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Why Kentucky courts ruled against a third party bad faith claim

When people file a claim with their insurance company in Kentucky, they may assume that the adjustor will review the circumstances, and they will receive the coverage that is their due. A claim denial or a much lower payment may be a shock, but these do not necessarily indicate that someone has been treated unfairly. 

According to the Kentucky Bar Association, in order to prove a bad faith claim, the plaintiff must show the following three elements:

  • The policy obligates the insurance company to pay the claim
  • There is no reason to deny the claim
  • The company knows the denial has no basis, or is recklessly disregarding the existence of the claim

The Insurance Journal notes that a recent case, which went all the way to the Kentucky Supreme Court, demonstrates how lack of evidence that an insurance company acted in bad faith can result in a failed lawsuit.

The case in question involved a fender bender in a parking lot. The insurance company of one of the drivers investigated, and then covered the property damage to the plaintiff's vehicle. Neither party called law enforcement, though, and the accounts of the accident were not consistent.

In addition to the property damage, the plaintiff claimed that she suffered a physical injury that resulted in medical bills and lost wages. The insurance company reviewed her documentation and offered her an amount much lower than she requested. She sued based on her belief that the company did not negotiate a settlement based on a reasonable evaluation and investigation of her claim.

The ruling in the trial court, which was confirmed in the appellate and supreme courts, was that the dispute over liability of the accident and the plaintiff's injuries were never absolutely settled. This released the insurance company of the obligation to pay the claim. There was also no concrete evidence that the company displayed any intentional misconduct or reckless indifference to the plaintiff's rights. Without this proof, the court could not verify that the bad faith claim was viable.

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