investigation and reporting of a suspicious surge of disability claims asserted by its employees by stretching the torts of defamation and tortious interference.

A railroad, CSX Transportation, Inc. (“CSXT”), had a policy of providing furloughed employees up to four months of benefits, but allowing employees who are out of work due to a medical condition at the time of the furlough to continue to receive benefits for two years. In 2017, a surge of employees attempted to exploit this policy following announcements of expected workforce reductions. CSXT became suspicious when it received an unprecedented number of nearly identical injury claims filed on behalf of employees by two chiropractors who frequently treated CSXT railroad workers. Initiating an internal investigation, CSXT and its medical director, Dr. Heligman, sent a letter to the Railroad Retirement Board, as well as several private insurers and chiropractic boards, alerting them of the potential fraud involving the doctors and the employees. The investigation confirmed CSXT’s concerns, prompting the company to discontinue accepting injury claims submitted by these doctors.

The doctors sued CSXT and Dr. Heligman in 2018, alleging that their letter cautioning other entities of potential fraud was defamatory, and that they tortiously interfered with the doctors’ business relationships with the employees. A Greenup Circuit Court jury delivered a substantial judgment in favor of the plain- tiffs, consisting of $21.4 million in punitive damages and $1.4 million in compensatory damages. The court subsequently denied the defendants’ post-trial motions.

CSXT appealed and ATRA submitted an amicus curiae brief in support, urging the Kentucky Court of Appeals to reverse the judgment. Of particular concern is the trial court’s failure to properly apply the qualified privilege that protects those who report suspected fraud to appropriate authorities and to those who share a common interest in investigating and responding to potential abuse from defamation claims. Failing to apply this privilege to employers with legitimate suspicions of fraudulent claims would deter businesses and insurers from investigating lawsuit abuse. This is particularly relevant in mass tort litigation, where illegitimate claims can easily get mixed in with viable ones, making it susceptible to fraudulent conduct. Fraudulent claim schemes can also arise in a wide range of other contexts, from staged accidents to clinics that, working with attorneys, exaggerate injuries or inflate medical bills.

A business’s legitimate interest in reporting potentially fraudulent claims is a defense to a tortious interference lawsuit, which the trial court omitted in its instructions to the jury. Instead, the trial court told the jury that if they found that Dr. Heligman’s feelings toward the two chiropractors motivated him to report his suspicions, this could suffice to prove malice for tortious interference liability. But the personal feelings of a business’s employees should not be at the forefront. A business should be able to protect itself and others from the exorbitant costs incurred by fraudulent claims.

The case is pending in the Kentucky Court of Appeals.

Medical Malpractice Lawsuits

Medical malpractice lawsuits have increasingly become a thorn in Kentucky’s civil justice system. In 2017, the Kentucky Legislature enacted S.B. 4, which established panels of healthcare providers to review and evaluate medical malpractice claims before they are filed in court. The law was commendably aimed at screening out meritless medical malpractice lawsuits; however, its benefits were short-lived. Only a few months later, Franklin Circuit Judge Phillip Shepherd struck the law down as an unconstitutional barrier to the court system. The following year, the Kentucky Supreme Court affirmed the lower court’s decision in Commonwealth of Kentucky v. Claycomb, and medical review panels were eliminated.

The Kentucky court system has since hosted a plethora of medical malpractice cases, including some that have culminated in nuclear verdicts. In August, a $44.5 million award was delivered in Jefferson Circuit Court against an oncologist in a wrongful death suit. According to the Kentucky Trial Court Review, this is “the largest single plaintiff personal injury compensatory damages verdict in Kentucky history.” One year earlier, in August 2022, a medical malpractice trial in Warren County Circuit Court resulted in a $21.3 million verdict against a clinic that was forced to subsequently file for bankruptcy.

While the verdicts are less egregious than some of the hundred-million-dollar verdicts pumped out of other jurisdictions, it is important to place them within the broader context of Kentucky’s prior lack of nuclear verdicts. A recent report showed that in 2020, Kentucky did not see a single nuclear verdict.

However, this trend took a turn in 2021, when the state’s nuclear verdict sum jumped to $74 million after a wrongful death suit in Boone County. The pattern persisted in each year since then, including judgments of $22.8 million in 2022 and $14 million in March 2023.

The trend of rising damages in medical lawsuits is exacerbated by Kentucky courts allowing plaintiffs to recover phantom damages for billed medical costs that are written off or reduced by insurers or other third parties.

With an effective filter for insignificant medical lawsuits dismantled, a rise in substantial verdicts, and a practice of awarding phantom damages, a troubling litigation climate may be brewing in Kentucky’s medical liability sphere.

Plaintiff’s Lawyer Misled Court to Keep Suit Alive

In a desperate attempt to circumvent Kentucky’s one-year statute of limitations, a plaintiff’s lawyer invented a false narrative in the affidavits submitted to the court.

In March 2020, a former coal miner sued 3M claiming that he developed black lung due to the company’s allegedly defective respirators. 3M swiftly moved for summary judgment, arguing that the action was time-barred because the plaintiff had constructive knowledge of his claims dating back to his 2013 diagnosis. 3M also referenced a January 2019 letter, sent by the plaintiff’s attorney, Glen Hammond, to the plaintiff’s pulmonologist to request medical records for the plaintiff’s injury claim. This clearly demonstrated that the claim had been under investigation for over a year before it was formally filed.

In opposition to summary judgment, Hammond submitted an affidavit with a fabricated explanation of this damaging letter. He contended that the letter referred to an entirely different claim, namely, a denial of workers’ compensation coverage. To substantiate this lie, Hammond presented some handwritten notes that supposedly originated from a May 2018 meeting between himself and the plaintiff, discussing the coverage denial.

Notwithstanding the Pike Circuit Court’s rejection of 3M’s summary judgment motion, Hammond’s lies were unraveled during a deposition. The deposition revealed that the plaintiff’s coverage denial did not occur until 2019, highlighting an obvious inconsistency with the reference to a May 2018 meeting on this topic. Furthermore, the handwritten note actually stemmed from one of the plaintiff’s hospital visits that occurred six months after the May 2018 meeting. 3M immediately moved to strike both Hammond and Wilson’s affidavits.

Although caught red-handed, the plaintiff’s legal team moved for sanctions against 3M, claiming that 3M’s motions to strike the affidavits were in bad faith, and that it deliberately mishandled production of documents from the plaintiff’s former employer. In response, 3M pointed out that “it is not sanctionable to expose a lie.” Moreover, the document controversy was invented by Hammond’s co-counsel to distract the court from the false affidavits it had been fed.

In March, the circuit court dismissed the plaintiff’s case. Following this, Hammond’s co-counsel moved the court to stay the other proceedings in which Hammond was representing plaintiffs against 3M. Their request was prompted by their discovery that Hammond had withheld critical documents that demonstrated the plaintiff had indeed engaged his services back in May 2018 in connection with the respirator claims.

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