Kentucky Supreme Court Rules Against Lexington in Police Lawsuit Reimbursement Fight
The Kentucky Supreme Court has ruled that Lexington-Fayette Urban County Government must arbitrate a dispute with its police union over legal costs stemming from a civil lawsuit against one of its officers. The decision, made on June 20, 2025, highlights the importance of grievance and arbitration procedures in collective bargaining agreements for self-insured public entities.
The case began in 2018 when Sergeant Christopher Morrow, a Lexington police officer, was sued by an acquaintance for alleged sexual assault. The city provided legal defense under its self-insurance plan but with a reservation of rights, indicating it might later seek to withdraw coverage and recover costs. In 2020, the Fraternal Order of Police, Lodge #4, filed a grievance on behalf of Morrow when they learned the city might formalize its withdrawal of coverage.
The dispute centered on two key documents: Article 19 of the collective bargaining agreement (CBA) and the city’s self-insurance policy. Both outlined conditions under which the city must provide legal representation to officers facing civil claims. The CBA stated that the city would defend officers only when the alleged actions occurred “within the scope of employment” and allowed the city to seek reimbursement if it determined otherwise. The self-insurance policy mirrored this language, excluding coverage for acts like assault and battery unless committed during official duties.
Lower courts initially sided with the city, ruling that no actual controversy existed at the time of the grievance since the city hadn’t yet ended Morrow’s defense. They also noted that Morrow was off duty when the alleged assault occurred, supporting the city’s position that the claim wasn’t covered.
However, the Supreme Court took a different view. It found that the city’s decision to file a counterclaim seeking a formal declaration that it had no duty to defend or indemnify Morrow created an actual dispute under the CBA’s arbitration clause. This move triggered the obligation to arbitrate before seeking a judicial resolution. The decision nullifies a lower court ruling that awarded the city over $22,000 in legal fees and sends the matter back for arbitration.
The arbitration will be advisory and not binding, but the court emphasized that the process must be completed before the courts can rule on the city’s attempt to recover costs. This ruling serves as a reminder to public entities, insurers, and municipal risk pools that contract language, particularly around arbitration, can dictate how defense decisions unfold, regardless of the strength of the underlying coverage argument.
The decision reinforces the binding nature of grievance and arbitration procedures negotiated in collective bargaining agreements. It underscores the importance of carefully drafting and adhering to these procedures to avoid potential disputes and legal challenges.
