PAINTSVILLE—U.S. District Court Judge Amul R. Thapar issued a three-page Opinion on May 6 that may have far-reaching implications in a lawsuit filed in the Johnson Circuit Court by Paul and Cheryl Fannin against State Farm Insurance Company, Mark Anderson and Paul Pelphrey.
The Fannins, in their suit filed on March 7, 2011 by John Kirk, allege that State Farm Insurance Company would not adequately compensate them for a fire loss that totally destroyed their home at Van Lear on January 6, 2010 and that State Farm and its agents, Mark Anderson and Paul Pelphrey, "Breached a Contract of Insurance Protection," "Violated the Consumer Protection Act," "Breached the Unfair Claims Settlement Act," "Engaged in Bad Faith" and "Intentionally Inflicted Emotional Distress" upon them.
The lawsuit demands payment of $3,261,825.00 allegedly owed them under their policy contract for the loss of their home and furnishings and the sum of $10 million for punitive damages. Fannins' complaint alleges that they purchased a policy of fire insurance on their 14,549 square foot home from State Farm for coverage of $3,261,825.00, the value they allege was assigned to their home by State Farm's underwriting agent, but that State Farm will not agree to pay them an adequate amount for their loss.
Besides the value placed on their home by State Farm's underwriting agent, the Fannins allege that they submitted appraisal reports from three commercial builders, all of whom reported that the cost of rebuilding the home exceeded the coverage amount.
State Farm, in refusing to agree to compensate them for their home loss, relied upon the report of one person who, according to John Kirk, is not a builder. "Every person, including State Farm's underwriting agent, assigned a value to the home of at least the policy amount, except for a State Farm employee who, as far as we can find out, is not a home builder. We think that clearly constitutes unfair settlement practices."
State Farm filed a notice with the U.S. District Court at Pikeville to have the case removed from the Johnson Circuit Court on the grounds that agents Anderson and Pelphrey were "fraudulently joined" in the state court action and, because a policy holder can only bring a suit against the insurance company and not its employees, that the case should be in federal court and that cases against Anderson and Pelphrey should be dismissed.
Following briefs to the court by all parties, U.S. District Judge Thapar concluded in his three-page Order by stating, "Given all this, the plaintiffs (Paul and Cheryl Fannin) have a 'colorable' argument that Kentucky law on bad faith claims is on their side."