Scottie Scheffler Gives Kentucky High Court Something to Ponder

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at an insurance dispute impacting how Kentucky municipalities pay for wrongful conviction claims. Sign up to receive this column in your Inbox on Thursday mornings.

Scottie Scheffler, the world’s highest ranked pro golfer, chose not to pursue a civil lawsuit against Louisville police after they dropped felony charges against him.

The golfer was arrested and handcuffed May 17 after a misunderstanding with a police officer directing traffic outside the PGA Championship at Louisville’s Valhalla Golf Club.

A lawsuit, presumably for false arrest, would be an unfair burden to taxpayers, Scheffler said.

“I did not want to have to pursue legal action against Louisville because at the end of the day the people of Louisville are then going to have to pay for the mistakes of their police department,” Scheffler said. “And that just doesn’t seem right.”

The Louisville government is making a similar argument to Kentucky’s Supreme Court.

It just doesn’t seem right, the city argues, that taxpayers are left holding the bag for the mistakes of Kentucky’s justice system because insurers elude paying the fair amount to compensate victims.

The city is backing an appeal of a 2022 court ruling that limits how much insurance companies must pay to those victims.

“Simply put, with the loss of insurance assets available to resolve them, more civil rights cases will necessarily need to be tried to verdict, leaving the public to be taxed with the entire bill and judgment,” lawyers for the Louisville and Jefferson County governments wrote in an April filing before the state Supreme Court.

Ponying Up

Municipalities often purchase insurance policies that cover wrongful conviction claims. They then sometimes fight with insurers over when the policies are triggered—and how big the payout should be.

I wrote two years ago about a group of lawyers at Lathrop GPM who specialize in these disputes with insurers.

Kansas City, Missouri-based Lathrop GPM has helped plaintiffs recover more than $250 million over the past 20 years in civil rights lawsuits. It’s on the Kentucky case, alongside Chicago civil rights firm Loevy & Loevy.

Scottie Scheffler

Photo: Ross Kinnaird/Getty Images

The argument playing out in Kentucky involves the estate of William Virgil, who was released in 2015 after spending 28 years in prison for a murder charge that was later dismissed. Virgil died in 2022 at age 69, and his family last year settled a civil rights claim for $28 million against the city of Newport, Kentucky and several police officers.

While his federal civil rights claim was pending, an insurer that sold a policy to Newport filed suit. The insurer asked a judge to declare that the company had no obligation to defend the claim or cover the costs of settling it.

The judge agreed. An appeals court last year upheld the ruling, which stated there was only one policy “triggered” by Virgil’s case: The one purchased in 1987, the year he was charged with the crime that led to his imprisonment.

“For Virgil, his injury, whatever name might be given to it, occurred when he was wrongfully charged and incarcerated in 1987,” the appeals court wrote. “The fact he continued to suffer damages every day does not alter this.”

Plain Terms

Lathrop GPM lawyers say the decision misreads the plain terms of the insurance policy. The policy covered the type of “bodily injury” or “personal injury” Virgil sustained during his wrongful imprisonment, they argue.

More broadly, they say the bright-line rule that only one policy can be implicated is bad public policy.

“The effect of the rule is to reduce the value of all such coverage that Kentucky municipalities and counties purchased with taxpayer funds,” the lawyers wrote.

The case is likely to be argued before the Kentucky Supreme Court this fall.

Alexander Brown, a partner at Lathrop GPM who is working on similar disputes in roughly a dozen jurisdictions, said taxpayers suffer when insurers aren’t held to the language of the policies. Wrongful conviction suits often end up costing governments between $1 million and $2 million for every year of imprisonment.

“It’s a huge problem for municipalities and public entities when courts are, for whatever reason, unwilling to hold insurers to the actual language of their policies,” Brown said. “It’s ridiculous from my perspective.”

Scheffler, had he filed a successful lawsuit, wouldn’t have cost Louisville as much as someone who was wrongly imprisoned for decades. Yet the golfer’s worry about burdening taxpayers is a concern Lathrop GPM lawyers hope the Supreme Court will share.

Worth Your Time

On Akin Gump: Kim Koopersmith is stepping down from the top role at Akin Gump Strauss Hauer & Feld after more than a decade leading the firm, Meghan Tribe reports.

On Munger Tolles: Munger Tolles & Olson is seeking to protect communications with an exclusive boarding school it investigated for sexual abuse, saying disclosure would discourage such organizations from seeking probes, Justin Wise reports.

On King & Spalding: Two lender-side structured finance partners returned to King & Spalding after roughly a year at Milbank. The move was partly due to Kirkland & Ellis’ decision to build up a borrower-side practice in the niche market.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.