                      RECOMMENDED FOR FULL-TEXT PUBLICATION
                           Pursuant to Sixth Circuit Rule 206
                                  File Name: 12a0158p.06

               UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                 _________________


                                               X
                                                -
 CYNTHIA PHELPS,
                                                -
                              Plaintiff-Appellant,
                                                -
                                                -
                                                    No. 10-6085
          v.
                                                ,
                                                 >
                                                -
                                                -
 STATE FARM MUTUAL AUTOMOBILE

                        Defendant-Appellee. -
 INSURANCE COMPANY,
                                               N
                  Appeal from the United States District Court
               for the Western District of Kentucky at Louisville.
            No. 3:07-cv-291—Charles R. Simpson III, District Judge.
                           Decided and Filed: May 25, 2012
    Before: BATCHELDER, Chief Judge; CLAY and GILMAN, Circuit Judges.

                                  _________________

                                       COUNSEL
ON BRIEF: Sara B. Gregory, Lance W. Turner, Thomas E. Carroll, CARROLL &
TURNER, P.S.C., Monticello, Kentucky, for Appellant. David T. Klapheke, BOEHL
STOPHER & GRAVES, LLP, Louisville, Kentucky, for Appellee.
    GILMAN, J., delivered the opinion of the court in which CLAY, J., joined.
BATCHELDER, C. J. (pp. 15–19), delivered a separate dissenting opinion.
                                  _________________

                                        OPINION
                                  _________________

        RONALD LEE GILMAN, Circuit Judge. Cynthia Phelps alleges that State Farm
Mutual Automobile Insurance Company violated Kentucky’s Unfair Claims Settlement
Practices Act (UCSPA) in its processing of her third-party insurance claim. The district
court granted summary judgment in favor of State Farm on the ground that Phelps had
failed to present sufficient evidence to show that the three years taken to settle her claim
raised a genuine dispute as to whether State Farm had acted in bad faith. For the reasons

                                             1
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 2


set forth below, we REVERSE the judgment of the district court and REMAND the
case for further proceedings consistent with this opinion.

                                    I. BACKGROUND

       This case arises out of an automobile accident that occurred on July 18, 2003.
As Phelps was pulling into a gas station in Jefferson County, Kentucky, Lindsey Kirby
pulled out of the station in front of Phelps without warning. The two cars collided,
causing injuries to Phelps’s spine that ultimately required surgery in October 2003.
Kirby was insured by State Farm under an automobile insurance policy with a $50,000
limit of liability. State Farm concedes that Kirby was at fault for the accident and that
State Farm was obligated to provide the insurance coverage.

       Not long after the accident, Phelps filed a third-party liability claim with State
Farm for personal injuries and property damage arising out of the accident. Adjuster
Denise Ray was assigned to the claim. Ray sent Phelps a medical-authorization form in
September 2003, which Phelps signed and returned that same month. On October
2, 2003, State Farm transferred Phelps’s claim to a second adjuster, Bob Nieses. Nieses
sent Phelps’s counsel, Thomas Carroll, a letter requesting a list of Phelps’s medical
providers. Nieses received a response within two weeks. He then began collecting
Phelps’s medical records.

       Phelps’s claim file shows minimal activity until February 11, 2004, when State
Farm first noted that Phelps had a prior back injury in 1999 in the same part of her body
as the present injury. Nieses determined that additional information was needed to
evaluate Phelps’s claim and to separate any prior injuries from the current claim. His
file note indicates: “Need to gather information on wage loss, medical bills, and prior
condition.” But there is no evidence that Phelps was made aware of State Farm’s need
for this information at the time.

       Carroll submitted a “settlement package” that was received by State Farm on
April 2, 2004. The package included documentation regarding Phelps’s surgery and
related medical and wage-loss costs totaling $22,620.22. The package did not include
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                       Page 3


a demand, but it expressed Phelps’s interest in reaching a settlement and made a request
for information about State Farm’s policy limits.

       State Farm apparently did little to process Phelps’s claim for several months after
receiving her settlement package. Nieses testified in his deposition that he did not
complete a claim valuation because he considered it “premature” due to the outstanding
information about Phelps’s 1999 back injury. In July 2004, State Farm substituted yet
another adjuster, Amy Lirely, to process Phelps’s claim. On September 14, 2004, Lirely
requested information from Phelps’s attorney about the 1999 injury. State Farm
allegedly “received permission to examine PIP [personal injury protection] records”
relating to Phelps six days later, but neither party has explained what these records
covered.

       By October 24, 2004, State Farm had received the medical records relevant to
Phelps’s 1999 injury. But State Farm contends that the records it received covered only
Phelps’s immediate treatment following the 1999 injury and did not include
documentation about her treatment in the years following that injury. Lirely testified
that the missing information was relevant to determine how well Phelps had recovered
from the 1999 injury by the time of the present accident. Nonetheless, Lirely proceeded
to complete a claim evaluation based on the available records, valuing Phelps’s claim
between $24,620 and $49,620. Phelps argues that this range was outrageously low given
the documentation that State Farm had before it.

       State Farm made an initial settlement offer of $25,000 four days later, on October
28, 2004. According to State Farm, its offer did not include compensation for future
wage loss or future impairment of earnings because Phelps failed to include any such
information in her settlement package. In addition, medical records from December
2003 indicated to State Farm’s adjusters that Phelps had substantially recovered from
her July 2003 injury and probably would not experience any future impairments.

       Carroll did not directly respond to State Farm’s offer, but Phelps contends that
Carroll made additional requests for State Farm to reveal its policy limits over the course
of the fall and that Lirely refused to provide this information. Lirely, however, disputes
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 4


ever being asked about the policy limits. In any event, having heard nothing from
Carroll about her offer, Lirely left a phone message for him in January 2005, but the call
was not returned.

       On March 29, 2005, Lirely finally heard from Carroll, who rejected State Farm’s
$25,000 offer and demanded $150,000 to settle the claim. Although State Farm
criticizes Carroll for making a demand that far exceeded the policy limits, there is no
evidence that Lirely contemporaneously told Carroll that the demand in fact exceeded
the policy limits or that Lirely disclosed any information about the policy limits.

       Phelps eventually filed suit against Kirby, the driver insured by State Farm, in
Kentucky state court in May 2005. In late May and early June, State Farm’s attorney
submitted discovery requests to Carroll. Carroll did not respond to these requests until
October 25, 2005. State Farm asserts that the discovery produced pertinent new
information, including a comprehensive medical-records release and wage-loss
documentation. But Phelps contends that the information obtained through discovery
was not necessary to the adjudication of her claim and that State Farm had all of the
pertinent information that it needed as of April 2, 2004, when it received the settlement
package (or, at the very latest, as of October 24, 2004, when it received information
about Phelps’s 1999 injury).

       On November 3, 2005, State Farm once again replaced Phelps’s claims adjuster,
this time assigning the claim to Lillian Jones. Meanwhile, discovery in the pending
lawsuit continued through the winter. Phelps was deposed on March 22, 2006. She
testified that she had fully recovered from her 1999 injury prior to the 2003 accident.
State Farm’s attorney determined that Phelps was a credible witness and recommended
that State Farm increase its settlement offer.

       Carroll first demanded the policy-limits amount of $50,000 on April 11, 2006.
State Farm countered with an offer of $40,000 the following day, which Carroll rejected.
Finally, State Farm offered $50,000, the full policy limits, on April 13, 2006. Phelps
accepted the offer shortly thereafter, which resolved her pending suit against Kirby.
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 5


       In May 2007, Phelps filed the present lawsuit, alleging that State Farm had
violated Kentucky’s UCSPA through its conduct in processing her claim. The lawsuit
originated in state court, but State Farm removed the case to the United States District
Court for the Western District of Kentucky based on diversity jurisdiction. Following
discovery, State Farm filed a motion for summary judgment. Phelps relied in her
response on the testimony of two expert witnesses, Gary Fye and David Huff,
concerning the allegedly unreasonable claims-handling practices of State Farm.

       In his report, Fye describes himself as a “national claim handling expert,”
presently employed as a claim-practices analyst at the Gary T. Fye Company. He has
previously worked as a licensed independent analyst and as a claims adjuster or manager
for four different insurance companies. His educational background is varied, but
largely unrelated to the insurance industry (with the exception of some course work in
Business Administration). Fye has also participated in several dozen insurance-related
educational programs, given a multitude of presentations, and offered expert testimony
in many federal and state court cases.

       His report provides background information on the insurance industry and State
Farm’s general methods for handling claims, focusing on its financial motivations. With
respect to Phelps’s claims, Fye presented the following opinions:

       State Farm treated this claim as an opportunity to seek an underpayment
       by unreasonably making and maintaining a lowball offer to the claimant,
       whom it considered an adversary. BI [(Bodily Injury)] liability coverage
       is meant to pay the sums owed by Kirby, within the policy limit, without
       a delay or a trial. It appears State Farm attempted to achieve its own
       outcome goals by freezing its assessment of the range of value and not
       moving.
       State Farm incorrectly substituted its own subjective and unreasonable
       value for the claim. State Farm offered what its adjuster felt the
       beginning point of negotiations should be, but didn’t investigate what a
       jury might find. It particularly avoided obtaining an Independent
       Medical Examination (IME) that could only support the claimant’s
       position with regard to the longer term effects of this type of injury.
       Knowing that a jury’s determination forms the basis of recovery under
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                         Page 6


        this particular coverage, the file should have the facts that support paying
        the claim, not just facts that suggest not paying it.
        This claim became a limit claim on October 15, 2003 when Ms. Phelps
        had lumbar spine surgery. There was no “new information” in terms of
        evaluation. State Farm made no attempt to use the policy to soften the
        financial consequences of the accident for her. It withheld its limit
        information, and stood on its lowball subjective offer of $25,000 in the
        face of what amounted to authority for the policy limit. Even when it
        paid the policy limit, it tried to save $10,000 first. State Farm knew or
        should have known during this time that it was at risk of extracontractual
        liabilities for both it and its insured while adopting this stonewall
        position in non-compliance with Kentucky’s rules for fair
        claim-handling.
        State Farm’s redesigned claim operations and performance-based pay
        programs undercut Kentucky’s insurance laws and the purpose of BI
        liability insurance. State Farm is aware of this, yet its programs remain
        undisclosed to the insuring public both at point of sale and when a claim
        is reported.
        Among the affirmative duties of an insurer is to fulfill the purposes of the
        coverage. State Farm’s handling of the Phelps case did not provide the
        level of service the public should expect from an insurer.

        Huff, Phelps’s other expert witness, is the CEO of Integrated Risk Management,
Inc., a business consulting firm. His background includes positions in the legal and
insurance departments of different businesses and in private legal practice. He has
received several insurance-related certifications and is a member of numerous
professional organizations in the insurance industry. Huff graduated with a bachelor of
arts degree from Berea College in Kentucky and a law degree from the University of
Kentucky College of Law.          His report states:     “[I]t is my opinion that State
Farm . . . acted in bad faith by failing to fulfill its obligation under its insurance policy
to pay Cynthia Phelps for her damages and injuries in a reasonable and timely manner
and State Farm knew or should have known that it had no reasonable basis in law or fact
for such a failure.” He then notes in a bulleted list the facts from the record that he
believes supports this conclusion.

        The district court granted summary judgment in favor of State Farm without
discussing the testimony of either of Phelps’s expert witnesses. It concluded that all
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                      Page 7


reasonable jurors would find that the delay in processing Phelps’s claim was solely
attributable to Phelps’s own counsel and to the time reasonably needed for State Farm’s
investigation. The court also found that Phelps had failed to prove that an improper
purpose—rather than a lack of evidence—drove State Farm’s allegedly low settlement
offers. This timely appeal followed.

                                    II. ANALYSIS

A.     Standard of review

       We review de novo a district court’s grant of summary judgment. ACLU of Ky.
v. Grayson Cnty., Ky., 591 F.3d 837, 843 (6th Cir. 2010). Summary judgment is proper
where no genuine dispute of material fact exists and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a). In considering a motion for
summary judgment, we must draw all reasonable inferences in favor of the nonmoving
party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
The central issue is “whether the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as a matter
of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

B.     Kentucky’s Unfair Claims Settlement Practices Act

       Kentucky’s UCSPA is intended “to protect the public from unfair trade practices
and fraud,” State Farm Mut. Auto. Ins. Co. v. Reeder, 763 S.W.2d 116, 118 (Ky. 1988),
and “imposes what is generally known as the duty of good faith and fair dealing owed
by an insurer to an insured,” Knotts v. Zurich Ins. Co., 197 S.W.3d 512, 515 (Ky. 2006).
The UCSPA fundamentally requires that “a good faith attempt be made to effectuate a
prompt, fair and equitable settlement.” Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d
437, 454 (Ky. 1999); accord Coomer v. Phelps, 172 S.W.3d 389, 395 (Ky. 2005).
Moreover, the UCSPA “should be liberally construed so as to effectuate its purpose.”
Reeder, 763 S.W.2d at 118.
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                       Page 8


         Insurances companies are prohibited by the UCSPA from engaging in 14 specific
unfair practices. Ky. Rev. Stat. § 304.12-230. Phelps alleges that State Farm violated
the following subsections:

         (3)    Failing to adopt and implement reasonable standards for the
                prompt investigation of claims arising under insurance policies;
         (4)    Refusing to pay claims without conducting a reasonable
                investigation based upon all available information; . . .
         (6)    Not attempting in good faith to effectuate prompt, fair and
                equitable settlements of claims in which liability has become
                reasonably clear; [and]
         (7)    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;

Id. § 304.12-230. An insurance company’s violation of the UCSPA creates a private
cause of action both for the named insured and for those who have claims against named
insureds, and the same standards govern both types of cases. Motorists Mut., 996
S.W.2d at 452; see also King v. Liberty Mut. Ins. Co., 54 F. App’x 833, 836 (6th Cir.
2003).

         In order to state a claim under the UCSPA, Phelps must meet a high threshold
standard that requires evidence of “intentional misconduct or reckless disregard of the
rights of an insured or a claimant” by the insurance company that would support an
award of punitive damages. Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993)
(describing this standard as that of “outrageous” conduct by the insurance company);
United Services Auto. Ass’n v. Bult, 183 S.W.3d 181, 186 (Ky. Ct. App. 2003)
(describing the threshold showing as “high indeed”). After meeting this initial showing,
Phelps must establish the following three elements of a bad-faith claim:

         (1) the insurer must be obligated to pay the claim under the terms of the
         policy; (2) the insurer must lack a reasonable basis in law or fact for
         denying the claim; and (3) it must be shown that the insurer either knew
         there was no reasonable basis for denying the claim or acted with
         reckless disregard for whether such a basis existed.
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                      Page 9


Wittmer, 864 S.W.2d at 890 (internal quotation marks omitted); accord Motorists Mut.,
996 S.W.2d at 452; Med. Protective Co. v. Wiles, --- S.W.3d ---, 2011 WL 2420011, at
*6 (Ky. Ct. App. Oct. 21, 2011). Oddly, the second and third elements of this test
depend on evidence similar to the threshold inquiry. King, 54 F. App’x at 838.

       “The appropriate inquiry is whether there is sufficient evidence from which
reasonable jurors could conclude that in the investigation, evaluation, and processing of
the claim, the insurer acted unreasonably and either knew or was conscious of the fact
that its conduct was unreasonable.” Farmland Mut. Ins. Co. v. Johnson, 36 S.W.3d 368,
376 (Ky. 2000) (internal quotation marks omitted). Evidence about problematic
“settlement behavior during litigation” may be considered as part of this inquiry. Knotts,
197 S.W.3d at 517, 522-23 (internal quotation marks omitted).

       The Kentucky Supreme Court has cautioned insurance companies that “coming
up with an amount that is within the range of possibility is not an absolute defense to a
bad faith case.” Farmland Mut., 36 S.W.3d at 376 (internal quotation marks omitted);
cf. Wittmer, 864 S.W.2d at 892 (suggesting that a low offer might serve as evidence of
bad faith). To comply with their obligations under the statute, insurers “should not force
an insured to go [through] needless adversarial hoops to achieve [her] rights under the
policy. [They] cannot lowball claims or delay claims hoping that the insured will settle
for less.” Farmland Mut., 36 S.W.3d at 376 (internal quotation marks omitted).

       But “mere delay in payment does not amount to outrageous conduct absent some
affirmative act of harassment or deception. . . . or evidence supporting a reasonable
inference that the purpose of the delay was to extort a more favorable settlement or to
deceive the insured with respect to the applicable coverage.”           Motorists Mut.,
996 S.W.2d at 452-53 (citation omitted). Nor is the insurer’s below-policy-limits offer
considered evidence of bad faith per se, particularly where “the claimants never
demanded payment of the policy limits or any other sum.” Id. at 453 (emphasis
omitted); see also Coomer, 172 S.W.3d at 395 (noting that the UCSPA does not require
that settlement offers “always provide wholly accurate or complete compensation for an
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 10


injury”). And an insurer may refuse a demand exceeding the policy limits without
running afoul of the UCSPA. Motorists Mut., 996 S.W.2d at 453.

        In addition, an insurer is entitled to challenge a claim through litigation if the
claim is “fairly debatable,” Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker
Serv., Inc., 880 S.W.2d 886, 889-90 (Ky. Ct. App. 1994), on either “the law or the facts.”
Wittmer, 864 S.W.2d at 890 (internal quotation marks omitted). The Kentucky Supreme
Court revisited the definition of “fairly debatable” in Farmland Mutual, which clarified
that “Empire Fire does not stand for the proposition . . . that a disputed factual matter
requires dismissal of a bad faith claim as a matter of law” and explained that “the
existence of jury issues on the [underlying] contract claim does not preclude the bad
faith claim.” Farmland Mut., 36 S.W.3d at 375. It distinguished Empire Fire as a case
involving unresolved legal questions about the insurer’s liability. Id. Farmland Mutual
then held that “although elements of a claim may be ‘fairly debatable,’ an insurer must
debate the matter fairly” and “still is obligated under the KUSCPA to investigate,
negotiate, and attempt to settle the claim in a fair and reasonable manner.” Id. Whether
a claim may be considered “fairly debatable” is a question of fact for the jury. Id. at 376.

        Finally, we note that our dissenting colleague’s disagreement with the reversal
of summary judgment in this case is primarily based on the “intentional misconduct or
reckless disregard” standard for bad faith set forth in Wittmer, 864 S.W.2d at 890. We
acknowledge that the Kentucky cases still recognize Wittmer’s punitive-damages
standard despite the Kentucky Supreme Court’s later pronouncement that “the
appropriate inquiry is whether . . . the insurer acted unreasonably,” Farmland Mut.,
36 S.W.3d at 375 (internal quotation marks omitted). See, e.g., Wiles, 2011 WL
2420011, at *7-9. This strikes us as confusing because a claim will obviously meet
Farmland’s lower standard of “unreasonableness” if it has first met Wittmer’s higher
standard of “reckless disregard.” Wittmer’s threshold inquiry thus appears to render
superfluous the merits inquiry into an insurance company’s alleged bad faith. In any
event, this seems to be the current state of Kentucky law.
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 11


        But even after acknowledging that Phelps has to meet Wittmer’s higher threshold
standard, we believe that the facts here would allow reasonable jurors to so find. This
is not to say that they must—or even that they will—find for Phelps, but simply that we
believe that the district court erred in concluding that no reasonable juror could find that
Phelps has met this standard based on the analysis set forth in Part II.C. below.

C.      Summary judgment on Phelps’s UCSPA claim was improper

        The district court granted summary judgment for State Farm because it concluded
that Phelps had failed to present sufficient evidence that State Farm acted unreasonably
in the processing of her claim. See Farmland Mut., 36 S.W.3d at 375. But the district
court’s opinion draws inferences that favor State Farm rather than Phelps, and it failed
to consider—or explain why it did not consider—Phelps’s expert-witness testimony. In
our view, Phelps presented sufficient evidence to raise a genuine dispute as to whether
State Farm violated the UCSPA in handling her claim.

        First, State Farm’s initial offer of $25,000 was just barely above the low end of
both its own evaluation of the claim ($24,620 to $49,620) and Phelps’s documentation
of medical and wage-loss costs ($22,620.22). The offer failed to reasonably account for
Phelps’s pain and suffering or future wage loss. Although State Farm argues that it was
not required to include these items in its settlement offer because Phelps had not
provided any proof of her pain and suffering or future wage loss, that does not excuse
State Farm’s failure to include an approximate amount for these damages based on a
likely jury verdict. See Farmland Mut., 36 S.W.3d at 375-76 (explaining that an insurer
“cannot lowball claims . . . hoping that the insured will settle for less,” and it instead
must “attempt to settle the claim in a fair and reasonable manner” (internal quotation
marks omitted)); Motorists Mut., 996 S.W.2d at 454 (cautioning that, although the
“UCSPA does not require that a claim be evaluated, or that it be evaluated correctly,”
it does require “that a good faith attempt be made to effectuate a prompt, fair and
equitable settlement”). And State Farm has offered no other explanation for its low
offer. Whether State Farm acted reasonably in failing to include these damages in its
initial settlement offer thus presents a question of fact for the jury.
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                      Page 12


        Another ground on which a jury could reasonably find that State Farm exhibited
bad faith is the extensive delay of nearly three years before Phelps’s claim was settled.
See id. at 376 (providing that an insurer “cannot . . . delay claims”). Several cases have
determined that delays of substantially shorter length constitute more than “mere delay”
and instead may serve as evidence of bad faith. See Med. Protective Co. v. Wiles, ---
S.W.3d ---, 2011 WL 2420011, at *9 (Ky. Ct. App. Oct. 21, 2011) (involving a delay of
27 months between the injury and the initial settlement offer); King v. Liberty Mut. Ins.
Co., 54 F. App’x 833, 837-38 (6th Cir. 2003) (involving a delay of 18 months from the
date of a follow-up inquiry about the settlement through the date that the company
finally checked its purged files). Although the early months of the claims process—from
September 2003 through February 2004—may be attributed to the time needed for a
reasonable investigation, a legitimate question arises as to whether the delay involved
in obtaining records from Phelps’s 1999 injury was reasonable. State Farm first noted
this earlier injury in its February 11, 2004 log notes, but there is no evidence that records
were requested from Phelps until September of that year. There is no explanation in the
record for this six-and-a-half month delay beyond the fact that the claims adjuster was
replaced for the second time in the interim. Cf. King, 54 F. App’x at 837-38 (concluding
that an 18-month delay for investigatory purposes was unreasonable).

        State Farm’s position that this information was necessary to evaluate Phelps’s
claim may also be construed as a delay tactic. Viewing the facts in the light most
favorable to Phelps, the settlement package submitted in March 2004 included all of the
information needed to settle her claim. The jury may infer that State Farm raised the
prior-injury issue at this time in order to delay making a settlement offer. This inference
is bolstered by the fact that State Farm had access to databases reporting prior insurance
claims and could have uncovered the existence of Phelps’s 1999 injury well before
receiving her allegedly deficient medical records. Similarly, adjustor Nieses’s refusal
to complete an initial valuation before receiving these records—on the ground that such
an evaluation would be “premature” (despite the fact that settlements are often reached
at premature stages in litigation)—could also be considered a delay tactic.
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                    Page 13


       Phelps’s case further involves some general evidence of delay tactics, some
questionable delays in the processing of her claim, and a nearly three-year delay before
payment. We recognize, of course, that some of the delay in this case is due to the
apparent lack of diligence by Phelps’s own counsel. But the majority of the delay, when
viewed in the light most favorable to Phelps, seems fairly attributable to State Farm.

       Another inference of bad faith arises from State Farm’s prolonged refusal to
disclose its policy limits, particularly after Carroll made a demand that far exceeded the
limit. State Farm disputes whether any request to disclose policy limits was ever made,
but the district court was obligated to view the record in the light most favorable to
Phelps when considering State Farm’s motion for summary judgment. In addition, State
Farm argues that it was not required under Kentucky law to disclose its policy limits, a
contention for which State Farm offers no support but to which Carroll conceded during
his deposition. But even if an insurer is not generally obligated to disclose its policy
limits, the failure to promptly offer its limits as soon as it knows or should have known
that a reasonable evaluation of the claim is in excess of the limit could support an
inference that State Farm was not attempting to negotiate in good faith. Cf. Coppage v.
Firemen’s Fund Ins. Co., 379 F.2d 621, 624 n.3 (6th Cir. 1967) (declining to hold under
Tennessee law that “an insurer has a general duty to disclose policy limits,” but
determining that “on the record before us, the withholding of this information was a
circumstance which the jury could consider on the question of bad faith”).

       The record further includes some evidence of troubling claims-handling practices
by State Farm both in this case and in general. These include switching claims adjustors
four times without explanation, habitually making offers at the low end of valuation
ranges, refusing to increase an offer without documentation of additional damages,
failing to ask Phelps to submit to an independent medical examination, and failing to
include facts in the claim file that would support a jury verdict in Phelps’s favor. Two
of these practices—extending low offers and refusing to increase the valuation
range—find support in the deposition testimony of State Farm’s own claims adjustors.
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 14


        Finally, we note the critique of State Farm’s handling of the claim in question
that is documented in the reports from Phelps’s expert witnesses Fye and Huff, which
the district court totally failed to consider. State Farm did not move to exclude the
testimony of these experts, and Phelps relied on their reports in her response to State
Farm’s motion for summary judgment. The district court therefore had a duty to at least
address their reports. See Fed. R. Civ. P. 56(c)(3) (mandating that “[t]he court need
consider only the cited materials” in the parties’ briefs); see also Logan v. Denny’s Inc.,
259 F.3d 558, 568 (6th Cir. 2001) (finding that “the district court’s analysis . . . [is] in
complete contravention to the requirement that the evidence—all of the evidence—be
viewed in the light most favorable to the nonmoving party” on summary judgment). Its
failure to do so is troubling, especially because the opinions of the two expert witnesses
raise a genuine dispute as to State Farm’s compliance with the UCSPA in this case.

        All of this is not to say that a jury will ultimately find that State Farm violated
the UCSPA by processing Phelps’s claim in bad faith. But the evidence presented by
Phelps is sufficient to raise a genuine dispute as to this issue. The proof, in other words,
is not “so one-sided that [State Farm] must prevail as a matter of law.” See Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

                                  III. CONCLUSION

        For all of the reasons set forth above, we REVERSE the judgment of the district
court and REMAND the case for further proceedings consistent with this opinion.
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 15


                                      __________

                                       DISSENT
                                      __________

       ALICE M. BATCHELDER, Chief Judge, dissenting. I respectfully, though
strongly, dissent from the majority’s decision to reverse the district court’s summary
judgment order because there is simply no evidence in the record establishing that State
Farm acted in bad faith. The majority completely denies the Kentucky Supreme Court’s
requirement that “[b]efore [a] cause of action [under the U.C.S.P.A.] exists in the first
place, there must be evidence sufficient to warrant punitive damages,” which requires
proof that is “sufficient for the jury to conclude that there was conduct that is
outrageous[] because of the defendant’s evil motive or his reckless indifference to the
rights of others.” Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993) (internal citation
and quotation marks omitted). Phelps has failed to make this threshold showing. On
summary judgment, Phelps must “do more than simply show that there is some
metaphysical doubt as to the material facts”—she must present specific facts establishing
bad faith. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
She has wholly failed to do so. The majority infers bad faith from four of State Farm’s
actions, but even when those actions are viewed in the light most favorable to Phelps,
they are insufficient to establish bad faith of an outrageous nature.

       First, the $25,000 settlement offer is insufficient to establish bad faith because
it adequately accounted for Phelps’s claimed loss.            Phelps gave State Farm
documentation indicating that her actual damages were $22,620.22, and, as the majority
recognizes, Phelps did not provide any documentation of her pain and suffering or future
wage loss. Nevertheless, the majority faults State Farm for failing to include in its offer
“an approximate amount for these damages based on a likely jury verdict.” This
conclusion completely overlooks State Farm’s evaluation range, from which State Farm
derived the $25,000 offer. In this evaluation, State Farm explicitly accounts for pain and
suffering. Moreover, even though Kentucky does not require an insurance settlement
offer to include a jury verdict estimate, the record shows that in creating its evaluation
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 16


range for her claim, State Farm did account for how a jury would consider Phelps’s
medical evidence.

        Considering these facts in the light most favorable to Phelps does not establish
that State Farm’s initial offer was in bad faith. Though the offer was at the low end of
the evaluation range, it covered the cost of Phelps’s past medical bills and lost wages,
which was the only documented loss that State Farm had at the time it made the offer.
“[C]oming up with an amount that is within the range of possibility is not an absolute
defense to a bad faith case.” Farmland Mut. Ins. Co. v. Johnson, 36 S.W.3d 368, 376
(Ky. 2000) (internal quotation marks and citation omitted). But the evidence that State
Farm had at the time of the offer, viewed in the light most favorable to Phelps, does not
indicate the outrageous conduct or reckless disregard for her rights that is necessary for
a bad faith claim under the U.C.S.P.A. The offer included the only documented damages
that State Farm was aware of, and Phelps has not presented specific facts from either her
medical documents or her experts showing that State Farm deliberately neglected to
include additional damages in the offer.

        Second, the delays along the way of the settlement process are likewise not
indicative of bad faith. The majority exaggerates the importance of the various delays
during Phelps’s settlement by grouping them together as one “nearly three-year long
delay,” when the majority’s main concern rests on only one particular instance of
delay—the delay between February 11, 2004, and September 23, 2004.                    Even
considering the entire three-year settlement process as a delay is insufficient to establish
bad faith absent evidence of evil motive or reckless indifference to Phelps’s rights. See
United Servs. Auto. Ass’n v. Bult, 183 S.W.3d 181, 186 (Ky. Ct. App. 2003) (“Evidence
of mere negligence or failure to pay a claim in timely fashion will not suffice to support
a claim for bad faith. Inadvertence, sloppiness, or tardiness will not suffice; instead, the
element of malice or flagrant malfeasance must be shown.”). Though the majority cites
two non-binding cases to support its conclusion that the overall time to settle was too
long, those cases involve delays that are accompanied with evidence of improper motive
or reckless indifference. See Med. Protective Co. v. Wiles, No. 2010-CA-000262, 2011
No. 10-6085        Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 17


WL 2420011, at *8–9 (Ky. Ct. App. Oct. 21, 2011) (finding evidence of “questionable
motive” and stating that “it must be kept in mind that mere delay in payment does not
amount to outrageous conduct absent some affirmative act of harassment or deception
. . . . In other words, there must be proof or evidence supporting a reasonable inference
that the purpose of delay was to extort a more favorable settlement or to deceive the
insured with respect to the applicable coverage” (internal citation omitted)); King v.
Liberty Mut. Ins. Co., 54 F. App’x 833, 837–38 (6th Cir. 2003) (finding evidence of
reckless disregard for the claimant’s rights where the insurer refused to acknowledge a
prior settlement agreement that the insurer had in its own files and failed to search those
files for 18 months, and where there were disputed facts regarding an employee’s
knowledge of the prior settlement).

       After faulting the three-year settlement process, the majority discusses its main
concern—the February to September 2004 delay, during which time State Farm was
gathering information regarding Phelps’s prior spine injuries. The majority concludes
that this delay was unreasonable because information regarding Phelps’s prior medical
history was not necessary to evaluate her claim. However, the majority’s focus on the
reasonableness of the delay goes to the ultimate question of the U.C.S.P.A. claim, and
it fails to address the threshold question of whether there is any evidence of bad faith.
United Servs. Auto. Ass’n, 183 S.W.3d at 186 (“Absent such evidence of egregious
behavior, the tort claim predicated on bad faith may not proceed to a jury.”). Further,
the purpose for this delay is not evidence of bad faith because, at the very least, the
information was relevant to State Farm’s evaluation of the cause and extent of Phelps’s
2003 injury, as her prior injury was to the same spinal region. The majority infers that
in offering this reason, State Farm is disingenuous because State Farm had access to a
database that would have “uncovered the existence of Phelps’s 1999 injury well before”
receiving her medical records. However, State Farm already knew about the existence
of Phelps’s prior spinal injury prior to receiving the medical records—that was why
State Farm requested the records. To the extent the majority implies that the database
would have given State Farm earlier information that would have been identical to the
information it eventually learned from the medical records, that argument does not
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 18


comport with the evidence in the record. Phelps’s expert, Gary Fye, stated that State
Farm has access to an external reporting service that would automatically inform State
Farm whether Phelps had any prior injuries or claims; however, Fye stated that this
service would not necessarily disclose information regarding the medical providers for
those prior claims. Nor is there any information in the record that this service would
disclose any of the details of the prior injury or claim that the medical records would
have disclosed. Essentially, the index would have informed State Farm that there was
a prior injury, and it may have given State Farm the names of the medical providers for
that injury, but there is no indication that it would have given the details of the injury,
as the majority suggests. Even viewed in the light most favorable to Phelps, this
evidence does not indicate that the delay in obtaining her prior medical records
constitutes the bad faith that she is required to show to establish her U.C.S.P.A. claim.

        Third, the majority’s conclusion that State Farm’s failure to disclose its policy
limit constitutes bad faith lacks any basis in law or logic. Viewing the evidence in
Phelps’s favor, and presuming for this purpose that Phelps’s counsel, Carroll, had
requested information regarding the policy limit, State Farm did not act in bad faith
when it did not disclose it. Kentucky law does not require insurers to disclose their
policy limits during settlement negotiations, and neither Phelps nor the majority have
cited a Kentucky case that has indicated that failing to disclose a policy limit constitutes
bad faith under the U.C.S.P.A. More importantly, Phelps has not presented any evidence
to show that this failure to disclose the policy limit stemmed from State Farm’s evil
motive or reckless indifference to her rights. See Wittmer, 864 S.W.2d at 890. Without
such evidence, the failure to disclose the policy limit cannot support an inference of bad
faith under the U.C.S.P.A.

        Moreover, the record shows that State Farm offered to pay its policy limit as soon
as it knew that a reasonable evaluation of the claim was in excess of the limit—a practice
that the majority concludes is proper. On March 23, 2006, State Farm indicated on its
activity log that its counsel believed Phelps “may be a limits case.” On April 11, 2006,
State Farm agent Jones received authority to increase the settlement offer to the $50,000
No. 10-6085         Phelps v. State Farm Mutual Auto. Ins. Co.                     Page 19


limit. Jones offered Carroll $40,000, which he refused and then demanded $50,000.
State Farm responded by offering the policy limit, and on April 13, 2006, Carroll
accepted on Phelps’s behalf. Even viewing these facts in Phelps’s favor, State Farm’s
failure to disclose the policy limits until its conclusion that she was a “limits case” does
not establish bad faith. Instead, it is more indicative of State Farm’s effort to engage in
normal settlement negotiation strategy, typical in civil litigation.

        Finally, the majority takes issue with some of State Farm’s claims-handling
practices but again fails to address how these practices exhibit the type of bad faith
stemming from an evil motive or reckless indifference that Phelps needs to present.
There is simply no evidence in the record, including Phelps’s experts’ depositions, that
any of State Farm’s actions rose to the level of bad faith that is required under the
U.C.S.P.A. Phelps’s experts do nothing more than make conclusory statements that
State Farm acted with improper motives, and they do not present any evidence to support
those conclusions other than their own inferences. “Although juries are generally free
to believe expert witnesses, a plaintiff cannot survive summary judgment with an
expert’s bare opinion on the ultimate issue.” Hirsch v. CSX Transp., Inc., 656 F.3d 359,
363 (6th Cir. 2011) (internal citations omitted). Their reports and depositions discuss
the training and resources available to State Farm agents, but that evidence does not
establish evil motive or reckless indifference to claimants’ rights, even when viewed in
the light most favorable to Phelps.

        By failing to apply Kentucky’s law requiring that a bad faith claim must be
supported by actual evidence of bad faith, the majority has opened the door to cries of
“bad faith” each time a discontented claimant encounters delays and challenges prior to
settlement. Therefore, I must respectfully dissent.
