Opinion ID: 795624
Heading Depth: 4
Heading Rank: 2

Heading: Rawe's Third-Party Common-Law Bad-Faith Claim

Text: 28 The district court correctly dismissed Rawe's third-party common-law bad-faith claim as a matter of law, because the pleadings do not allege that Haggard, who was the insured under the bodily injury policy, ever assigned his rights under the policy to Rawe. J.A. at 41 (Order at 6). It is settled law in Kentucky that insurers do not have any common-law duty of good faith to third-party claimants. Manchester Ins. & Indem. Co. v. Grundy, 531 S.W.2d 493, 498 (Ky.1975) (There is no privity of contract between the insurer and the claimant, so the insurer is never guilty of `bad faith' to the claimant. The claimant can look only to the insured for satisfaction of the judgment unless the insured makes an assignment to the claimant.), cert. denied, 429 U.S. 821, 97 S.Ct. 70, 50 L.Ed.2d 82 (1976); see also Glass, 996 S.W.2d at 451 (citing Manchester as establishing that a cause of action for common-law bad faith belongs only to the liability insured). In Glass, the Supreme Court of Kentucky explained that a third-party common-law bad-faith claim arises only when the insured has assigned her contractual rights to the third-party plaintiff. 29 [U]nder the principle of privity of contract, the [common-law bad-faith] cause of action belonged only to the liability insured; but ... the insured could assign it to the liability plaintiff in consideration for a release of the insured from any liability in excess of the policy limits. As assignee of the insured, the successful plaintiff could then bring the bad faith action in a derivative capacity against the insurer to recover the excess amount of the verdict. Punitive damages were not recoverable, because the action was considered to be one for breach of contract. This type of action is referred to as a third-party bad faith action. 30 Id. In Count II of her complaint, Rawe does not allege that Haggard assigned rights to her, but merely states that she was a third party beneficiary to Haggard's bodily injury insurance contract with Liberty Mutual, and that Liberty Mutual owed her a duty in that capacity. J.A. at 27 (Compl. at ¶ 80). This is insufficient under Kentucky law. We therefore affirm the district court's dismissal of Rawe's third-party bad-faith claim because Rawe has not alleged privity of contract between herself and Haggard. 31