There are a variety of defenses that an insurance company can assert when facing a lawsuit for bad faith. None of my posts, however, have addressed the one that I came across in Hamilton Mutual Insurance Company of Cincinnati v. Buttery, 220 S.W.3d 287 (Ky. App. 2007). In Hamilton, the Kentucky Appellate Court analyzed a number of interesting bad faith issues, and I will address most of them. The one that is the most interesting to me, however, is the defense asserted by the carrier that it relied upon the advice of its attorney. I will dedicate two weeks to this case and will address the carrier’s defenses in next week’s post so that this week I can start with the details of how the claim originated and how the matter came to be evaluated by the Appellate Court.
When Mr. Buttery discovered that his home had been vandalized, he notified the police and his insurance company, Hamilton Mutual. Hamilton sent John Dotson, who advised Mr. Buttery that Hamilton would pay the claim within 10 days and that he was entitled to additional living expenses as well. Despite the fact that Mr. Buttery’s policy was for replacement value, Hamilton provided him with claim forms to recover the actual cash value. When doing so, Hamilton did not advise Mr. Buttery that he was entitled to replacement value in accordance with the terms of his insurance policy. Mr. Buttery complied with Hamilton’s request and filled out the forms that he was provided. He returned them to Hamilton within 24 hours. The ten days came and went, but Mr. Buttery did not receive any payment on his claim. As Hamilton’s investigation and evaluation of the claim progressed, Mr. Buttery provided a tremendous amount of information and documentation and submitted to four examinations under oath. He ultimately filed a bad faith lawsuit against Hamilton after almost one year had passed and Hamilton had still not made any payment on the claim.
Mr. Buttery’s complaint was based on Hamilton’s failure to act in a timely fashion to settle his claim for the burglary and vandalism of his home. Hamilton appealed a judgment entered by the Circuit Court following a jury verdict in Mr. Buttery’s favor.
The jury found that Hamilton Mutual lacked a reasonable basis to refuse payment of Buttery’s claim and that it either knew that it lacked such a basis to refuse payment or that it acted with reckless disregard as to whether such a basis existed to justify its refusal to pay. The jury also found that Hamilton Mutual had violated nine separate provisions of Kentucky’s Unfair Claims Settlement Practices Act…Buttery was awarded $251,003.05, including punitive damages; $12,727.17 in prejudgment interest; and an additional $27,102.64 in attorneys’ fees.
When the Kentucky Appellate Court evaluated the Circuit Court’s decision, it began its analysis by reviewing the jury’s findings with regard to Hamilton’s conduct:
[Hamilton] Failed top make a timely, good faith attempt to satisfy Buttery’s claim and that the delay was without reasonable foundation…The jury found specifically that Hamilton Mutual lacked a reasonable basis to refuse payment of Buttery’s claim; that it refused to pay Buttery’s claim without conducting a reasonable investigation; that it failed either to affirm or to deny coverage within a reasonable time after an adequate proof of loss statement had been completed; that it did not attempt in good faith to effectuate a prompt, fair and equitable settlement of Buttery’s claim; that it compelled Buttery to bring a legal action to recover amounts due under the insurance policy by offering him substantially less than the amounts ultimately recovered following the first trial; that it delayed the investigation or payment of claims by requiring Buttery to submit multiple forms containing substantially the same, repetitive information; and that it engaged in unfair or deceptive practices.
The Appellate Court agreed with the lower court’s finding that Mr. Buttery presented proof that Hamilton engaged in intentional misconduct driven by an improper motive or a reckless indifference to Mr. Buttery’s rights as an insured. As I mentioned at the beginning of this post, there were several issues raised and analyzed in this case, which I will address in my next post.
Please tune in next week for a continued evaluation of this decision from the Kentucky Court of Appeals.