The basic property and casualty concepts are the same everywhere and are covered in the national basics guides: insurable interest, indemnity, negligence, occurrence and claims-made coverage, actual cash value and replacement cost. This guide collects the Kentucky rules that apply to P&C policies in general:

• the fault rule
• contract basics in the code
• cancellation and nonrenewal (KRS 304.20-300 to 304.20-350)
• the claims settlement regulation (806 KAR 12:095)
• loss runs
• the FAIR plan and the mine subsidence program

Auto-specific rules are in the Kentucky personal auto guide.

Negligence: pure comparative fault (KRS 411.182)

Kentucky uses pure comparative negligence. The judge or jury assigns each party a percentage of fault and apportions damages accordingly. A partly at-fault claimant is never barred: someone 80% at fault can still recover 20% of their damages.

Contract basics in the code

• Insurance is a contract to pay or indemnify another for loss from specified contingencies or perils, which the statute calls "risks" (KRS 304.1-030).
• Property insurance covers property and every interest in it, including consequential loss. It doesn't include noncontractual legal liability for the loss (304.5-050).
• Casualty insurance includes workers' compensation and employer's liability, burglary and theft, glass, and boiler and machinery (304.5-070).
• Insurable interest in property is any actual, lawful and substantial economic interest in the property's safety or preservation. It must exist at the time of loss (304.14-060).
• Application statements are representations, not warranties. A misstatement bars recovery only if one of these is true (304.14-110):
  • it was fraudulent
  • it was material to the risk
  • the insurer in good faith would not have issued the policy on the same terms
• Policy, inspection and similar fees are part of the premium. A late charge of up to 18% a year is allowed on premium unpaid 30 days past due (304.14-030).
• After a loss has occurred, an insurer and insured may not cancel a liability policy back to an earlier date. Any such retroactive annulment is void (304.20-030).

Cancellation and nonrenewal (KRS 304.20-300 to 304.20-350)

Scope. These rules cover most property and casualty policies. They do not cover auto liability policies, which have their own statute, or residual market policies (304.20-300).

Policy terms (304.20-310):

• A term of less than six months is treated as six months. A term longer than a year is treated as one year.
• Moving a policyholder to another company in the same group counts as a termination.

Cancellation notice (304.20-320(2)):

After 60 days, the permitted reasons include (304.20-330):

• nonpayment
• fraud or misrepresentation
• willful acts that increase the hazard
• a substantial change in the risk
• a fire, building or safety code violation that substantially increases the hazard
• inability to reinsure
• a Commissioner determination

A storm claim is not a permitted reason.

Nonrenewal (304.20-320(3)):

• The insurer gives at least 75 days' written notice with specific reasons. Without proper notice, coverage is deemed renewed on payment of the premium.
• If a renewal bill goes out at least 30 days before expiration and isn't paid, the policy ends on the due date. The insurer then sends a notice within 15 days.

Premium increases (304.20-320(4)). A renewal increase of more than 25% for like coverage needs 75 days' notice, with a copy to the agent.

Declined applications (304.20-320(1)). An applicant may ask in writing why they were declined and must get a prompt written answer.

Prohibited reasons (304.20-340). An insurer may not decline or terminate solely because:

• the applicant was previously insured in a residual market
• of the age or location of a residence, unless there is a genuine business reason that isn't a pretext for discrimination
• of losses from natural causes that couldn't have been prevented

Enforcement (304.20-350). The Commissioner may order an insurer to reinstate an improperly cancelled policy to the end of the policy period.

Claims settlement (806 KAR 12:095)

• In this regulation, "days" means business days (Monday through Friday, excluding holidays) unless it says calendar days.
• Notice to the agent is notice to the insurer.
• The insurer acknowledges a claim within 15 days, unless it pays within that time. It answers a Department inquiry within 15 days.
• It offers payment due on a first-party claim within 30 calendar days of proof of loss.
• If its investigation is incomplete, it sends a letter explaining why every 45 calendar days.
• It warns an unrepresented first-party claimant in writing at least 30 calendar days before a time limit expires.
• It may not mark a check "final" or as a release unless the policy limit was paid or a compromise was agreed.
• It may not require a polygraph unless the policy or law authorizes it.
• Late payment (KRS 304.12-235). Claims not settled in good faith within 30 days bear 12% interest, plus attorney fees if the delay had no reasonable foundation.

Commercial loss runs (KRS 304.20-100)

• On a written request, the insurer provides a commercial loss run within 20 calendar days.
• The loss run covers five years, or the full history if shorter. One is free.
• An agent who receives it gives the insured a copy within 5 calendar days.

Lenders (KRS 304.12-150, -160)

• A lender requiring property insurance must tell the borrower they can choose the agent and insurer.
• It must accept an adequate policy the borrower offers.
• It may not charge a fee for substituting a policy.

FAIR plan and the reinsurance association (KRS 304.35)

• "FAIR" stands for Fair Access to Insurance Requirements.
• Every insurer writing property or casualty insurance directly in Kentucky must belong to the FAIR plan and the reinsurance association as a condition of its authority.
• Annual member assessments may not exceed 1% of the member's prior-year voluntary Kentucky premium.

Mine subsidence insurance (KRS 304.44)

What it covers. Mine subsidence means the collapse of underground coal mines that directly damages a structure. Earthquake, landslide, water seepage, volcanic eruption and collapse of storm and sewer drains are excluded. A structure is a dwelling, building or fixture permanently attached to land. Land, trees, plants and crops are not structures.

Required in policies. In counties that haven't been exempted, policies insuring structures must include mine subsidence coverage at a separately stated premium, unless the insured waives it in writing. A county is exempt if it has no underground coal mines or coal-bearing strata, or if its fiscal court hasn't voted to approve the coverage.

Terms:

• The deductible is 2% of insured value, but never less than $250 or more than $500.
• The fund reinsures up to $500,000 per structure, unless the administrator sets a different amount.
• Displaced owners get up to $50,000 for additional living expenses.
• The premium is the one the administrator sets, with no deviation.
• An insurer may refuse coverage on a structure with unrepaired subsidence damage.

Administration. The Mine Subsidence Insurance Fund is run by the Department or by the FAIR plan's reinsurance association. It pays insurers within 90 days of a loss report.

Common exam traps

• Kentucky uses pure comparative negligence, so there is no bar at 50% or 51%.
• Cancellation needs 14 days' notice for nonpayment or in the first 60 days, and 75 days' notice after that. Nonrenewal also needs 75 days.
• A premium increase over 25% needs 75 days' notice.
• A claim must be acknowledged in 15 days, with payment offered 30 calendar days after proof.
• A commercial loss run is due in 20 days.
• Mine subsidence carries a 2% deductible between $250 and $500 and $50,000 in living expenses.
• Every P&C insurer must belong to the FAIR plan.