Opinion ID: 800999
Heading Depth: 3
Heading Rank: 3

Heading: Summary judgment on Phelps's UCSPA claim was improper

Text: The district court granted summary judgment for State Farm because it concluded that Phelps had failed to present sufficient evidence that State Farm acted unreasonably in the processing of her claim. See Farmland Mut., 36 S.W.3d at 375. But the district court's opinion draws inferences that favor State Farm rather than Phelps, and it failed to consideror explain why it did not consider Phelps's expert-witness testimony. In our view, Phelps presented sufficient evidence to raise a genuine dispute as to whether State Farm violated the UCSPA in handling her claim. First, State Farm's initial offer of $25,000 was just barely above the low end of both its own evaluation of the claim ($24,620 to $49,620) and Phelps's documentation of medical and wage-loss costs ($22,620.22). The offer failed to reasonably account for Phelps's pain and suffering or future wage loss. Although State Farm argues that it was not required to include these items in its settlement offer because Phelps had not provided any proof of her pain and suffering or future wage loss, that does not excuse State Farm's failure to include an approximate amount for these damages based on a likely jury verdict. See Farmland Mut., 36 S.W.3d at 375-76 (explaining that an insurer cannot lowball claims . . . hoping that the insured will settle for less, and it instead must attempt to settle the claim in a fair and reasonable manner (internal quotation marks omitted)); Motorists Mut., 996 S.W.2d at 454 (cautioning that, although the UCSPA does not require that a claim be evaluated, or that it be evaluated correctly, it does require that a good faith attempt be made to effectuate a prompt, fair and equitable settlement). And State Farm has offered no other explanation for its low offer. Whether State Farm acted reasonably in failing to include these damages in its initial settlement offer thus presents a question of fact for the jury. Another ground on which a jury could reasonably find that State Farm exhibited bad faith is the extensive delay of nearly three years before Phelps's claim was settled. See id. at 376 (providing that an insurer cannot . . . delay claims). Several cases have determined that delays of substantially shorter length constitute more than mere delay and instead may serve as evidence of bad faith. See Med. Protective Co. v. Wiles, ___ S.W.3d ___, ___, 2011 WL 2420011, at  (Ky.Ct.App. Oct. 21, 2011) (involving a delay of 27 months between the injury and the initial settlement offer); King v. Liberty Mut. Ins. Co., 54 Fed.Appx. 833, 837-38 (6th Cir.2003) (involving a delay of 18 months from the date of a follow-up inquiry about the settlement through the date that the company finally checked its purged files). Although the early months of the claims processfrom September 2003 through February 2004may be attributed to the time needed for a reasonable investigation, a legitimate question arises as to whether the delay involved in obtaining records from Phelps's 1999 injury was reasonable. State Farm first noted this earlier injury in its February 11, 2004 log notes, but there is no evidence that records were requested from Phelps until September of that year. There is no explanation in the record for this six-and-a-half month delay beyond the fact that the claims adjuster was replaced for the second time in the interim. Cf. King, 54 Fed.Appx. at 837-38 (concluding that an 18-month delay for investigatory purposes was unreasonable). State Farm's position that this information was necessary to evaluate Phelps's claim may also be construed as a delay tactic. Viewing the facts in the light most favorable to Phelps, the settlement package submitted in March 2004 included all of the information needed to settle her claim. The jury may infer that State Farm raised the prior-injury issue at this time in order to delay making a settlement offer. This inference is bolstered by the fact that State Farm had access to databases reporting prior insurance claims and could have uncovered the existence of Phelps's 1999 injury well before receiving her allegedly deficient medical records. Similarly, adjustor Nieses's refusal to complete an initial valuation before receiving these recordson the ground that such an evaluation would be premature (despite the fact that settlements are often reached at premature stages in litigation)could also be considered a delay tactic. Phelps's case further involves some general evidence of delay tactics, some questionable delays in the processing of her claim, and a nearly three-year delay before payment. We recognize, of course, that some of the delay in this case is due to the apparent lack of diligence by Phelps's own counsel. But the majority of the delay, when viewed in the light most favorable to Phelps, seems fairly attributable to State Farm. Another inference of bad faith arises from State Farm's prolonged refusal to disclose its policy limits, particularly after Carroll made a demand that far exceeded the limit. State Farm disputes whether any request to disclose policy limits was ever made, but the district court was obligated to view the record in the light most favorable to Phelps when considering State Farm's motion for summary judgment. In addition, State Farm argues that it was not required under Kentucky law to disclose its policy limits, a contention for which State Farm offers no support but to which Carroll conceded during his deposition. But even if an insurer is not generally obligated to disclose its policy limits, the failure to promptly offer its limits as soon as it knows or should have known that a reasonable evaluation of the claim is in excess of the limit could support an inference that State Farm was not attempting to negotiate in good faith. Cf. Coppage v. Fireman's Fund Ins. Co., 379 F.2d 621, 624 n. 3 (6th Cir.1967) (declining to hold under Tennessee law that an insurer has a general duty to disclose policy limits, but determining that on the record before us, the withholding of this information was a circumstance which the jury could consider on the question of bad faith). The record further includes some evidence of troubling claims-handling practices by State Farm both in this case and in general. These include switching claims adjustors four times without explanation, habitually making offers at the low end of valuation ranges, refusing to increase an offer without documentation of additional damages, failing to ask Phelps to submit to an independent medical examination, and failing to include facts in the claim file that would support a jury verdict in Phelps's favor. Two of these practicesextending low offers and refusing to increase the valuation rangefind support in the deposition testimony of State Farm's own claims adjustors. Finally, we note the critique of State Farm's handling of the claim in question that is documented in the reports from Phelps's expert witnesses Fye and Huff, which the district court totally failed to consider. State Farm did not move to exclude the testimony of these experts, and Phelps relied on their reports in her response to State Farm's motion for summary judgment. The district court therefore had a duty to at least address their reports. See Fed.R.Civ.P. 56(c)(3) (mandating that [t]he court need consider only the cited materials in the parties' briefs); see also Logan v. Denny's Inc., 259 F.3d 558, 568 (6th Cir.2001) (finding that the district court's analysis . . . [is] in complete contravention to the requirement that the evidenceall of the evidencebe viewed in the light most favorable to the nonmoving party on summary judgment). Its failure to do so is troubling, especially because the opinions of the two expert witnesses raise a genuine dispute as to State Farm's compliance with the UCSPA in this case. All of this is not to say that a jury will ultimately find that State Farm violated the UCSPA by processing Phelps's claim in bad faith. But the evidence presented by Phelps is sufficient to raise a genuine dispute as to this issue. The proof, in other words, is not so one-sided that [State Farm] must prevail as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).