Articles Posted in Bad Faith Insurance

When somebody acquires a home, it is recommended to likewise obtain a comprehensive insurance policy for a myriad of protections. A policy could shield from fires, floods, theft, as well as comparable concerns. Nevertheless, it is critical to know what sorts of security are not provided in these types of coverage too.

If there is a requirement for additional insurance, it should be bought, yet the policy has to be understood, or it is feasible, to get an insurance provider where gaps may exist such as smoke or fire damages or theft of just particular goods. Standard insurance coverage might not be suitable for particular areas around the USA.

The standard policy that a new homeowner purchases usually covers whatever he or she may think about, however, this is not always sufficient based on what may go wrong. The theft policy may only cover small products such as radios, books, as well as digital gizmos, but the larger purchases may be exempt from this policy. Vandalism generally covers any type of damage, however, if theft is not part of the deed, anything stolen may not be compensated. Weather condition may include fire, wind, lightning, and similar problems, yet it may not cover flooded areas with extensive rains. And also, there are times when other issues occur that the homeowners may not have thought can happen in his or her place.

An insurance policy is a contract between the policyholder and the insurance company. Every insurance policy includes an “implied covenant of good faith and fair dealing,” which requires that the insurance company act in good faith toward the policyholder. When an insurance company violates this covenant by acting in bad faith toward a policyholder, the policyholder may have the right to file a lawsuit against the insurance company that includes both tort (personal injury) and contract claims due to Insurance Bad Faith.

Bad faith is broadly defined as dishonest dealing. Examples of bad faith practices by insurance companies include:

• Denying payments without a reasonable basis
• Discounting payments without a reasonable basis
• Delaying payments without a reasonable basis
• Failing to affirm or deny coverage of claims within a reasonable time
• Failing to conduct proper, prompt, and thorough investigations into claims
• Making burdensome requests for documentation
• Misrepresenting the law or policy language

Why is bad faith insurance important?

On March 30, 2017, a case from the Western District of Kentucky concluded Kentucky’s highest court would likely hold agreements that assign settlement proceeds from lawsuits are in violation of “Kentucky public policy and the statute proscribing champerty[.]” Boling v. Prospect Funding Holdings, LLC, 2017 U.S. Dist. LEXIS 48098, at *12 (W.D. Ky. March 30, 2017).

Christopher Boling, the Plaintiff in the case who suffered burn injuries from a gas can, sued a manufacturer. Mr. Boling then entered into various agreements with two companies (Prospect Funding Holdings, LLC (“Prospect”) and Cambridge Management Group, LLC) in which, in exchange for the borrowed money, he promised payment to the companies based on a “prospective recovery” from his lawsuit against the manufacturer. Boling later filed suit against Prospect, asking the Court to declare that he was not required by law to repay the monies he borrowed. As noted above, Judge Stivers held the Agreements were void. Judge Stivers also opined the interest charged by Prospect on the money advanced to Mr. Boling violates KRS 360.010(1), Kentucky’s usury law. Mr. Boling was not required to make payment under the Agreements.

You can read Judge Stivers’ opinion addressing the above information as well as other issues here.

In Kentucky, an insurance company is not the only party that can be sued for its involvement in insurance bad faith. In fact, insurance adjusters can also be sued for their liability in practicing insurance bad faith. Two Kentucky circuit courts have refused to dismiss allegations made against insurance adjusters. The defendants in both cases attempted to rely on Davidson v. American Freightways, Inc., 25 S.W.3d 94 (Ky. 2000), to have the claims against the adjusters dismissed. However, Judge Daugherty of Jessamine Circuit Court’s Division I ruled that “claims adjusters fall under the category of agents engaged in the business of insurance” so the claims against the adjuster were proper. See Marsh, et al. v. Starns, et al., Civil Action No. 17-CI-00042 (Jessamine Cir. Ct., Mar. 27, 2017). Fayette Circuit Court also previously refused to dismiss claims against an insurance adjuster.

On January 31, 2017, Honorable Thomas D. Wingate, Franklin Circuit Court’s Division II Judge, granted Plaintiff Lisa Warren’s motion for partial summary judgment and denied Defendant Auto-Owners’ motion for summary judgment. The Court held that Ms. Warren had satisfied the first prong of the test for a first-party bad faith claim as required in Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993) by proving the insurance company was obligated to pay her claim under the terms of her insurance policy. The Court disagreed with Auto-Owners’ argument that an insurer’s “obligation to pay its policyholders’ claims only arises once all judicial remedies it chooses to pursue have been exhausted[.]” Instead, the Court held that such an interpretation of the Wittmer test “confounds the concepts of contractual obligations of an insurer and the insured[.]” Warren v. Auto-Owners Insurance Company, Civil Action No. 09-CI-910, at *5 (Franklin Cir. Ct., Jan. 31, 2017).

An insurance company cannot use litigation as a tactic to prevent its obligation to pay under a claim of insurance bad faith.

Click here to read Judge Wingate’s full opinion.

In Hollaway v. Direct General Ins. Co. of Miss., 497 S.W.3d 733 (Ky. 2016), the Kentucky Supreme Court addressed the first substantive insurance bad faith case to come before it in ten (10) years.  In its decision, the Court affirmed a summary judgment granted by Fayette Chief Regional Circuit Judge Thomas Clark, who had found an absence of evidence of bad faith on the part of the insurer.  The Court had no trouble agreeing with Judge Clark, who had found that liability for the disputed parking lot fender bender that gave rise to the claim was never reasonably clear.  Without clearly proving liability for the accident, or the injuries stemming from it, the plaintiff could not prevail on a claim of bad faith, which requires that an insurer be obligated to pay under the terms of the policy.  Hollaway stems from a low-impact auto collision in a parking lot. The trial judge noted:

Liability was clearly contested.  Plaintiff and Defendant Sykes each gave different accounts of the accident and the cause of the accident. The only real item in which the parties agreed was that all parties were wearing seatbelts at the time of the minor impact. Hollaway v. Harry Sykes, et al., Civil Action No. 08-CI-02603 (Fayette Cir. Ct., April 29, 2013).

The claim notes indicate that a supervisor made a notation early on that there was “possible comparative negligence” as the insured vehicle driver backed out of a parking space when the claimant vehicle pulled into the parking space and collided with the insured vehicle.  Fourteen (14) days later, the supervisor told the adjuster to listen to the recorded statements again.  The adjuster did just that and made a note that there were “conflicting statements” and went on to conclude that he thought the $5,000 offer was a fair offer. Samantha Hollaway, who was a passenger, and her driver contended that they had stopped in the parking lot and were rammed by Mr. Sykes who was backing out of a parking space.  However, defendant Harry Sykes who later testified in a  deposition, had given  a completely different version of  the accident from Hollaway’s.  Sykes claimed that he was only backing up for a second or two before the other car, coming around the corner too fast, hit his car.  Defendant Sykes noted there was no damage to his car and stated that he was stopped after having backed out of the parking space and was about to move forward when the other car came around and hit him.