Kentucky Property Study Guide

Kentucky property law contains one programme that barely exists anywhere else and two rules that run backwards from the national default. That combination makes this the most state-specific of Kentucky’s exams — and, once you see the pattern, one of the most gettable. The trick is to notice each time Kentucky points the rule in the opposite direction from the one you expect.

Mine subsidence: coverage you have to opt out of

Kentucky sits on coal, and the ground above an abandoned mine does not always stay where it was. The Commonwealth’s answer is the Kentucky Mine Subsidence Insurance Fund, a state-run reinsurance programme under KRS Chapter 304, Subtitle 44.

Here is the part that breaks the pattern. In a county whose fiscal court has voted into the programme, KRS 304.44-030 provides that every policy insuring a structure there “shall include, at a separately stated premium,” coverage for mine subsidence “unless waived in writing by the insured.” The default runs opposite to ordinary optional coverage: the insured does not have to ask for it, they have to decline it in writing. The Department states that 37 Kentucky counties are participating.

The insurer’s discretion is narrow but not zero. KRS 304.44-040 permits refusal in two situations: on a structure evidencing unrepaired subsidence damage, until the necessary repairs are made; or where the insurer has declined, nonrenewed or cancelled all coverage under the policy for underwriting reasons unrelated to mine subsidence.

The limits became statutory on 1 January 2025: a maximum of $500,000 on structures, plus a maximum of $50,000 for additional living expense — $550,000 in total reinsured by the Fund. The deductible is 2% of the total insured value, with a floor of $250 and a ceiling of $500.

County participation is a political act on an annual cycle, which is worth knowing because it explains why the answer to “is this house covered?” turns on geography rather than on the carrier. A fiscal court’s approval must reach the commissioner more than 100 days before July 1 to take effect that year; otherwise it waits until the following July 1. The commissioner then notifies insurers 85 days before July 1.

There is no valued policy law. There is the opposite.

Ask most candidates whether Kentucky has a statute tying the policy limit to the value of the building and they will reach for valued policy law — the rule that pays the face amount on a total loss. Kentucky does not have one.

What Kentucky has is KRS 304.20-260, which does the opposite job. Since July 15, 1986, “no insurer shall deliver, issue for delivery or renew any policy … providing coverage for loss or damage to a structure located in this Commonwealth for an amount greater than one hundred percent (100%) of the replacement cost of the structure.” The section defines “structure” as any dwelling, building or fixture permanently affixed to realty, and expressly excludes land, trees, plants and crops.

So it is an anti-over-insurance ceiling imposed on the insurer at issuance, not a promise to the insured at settlement. Getting the direction right is the whole question.

While you are here, note a second absence. Kentucky has adopted no standard fire policy. Property forms run through the general form filing and approval process at KRS 304.14-120, subject to statutory readability, legibility and English-language requirements. There is no Kentucky equivalent of the New York standard fire policy to memorise.

Two claim clocks — one for conduct, one for money

Kentucky regulates claim handling twice over, and the exam tests whether you know which authority answers which question.

806 KAR 12:095 governs what an adjuster must do — and it counts in business days unless it says otherwise. Section 1(5) defines the term: “‘Days’ means any day, Monday through Friday, except holidays.” So acknowledge notice of a claim within 15 business days; respond to other pertinent communications within 15 business days; affirm, deny or offer within 30 calendar days of receiving proof of loss; if more time is needed, say so within 30 calendar days and then update every 45 calendar days measured from the initial notification, not from the proof of loss; pay within 30 business days of affirming liability where the amount is determined and undisputed. Everything the regulation leaves unqualified is a business day.

KRS 304.12-235 governs what delay costs. All claims under any contract of insurance must be paid “not more than thirty (30) days from the date upon which notice and proof of claim … are furnished the insurer.” Miss it without a good-faith attempt and the settlement bears 12% per annum. Where the delay was “without reasonable foundation,” the claimant also recovers reasonable attorney’s fees — and those fees may not be charged against the benefits otherwise due the claimant.

The residual market and the catastrophe that isn’t wind

The Kentucky FAIR Plan Reinsurance Association makes basic property coverage available to owners who cannot obtain it in the standard market. Its perils are fire, lightning, wind, hail, explosion, smoke and vandalism, with optional earthquake and mine subsidence in qualified counties. A member insurer’s assessment “may not annually exceed one percent (1%) of that member’s net direct premium written” (KRS 304.35-030).

Do not confuse the FAIR Plan with KAIP, the Kentucky Automobile Insurance Plan. They are different entities serving different residual markets, and the names get swapped constantly.

Finally, the catastrophe question. Kentucky is landlocked: there is no coastal or wind pool. Its named catastrophe exposure is earthquake — western Kentucky sits over the New Madrid seismic zone — and earthquake coverage and deductibles must be made available on habitational risks. Tornado, severe thunderstorm, hail and river flooding fill out the picture, but earthquake is the answer the exam is looking for when it asks what makes Kentucky distinctive.