Segal McCambridge Legal Blog

In Wilson v. State Farm, a ruling made June 14, 2011 in the USDC, WD KY, the court found an insurer did not act in bad faith in its refusal to pay a settlement while Medicare as Secondary Payer issues remain unresolved.    In summary, a settlement agreement was reached, the defendant wanted to resolve Medicare liens before paying the plaintiff and plaintiff’s counsel refused to cooperate and would not let State Farm talk to Medicare. Instead he “asked State Farm to deposit the full policy limits in an escrow account from which the Medicare lien would be paid. Plaintiff agreed “to hold State Farm . . . harmless from any claim by Medicare.” Medicare was not involved in nor bound by this agreement. As an alternative, State Farm suggested including Medicare as a payee on the settlement check. Plaintiff rejected this request. Finally, State Farm decided to await Medicare’s determination of the value of its lien and then issue separate checks to Medicare and Plaintiff.â€�

Plaintiff filed an action claiming “to delay payment of the $50,000 more than thirty days merely to protect Defendant from later liability to Medicare� was bad faith. Plaintiff ad a separate count under a KY statute that would allow for 12 percent interest and reasonable attorneys fees where an insurer failed to settle a claim without reasonable foundation. While the bad faith action was pending, State Farm learned the lien amount and paid the plaintiff and Medicare.  

The court found that “ to comply with federal law and to protect its own legitimate interest against overpayment is reasonable and certainly is not in bad faith. Defendant did not delay payment in order to pay less or harass Plaintiff. Motorists Mut. Ins. Co., 996 S.W.2d at 452-453 (stating that “there must be proof or evidence supporting a reasonable inference that the purpose of the delay was to extort a more favorable settlement or to deceive the insured with respect to the applicable coverage”). While it may serve Defendant’s self interest to comply with federal law, such action was not bad faith, especially when Plaintiff apparently refused to cooperate with Defendant’s attempts to pay the claim more quickly.â€�

The court also found that the delay was based on a “ ‘ reasonable  foundation’ “ when the delay in payment of the settlement was to seek “assurances concerning the amount and payment of the lien.�

This is a great ruling for companies who are struggling with resolving Medicare issues on settled cases, working under threat of suit for sanctions.

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CSX TRANSPORTATION, INC. v. MOODY

On May 20, 2010, the Supreme Court of Kentucky (”SCOKY”) affirmed a Court of Appeals decision on employee’s claim of permanent brain injury from use of “perc” solvents made by Dow. The decision can be found here

At the conclusion of a jury trial, the Plaintiff-appellee, who allegedly was exposed to solvents between 1978 and 1982, and, as a result, suffered a permanent psychiatric neurological injury, received a $2.74 million jury verdict in a Federal Employer’s Liability Act (FELA) toxic exposure case. The jury’s award was broken down into future medicals of $200,000; impairment of earning capacity $540,000; past pain & suffering $1 million and future pain & suffering $1 million. On appeal, CSX challenged issues of jury instructions; foreseeability and causation; Daubert issues; the admission of various evidence; and damage calculations. The Court of Appeals vacated $200,000 of the award based on the speculative nature of the future medicals.

A unanimous Kentucky Supreme Court affirmed the opinion of the Court of Appeals.