Court Opinion

ID: 9597099
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:55:29.534444+00
Date Added: 2024-06-11T09:42:03.293281
License: Public Domain

COOPER, Justice,
dissenting.
I agree with Justice Graves that the trial court erred in failing to instruct the jury in accordance with KRS 411.184(2) and abused his discretion in finding the witness, Michael Breen, insufficiently qualified to render expert testimony on the issue of bad faith.1 I write separately because I believe the trial court also erred in excluding the testimony of Andrew Byler.
One of the bases for the finding of bad faith in this case was a violation of KRS 304.12-230(6), i. e., failure to attempt in good faith to effectuate a prompt, fair and *384equitable settlement of the claim. Farmland’s claims adjuster offered the Johnsons $168,993.18 to settle their claim. The jury in the contract trial found that the John-sons were entitled to $213,810.00, representing a replacement cost of $251,541.00, less depreciation. Byler was the principal contractor of the structure when it was originally built. He was prepared to testify in the bad faith trial that he could have rebuilt the building from the slab up for $182,724.00.
The majority opinion asserts that Byler’s testimony was irrelevant to the issue of bad faith, but does not explain why. The trial court held that Byler’s testimony was irrelevant because the actual replacement cost of the building had already been established in the contract trial. While I agree that the actual replacement cost of the building was not the ultimate issue in the bad faith trial, whether Farmland’s settlement offer of $168,993.18 was fair and equitable was the ultimate issue, and Byler’s proposed testimony was entirely relevant to that determination. The fact that the jury in the contract trial accepted neither Byler’s replacement cost estimate of $168,993.18 nor Johnsons’ expert’s replacement cost estimate of $304,440.00, but instead found the replacement cost to be $251 541 00 does not automatically mean that Farmland’s settlement offer was made in bad faith. After subtracting depreciation as required by the insurance contract the jury’s verdict in the contract trial was $213,810.00. If the same amount of depreciation is subtracted from Byler’s replacement cost estimate, that estimate would have supported a settlement offer of $144,993.00, or $24,000.00 less than Farmland’s offer.
Evidence that the contractor who actually built the original building could have replaced it for $24,000.00 less than Farmland’s gross settlement offer before depreciation was highly relevant to a determination of whether Farmland’s offer was a fair and equitable attempt to settle the claim. The exclusion of that evidence was prejudicial error.
The majority opinion essentially holds that the reasonableness of a settlement offer is measured only by hindsight, i.e., only against the ultimate verdict and not by the facts available to the insurer at the time the offer was made; and if the settlement offer does not equal or exceed the ultimate verdict, it is ipso facto made in bad faith and the claimants are entitled to punitive damages. That, of course, is a significant departure from the holding in Wittmer v. Jones, Ky., 864 S.W.2d 885 (1993) that bad faith occurs only when the insurer’s conduct is “outrageous, because of the defendant’s evil motive or his reckless indifference to the rights of others.” Id. at 890 (quoting Federal Kemper Ins. Co. v. Hornback, Ky., 711 S.W.2d 844, 848 (1986) (Leibson, J., dissenting) and Restatement (Second) Torts § 909(2) (1979)).
Accordingly, I dissent.
GRAVES, J., joins this dissent.
KELLER, J., joins this dissent only as it pertains to the exclusion of the testimony of the witness, BYLER.