The Federal Court in the Eastern District of Kentucky was faced with a question that, as of January 12, 2006, no Court in Kentucky had answered. Lawyers call this "a case of first impression". The author was retained as an Expert Witness in an Insurance case in Florida just like this one.
The question in the Kentucky case was whether there was Good Faith or Bad Faith by a Liability Insurance Company in its settlement with more than one person who made a liability claim against the Policyholder. In the process of settling these claims, the Insurance Company exhausted or used up the Policyholder's complete policy limits -- and triggered a policy provision that the Insurance Company no longer had to defend once the policy limits are exhausted. The answer to this question will determine Good Faith or Bad Faith, and at the same time the answer in a case like this also determines whether the Insurance Company has to defend the next claim from the same automobile accident in this particular situation.
In January, 2006, the Federal Court said that there was not enough evidence in the record to determine whether the Insurance Company had settled in Good Faith or in Bad Faith: Safeco_Insurance_Co. v. Ritz (E.D. Ky., Opinion Filed Jan. 12, 2006).pdf. When there was enough evidence to consider the Good Faith or Bad Faith question, Kentucky law as announced by the Federal Judge for cases involving more than one claimant, would require various facts to be considered:
Among the 'various factors' to be considered in determining the existence of bad faith are (1) whether the settlement offers of all the claimants totaled the policy limits or less, (2) whether the insured demanded that the insurer settle with all claimants, and (3) the probability that the claimants excluded from the settlement would obtain a jury verdict or verdicts against the insured which would exceed the policy limits.
Slipsheet Opinion at page 12. The Supreme court of Kentucky makes it clear that these are not going to be the only factors to consider, the Federal Judge hastened to add. Among other things, Kentucky Courts in such cases will "likely look to courts in other jurisdictions" as the Federal Judge himself did in this case.
In December of the same year, the Federal Judge held that there was no Bad Faith, granted the Insurance Company's motion for summary judgment on the record by that time, and also held that the Insurance Company in that case did not have a duty to defend the next claim, based on the same automobile accident, and by a claimant with whom the Insurance Company had not settled: Safeco_Insurance_Co. v. Ritz (E.D. Ky., Opinion Filed Dec. 5, 2006).pdf.
Many legal results depend on the actual facts, and this is one of them.
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