Settlement, Negotiation, and Unfair Claims Settlement Practices
The legal standard
KRS 304.12-230, Kentucky's Unfair Claims Settlement Practices Act, prohibits misrepresenting policy provisions, failing to act promptly on communications, failing to adopt reasonable standards, refusing to pay without a reasonable investigation, failing to affirm or deny coverage within a reasonable time, failing to explain a denial, and failing to settle where liability is reasonably clear. Kentucky also recognizes common-law bad faith and has addressed third-party bad-faith claims. Statutory interest may apply to overdue claim payments.
A proper denial is written, cites the policy provision and facts, and explains reconsideration rights. A reservation of rights is not a denial. Settlement must rest on a documented evaluation of liability, damages, comparative fault, policy limits, liens, and exposure above limits.
Negotiation practice
Evaluate specials (medical bills, wage loss, property damage) and general damages, apply Kentucky's pure comparative fault, and assess subrogation and liens-Medicare, Medicaid, hospital, and workers compensation-before releasing. Confirm authority, make reasoned offers with explanations, and put settlements in writing with an appropriate release. Time-limited policy-limits demands require prompt evaluation and a documented response; ignoring one can create excess exposure. Minors' settlements may require court approval.
Worked example
Policy limit $25,000; clear liability; medical specials $30,000; claimant demands $100,000. The adjuster documents liability, damages, lien amounts, and excess exposure, then considers a limits offer conditioned on a full release and lien resolution. The file records why the demand was accepted or rejected.
Traps: lowballing without explanation, failing to document the rationale, settling before resolving liens, overlooking subrogation, and missing response deadlines. Rule of thumb: investigate, evaluate, document, obtain authority, communicate in writing, then settle.