In Phelps v. State Farm Mutual Auto Insurance Company, a split panel yesterday reversed the grant of a summary judgment in a claim brought under Kentucky’ Unfair Claims Settlement Practices Act. The majority, in an opinion written by Judge Gilman, concluded that the plaintiff had established sufficient factual support that would enable a jury to conclude that State Farm had violated several sections in Kentucky’s UCSPA. In reaching this conclusion the majority chronicled a number of pieces of evidence, such as delay by State Farm, frequently changing adjusters, lowball settlement offers, failing to disclose policy limits and other similar conduct. By contrast, Chief Judge Batchelder found this evidence woefully inadequate to reach a jury. Chief Judge Batchelder concluded that, under Kentucky law, in order to reach the jury on a UCSPA claim, there must first be evidence sufficient to warrant punitive damages.
One interesting aspect of this decision was the Court’s discussion of the experts presented by the plaintiff. These include a “national claim handling expert” and another claims handling expert. One of the experts opined that State Farm acted in bad faith through its conduct. Although these expert opinions seem ripe for the challenge, particularly in light of the recent case law from the Sixth Circuit striking down experts on Daubert grounds, surprisingly State Farm did not appear to challenge the admissibility of the expert opinions. As a result, the Sixth Circuit faulted the district court for failing to consider the expert reports in its analysis and also pointed to those reports as raising a genuine dispute concerning State Farm’s complying with the UCSPA in this case. This decision is a good reminder about why parties need to object to questionable expert testimony, a conclusion reinforced by recently Sixth Circuit cases. The failure to do so can certainly prove to be problematic on appeal.