The Kentucky Unfair Claims Settlement Practices Act is aimed at promoting at least a good faith attempt to settle a claim promptly on fair and equitable terms. In the recent case, Phelps v. State Farm, No 10-6085 (May 25, 2012), the Sixth Circuit found real questions about whether State Farm had acted in good faith in taking nearly three years to settle Phelps' rather routine claim. An earlier post, How Long Is Too Long? Settling Injury Claims With Insurance Companies and the Kentucky Unfair Claims Settlement Practices Act, set out the lengthy time line for settlement of this claim.
After noting that the purpose of the Unfair Claims Settlement Practices Act was to promote at least good-faith attempts to settle claims promptly and on fair and equitable terms, the Sixth Circuit identified several other salient points:
- An insurance company should not force a claimant to go through needless adversarial hoops to achieve her rights under the policy
- An insurance company cannot lowball claims or delay claims hoping that the insured will settle for less
- State Farm failed to reasonably account for Phelps’s pain and suffering or future wage loss by omitting any consideration or allowance for these damages in its initial settlement offer
- A jury could find State Farm's delay of nearly 3 years to be unreasonable, since shorter periods of time constitute evidence of bad faith according to prior cases. See Med. Protective Co. v. Wiles, 2011 WL 2420011, at *9 (Ky. Ct. App. Oct. 21, 2011) (involving a delay of 27 months between the injury and the initial settlement offer); King v. Liberty Mut. Ins. Co., 54 F. App’x 833, 837-38 (6th Cir. 2003) (involving a delay of 18 months from the date of a follow-up inquiry about the settlement through the date that the company finally checked its purged files)
- State Farm offer no explanation for its failure to timely obtained Phelps’s 1999 injury records, other than the claims adjuster was replaced, a switch that is also unexplained
- State Farm offered no explanation for switching claims adjusters four times
- State Farm’s claims that it doubted the extent of Phelps’s injuries must be discounted since it failed to ask that she be medically examined
Comments