Legal Alerts

Granado v Wilson KS Court of Appeals Decision

In Granado v Wilson, Wilson ran a stop sign under the apparent influence of drugs and/or alcohol causing death of plaintiff’s spouse in October 2017. The liability carrier claim representative received the accident report confirming the apparent failure to stop and drug/alcohol involvement of the insured driver on November 2017. In February 2018, plaintiff hired an attorney who agreed to limit his fee to only those amounts above the policy limit. Plaintiff had a potential claim for PIP benefits and/or UIM benefits with her own carrier but failed to respond to an initial letter inquiring about payment of medical bills. Her carrier contacted the liability carrier but reported no knowledge of a claim or attorney involvement in March of 2018. In April 2018, the carrier set a reserve of the entire policy limits but did not contact the widow or inform the insured that the claim value seemed to exceed the policy limits. In May 2018, plaintiff received a letter from her own carrier mentioning that she had a claim against the liability carrier for Wilson as a result of the accident. In June of 2018, plaintiff filed suit without ever presenting a formal claim or making a settlement demand to Wilson’s insurance company. In July after the lawsuit was served, Wilson’s carrier offered its policy limits to plaintiff.  Three days later, plaintiff’s attorney rejected the offer without a counter-offer. In October of 2018, plaintiff submitted a demand for nearly $3 million claiming the carrier had committed bad faith in failing to offer the policy limits in the roughly 8 months since the accident occurred.

The initially claims were resolved by a bench trial resulting in a total judgment of $3.3 million for plaintiff against Wilson. Thereafter, a garnishment action was filed against the liability carrier and a year later another bench trial resulting in a judgment finding the carrier was liabile for the entire underlying judgment due to a bad faith failure to offer the policy limits before suit was filed. At trial, the claims manager testified that the claim representative failed to follow the company’s claims handling practices and standards in several respects including failing to call the insured after receiving the accident report to discuss his exposure and failing to complete the claim evaluation in 30 days and never specifically informing the insured of his exposure beyond the policy limits.

The Kansas Court of Appeals in a detailed and lengthy opinion reversed the trial court and declared that there was insufficient evidence of bad faith claims handling that caused the excess verdict as a matter of law. First, the Court noted “Kansas courts have recognized that an insurer is not the legal cause of an excess judgment if the claimant rejects a settlement offer that he or she would have accepted earlier solely to manufacture a bad-faith claim.” The Court found that plaintiff had set an arbitrary deadline for offering the policy limits by filing the lawsuit without notice of an intention to make a claim. Without communicating her “deadline” for accepting settlement, plaintiff was found to be in total control of whether the carrier’s actions would lead to an excess judgment. Next, the Court noted that plaintiff gave no reasons why she would not settle for Key’s policy limits after the lawsuit, except for referring to a potential bad-faith claim. According to the Court, “an insurer is not the legal cause of an excess judgment when the claimant rejects a policy-limits settlement offer that he or she would have accepted earlier, solely to manufacture a bad-faith claim.” Here, the Court concluded that plaintiff’s own conduct and arbitrary behavior were the legal cause of the excess judgment, not the conduct of the insurance company representatives whose conduct the Court accepted was evidence consistent with bad faith according the trial court.

Importantly, the Court went on to address the claim that an insurance company has a duty to initiate settlement negotiations in Kansas despite the lack of a settlement demand from the claiming party. Rejecting this broad contention, the Court determined “none of the cases relied on by [plaintiff] persuasively establish that [the insurance company] had a duty to initiate settlement negotiations with [plaintiff] before she informed [the insurance company] that she was requesting damages.” Instead, the Court concluded that in Kansas the injured party must make  “some indication that he or she [is] seeking damages from the insurance company.” The company does not have an affirmative duty or obligation to initiate settlement negotiations with a potential claimant to avoid a claim of bad faith.