Sometimes the black letter law passed by the legislature is unclear. The legislature can’t anticipate every possible fact scenario when they pass a law, so it lay to the courts to interpret the law and give guidance to what it means. This interpretation is called case law. When the court decides a certain meeting to the law it essentially answers a legal question. Lawyers and other courts then can rely on that ruling when they have a similar issue in their case. The following case answers the question above.
Spencer v. Aetna Life & Casualty Insurance Co., 227 Kan. 914, 611 P.2d 149 (1980).
This case addresses the following issue:
Does Kansas law recognize an independent tort of “common law” bad faith against an insurance company?
Kansas has some statutory causes of action an insured can bring against an insurance company, such as vexatious refusal to pay and basic breach of contract claims. Id. at 923. In this case, the Kansas Supreme Court was asked to determine if a non-statutory claim for bad faith, which didn’t fit within these statutes, existed under Kansas law. Id. at 916. After weighing the pros and cons, the court determines that Kansas law does not recognize such an independent, bad-faith tort. Id. at 926.
This case found its way to Kansas in a somewhat peculiar way. The case was originally filed in Federal court, alleging breach of contract and bad faith, arising out of an insurance contract between Plaintiff and Defendant. Id. at 914. The Federal court was asked to decide whether Kansas law recognized the tort of bad faith. Id. Being unsure, the Federal court used a process called “Certification of Questions of Law,” which allows a Federal court to pose a legal question to the highest court of a state. Id. This is important because the Kansas Supreme Court gets the final say on what Kansas law is, even over the United States Supreme Court. Because this case came to the court in this way, the facts of the underlying case aren’t discussed in depth; in fact, the court notes: “The facts of the case are unnecessary for the determination of this issue.” Id. at 916.
The court begins by explaining the rise of bad-faith claims around the country. Id. at 916-17. These torts are based upon the obligation that “the insurer must act fairly and in good faith in discharging its contractual responsibilities.” Id. at 916. When an insurance company fails to act with good faith and fairness, the insured can bring about a claim for redress of loses caused by this failure to honor the insured’s obligation. Id. at 917. The court noted that states have taken each side of the argument. Id. at 918-19.
Looking at Kansas law, the court found that there are obligations to “act in good faith” and “to act without negligence.” Id. at 922. However, “Kansas cases have not gone so far as to find the lack of good faith…rises to the level of an independent tort.” Id. The court found that existing laws provided sufficient protections for “first party claims,” or claims in which the insurer owes the insured money directly, such as a life insurance contract. Id. So long as these “adequate remedies provided by statute” exist, the court did not feel empowered to create a new, independent tort. Id. at 923. Thus, Kansas does not recognize the independent tort of bad faith. Id.