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Federal Court rules insured’s bad faith claim failed under Kentucky Law

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By Kyle Roby, Attorney and Partner
English, Lucas, Priest and Owsley, LLP

It often comes as a surprise to those injured in car accidents that dealing with one’s own insurance company can be just as vexing and contentious as dealing with the insurance company of the driver whose negligence or recklessness caused the accident.

Fortunately, the law does provide some protection for insureds who have to fight with their own insurance company to get that to which they are contractually entitled. However, the threshold for success in such cases is high, and not every case results in a judgment in the insured’s favor.

The Facts of the Case

In the recent federal case of Smith v. Liberty Mutual Insurance Company, the plaintiff was a woman who was involved in a car accident in Louisville, Kentucky. As a result of the accident, the plaintiff suffered a broken leg, broken ribs, and other injuries. Her medical expenses totaled more than $150,000. She made a claim with the liability insurance company that insured the driver who caused the wreck, and that insurance company paid the plaintiff all of the other driver’s policy limits of insurance.

Thereafter, the plaintiff made a claim under her own uninsured/underinsured motorist coverage with the defendant, Liberty Mutual Insurance Company. The defendant eventually paid out the plaintiff’s uninsured/underinsured policy limits, but, in the meantime, the plaintiff filed suit against the defendant in the United States District Court for the Western District of Kentucky, seeking damages for the defendant’s alleged violation of the Kentucky Unfair Claims Settlement Practices Act and the Kentucky Consumer Protection Act. The parties settled the plaintiff’s breach of contract claim, and then the defendant sought summary judgment as to the remaining claims.

The Court’s Decision

The court granted the insurance company’s motion for summary judgment, agreeing with its argument that the plaintiff had not shown that she suffered damages as a result of its conduct nor had she shown outrageous conduct by it.

In so holding, the court reiterated the case law set forth in the 2000 Kentucky Supreme Court case of Wittmer v. Jones, which stated that there are three elements in a cause of action for bad faith:  an obligation by the insurer to pay the claim, the lack of a reasonable basis for denying the claim, and proof that the insurer knew there was no reasonable basis for denial of the claim or that it acted with reckless disregard as to whether there was a reasonable basis for denial.

Since the plaintiff did not meet the evidentiary threshold of a bad faith claim, her cause of action for punitive damages against the insurer failed. The court noted that the plaintiff had suffered a great deal of stress because of having to file bankruptcy, but the court found that the insurer was not responsible for the bankruptcy, since the plaintiff had actually filed for bankruptcy protection prior to the accident (although she later filed a second bankruptcy action due to the dismissal of the first).

To Talk to a Lawyer About Your Car Accident Case

There can be many facets in an “average” car accident case, many of which involve time limitations. If you or a family member has been hurt in a car wreck, truck accident, or motorcycle crash, you should speak with an attorney as soon as possible. To schedule a free consultation with one of the experienced Kentucky motor vehicle collision lawyers at English, Lucas, Priest & Owsley, call me, attorney Kyle Roby, at (270) 781-6500. We represent clients throughout Kentucky and Tennessee, including in Bowling Green, Nashville, and Glasgow.

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