CAN A PLAINTIFF BRING A PRIVATE CAUSE OF ACTION AGAINST AN INSURANCE COMPANY FOR VIOLATION OF THE KANSAS UNFAIR CLAIMS SETTLEMENT PRACTICES ACT?
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.
Bonnell v. Bank of America, 284 F.Supp.2d 1284 (D. Kan. 2003).
This case addresses the following issue:
Can a plaintiff bring a private cause of action against an insurance company for violation of the Kansas Unfair Claims Settlement Practices Act?
This case explored the issue of whether a plaintiff could bring a private cause of action against an insurance company for violation of the Kansas unfair claims settlement practice statute (the “Kansas Act’). Basically, the plaintiff felt like the insurance company treated him unfairly in processing his disability benefits so he brought a lawsuit seeking monetary damages against the insurance company claiming that they violated the Kansas Act. In addressing this issue, the court held that the Kansas Act did not provide a private cause of action for the plaintiff against the insurance company. Id. at 1289.
This lawsuit arose from a dispute regarding the amount of benefits due to the plaintiff under the terms of a long-term disability sponsored by his employer, defendant Bank of America. Id. at 1285. The other defendant in this case was the insurance company. Id.
The plaintiff began working for the bank on June 8, 2000 and at all relevant times he participated in the bank’s group benefits programs. Id. One component of the program was a long-term disability plan that the insurance company insured. Id. After being diagnosed with a disability, the plaintiff stopped working during the first week of October 2000. Id. He attempted to work during the winter and spring of 2001 but was unable to do so due to his disability. Id. On October 1, 2001, the plaintiff stopped working entirely and applied for the long-term disability benefits under the insurance company’s long-term disability plan. Id. Initially, the insurance company denied the plaintiff’s application. Id. However, after the plaintiff appealed the denial, the insurance company awarded the plaintiff long-term disability benefits, but only in the amount of $6,000 per month ($9,000 less than what he was making when he worked full time). Id. The plaintiff appealed this monetary figure and the insurance company informed him that they were using the income given to them by the bank. Id. The bank stated that the plaintiff’s basic monthly earnings were calculated by averaging his earnings from the twelve month period prior the date he became disabled. Id. at 1286. With that said, the bank used October 1, 2001 as the date of disability and the plaintiff wanted the bank to use October 2000. Id. The plaintiff’s earnings from June 2000 to October 2000 averaged $15,000 per month, whereas his monthly earnings from October 2000 to October 2001 were significantly less, which was due to his disability impairing his ability to function. Id. Based on the $6,000 monthly figure, the plaintiff brought a lawsuit against the defendants alleging violations of the Kansas Act. Id. In essence, the plaintiff felt like the defendants using the October 2000 date of disability was an unfair practice and he felt like proving a Kansas Act violation was a good way of recovering monetary damages. Id.
In addressing the plaintiff’s argument, the court held that the Kansas Act did not provide the plaintiff any remedy at all. Id. at 1289. In fact, the court noted that the commissioner of insurance had the exclusive power to enforce the Kansas Act. Id. With this said, the court identified the powers of the commissioner of insurance which included: (1) having the authority to examine and investigate insurance companies to determine whether they engaged in unfair claim settlement practices; (2) having the authority to charge insurance companies with violations and conduct hearings with respect to those charges; (3) having the authority tell the insurance companies to stop their wrongful activity, to impose fines, and to suspend or revoke insurance company’s licenses; and (4) having the authority to impose further penalties if an insurance company did not stop their wrongful activity. Id. Therefore, the court determined that the Kansas Act did not provide a private cause of action (the plaintiff could not rely on the Kansas Act to receive monetary damages from the defendants). Id.
In sum, the plaintiff had no claim under the Kansas Act and could not recover any monetary damages. Id.