When you pay for something, you expect to receive it. The same applies to insurance coverage after a wreck. If an insurance company willfully violates terms of their policy (e.g. a contract), they may be acting in bad faith on a motorcycle accident claim.
Before we go any further, I created an entire series of pages explaining how I handle motorcycle accident claims. There are several other pages you may want to review prior to reading further:
- Understanding Kentucky Motorcycle Accident Claims
- The Purpose of a Letter of Representation in a Motorcycle Accident Claim
- Reserving No-Fault Benefits After a Motorcycle Wreck
- Getting Motorcycle Crash Medical Records and Bills
- Quickly Filing a Motorcycle Accident Claim for Policy Limits
- Splitting Policy Limits between Multiple Injured Motorcyclists
- Looking for Additional Sources of Insurance Coverage
- No-Fault Coverage While Riding a Motorcycle
So, in my example over the last several pages, I have one insurance company admitting fault on behalf of their insured and tendering their policy limits to several claimants. I also have an underinsured motorist claim, on behalf of my injured client, since that insurance carrier did not have enough insurance, i.e. policy limits, to cover the whole value of my client’s injury claim.
However, both these claims are pending and can’t be resolved yet because: 1) you can’t resolve the claims against the liability policy unless all the claimants can agree on how to divide the insurance policy and; 2) KRS 304.39-320 provides an underinsured carrier with thirty days to determine if they are going to preserve their subrogation rights or not. Essentially, an underinsured carrier can preserve their right(s) to sue the at-fault driver for whatever they pay out to their insured.
When I say sue, I mean to sue them beyond the policy limits and go after the at-fault driver’s assets to recover whatever they have paid out on behalf of their insured. However, to do so, they must substitute the dollars being offered, $25,000 in my example, and pay their insured that money directly within the time limits prescribed by the statute. If I don’t give the underinsured carrier the time and the ability to make that decision about “substituting the policy limits” to preserve their subrogation rights, I can jeopardize my client’s rights to recover underinsured motorist benefits.
To keep my client’s injury claim moving forward, let’s turn our attention to the second, at-fault driver whose insurance company still has not accepted fault. They may be at risk of committing bad faith on a motorcycle accident claim.
I made an argument, to the insurance carrier of this second driver, that their driver had contributed to the wreck by cutting off the first driver which caused him to lose control of his motorcycle. Also, since my client had surgery and over $79,000 in medical bills, I asked them to contact their insured and obtain his permission to reveal the limits of his insurance policy. Insurance companies will cite privacy laws as their basis for not revealing their limits. However, they have to reveal the policy limits in litigation and by asking them to contact their insured to obtain his permission, you are putting a duty on them to take some action.
The insurance carrier refused to acknowledge any fault by their driver and would not tell me their applicable, insurance limits. So, I filed a lawsuit on my client’s behalf against everyone, all the drivers. So yes, even though the one driver’s insurance company already offered their policy limits, that driver was still brought into the lawsuit, and that insurance carrier had to hire defense counsel to defend the claims. Nevertheless, their offer remained open and realistically, bringing their driver into the lawsuit has more to do with determining the percentages of fault on the at-fault drivers than recovering more dollars from his insurance.
What if I had left that driver out of the lawsuit? Another party to the lawsuit would have brought him in through their own claim and I would have been forced to amend my client’s Complaint to make a claim against him as well.
Once a lawsuit was filed, I spoke to defense counsel for the second driver, the driver who was still denying fault and not offering their policy limits. At that time, they revealed they only had an insurance policy with limits of $25,000 per person and $50,000 per accident. At this point, I started yelling “bad faith” and a violation of the Unfair Claims Settlement Practices Act.
It is not often that I accuse an insurance company of a violation of The Unfair Claims Settlement Practices (a.k.a. “acting in bad faith”); because it is a real slap in their face that no one tends to forget. If an attorney brings it up too often, they are seen as being unrealistic and waiving a gun that they never intend to use. However, the facts supported such a claim. A bad faith claim is against the insurance carrier for their actions, and it is not limited in the amount you can recover.
Kentucky Is a Pure Comparative Fault State
Recall that before the lawsuit, I gave his insurance my client’s medical bills and records. I also told you that my client’s injury claim had a value of $150,000 to $300,000. We spoke earlier that Kentucky is a pure comparative fault state.
To oversimplify comparative fault, it is means that you can be 99% responsible for causing a wreck but can still recover 1% of your damages. Essentially, comparative fault means that even if you are more at fault for the motorcycle wreck than the other driver, you can still recover your damages from the at-fault driver. Of course, you are limited to the percentage of your damages for which a jury determined you were not at fault.
My argument to the insurance carrier was simple, all I must do is show their driver was just 20% at fault for this motorcycle wreck, and my client wins! Here’s how the math works: 20% of $150,000 is $30,000. That $30,000 is above the $25,000 per person limit of the applicable insurance policy issued to their driver.
As a result, with the documentation I had already sent, my argument was that the insurance company had sufficient information to evaluate the value of my client’s personal injury claim, higher than the insurance coverage limit on their at-fault driver. If this was true, that insurance carrier should have tendered their policy limits to protect their insured from an excess judgment and by failing to do so, they acted in bad faith on a motorcycle accident claim.
Do you see the power of Kentucky being a pure comparative fault state? To win, I did not have to show that their insured was the primary cause for the motorcycle wreck or that he bore the majority of negligence for the accident. All I have to do is show that his actions contributed to the motorcycle wreck. Why? Because that driver had a lousy insurance policy with low policy limits.
The strength of my argument comes from the fact that if my client gets a judgment against their insured above their policy limits, the insurance company can be held liable for that judgment under the Unfair Claims Settlement Practices Act. Well, if their driver had purchased a liability policy with $500,000 in insurance coverage, they would have probably stood by their denial of liability because they would have more than enough insurance coverage to protect their insured from a $30,000 judgment.
It Worked Out in the End
There were some heated discussions between the attorney for the insurance carrier and me. Nevertheless, they finally offered their policy limits of $25,000 per person and $50,000 per accident to all the claimants against this policy, just like the insurance carrier for the first at-fault driver had. They realized it was in their best interest to pay the coverage they were obligated to pay, rather than to risk being sued for bad faith on a motorcycle accident claim.
Let’s proceed to the next step in the process, which deals with collecting underinsured motorist benefits against multiple policies when more than one motorcycle driver is at-fault for the motorcycle accident.