Bad Faith Insurance Claims

In Kentucky, bad faith claims against an insurance company can be premised on common law or statutory provisions. Common law bad faith claims flow from the insurer's breach of the covenant of good faith and fair dealing when settling a claim. Bad faith claims can also be based on two Kentucky statutes:

  • the Kentucky Consumer Protection Act found at KRS 367.170; and/or
  • the Unfair Claims Settlement Practices Act (UCSPA) found at KRS 304.12-230.

The three requirements of these bad faith insurance claims, whether based on common law principles or statutory provisions in Kentucky, require proof of the following elements:

  1. the insurance company must be obligated to pay the claim under the terms of the policy;
  2. the insurance company must lack a reasonable basis in law or fact for denying the claim; and
  3. the insurance company either knew there was no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed.

Attorneys for Bad Faith Insurance Claims in Northern Kentucky

Contact an experienced personal injury attorney in Northern Kentucky at Steiden Law Offices to discuss a bad faith claim against an insurance company after the company fails to fairly settle the claim. Our personal injury attorneys represent clients with bad faith claims from their offices in Covington and Florence for cases throughout Northern Kentucky. Call us to find out how much your claim might be worth and the best way to pursue justice against an insurance company.

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Bad Faith Claims under the Consumer Protection Act in Kentucky

The Consumer Protection Act prohibits “unfair, false, misleading, or deceptive acts or practices in the conduct of any trade or business.” Under KRS 367.170 and KRS 367.220, the consumer protection act in Kentucky grants a right of recovery to persons who have leased or purchased services or goods for household, personal or family purposes when the service or product causes an injury by a prohibited practice or act.

For example, in Stevens v. Motorists Mut. Ins. Co., 759 S.W.2d 819 (Ky. 1988), the courts found that the homeowner's policy was classified as a purchase of “service.” For this reason, the homeowner had Consumer Protection Act claim when the insurer intentionally misrepresented an experts' report and arbitrarily refused to negotiate blasting damage claim.

The UCSPA in Kentucky

Under KRS 304.12-230 in Kentucky, the Unfair Claims Settlement Practices Act (UCSPA) prohibits a number of different “acts or omissions” including:

  • misrepresenting pertinent facts or policy provisions related to the scope of coverage;
  • failing to promptly acknowledge and respond to claims as required by the insurance policy;
  • failing to create and properly use standards for prompt investigation of claims;
  • refusing to pay claims without first conducting a reasonable investigation;
  • failing to affirm or deny coverage within a reasonable period of time; and
  • not attempting in good faith to reach a prompt, fair and equitable settlement of claims on which liability is reasonably clear.

The purpose of the UCSPA is to require an insurance company to deal in good faith with a claimant, whether the claimant is an insured or a third-party, when the insurance company is contractually obligated to pay under the claim.

The UCSPA does not include a private right of action provision, however, KRS 446.070 permits a person injured by a violation of any Kentucky statute to recover damages from the offender. For this reason, when KRS 446.070 and KRS 304.12-230 are read together the two statutes create a statutory bad faith cause of action.

This article was last updated on Friday, October 6, 2017.

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