Kansas Insurance Bad Faith Demand Letter

INSURANCE BAD FAITH DEMAND LETTER

STATE OF KANSAS

PRIVILEGED AND CONFIDENTIAL

SETTLEMENT COMMUNICATION PURSUANT TO K.S.A. 60-452

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND ELECTRONIC TRANSMISSION

Date: [__/__/____]

TO:
[________________________________]
[Insurance Company Legal Name]
[________________________________]
[Street Address]
[________________________________]
[City, State, ZIP Code]

ATTN: Claims Manager / Bad Faith Claims Unit

CC:
[________________________________]
[Registered Agent for Service of Process in Kansas]
[________________________________]
[Address]

CLAIM AND POLICY IDENTIFICATION

I. INTRODUCTION AND PURPOSE

This letter constitutes a formal demand for payment of all benefits owed under the above-referenced insurance policy, together with consequential damages, statutory attorney's fees, and all other recoverable damages arising from [________________________________] ("Insurer")'s bad faith conduct in handling this claim.

CRITICAL NOTICE: This demand is made pursuant to Kansas law and is intended to provide Insurer with a final opportunity to resolve this matter before the commencement of litigation. Insurer's failure to respond appropriately within the time specified herein will be deemed an admission that Insurer has no just cause or excuse for its conduct and will be used as evidence of bad faith in subsequent proceedings.

The undersigned represents [________________________________] ("Claimant") in connection with the Insurer's wrongful [☐ denial / ☐ delay / ☐ underpayment / ☐ failure to investigate / ☐ failure to settle] of claims arising under Policy No. [________________________________].

II. KANSAS BAD FAITH LAW - LEGAL FRAMEWORK

A. Distinction Between First-Party and Third-Party Claims

Kansas law distinguishes between first-party claims (insured versus own insurer) and third-party claims (involving liability coverage and injured third parties). This distinction is critical under Kansas law as established in Spencer v. Aetna Life & Casualty Insurance Co., 227 Kan. 914, 611 P.2d 149 (1980).

This claim involves: ☐ First-Party Coverage ☐ Third-Party Liability Coverage

B. First-Party Claims - Breach of Contract and Duty of Good Faith

While Kansas does not recognize an independent tort of "bad faith" in first-party claims, Kansas law imposes significant obligations on insurers and provides substantial remedies for breach:

1. Implied Duty of Good Faith and Fair Dealing

Every insurance contract in Kansas imposes upon each party a duty of good faith and fair dealing in its performance and enforcement. Morriss v. Coleman Co., 241 Kan. 501, 514, 738 P.2d 841 (1987); Restatement (Second) of Contracts § 205. A breach of this duty occurs when a party's actions are "commercially unreasonable." Pizza Mgmt., Inc. v. Pizza Hut, Inc., 737 F. Supp. 1154, 1167 (D. Kan. 1990).

2. Statutory Attorney's Fees - K.S.A. 40-256

When an insurer refuses to pay the full amount of a loss "without just cause or excuse," the insured is entitled to recover reasonable attorney's fees in addition to the amount of the loss. K.S.A. 40-256. A refusal is without just cause when no bona fide controversy exists regarding coverage or the amount of loss.

3. Property Insurance Attorney's Fees - K.S.A. 40-908

For policies insuring property against loss, when judgment is rendered against a company on a policy, the insured may recover attorney's fees as provided by statute.

C. Third-Party Claims - Bad Faith Failure to Settle

In third-party claims, Kansas recognizes that an insurer's exclusive control over defense and settlement creates a fiduciary relationship with its insured. Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79 (1990).

Elements of Third-Party Bad Faith Failure to Settle (per Zumwalt v. Utilities Ins. Co., 228 S.W.2d 750 (Mo. 1950), adopted in Kansas):

1. An insurance policy has been issued to the insured
2. The policy gives the insurer exclusive right to contest or settle claims
3. The policy prohibits the insured from settling claims without insurer's consent
4. A claim has been asserted by a third party against the insured
5. The insurer refused to settle within policy limits
6. The insurer's refusal was based on fraud or bad faith
7. Judgment or settlement exceeds policy limits

Kansas Factors for Evaluating Bad Faith:

☐ Strength of the injured claimant's case on liability and damages
☐ Attempts by insurer to induce insured to contribute to settlement
☐ Failure to properly investigate circumstances and evidence
☐ Rejection of advice from insurer's own attorney or agent
☐ Failure to inform insured of compromise offers
☐ Financial risk exposure to each party if settlement refused
☐ Fault of insured in inducing rejection by misleading insurer
☐ Any other factors tending to establish or negate bad faith

D. Assignment of Bad Faith Claims

In Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79 (1990), the Kansas Supreme Court overruled prior precedent and held that "an insured's breach of contract claim for bad faith or negligent refusal to settle may be assigned." This allows injured third parties to acquire the insured's rights through a covenant not to execute in exchange for an assignment of the bad faith claim.

III. DETAILED CHRONOLOGY OF CLAIM HANDLING

The following chronology documents Insurer's handling of this claim and demonstrates the pattern of bad faith conduct:

Initial Claim Submission

Insurer's Response Timeline

Claim Handling Events

Event 1:

• Date: [__/__/____]
• Description: [________________________________]
• Insurer Representative: [________________________________]
• Documentation: [________________________________]
• Violation: [________________________________]

Event 2:

• Date: [__/__/____]
• Description: [________________________________]
• Insurer Representative: [________________________________]
• Documentation: [________________________________]
• Violation: [________________________________]

Event 3:

• Date: [__/__/____]
• Description: [________________________________]
• Insurer Representative: [________________________________]
• Documentation: [________________________________]
• Violation: [________________________________]

Event 4:

• Date: [__/__/____]
• Description: [________________________________]
• Insurer Representative: [________________________________]
• Documentation: [________________________________]
• Violation: [________________________________]

Event 5:

• Date: [__/__/____]
• Description: [________________________________]
• Insurer Representative: [________________________________]
• Documentation: [________________________________]
• Violation: [________________________________]

[Add additional events as necessary]

Settlement Negotiations (If Applicable)

IV. VIOLATIONS OF K.S.A. 40-2404 - UNFAIR CLAIMS SETTLEMENT PRACTICES

K.S.A. 40-2404(9) defines unfair claim settlement practices. While this statute does not create a private right of action (Jahnke v. Blue Cross and Blue Shield of Kansas, Inc., 353 P.3d 455, 465 (Kan. Ct. App. 2015)), violations are relevant to establishing breach of the implied covenant of good faith and fair dealing, lack of just cause under K.S.A. 40-256, and may be reported to the Kansas Insurance Commissioner.

Enumerated Violations Checklist

Check all that apply to this claim:

☐ (a) Misrepresentation of Facts or Policy Provisions
Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (b) Failure to Acknowledge Communications Promptly
Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (c) Failure to Adopt Reasonable Investigation Standards
Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (d) Refusal to Pay Without Reasonable Investigation
Refusing to pay claims without conducting a reasonable investigation based upon all available information.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (e) Failure to Affirm or Deny Coverage Timely
Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (f) Failure to Attempt Good Faith Settlement
Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (g) Compelling Litigation Through Low-Ball Offers
Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (h) Attempting Settlement for Less Than Reasonable Person Would Expect
Attempting to settle a claim for less than the amount to which a reasonable person would have believed they were entitled by reference to written or printed advertising material accompanying or made part of an application.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (i) Attempting to Settle on Altered Application
Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (j) Failing to Explain Appeals Process
Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made; failing to provide a reasonable explanation of the basis for denial of a claim or for the offer of a compromise settlement.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (k) Delaying Investigation or Payment
Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (l) Failing to Affirm or Deny Coverage in Reasonable Time
Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (m) Failing to Provide Necessary Forms Promptly
Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

☐ (n) Failure to Explain Denial or Settlement Basis
Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

• Specific violation: [________________________________]
• Date(s): [__/__/____]
• Evidence: [________________________________]

V. VIOLATIONS OF K.A.R. 40-1-34 - CLAIMS HANDLING REGULATIONS

Kansas Administrative Regulations impose specific timeframes and standards on insurers:

Acknowledgment Requirements (10 Days)

☐ Violation: Insurer failed to acknowledge receipt of claim within 10 working days.

• Claim submitted: [__/__/____]
• Acknowledgment received: [__/__/____] or ☐ Never received
• Days elapsed: [____] days

Coverage Decision Requirements (15 Days After Proof of Loss)

☐ Violation: Insurer failed to advise of acceptance or denial within 15 working days after receipt of properly executed proof of loss.

• Proof of loss submitted: [__/__/____]
• Coverage decision communicated: [__/__/____] or ☐ Never received
• Days elapsed: [____] days

Investigation Completion (30 Days or Status Updates)

☐ Violation: Insurer failed to complete investigation within 30 days and failed to provide written status updates every 45 days.

• Investigation initiated: [__/__/____]
• Last status update: [__/__/____]
• Days without update: [____] days

Statute of Limitations Notice

☐ Violation: Insurer failed to provide 30/60-day written notice before expiration of time limits.

• Applicable limitation period: [________________________________]
• Expiration date: [__/__/____]
• Notice provided: ☐ Yes ☐ No
• Date of notice: [__/__/____]

Settlement Practices

☐ Violation: Insurer attempted to settle first-party claim for less than repair cost without written agreement.
☐ Violation: Insurer refused settlement based on claim that others should bear responsibility.
☐ Violation: Insurer failed to include all required components in total loss valuation.
☐ Violation: Insurer failed to itemize and specify all deductions.

VI. DAMAGES CALCULATION

A. Contract Damages - Policy Benefits Owed

B. Consequential Damages

Consequential damages flowing naturally and proximately from the breach:

C. Emotional Distress Damages (Where Independent Tort Established)

Where Insurer's conduct constitutes an independent tort (fraud, intentional infliction of emotional distress), emotional distress damages may be recoverable:

D. Punitive Damages

Under Kansas law, punitive damages require proof of an independent tort committed with "malice, fraud or wanton disregard for the rights of others." Guarantee Abstract & Title Co. v. Interstate Fire & Cas. Co., 228 Kan. 532, 618 P.2d 1195 (1980).

Evidence supporting punitive damages:

☐ Fraud in claim investigation or handling
☐ Intentional misrepresentation of policy terms
☐ Pattern and practice of similar conduct
☐ Conscious disregard of claimant's rights
☐ Knowledge that conduct was wrongful
☐ Other: [________________________________]

E. Statutory Attorney's Fees

K.S.A. 40-256: Attorney's fees are recoverable where the insurer refused to pay the full amount of loss "without just cause or excuse."

K.S.A. 40-908: Attorney's fees for property insurance claims.

K.S.A. 40-3111: Attorney's fees for unreasonable delay or refusal to pay PIP benefits.

F. Excess Judgment Exposure (Third-Party Claims)

For third-party bad faith failure to settle claims:

VII. TOTAL DAMAGES SUMMARY

VIII. EVIDENCE CHECKLIST

The following evidence supports this demand and will be produced in litigation:

Policy and Claim Documents

☐ Complete insurance policy with all endorsements
☐ Insurance application and underwriting documents
☐ Premium payment records
☐ Claim submission documents and proof of loss
☐ All correspondence with Insurer
☐ Claim file notes (to be obtained in discovery)
☐ Recorded statements (if any)
☐ Reservation of rights letters
☐ Denial letters with stated reasons

Investigation Records

☐ Insurer's investigation reports
☐ Independent adjuster reports
☐ Engineering/expert reports obtained by Insurer
☐ Photographs and video documentation
☐ Witness statements obtained by Insurer
☐ Surveillance footage (if any)
☐ Medical records reviewed by Insurer
☐ IME reports (if applicable)

Damages Documentation

☐ Medical records and bills
☐ Property repair estimates/invoices
☐ Lost wage documentation
☐ Tax returns showing income loss
☐ Expert damage assessments
☐ Consequential damage documentation
☐ Mitigation expense records

Bad Faith Evidence

☐ Timeline of all communications
☐ Evidence of unreasonable delay
☐ Comparison to industry standards
☐ Similar claim handling by Insurer
☐ Insurer's claims manual/guidelines
☐ Training materials on claim handling
☐ Prior bad faith findings against Insurer
☐ Pattern and practice evidence
☐ Internal emails and memoranda (discovery)
☐ Testimony of former employees (if available)

Expert Witnesses

☐ Insurance industry standards expert
☐ Bad faith claims handling expert
☐ Damages expert (economist)
☐ Medical experts (if applicable)
☐ Property damage experts (if applicable)
☐ [________________________________]

IX. KANSAS CASE LAW SUPPORTING THIS DEMAND

Spencer v. Aetna Life & Casualty Insurance Co.

227 Kan. 914, 611 P.2d 149 (1980)

Established that while Kansas does not recognize an independent tort of bad faith in first-party claims, insureds have remedies under breach of contract and statutory provisions including K.S.A. 40-256 (attorney's fees), K.S.A. 40-908 (property insurance attorney's fees), and K.S.A. 40-3111 (PIP benefits). The court outlined the statutory framework for holding insurers accountable.

Glenn v. Fleming

247 Kan. 296, 799 P.2d 79 (1990)

Held that an insurance company may be liable for amounts in excess of policy limits if it fails to act in good faith and without negligence in defending and settling third-party claims. The court established that when determining whether to accept or reject a settlement offer, the insurer "must give at least the same consideration to the interests of its insured as it does to its own interests." Also held that bad faith claims are assignable, overruling Heinson v. Porter.

Morriss v. Coleman Co.

241 Kan. 501, 738 P.2d 841 (1987)

Established that every contract in Kansas imposes upon each party a duty of good faith and fair dealing in its performance and enforcement, adopting Restatement (Second) of Contracts § 205.

Guarantee Abstract & Title Co. v. Interstate Fire & Casualty Co.

228 Kan. 532, 618 P.2d 1195 (1980)

Addressed punitive damages in insurance cases, holding that where an independent tort warrants punitive damages, proof must show "malice, fraud or wanton disregard for the rights of others."

Spivey v. Safeco Insurance Co.

254 Kan. 237, 865 P.2d 182 (1993)

Clarified that attorney's fees under K.S.A. 40-256 are not payable where a good faith legal controversy exists regarding coverage.

Jahnke v. Blue Cross and Blue Shield of Kansas, Inc.

353 P.3d 455 (Kan. Ct. App. 2015)

Confirmed that K.S.A. 40-2404 does not create a private right of action, though violations remain relevant to establishing breach of the duty of good faith.

X. SETTLEMENT DEMAND

Demand Amount

Based on the foregoing, Claimant demands payment of the following:

Alternative Structured Settlement

Claimant would consider a structured settlement with the following terms:

☐ Immediate payment of policy benefits: $[________________]
☐ Payment of attorney's fees: $[________________]
☐ Additional compensation for bad faith: $[________________]
☐ [________________________________]

Conditions of Settlement

Any settlement must include:

☐ Full payment of all policy benefits owed
☐ Payment of statutory attorney's fees under K.S.A. 40-256
☐ Reimbursement of all litigation costs
☐ Withdrawal of any coverage defenses
☐ Agreement not to pursue subrogation (if applicable)
☐ Mutual release of claims
☐ Confidentiality provisions (if desired by Claimant)
☐ [________________________________]

XI. RESPONSE DEADLINE AND CONSEQUENCES

Response Required

Insurer must respond to this demand in writing within THIRTY (30) DAYS of receipt, specifically by [__/__/____].

Required Response Components

A complete response must include:

☐ Acceptance or rejection of demand
☐ If rejection, specific reasons for each component rejected
☐ Counteroffer (if any) with itemized breakdown
☐ Response to each alleged violation of K.S.A. 40-2404
☐ Explanation of Insurer's position on coverage
☐ Identification of any information needed for resolution

Consequences of Inadequate Response

If Insurer fails to respond adequately within the specified time:

1. Litigation: Claimant will file suit in the appropriate Kansas court seeking all damages described herein, plus additional damages accruing from continued delay.

2. Regulatory Complaint: A formal complaint will be filed with the Kansas Insurance Department alleging violations of K.S.A. 40-2404 and K.A.R. 40-1-34.

3. Evidence of Bad Faith: This demand letter and Insurer's inadequate response will be offered as evidence of bad faith and lack of just cause under K.S.A. 40-256.

4. Punitive Damages: Continued unreasonable conduct will support a claim for punitive damages based on wanton disregard for Claimant's rights.

5. Publication: Claimant reserves the right to publicize Insurer's conduct through appropriate channels.

XII. RESERVATION OF RIGHTS

Claimant expressly reserves all rights and remedies available under Kansas law, including but not limited to:

☐ Right to file suit at any time without further notice
☐ Right to amend damage calculations as additional damages accrue
☐ Right to seek punitive damages upon proper showing
☐ Right to file regulatory complaints
☐ Right to conduct discovery regarding Insurer's practices
☐ Right to seek class action certification if pattern established
☐ Right to assign claims to third parties
☐ All other rights under Kansas and federal law

Nothing in this demand letter shall be construed as a waiver of any claim, defense, or right available to Claimant.

XIII. COMMUNICATION INSTRUCTIONS

All communications regarding this demand should be directed to:

Claimant's Counsel:

[________________________________]
[Attorney Name]
[________________________________]
[Law Firm Name]
[________________________________]
[Street Address]
[________________________________]
[City, State, ZIP Code]

Telephone: [________________________________]
Facsimile: [________________________________]
Email: [________________________________]
Kansas Bar No.: [________________________________]

DO NOT CONTACT CLAIMANT DIRECTLY. All communications must be through undersigned counsel pursuant to Kansas Rules of Professional Conduct.

XIV. VERIFICATION

I, [________________________________], verify under penalty of perjury under the laws of the State of Kansas that the factual statements in this demand letter are true and correct to the best of my knowledge, information, and belief.

Claimant Signature: [________________________________]

Date: [__/__/____]

XV. ATTORNEY CERTIFICATION

I, the undersigned attorney, certify that:

1. I am licensed to practice law in the State of Kansas
2. I have reviewed the facts and law applicable to this claim
3. This demand is made in good faith and is supported by evidence
4. The damages claimed are reasonable and supported by documentation
5. This communication is intended to facilitate settlement

Attorney Signature: [________________________________]

Printed Name: [________________________________]

Kansas Bar Number: [________________________________]

Date: [__/__/____]

APPENDICES

The following documents are attached or will be provided upon request:

☐ Appendix A: Insurance Policy (complete with endorsements)
☐ Appendix B: Claim Correspondence Chronology
☐ Appendix C: Proof of Loss and Supporting Documentation
☐ Appendix D: Damage Calculations and Supporting Evidence
☐ Appendix E: Medical Records Summary (if applicable)
☐ Appendix F: Expert Reports (if obtained)
☐ Appendix G: [________________________________]
☐ Appendix H: [________________________________]

This demand letter is a settlement communication made pursuant to K.S.A. 60-452 and is inadmissible to prove liability for or invalidity of a claim or its amount. However, this letter may be used for other purposes, including to establish notice, the timeline of events, and Insurer's knowledge of the claim.