Justia Contracts Opinion Summaries

Two brothers had a dispute over an alleged oral agreement relating to the care of their mother by which one brother agreed to give up part of his inheritance if the other brother would care for their mother. The trial court found that a valid agreement between the brothers had been reached. The court of appeals reversed on an issue that had not been raised at the trial court but which the court reached as part of its overall examination of the validity of the agreement. The Supreme Court affirmed, holding (1) the court of appeals cannot reverse the judgment of the trial court on an issue that was not specifically raised at the trial court, but (2) the court of appeals nevertheless reached the correct result because the parties' agreement was unenforceable under the statute of frauds, and thus, no action on it could be maintained.

Five years after Homeowners contracted for the construction of their home, Homeonwers sued Elite Homes, the construction company that built their home, and Motorists Mutual Insurance, the insurance company that provided commercial general liability (CGL) insurance to the construction company while the home was under construction, claiming the house was so poorly built it was beyond repair. Motorists settled Homeonwers' claims against itself and Elite. Under the terms of the settlement, Homeowners and Elite assigned to Motorists all claims they may have had against Cincinnati Insurance, which was a successor to Motorists as Elite's CGL insurer. Motorists then filed a third-party complaint against Cincinnati. The trial court granted summary judgment to Cincinnati, holding that Homeowners' claims of intangible economic loss did not qualify as an "occurrence" causing property damage under Cincinnati's CGL policy. The court of appeals vacated the grant of summary judgment. At issue on appeal was whether faulty construction-related workmanship, standing alone, qualifies as an "occurrence" under a CGL policy. The Supreme Court reversed the court of appeals and reinstated the judgment of the trial court, holding that the trial court's conclusion that the claims were not an "occurrence" was correct.

Claimant Anthony Traugott, a Kentucky resident, filed an application for benefits alleging that he injured his left arm in Missouri while working for defendant-employer under a contract of hire. The employer was headquartered in Rhode Island and had no office in Kentucky. The employer denied the claim on the grounds that Kentucky lacked extraterritorial jurisdiction over the matter under Ky. Rev. Stat. 342.670. The ALJ dismissed the claim based on findings that the claimant's employment was not principally localized in Kentucky and that the contract for hire was not made in Kentucky. The claimant appealed, and the Workers' Compensation Board affirmed, noting that the claimant failed to petition for reconsideration and that the record contained substantial evidence to support the ALJ's legal decision. The Court of Appeals affirmed. On appeal, the claimant maintained that the court erred by failing to find that contract for hire was made in Kentucky. The Supreme Court affirmed, finding the record contained no evidence to support claimant's argument.

In this case the Kentucky Supreme Court considered whether to adopt the "economic loss rule," which prevents the commercial purchaser of a product from suing in tort to recover for the economic losses arising from the malfunction of the product itself. The case involved a claim to insurers for a damaged piece of machinery. The insurers sued the manufacturers to recover the amount paid, claiming several causes of action including negligence, strict liability, and negligent misrepresentation. The trial court held the economic loss rule barred the tort claims. The court of appeals affirmed the trial court's adoption and application of the rule. The Supreme Court affirmed the judgment of the trial court, holding (1) the economic loss rule applies to claims arising from a defective product sold in a commercial transaction, and that the relevant product is the entire item bargained for by the parties and placed in the stream of commerce by the manufacturer; and (2) the economic loss rule applies regardless of whether the product fails over a period of time or destroys itself in a calamitous event, and the rule's application is not limited to negligence and strict liability claims but also encompasses negligent misrepresentation claims.