Kentucky law requires insurance companies to exercise good faith by dealing fairly with policyholders and others making claims for benefits. Failure to do this makes the insurance company subject to a lawsuit for what is commonly called "bad faith." Although "bad faith" is the most commonly used term in describing these claims, it is a misnomer. In order to prevail, the insured claimant need only prove that the insurance company acted with a reckless disregard for the claimants' rights.
These claims can arise in a number of settings, including:
Insurance companies realize that individuals who have these types of claims are often distraught about their situation and, therefore, vulnerable. Sometimes they attempt to take advantage of claimants and exploit this vulnerability by using unfair settlement tactics to deny claims or to make unreasonably low offers. As a claimant or policyholder, an individual may be able to sue for the emotional distress caused by the insurance companies and, in some cases, for punitive damages.
The basis for these claims comes from the Kentucky legislature and can be found in the Kentucky Revised Statutes.
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