Is three years too long to settle in injury claim for policy limits of $50,000? The Sixth Circuit recently ruled in Phelps v. State Farm, No 10 – 6085 (May 25, 2012), that a three-year delay in settling an injury claim along with other factors raised a fact issue regarding whether State Farm had acted in bad faith and in violation of the Kentucky Unfair Claim Settlement Practices Act in settling the claim.
The timeline in the case is as follows:
- July 18, 2003 – claimant Cynthia Phelps is injured in an auto accident
- October 2003 – Phelps undergoes spinal surgery as a result of the injuries sustained in the auto accident
- October 2, 2003 – the claims file is reassigned by State Farm to a second adjuster; Phelps sends State Farm paid medical records authorization form and it begins collecting her medical records
- February 11, 2004 - After months of minimal activity on the file, State Farm notes for the first time that Phelps had a prior back injury in 1999. State Farm decides to gather additional evidence regarding Phelps' 1999 back injury, although it says nothing to her about it
- April 2, 2004 – Phelps's lawyer, Thomas Carroll, sends State Farm a settlement package documenting her surgery as well as related medical and wage loss costs totaling $22,620.22. Phelps does not make a specific settlement demand, but says she wants to settle and requests information about State Farm's policy limits
- July 2004 – State Farm substitutes yet another adjuster to handle Phelps's claim
- September 14, 2004 – State Farm for the first time requests information from Phelps's lawyer about her 1999 back injury
- October 24, 2004, by the state State Farm and received the relevant medical records to Phelps's 1999 injury. Although State Farm would later claim that it was still missing some pertinent information, it, nonetheless, completed a claim evaluation, the low end being $24,620 and the high-end, $49,620
- October 28, 2004 – State Farm makes a settlement offer of $25,000, approximately $2300 more than Phelps is documented medical and wage losses as of April 2004
- March 29, 2005 – Phelps rejects State Farm's $25,000 offer and demands $150,000. State Farm still had not by this date disclose any information about its policy limits
- May 2005 – Phelps files suit
- October 25, 2005 – Phelps provides to State Farm would later claims to be new information regarding her medical records and wage loss
- November 3, 2005 – State Farm again changes the claims adjuster on Phelps's claim
- March 22, 2006 – Phelps' deposition is taken; "State Farm's attorney determined that Phelps was a credible witness and recommended that State Farm increase if settlement offer."
- April 11, 2006 – Phelps for the first time demands the policy limits of $50,000
- April 12, 2006 – State Farm counters with an offer of $40,000
- April 13, 2006 – State Farm finally offers the policy limits, $50,000, and Phelps settles her injury suit against the other driver.
Phelps' injury claim appears very routine. The negligence of the other driver was not disputed by State Farm, so its liability for Phelps' injury was clear. She obviously suffered significant injuries as she documented over $22,000 of losses based just on medical bills and lost wages within nine months of the auto accident. The significance that the Sixth Circuit attributed to this timeline will be examined in a further post.