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Supreme Court of Kentucky
September 30, 1993, Rendered
[*886] OPINION OF THE COURT BY JUSTICE LEIBSON
Three recent decisions from this Court recognize a cause of action to recover tort damages against insurance companies upon proof of bad faith failure to pay claims clearly due and payable. These cases are: Stevens v. Motorists Mut. Ins. Co., Ky., 759 S.W.2d 819 (1988), recognizing a statutory bad faith claim by an insured against his own insurer under the Consumer Protection Act (CPA), KRS 367.110, et seq.; State Farm Mut. Auto. Ins. Co. v. Reeder, Ky., 763 S.W.2d 116 (1989), recognizing [**2] the existence of a claim by a third-party for damages sustained by reason of an insurance company's violation of the Unfair Claims Settlement Practices Act (UCSPA), KRS 304.12-230 and 235; and, finally, Curry v. Fireman's Fund Ins. Co., Ky., 784 S.W.2d 176 (1989), recognizing an insured's recovery against his own insurer of consequential and punitive damages for bad faith in breach of a business insurance policy based on common law principles. In so doing, Curry overruled our previous decision to the contrary in Federal Kemper Ins. Co. v. Hornback, Ky., 711 S.W.2d 844 (1986). In the present case we are called upon to explain, as best we can, the mechanics involved in applying these three decisions.
Loretta Wittmer and Tamara Jones were involved in a motor vehicle accident on October 19, 1988, in Owensboro, Kentucky. Jones failed to yield the right-of-way after a stop sign and struck Wittmer's vehicle in the side, causing it to careen out of control into a pole. Jones carried liability insurance with [*887] State Farm, whose claims representative contacted Wittmer within a few days after the accident and offered to pay her [**3] $ 3,562.66, the cost of repairs to the vehicle using new parts. Wittmer had purchased the car new only three weeks before, and had about 1,000 miles on it. She refused State Farm's offer because she wanted State Farm to replace her vehicle with a new vehicle equivalent to hers before it was damaged. When State Farm refused to offer more than the cost of repair she went to an attorney. Her attorney negotiated with State Farm, eventually demanding "the difference between the fair market value (FMV) immediately before and immediately after" the car was damaged, placing the before FMV at $ 10,500, which was substantially equivalent to the new car value of Wittmer's vehicle. The after FMV was stated at $ 4,000, and the difference demanded was $ 6,500. The lawyer's position was, and remains to this day, that the fact that a vehicle is repaired, no matter how perfectly, necessarily depreciates its FMV when compared to an identical car which has never been wrecked, and State Farm has unreasonably refused to take this factor into account. The problem with the settlement demand letter from Wittmer's lawyer is that, while rejecting cost of repair, the figures set forth for before and after FMV [**4] are not attributed to any reliable source, or supporting documents of any kind. They are described simply as "our computation." Likewise, the letter demands "loss of use" at "$ 280," an unsubstantiated figure.
Wittmer's principal claim, throughout this litigation, has been that because the UCSPA specifies it is an "unfair claims settlement practice" to "refuse to pay claims without conducting a reasonable investigation based upon all available information (KRS 304.12-230(4))," when State Farm used repair cost rather than obtaining appraisals to fix the difference in FMV, it violated the terms of the Act. However, the facts are that Wittmer's counsel did not obtain and present appraisals in connection with his demand letter. Further, Wittmer's trial expert (whose credibility was arguably impaired since he was a brother-in-law to one of Wittmer's attorneys) testified to a substantially lower before FMV than the new car value presented in Wittmer's demand letter and testified that the difference in FMV was $ 5,150 rather than the $ 6,500 claimed in the demand letter.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
864 S.W.2d 885 *; 1993 Ky. LEXIS 138 **
LORETTA WITTMER, MOVANT v. TAMARA JONES and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, RESPONDENTS AND STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, MOVANT v. LORETTA WITTMER and TAMARA JONES, RESPONDENTS
Subsequent History: [**1] Released for Publication October 21, 1993.
Prior History: ON REVIEW FROM COURT OF APPEALS. 91-CA-992. DAVIESS CIRCUIT COURT. HON. JAMES E. McDANIEL, JUDGE. 89-CI-191
Disposition: AFFIRMING IN PART/REVERSING IN PART
insurer, punitive damages, trial court, bad faith, damages, repair costs, repaired, instructions, cause of action, claimant, prejudgment interest, contributory fault, loss of use, settlement, violations, bifurcate
Insurance Law, Claim, Contract & Practice Issues, Appraisals, Torts, Defenses, Contributory Negligence, General Overview, Liability & Performance Standards, Bad Faith & Extracontractual Liability, Coverage, Property, Transportation Law, Private Vehicles, Safety Standards, Horns, Transportation Torts, Motor Vehicles, Causation, Proximate Cause, Elements, Types of Damages, Property Damages, Loss of Use, Compensatory Damages, Pain & Suffering, Emotional Distress, Intentional Torts, Intentional Infliction of Emotional Distress, Bad Faith & Extracontractual Liability, Civil Procedure, Remedies, Damages, Punitive Damages, Punitive Damages, Aggravating Circumstances, Trials, Jury Trials, Province of Court & Jury, Judgment as Matter of Law, Penalties, Evidence, Preliminary Questions, Admissibility of Evidence, Negligence, Pleading & Practice, Joinder of Claims & Remedies, Joinder of Claims, Separate Trials, Admissibility, Conduct Evidence, Liability Insurance, Judgment Interest, Prejudgment Interest, Costs & Attorney Fees, Computation, Measurement of Damages