Kansas Claims Compliance

An insurer defending a third-party claim owes a duty to act in good faith and without negligence. This duty specifically requires the insurer to communicate to the insured the results of any investigation indicating liability in excess of policy limits and any offers of settlement, so the insured may protect their interests.

A liability insurer that assumes the defense of an action may save itself from the bar of waiver or estoppel only if it clearly disclaims liability under the policy and gives notice of its reservation of rights in a timely manner.

stating that while an insurer often reserves its rights contemporaneously with assuming the defense, the ultimate test is whether the insured was fairly and timely informed so they could make a choice regarding how to protect themselves .

the Kansas Supreme Court reaffirmed that the timeliness of a reservation of rights is fundamentally a question of fact, thereby precluding summary judgment on the issue of estoppel when the timeline is disputed . Best practices dictate that an insurer should reserve its rights contemporaneously or almost contemporaneously with its assumption of the insured's defense .

the insurer learned of the coverage issue but waited four months to send the ROR letter . The trial court granted summary judgment for the insurer, but the Kansas Supreme Court reversed, holding that whether a four-month delay was "timely" was a question of fact for the jury, precluding summary judgment .

established that waiting three years to send a reservation of rights is fundamentally untimely and prejudicial to the insured .

an automobile dealership suffered extensive hail damage to its inventory. The dealer sought first-party diminished value from its insurance carrier, arguing that the vehicles, even when repaired, could only be sold as damaged goods. The insurer denied the claim, citing a "loss of market" exclusion in the commercial inland marine policy .

established the core measure of damages for property that cannot be fully restored by physical repair. The Kansas Supreme Court ruled that the correct measure of damages is the difference in the fair market value of the automobile immediately prior to the injury and its fair market value immediately afterward .

. Under Glenn, an insurance company may become liable for an amount in excess of its policy limits if it fails to act in good faith and without negligence when defending and settling claims against its insured .

. The court held that while there is no explicit, stand-alone "duty to initiate" pre-claim, an insurer's failure to do so when liability is clear and damages obviously exceed limits can be submitted to a fact-finder as evidence that the insurer breached its broader implied duty of reasonable care and good faith .

and subsequent cases. An insurer is not the legal cause of an excess judgment if the claimant purposely sets artificial, unreasonable deadlines or rejects a subsequent policy-limits settlement offer solely to manufacture a bad faith claim and access the insurer's deep pockets .

ruled that the statutory penalty provisions of the Workers Compensation Act (K.S.A. 44-512a/b) are the exclusive remedy for such misconduct, barring all common-law claims .

litigated by the Palmer Law Group. In that case, the Kansas Supreme Court upheld a $5.22 million bad faith victory against Key Insurance . In Nicholson, the insurer delayed settlement and failed to adequately communicate and investigate within 88 days of the occurrence .

. The insurer retains the right to amend its coverage position as it learns new facts through discovery that place the claim outside the policy's coverage .

. In Kansas, a generic reservation of rights does not instantly give the insured the right to refuse a defense .

. The Court reasoned that the Kansas legislature had already enacted a comprehensive statutory scheme—including the Uniform Trade Practices Act, mechanisms for the Insurance Commissioner to enjoin business, and statutes awarding attorney's fees (K.S.A. 40-256)—to deter insurer misconduct . Consequently, the Court found it "undesirable...

the Kansas Supreme Court has consistently rejected the creation of a standalone tort for first-party bad faith .

and Spencer v. Aetna Life & Casualty Insurance Co. (1980), the Kansas Supreme Court has consistently rejected the creation of a standalone tort for first-party bad faith .

. The Venable court addressed the precise scenario of inherent diminished value, ruling that "when the repair of an injury does not restore the property to its original condition and value... the cost of the repair together with the difference in value of the repaired property and its value before injury might in some cases be a fair measure of the loss sustained" .