Cynthia Phelps v. State Farm Mutual Automobile I
2012 U.S. App. LEXIS 11931
6th Cir.2012Background
- Phelps injured in July 18, 2003 car crash; Kirby driver insured by State Farm with $50,000 liability limit.
- Phelps filed third-party claim; initial processing included a 1999 back-injury issue surfaced in 2004, affecting valuation.
- Settlement package in March-April 2004 valued at $24,620-$49,620; initial offer of $25,000 made October 28, 2004.
- State Farm repeatedly changed adjusters; significant delays and questions about policy-limit disclosure and information requests.
- Final settlement reached April 13, 2006 at $50,000 (policy limit); Phelps filed UCSPA claim in May 2007; case removed to federal court.
- District court granted summary judgment for State Farm; the Sixth Circuit reversed and remanded, finding genuine disputes on UCSPA bad-faith claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether summary judgment on UCSPA claim was proper | Phelps argues expert evidence shows bad faith. | State Farm argues delay and offers were reasonable; no outrageous conduct. | No; genuine disputes exist; summary judgment improper |
| Whether Wittmer standard governs bad-faith proof | Wittmer threshold shows outrageous conduct needed. | Post-Farmland allows broader unreasonableness inquiry. | Issue resolved for remand; standards discussed but not final |
| Whether delayed settlement supports bad faith | Delays, including records from 1999 injury, show recklessness. | Delays attributable to investigation; not necessarily bad faith. | Delay facts create triable issue for jury |
| Whether failure to disclose policy limits indicates bad faith | Failure to disclose policy limits supports bad faith inference. | Kentucky law does not require disclosure; lacking improper motive. | Insufficient as a matter of law; jury could still find in Phelps’s favor but not per se bad faith |
Key Cases Cited
- Knotts v. Zurich Ins. Co., 197 S.W.3d 512 (Ky. 2006) (high threshold for bad-faith showing; jury may assess related evidence)
- Farmland Mut. Ins. Co. v. Johnson, 36 S.W.3d 368 (Ky. 2000) (unreasonableness standard; cannot lowball claims; must negotiate fairly)
- Wittmer v. Jones, 864 S.W.2d 885 (Ky. 1993) (outrageous conduct/punitive-damages standard for UCSPA)
- Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437 (Ky. 1999) (duty to pursue prompt, fair, and equitable settlement)
- Coomer v. Phelps, 172 S.W.3d 389 (Ky. 2005) (insurer may challenge a claim when fairly debatable)
- Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886 (Ky. Ct. App. 1994) (fairly debatable standard in bad-faith determinations)
- King v. Liberty Mut. Ins. Co., 54 Fed.Appx. 833 (6th Cir. 2003) (affirmative evidence of bad faith can be inferred from actions regarding claims)
- Reeder v. State Farm Mut. Auto. Ins. Co., 763 S.W.2d 116 (Ky. 1988) (UCSPA purpose and public protection from unfair practices)
- Bult v. United Services Auto. Ass’n, 183 S.W.3d 181 (Ky. Ct. App. 2003) (unfair denial/fairness standards in bad-faith analysis)