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Q: What is the difference between first and third party bad faith?

A: Not every state recognizes bad faith. Kentucky is one that does. First party bad faith is when an individual makes a claim against his own insurance company and they refuse to pay or offer less than the claim is obviously worth. An example would be if a person had to make a claim against their own underinsured motorists policy (see the FAQ on underinsured coverage for more information) There really is no such thing as "third party bad faith" in Kentucky. If a person has been unfairly dealt with by someone else's insurance company (for example the insurance company of the person who injured you in a car wreck), the you can bring a claim under Kentucky's Unfair Claims Settlement Practices Act. KRS 304.12-230. To bring this type of claim, you have to prove the insurance company violated one of the fifteen sections of the statute.


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