Collins v. Nationwide Agribusiness Insurance Company ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JOHN GARY COLLINS, Case No.: 19-cv-1392-GPC-MSB 12 Plaintiff, ORDER GRANTING IN PART AND 13 v. DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY 14 NATIONWIDE AGRIBUSINESS JUDGMENT INSURANCE COMPANY; and DOES 1 15 THROUGH 10, [ECF No. 30] 16 Defendants. 17 18 Before the Court is Defendant Nationwide Agribusiness Insurance Company 19 (“Defendant” or “Nationwide”)’s Motion for Summary Judgment (“MSJ”). ECF No. 30. 20 Plaintiff responded in opposition, ECF No. 37, and Defendant replied, ECF No. 40. For 21 reasons below, Defendant’s Motion for Summary Judgment is GRANTED IN PART 22 and DENIED IN PART. 23 BACKGROUND 24 I. Factual Background 25 Defendant issued Business Auto Policy No. FPK BAN 78-2-1568321 (“Policy”) to 26 Suncoast Botanicals, Inc. (“Suncoast”) for the policy period of June 23, 2016 to June 23, 27 1 2017. Pl.’s Resp. to Separate Statement of Undisputed Material Facts, Undisputed Fact 2 (“UF”) No. 1, ECF No. 37-3. The Policy includes collision coverage, medical payments 3 coverage with limits of liability of $5000 and uninsured motorist (“UIM”) coverage with 4 limits of liability of $1 million per accident. Id., UF No. 2. 5 On March 7, 2017, Plaintiff, driver of a vehicle owned by Suncoast, was involved 6 in a heavy-impact rear collision with an uninsured motorist (an “Accident”). Id., UF No. 7 3. The next day, Plaintiff submitted a first-party claim to Defendant seeking collision, 8 medical payments, and UIM coverage benefits from the Accident (“Claim”). Id., UF No. 9 4. 10 On May 9, 2017, Plaintiff became dizzy and experienced shortness of breath at his 11 home, ultimately losing consciousness and striking his head on the kitchen counter. Id., 12 UF No. 7. He was diagnosed with deep vein thrombosis (“DVT”) and a pulmonary 13 embolism (“PE”). Id., UF No. 8. 14 Plaintiff claimed that the Accident caused the DVT and PE. Id., UF No. 12. On 15 May 23, 2017, Plaintiff emailed Defendant’s claims adjustors, which included the 16 following statement: 17 The day before I was discharged from the hospital I had an ultrasound test on both my legs and they found a blood clot behind my right knee. The clot 18 is called a DVT, Deep Vein Thrombosis. I was released on 5/14 and have 19 been recuperating at home since. After reviewing my medical history, lifestyle, and recent events both of my doctors indicated that trauma from the 20 auto accident caused or contributed to the blood clots in my right leg which 21 traveled up into my lungs. I had let my orthopedic doctor know something was wrong with my right knee but didn’t get scheduled for an MRI before 22 this happened. 23 24 / / / 25 26 27 1 Pl.’s Evid. Ex. 5, ECF No. 37-4 at 116.1 Defendant’s Claim File Note, created on June 2 12, 2017, documented the information delivered by Plaintiff. Pl.’s Evid. Ex. 6, ECF No. 3 37-4 at 119. 4 Plaintiff and Defendant’s claims adjusters exchanged emails throughout July 2017 5 regarding the Policy’s coverage, where Plaintiff expressed concerns over the financial 6 implications of the DVT/PE. Pl.’s Evid. Ex. 7, ECF No. 37-4 at 121–23. Defendant’s 7 claims adjuster informed Plaintiff that any bills over the $5000 medical payments 8 coverage will be Plaintiff’s responsibility until the UIM claim is concluded, in which case 9 the UIM coverage will pay for the out-of-pocket medical expenses, wage loss, and 10 compensation for pain and suffering. Id. at 122–23. In late November 2017 it was 11 internally discussed within the Defendant’s company whether Plaintiff’s UIM claim 12 should be transferred to a “Level 3” adjuster. Pl.’s Evid. Ex. 9, ECF No. 37-4 at 130. On 13 February 2, 2018, Plaintiff emailed the Defendant’s medical payments representative to 14 inform that he will be submitting a bill that will fulfill the $5000 medical coverage, and 15 that there will be additional bills over the next couple of months. Pl.’s Evid. Ex. 11, ECF 16 No. 37-4 at 136. On February 15, 2018, the claim was reassigned as Level 3 to Mr. Paul 17 Current, Commercial Casualty Claims Specialist III. Id. at 135. 18 On February 22, 2018, Mr. Current had a telephone call with Plaintiff in which 19 Plaintiff stated that “[h]e wants to wait until at least April before discussing settlement.” 20 Pl.’s Evid. Ex. 13, ECF No. 37-4 at 143–44. The same day, Mr. Current via email asked 21 Plaintiff to send copies of Plaintiff’s medical records. Decl. of Paul Current (“Current 22 Decl.”) Ex. B, ECF No. 30-5 at 3. Mr. Current followed up on May 7, 2018, and Plaintiff 23 24 1 The Court is aware that both parties submitted reams of evidentiary objections. To the 25 extent that the objected-to evidence is admissible and relied-on, the Court overrules the 26 objections. To the extent that the objected-to evidence is not referenced in this Order, the Court overrules the objections as moot. 27 1 replied on May 9, 2018, stating that he can forward the materials next week, and that he 2 is “in no hurry to begin claim discussions.” Id. at 2–3. 3 From May 2018 to July 2018, Plaintiff provided additional medical records to 4 Defendant. UF No. 11, ECF No. 37-3. Defendant’s Medical Claims Consulting Group 5 evaluated the available medical records regarding the alleged causal relationship between 6 Plaintiff’s DVT/PE and the Accident to support a valuation of the Claim in connection 7 with an anticipated settlement offer to Plaintiff. Id., UF No. 13. On July 23, 2018, 8 Medical Claims Consulting Specialist provided a Medical Review on the issue. Pl.’s 9 Evid. Ex. 16, ECF No. 37-4. The Medical Review made several suggestions, one of them 10 being: “Consider a cardiologist peer review.” Id. 11 On August 21, 2018, Mr. Current conveyed a $175,000 settlement offer to Plaintiff 12 via phone call. Current Decl. ¶ 13, ECF No. 30-3. Plaintiff told Mr. Current that (1) 13 Plaintiff’s records should be reviewed by a cardiologist, (2) Plaintiff did not accept the 14 offer, and (3) Plaintiff was going to contact a lawyer. Decl. of John Gary Collins 15 (“Collins Decl.”) ¶ 18, ECF No. 37-2. The next day, Defendant requested an external 16 peer review of the medical records. UF No. 20, ECF No. 37-3. 17 Shortly after the $175,000 settlement offer, Plaintiff reached out to attorney Jordan 18 Harlan and explained the circumstances. From late August 2018 through October 2018, 19 the two spoke several times. Collins Decl. ¶¶ 19, 20, ECF No. 37-2. 20 On October 1, 2018, the Peer Review Report concluded that (1) there was a highly 21 positive relationship between the Accident and the hospitalization for the PE, and (2) 22 Plaintiff had no work restrictions going forward as a result of the DVT and PE. UF Nos. 23 21–24, ECF No. 37-3. On October 16, 2018, Mr. Current conveyed a settlement offer of 24 $350,000. Current Decl. ¶ 17, ECF No. 30-3; Current Decl. Ex. F, ECF No. 30-9. 25 Subsequently on October 27, 2018, Plaintiff suffered a second PE. Collins Decl. ¶ 26 23, ECF No. 37-2. He spent five days in intensive care. Id. 27 1 On December 3, 2018, Plaintiff discussed the overall matter with Mr. Harlan. Id. ¶ 2 25. The next day, December 4, 2018, Plaintiff asked for additional information regarding 3 the breakdown of the $350,000 offer, and Defendant provided it. UF Nos. 26, 28, ECF 4 No. 37-3. On January 8, 2019, Plaintiff officially retained Mr. Harlan. Collins Decl. ¶ 5 27, ECF No. 37-2. 6 On January 23, 2019, Defendant received a letter of representation dated January 7 14, 2019 from Mr. Harlan, along with a demand for arbitration. UF No. 30, ECF No. 37- 8 3. By letter dated March 8, 2019, Mr. Harlan tendered a time-limited $1 million policy 9 limits demand to Defendant on behalf of Plaintiff. Id. UF No. 31. In connection with the 10 demand, Defendant was advised of Plaintiff’s second PE incident, the related 11 hospitalization, and his inability to work at his flower farm, none of which had been 12 previously relayed to Defendant. Id. UF Nos. 32–34. On April 4, 2019, Defendant 13 accepted the demand and agreed to pay the $1 million policy limits to Plaintiff for his 14 Accident-related damages. Id. UF No. 36. On April 10, 2019, Defendant issued payment 15 in the amount of $1 million jointly to Mr. Harlan and Plaintiff. Id. UF No. 37. 16 II. Procedural History 17 On June 26, 2019, Plaintiff filed a complaint in the Superior Court of the State of 18 California for the County of San Diego, which Defendant removed to federal court on 19 July 25, 2019. Def.’s Notice of Removal, ECF No. 1. Plaintiff alleged two causes of 20 action: (1) breach of contract, specifically the “contractual obligations to pay Collins’ 21 claim for uninsured motorist benefits”; and (2) breach of the implied covenant of good 22 faith and fair dealing, including “the duty to refrain from engaging in any act which 23 would interfere with Collins’ enjoyment of the intended benefits of the Policy.” Compl. 24 3–6, ECF No. 1-2. Plaintiff requested various forms of monetary relief, including 25 punitive and exemplary damages. Id. at 6. 26 27 1 On June 23, 2020, Defendant filed the MSJ, which requests the Court to dismiss all 2 causes of action against Defendant, including Plaintiff’s request for punitive damages. 3 ECF No. 30. The MSJ argues that Plaintiff’s causes of action and request for punitive 4 damages fail as a matter of law. Def.’s Mem. of P. & A., ECF No. 30-1. Plaintiff filed a 5 Response in Opposition on July 2, 2020. ECF No. 37. On August 13, 2020, Defendant 6 filed a Reply. ECF No. 40. 7 LEGAL STANDARD 8 Summary judgment is appropriate under Federal Rule of Civil Procedure 56(c) “if 9 the pleadings, depositions, answers to interrogatories, and admissions on file, together 10 with the affidavits, if any, show that there is no genuine issue as to any material fact and 11 that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. 12 Catrett, 477 U.S. 317, 322 (1986). A fact is material when it “might affect the outcome 13 of the suit.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 14 The initial burden of establishing the absence of any genuine issues of material fact 15 falls on the moving party. Celotex, 477 U.S. at 323. The movant can satisfy this burden 16 in two ways: (1) by presenting evidence that negates an essential element of the non- 17 moving party’s case; or (2) by demonstrating that the non-moving party failed to make a 18 showing sufficient to establish an element essential to that party’s case on which that 19 party will bear the burden of proof at trial. See id. at 322–23. In such cases, “there can 20 be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning 21 an essential element of the nonmoving party’s case necessarily renders all other facts 22 immaterial.” Id. 23 Once the moving party has satisfied its initial burden, the non-moving party cannot 24 rest on the mere allegations or denials of its pleading. The non-moving party must “go 25 beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to 26 interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a 27 1 genuine issue for trial.’” Id. at 324. The non-moving party may meet this requirement by 2 presenting evidence from which a reasonable jury could find in its favor, viewing the 3 record as a whole, in light of the evidentiary burden the law places on that party. See 4 Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221–22 (9th Cir. 1995). In 5 determining whether there are any genuine issues of material fact, the court must “view[] 6 the evidence in the light most favorable to the nonmoving party.” Fontana v. Haskin, 7 262 F.3d 871, 876 (9th Cir. 2001) (citation omitted). 8 DISCUSSION 9 I. Breach of Contract 10 Defendant moves for summary judgment on the First Cause of Action, arguing that 11 Defendant complied with the express terms of the Policy. Defendant paid Plaintiff: (1) 12 the full $5000 Policy limit under the medical payments coverage, (2) the total loss of the 13 vehicle under the collision coverage, and (3) $1 million, which is the Policy limit under 14 the UIM coverage. UF Nos. 2, 9, 37, ECF No. 37-3. 15 “Under the express terms of the contract, [Defendant] met its financial obligation 16 by paying . . . the policy limits.” Madrigal v. Allstate Indem. Co., No. CV 14-4242 SS, 17 2015 WL 12747906, at *15 (C.D. Cal. Sept. 30, 2015). Plaintiff agrees. See Pl.’s Resp. 18 in Opp’n 17 n.2, ECF No. 37. Since Plaintiff cannot demonstrate that Defendant 19 breached the express terms of the Policy, Defendant is entitled to summary judgment on 20 its breach of contract claim. See Madrigal, 2015 WL 12747906 at *15. 21 Therefore, the Court GRANTS Defendant’s Motion for Summary Judgment on the 22 First Cause of Action. 23 II. Implied Covenant of Good Faith and Fair Dealing 24 Defendant moves for summary judgment on the Second Cause of Action, breach of 25 the implied covenant of good faith and fair dealing, arguing that (1) Plaintiff has not 26 presented evidence that Defendant acted unreasonably in handling the Claim; and (2) 27 1 regardless, Defendant cannot be liable for “bad faith”2 because a “genuine dispute” 2 existed over the value of Plaintiff’s Claim. Def.’s Mem. of P. & A. 9–15, ECF No. 30-1. 3 Plaintiff disagrees, arguing that Defendant’s investigation and settlement offer were 4 unreasonable in several ways. Pl.’s Resp. in Opp’n 17–28, ECF No. 37. 5 An implied covenant of good faith and fair dealing exists “as a supplement to the 6 express contractual covenants, to prevent a contracting party from engaging in conduct 7 that frustrates the other party’s rights to the benefits of the agreement.” Waller v. Truck 8 Ins. Exch., Inc., 11 Cal. 4th 1, 36 (1995), as modified on denial of reh’g (Oct. 26, 1995); 9 see also Egan v. Mut. of Omaha Ins. Co., 24 Cal. 3d 809, 818 (1979) (“The implied 10 promise requires each contracting party to refrain from doing anything to injure the right 11 of the other to receive the benefits of the agreement.”). 12 To succeed on this claim, the plaintiff must show that the defendant’s conduct was 13 unreasonable or without proper cause. Mosley v. Pac. Specialty Ins. Co., 49 Cal. App. 14 5th 417, 435, as modified on denial of reh’g (June 24, 2020), review denied (Aug. 12, 15 2020). While the reasonableness of the insurer’s conduct is typically a question of fact, 16 “it becomes a question of law where the evidence is undisputed and only one reasonable 17 inference can be drawn from the evidence.” Chateau Chamberay Homeowners Ass’n v. 18 Associated Int’l Ins. Co., 90 Cal. App. 4th 335, 346 (2001), as modified on denial of 19 reh’g (July 30, 2001). In determining unreasonableness and bad faith, the conduct must 20 be more than a mistake. Mosley, 49 Cal. App. 5th at 436. There must be “a conscious 21 and deliberate act, which unfairly frustrates the agreed common purposes and disappoints 22 the reasonable expectations of the other party.” Id. At the same time, while dishonesty, 23 24 25 2 In this Order the Court uses “bad faith” and the breach of the implied covenant of good 26 faith and fair dealing interchangeably. See Archdale v. Am. Internat. Specialty Lines Ins. Co., 154 Cal. App. 4th 449, 466 (2007). 27 1 fraud, and concealment may be dispositive of bad faith, Merritt v. Reserve Ins. Co., 34 2 Cal. App. 3d 858, 876 (1973), “absence of evidence, circumstantial or direct, showing 3 actual dishonesty, fraud, or concealment is not fatal.” Betts v. Allstate Ins. Co., 154 Cal. 4 App. 3d 688, 706 (1984) (emphasis removed). 5 Here, the record contains sufficient evidence which, when viewed most favorably 6 to Plaintiff, would permit a reasonable jury to find that Defendant’s conduct in handling 7 the Claim was unreasonable, therefore violating the implied covenant of good faith and 8 fair dealing. Specifically, sufficient evidence exists where the jury could find that the 9 investigation process and settlement offers were both unreasonable. Since the 10 investigation could be found to have been conducted in bad faith, Defendant is not 11 entitled to a genuine dispute defense. Accordingly, the Court DENIES Defendant’s 12 Motion for Summary Judgment on the Second Cause of Action. 13 A. Reasonableness of Defendant’s Conduct 14 In the insurance context, a court may find that a defendant’s conduct was in bad 15 faith if the investigation or settlement offer was unreasonable. See, e.g., Frommoethelydo 16 v. Fire Ins. Exch., 42 Cal. 3d 208, 214–15 (1986) (discussing inadequate investigations as 17 grounds for bad faith); White v. W. Title Ins. Co., 40 Cal. 3d 870, 887 (1985) (admitting 18 evidence of settlement offer to prove breach of covenant of good faith and fair dealing). 19 Plaintiff has alleged both an unreasonable investigation and settlement offer in his 20 Complaint, and Defendant submits that Plaintiff has not offered evidence to demonstrate 21 unreasonableness. The Court will address each of these grounds in turn. 22 1. Investigation 23 “Among the most critical factors bearing on the insurer’s good faith is the 24 adequacy of its investigation of the claim.” Shade Foods, Inc. v. Innovative Prod. Sales 25 & Mktg., Inc., 78 Cal. App. 4th 847, 879 (2000), as modified on denial of reh’g (Mar. 29, 26 2000). “An insurance company may not ignore evidence which supports coverage. If it 27 1 does so, it acts unreasonably towards its insured and breaches the covenant of good faith 2 and fair dealing.” Jordan v. Allstate Ins. Co., 148 Cal. App. 4th 1062, 1074 (2007) 3 (citation omitted), as modified on denial of reh’g (Apr. 20, 2007). “For the insurer to 4 fulfill its obligation not to impair the right if the insured to receive the benefits of the 5 agreement . . . it is essential that an insurer fully inquire into possible bases that might 6 support the insured’s claim.” Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d 809, 819 7 (1979). 8 Plaintiff has presented evidence which raises a genuine issue of material fact 9 whether Defendant’s investigation process was reasonable and conducted in good faith. 10 Specifically, Defendant understood that valuation of the Claim depended to a great extent 11 on the connection of the Accident and the PE, yet it failed to conduct the necessary 12 investigation as to this nexus before it offered Plaintiff $175,000. 13 First, Defendant argues that the delays were wholly Plaintiff’s fault. The Court 14 disagrees. While it is true Plaintiff sought to defer settlement discussions until the fall of 15 2018, there is no explanation why the investigation itself, which is presumably a separate 16 process from a settlement discussion, could not have happened sooner. On May 23, 17 2017, Plaintiff emailed Defendant and informed Defendant of his DVT/PE diagnosis and 18 explained how his condition had led to four life-saving surgical procedures over the 19 course of five days. Defendant’s own records indicate that it had been aware of the issue 20 since mid-June 2017. Plaintiff and Defendant’s claims adjusters discussed the DVT/PE’s 21 implications on both the medical and UIM coverage in July 2017. Pl.’s Evid. Ex. 7, ECF 22 No. 37-4 at 121. While the provision of medical records was not complete until July 23 2018,3 Defendant’s initial request for the records occurred in mid-to-late February 2018. 24 25 3 Defendant states that Plaintiff “failed to provide Nationwide with all of his medical 26 records until August 2018,” Def.’s Reply at 12, ECF No. 40, but cites to UF No. 15, ECF 27 No. 37-3 (stating that the Medical Claims Consulting Specialist confirmed her opinion on 1 That demonstrates a six-month delay (from July 2017 to February 2018) on the part of 2 Defendant in initiating a medical investigation. 3 Second, Plaintiff has presented evidentiary exhibits which a reasonable jury could 4 rely on to find that the initial investigation leading to the July 2018 Medical Review was 5 unreasonable and conducted in bad faith. “A trier of fact may find that an insurer acted 6 unreasonably if the insurer ignores evidence available to it which supports the claim. The 7 insurer may not just focus on those facts which justify denial of the claim.” Wilson v. 8 21st Century Ins. Co., 42 Cal. 4th 713, 721 (2007) (quoting Mariscal v. Old Republic Life 9 Ins. Co., 42 Cal. App. 4th 1617, 1623 (1996)), as modified (Dec. 19, 2007). 10 Here, deposition records of Mr. Current indicate that he questioned the causal 11 relationship between the Accident and DVT/PE “from the very beginning.” Pl.’s Evid. 12 Ex. 1, ECF No. 37-4 at 6. This opinion was held despite Mr. Current’s impression of the 13 Plaintiff as being “very honest.” Pl.’s Evid. Ex. 13, ECF No. 37-4 at 143. More 14 troubling, Mr. Current never attempted to contact Plaintiff’s physicians to ascertain their 15 opinions on the potential causal relationship even though he could have, even though 16 Defendant was fully aware of the issue, and even though he knew it “was a very 17 important thing to figure out.” Pl.’s Evid. Ex. 1, ECF No. 37-4 at 7–10. Further, when 18 referring the claim to the Medical Claims Consulting Specialist for the initial review, Mr. 19 Current inserted facts revealing bias such as: (1) “There were no complaints of knee 20 pain,” (2) “He first complained of right knee pain on April 3, 2017,” and (3) “The 21 claimant stated that his cardiologist indicated that the DVT was probably due to the 22 trauma from the [Accident] when he hit his knee. However, this is not stated in the 23 medical reports we have.” Pl.’s Evid. Ex. 15, ECF No. 37-4 at 150–51. Mr. Current 24 25 26 August 8, 2018). UF No. 11, ECF No. 37-3 appears more instructive: “Between May 2018 and July 2018, [Plaintiff] provided additional medical records to [Defendant].” 27 1 stated at his deposition that the medical reviewer did not need him to state what is not in 2 the medical reports, and that the job could have been done “just fine without me putting 3 any of this summary into the log.” Pl.’s Evid. Ex. 1, ECF No. 37-4 at 11–12. 4 Relatedly, the Medical Review that was created from the investigation ignored 5 certain important facts that Defendant knew. Defendant was aware of Plaintiff’s right 6 knee pain prior to the DVT/PE on May 9, 2017, yet the Medical Review states: “If Gary 7 had no record of c/o pain or discomfort in either leg, the most likely cause of his DVT 8 could be his history of ulcerative colitis or his asthma.” Pl.’s Evid. Ex. 1, ECF No. 37-4 9 at 21–22; Pl.’s Evid. Ex. 16, ECF No. 37-4 at 157. Given the fact that Defendant was 10 informed of Plaintiff’s right knee pain, there was a “record” prior to the DVT/PE on May 11 9, 2017. In view of the above, a reasonable fact-finder could conclude that Mr. Current 12 was unduly nudging the initial investigation to justify denying Plaintiff’s UIM claim, and 13 that Defendant was ignoring evidence available that would support the insured’s claim. 14 Further, Defendant offered $175,000 before conducting any peer review—even 15 though it was suggested in the Medical Review to ascertain whether the DVT/PE was 16 caused by the accident. Pl.’s Evid. Ex. 16, ECF No. 37-4 at 158. In fact, the external 17 peer review concluded that there was a highly positive relationship between the Accident 18 and Plaintiff’s hospitalization for the DVT/PE. Pl.’s Evid. Ex. 23, ECF No. 37-4 at 202. 19 And based upon the belated peer review, Mr. Current was given settlement authority in a 20 range of $350,000 to $500,000. A reasonable jury could find that jumping to a settlement 21 offer without even following the initial investigation’s own suggestion to further examine 22 the issue constitutes bad faith. 23 Lastly, Plaintiff presented evidence where a reasonable jury could find that Mr. 24 Current attempted to improperly influence the external peer review as well. Plaintiff has 25 presented email records where Mr. Current this time underlined certain statements, which 26 happen to be the same statements on knee pain that he had flagged when referring the 27 1 claim for initial review. Pl.’s Evid. Ex. 22, ECF No. 37-4 at 197. Such underlining could 2 be construed as evidence of bias. See H. Walter Croskey, Rex Heeseman, Jeffrey I. 3 Ehrlich & Peter H. Klee, California Practice Guide: Insurance Litigation § 12:904 4 (2020) (“For example, did the claims examiner use marker pens or other means to 5 highlight only the evidence in the file supporting denial?”). 6 Defendant argues that its conduct is part of the normal practice within the 7 insurance industry. It relies on expert testimony, which opined that “[t]here were no 8 unreasonable or unexplained delays on the part of [Defendant] in its investigation.” Decl. 9 of Michelle R. Bernard Ex. K, ECF No. 30-15 at 5. However, Plaintiff has provided 10 sufficient evidence to cast doubt on the expert’s credibility based on the expert’s prior 11 involvement with the insurance industry (but rarely in support of insurance policy- 12 holders) and the potentially conflicting statements that the expert made during the 13 deposition, see, e.g., Pl.’s Evid. Ex. 4, ECF No. 37-4 at 84–87, 112–13. As such, 14 Defendant’s expert testimony is insufficient to support summary judgment on the issue of 15 bad faith in the delay and manner of the investigation.4 See, e.g., Mullins v. Premier 16 Nutrition Corp., 178 F. Supp. 3d 867, 895–96 (N.D. Cal. 2016) (denying summary 17 judgment in part because a reasonable jury could conclude the expert’s opinion as 18 unreasonable). 19 Because Plaintiff has presented evidence in which a reasonable jury could find that 20 the investigation was conducted under inappropriate influences by Mr. Paul Current, the 21 Court cannot summarily conclude that Defendant’s investigation was reasonable. 22 23 24 25 4 Contrary to Defendant’s assertion, the absence of an expert does not mean that the issue 26 is now unrefuted or without evidence. As discussed above, Plaintiff has presented alternative evidence on the issue. 27 1 2. Settlement Offer 2 “No insurer shall attempt to settle a claim by making a settlement offer that is 3 unreasonably low.” Cal. Code Regs. tit. 10, § 2695.7(g) (California Fair Claims 4 Settlement Practices Regulations); see also White v. W. Title Ins. Co., 40 Cal. 3d 870, 887 5 (1985) (admitting settlement offers as evidence of “failure to process the claim fairly and 6 in good faith”). Some of the considerations in determining whether a settlement offer is 7 “unreasonably low” are “the extent to which the insurer considered evidence submitted 8 by the claimant to support the value of the claim,” and “the extent to which the insurer 9 considered . . . evidence made known to it or reasonably available.” Cal. Code Regs. tit. 10 10, § 2695.7(g)(1), (2). 11 It is true that Defendant’s supposed failure to present the “top end” valuation of 12 $500,000 does not by itself make Defendant’s offers unreasonably low. See, e.g., 13 Signature Dev. Companies, Inc. v. Royal Ins. Co. of Am., 230 F.3d 1215, 1223–24 (10th 14 Cir. 2000) (“We are also unwilling to infer that ‘settlement authority invariably 15 constitutes a final, objective assessment of a claim’s worth to which an insurer may be 16 held on penalty of bad faith.’” (citation omitted)). If a claims adjuster was obligated to 17 offer the full amount of the settlement authority every time, it “would foreclose any 18 flexibility during negotiations between insurers and those making claims.” Murphy v. 19 United Fin. Cas. Co., No. 15-4199, 2016 U.S. Dist. LEXIS 51390, at *11 (E.D. Pa. Apr. 20 18, 2016). 21 Nonetheless, a reasonable fact-finder could still conclude that Defendant’s 22 settlement offers were unreasonable for two reasons. First, Defendant’s $175,000 offer 23 and the circumstances leading to that offer could be found unreasonable by the jury. The 24 Court has already discussed the potentially unconscionable nature of the investigation, 25 and since the $175,000 offer was based on it, a jury could equally conclude that a 26 settlement offer founded on an allegedly deficient investigation is unreasonable. 27 1 Second, even if the investigation was adequate and legitimate, the jury could still 2 find that Mr. Current’s offers were problematic insofar as they heavily relied on 3 inconclusive causal factors. The Medical Review, the product of the initial investigation, 4 stated that “this [Accident] could have caused injury to [Plaintiff’s] right leg and led to 5 this DVT,” and suggested to obtain medical records and consider a cardiologist peer 6 review. Pl.’s Evid. Ex. 16, ECF No. 37-4 at 157–58. While the Medical Review also 7 stated that Plaintiff’s history of ulcerative colitis or asthma could have caused the DVT, 8 id. at 157, the reviewer also flagged that the coagulation studies were normal, Pl.’s Evid. 9 Ex. 1, ECF No. 37-4 at 13. Finally, even Mr. Current’s supervisor cautioned him that 10 “DVT can be caused by trauma and it could take time to develop.” Pl.’s Evid. Ex. 19, 11 ECF No. 37-4 at 167. Yet Mr. Current did not make any additional inquiries and made 12 the $175,000 settlement offer entirely based on an “inconclusive” causal relationship— 13 the ulcerative colitis or asthma. Pl.’s Evid. Ex. 1, ECF No. 37-4 at 16–17, 26–27. 14 Further, this causal relationship was listed again when the offer increased to $350,000. 15 Id. at 54–55; see also Pl.’s Evid. Ex. 28, ECF No. 37-4 at 223. This was even after the 16 external peer review stated that, “with a high degree of medical certainty,” the Accident 17 caused the DVT/PE. UF No. 22, ECF No. 37-3. By basing the $175,000 settlement offer 18 entirely on a causal relationship that the medical report itself was inconclusive about, and 19 by stating that same relationship as a “mitigating factor” when presenting the $350,000 20 offer, a jury could find that Defendant’s offers were unreasonable. Cf. Wilson v. 21st 21 Century Ins. Co., 42 Cal. 4th 713, 721 (2007) (“The insurer may not just focus on those 22 facts which justify denial of the claim.”), as modified (Dec. 19, 2007). 23 Defendant raises Plaintiff’s failure to provide a counteroffer to Defendant’s offer 24 as evidence of reasonableness. However, Defendant cannot point to such a requirement. 25 Cf. Mazik v. Geico Gen. Ins. Co., 35 Cal. App. 5th 455, 461 (2019) (affirming a jury 26 verdict that ignored defendant’s argument that “there was no negotiation from the other 27 1 side”). Defendant further contests Plaintiff’s failure to provide an expert to assess the 2 reasonableness of the offer. This is not required either. While Plaintiff’s “belief” on the 3 reasonableness of the settlement offers, Collins Decl. ¶ 18, 21, 26, ECF No. 37-2, would 4 not be enough by itself, the Court’s analysis above demonstrates that Plaintiff has 5 supported his dissatisfaction with “other facts to substantiate that claim.” See Collings v. 6 Longview Fibre Co., 63 F.3d 828, 834 (9th Cir. 1995), cert. denied, 516 U.S. 1048 7 (1996). 8 Because Plaintiff has presented evidence in which a reasonable jury could find that 9 settlement offers were unreasonable and based on a defective investigation and 10 inconclusive investigation findings, the Court cannot summarily conclude that the 11 settlement offers were reasonable. 12 B. The “Genuine Dispute” Defense 13 Defendant argues that even if Plaintiff provided evidence on the unreasonableness 14 of Defendant’s conduct, the Complaint fails as a matter of law because there was a 15 “genuine dispute” regarding the valuation of the UIM claim. Def.’s Mem. of P. & A. at 16 14–21, ECF No. 30-1. Indeed, a bad faith claim should be dismissed on summary 17 judgment if there was a genuine dispute on “a reasonable factual dispute or an unsettled 18 area of insurance law.” Feldman v. Allstate Ins. Co., 322 F.3d 660, 669 (9th Cir. 2003). 19 In determining if a dispute is genuine, “the court does not decide which party is ‘right’ as 20 to the disputed matter, but only that a reasonable and legitimate dispute actually existed.” 21 Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co., 90 Cal. App. 4th 22 335, 348 n.7 (2001), as modified on denial of reh’g (July 30, 2001). 23 Defendant’s argument fails because “a genuine dispute does not exist where there 24 is evidence that the insurer failed to conduct a thorough investigation.” Feldman, 322 25 F.3d at 669 (citing Guebara v. Allstate Ins. Co., 237 F.3d 987, 996 (9th Cir. 2001)); see 26 also Wilson v. 21st Century Ins. Co., 42 Cal. 4th 713, 723 (2007) (“The genuine dispute 27 1 rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, 2 process and evaluate the insured’s claim.”), as modified (Dec. 19, 2007). The Court has 3 already discussed various ways a jury could find that Defendant’s investigation—both 4 relating to the $175,000 and $350,000 settlement offers—was unreasonably conducted at 5 the time and therefore in bad faith. Therefore, this defense cannot apply. 6 III. Punitive Damages 7 Finally, Defendant moves for summary judgment on the issue of punitive damages. 8 “In order to establish that an insurer’s conduct has gone sufficiently beyond mere bad 9 faith to warrant a punitive award, it must be shown by clear and convincing evidence that 10 the insurer has acted maliciously, oppressively or fraudulently.” Mock v. Michigan 11 Millers Mut. Ins. Co., 4 Cal. App. 4th 306, 328 (1992). 12 A determination that a defendant breached its duty of good faith and fair dealing 13 does not in itself establish that defendant acted with the intent necessary to award 14 punitive damages. Neal v. Farmers Ins. Exch., 21 Cal. 3d 910, 922 (1978). “Evidence 15 that an insurer has violated its duty of good faith and fair dealing does not thereby 16 establish that it has acted with the requisite malice, oppression or fraud to justify an 17 award of punitive damages.” Mock, 4 Cal. App. 4th at 328. There must be “clear and 18 convincing evidence” that the defendant acted maliciously, oppressively, or 19 fraudulently—a conscious disregard of the plaintiff’s rights. Id.; Cal. Civ. Code § 20 3294(a). Accordingly, conclusory characterizations are insufficient, and Plaintiff must 21 provide more specific details. See Grieves v. Superior Court, 157 Cal. App. 3d 159, 166 22 (1984); Brousseau v. Jarrett, 73 Cal. App. 3d 864, 872 (1977) (citing G. D. Searle & Co. 23 v. Superior Court, 49 Cal. App. 3d 22, 27–32 (1975)). 24 California follows the Restatement rule regarding assessment of punitive damages 25 against a principal: “Punitive damages can properly be awarded against a master or other 26 principal because of an act by an agent if, but only if, (a) the principal authorized the 27 1 doing and the manner of the act, or (b) the agent was unfit and the principal was reckless 2 in employing him, or (c) the agent was employed in a managerial capacity and was acting 3 in the scope of employment, or (d) the principal or a managerial agent of the principal 4 ratified or approved the act.” Egan v. Mut. of Omaha Ins. Co., 24 Cal. 3d 809, 822 5 (1979) (quoting Rest. 2d Torts § 909 (Tent. Draft No. 19, 1973)). 6 Under California law, an employer may be liable for punitive damages based upon 7 acts of an employee if the employer “authorized or ratified the wrongful conduct for 8 which the damages are awarded or was personally guilty of oppression, fraud, or malice.” 9 Cal. Civ. Code § 3294(b). Further, “[w]ith respect to a corporate employer, the advance 10 knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, 11 or malice must be on the part of an officer, director, or managing agent of the 12 corporation.” Id. 13 The evidence required to support punitive damages is “of a different dimension” 14 from what is needed to support bad faith. Shade Foods, Inc. v. Innovative Prod. Sales & 15 Mktg., Inc., 78 Cal. App. 4th 847, 909 (2000), as modified on denial of reh’g (Mar. 29, 16 2000) (citing Tomaselli v. Transamerica Ins. Co., 25 Cal. App. 4th 1269, 1286 (1994)). 17 Typically, California courts have held that punitive damages are generally available 18 against insurance companies only if there are “established policies or practices in claims 19 handling which are harmful to insureds.” Mock, 4 Cal. App. 4th at 329 (emphases in 20 original); accord Mettler v. Gov’t Employees Ins. Co., No. 18-CV-2303-BAS-MSB, 2020 21 WL 1875265, at *10 (S.D. Cal. Apr. 15, 2020); see also Neal v. Farmers Ins. Exch., 21 22 Cal. 3d 910, 923 (1978) (deciding that punitive damages was proper because defendant’s 23 challenged conduct was “firmly grounded in established company policy”). 24 Here, Plaintiff ostensibly bases his punitive damages claim on the conduct of 25 Russell Salas, Christopher Davis and John Greer, Jr. Pl.’s Resp. in Opp’n 29–30, ECF 26 No. 37. However, it is plain that Plaintiff actually relies on the conduct of Paul Current. 27 1 See Pl.’s Evid. Ex. 2, ECF No. 37-4 at 62, 65 (Salas); Pl.’s Evid. Ex. 3, ECF No. 37-4 at 2 74–77 (Davis and Greer). Other than describing their respective roles in supervising, 3 supporting, and managing Mr. Current and other employees, Plaintiff has failed to offer 4 “clear and convincing evidence” that the three managers acted maliciously, oppressively, 5 or fraudulently in the investigation of the claim or making the settlement offers. In 6 addition, Plaintiff has not produced evidence demonstrating that a systematic company 7 policy existed in terms of denying insurance claims. Cf. Weisman v. Blue Shield of 8 California, 163 Cal. App. 3d 61, 67 (1984) (discussing that punitive damages would be 9 appropriate if the “entire nature of defendant’s operation . . . reflected defendant’s 10 overriding concern for a minimum-expense operation, regardless of the peril”). 11 Plaintiff’s string of citations that merely support how these supervisors provided 12 settlement authority (of initially $250,000 and later $500,000) so that Mr. Current could 13 “negotiate” accordingly does not clearly and convincingly support malice, oppression, or 14 fraud on behalf of any of Defendant’s managing agents. See Pl.’s Evid. Ex. 1, ECF No. 15 37-4 at 27–29, 33, 45–49; Pl.’s Evid. Ex. 2, ECF No. 37-4 at 69–71; Pl.’s Evid. Ex. 19, 16 ECF No. 37-4 a 167. 17 Because Plaintiff has not provided clear and convincing evidence that the three 18 managers acted “maliciously, oppressively, or fraudulently” or that Defendant had an 19 established policy of consciously disregarding the rights of the insured, punitive damages 20 is inappropriate. Therefore, the Court GRANTS Defendant’s Motion for Summary 21 Judgment on punitive damages. 22 CONCLUSION 23 Based on the above, the Court GRANTS Defendant’s Motion for Summary 24 Judgment on the First Cause of Action and on Plaintiff’s Request for Punitive and 25 Exemplary Damages, and DENIES Defendant’s Motion for Summary Judgment on the 26 27 1 Second Cause of Action. The Court also OVERRULES both parties’ evidentiary 2 || objections. 3 IT IS SO ORDERED. 4 5 ||Dated: November 16, 2020 Casto CL 6 Hon. Gonzalo P. Curiel 7 United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 20 28 19-cv-1392-GPC-MSB