Wilson v. State Farm Mutual Automobile Insurance
2011 U.S. Dist. LEXIS 63430
| W.D. Ky. | 2011Background
- Plaintiff Wilson, insured passenger, sue State Farm for bad faith and delayed payment after a collision where the other driver was uninsured.
- Medicare paid some medical bills and plaintiff sought uninsured benefits up to policy limits ($50,000).
- State Farm sought to determine Medicare’s lien value; plaintiff refused escrow, proposed paying into escrow with Medicare lien later paid, or adding Medicare as a payee; plaintiff offered to hold State Farm harmless from Medicare claims.
- State Farm waited for Medicare’s lien valuation before paying; plaintiff filed suit claiming delay was to protect against Medicare liability.
- Two months later Medicare’s lien value was known; State Farm paid Medicare and plaintiff the next day; both sides later moved for summary judgment.
- Court analyzes whether delay and payment conduct amounted to bad faith under Kentucky statutes KRS 304.12-230 and 304.12-235.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| whether delay to determine Medicare lien was bad faith under KRS 304.12-230 | Wilson argues delay was bad faith to avoid Medicare liability. | State Farm claims delay was reasonable to determine lien and prevent overpayment, not bad faith. | No bad faith; delay reasonable and protected against overpayment. |
| whether delay violated KRS 304.12-235 timing provision | Delay beyond 30 days violated statute and supported penalties. | Delay grounded in lien determination; not a violation and penalties unwarranted. | No violation; actions within reasonable foundation and timely resolution after lien determined. |
Key Cases Cited
- Wittmer v. Jones, 864 S.W.2d 885 (Ky. 1993) (bad faith requires outrageous conduct or reckless disregard)
- Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437 (Ky. 1997) (mere delay not bad faith; reasonable basis required for denial)
- Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv. Inc., 880 S.W.2d 886 (Ky. Ct. App. 1994) (fairly debatable grounds defeat bad faith claim)
- Zaleppa v. Seiwell, 9 A.3d 632 (Pa. Super. Ct. 2010) (MSPA rights not directly addressed; Medicare payment structure discussed)
- Pollo Operations, Inc. v. Tripp, 906 So.2d 1101 (Fla. Dist. Ct. App. 2005) (Medicare notice and allocation considerations in settlement)