Moyer v. American Zurich Insurance Company ( 2021 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
MICHAEL MOYER, :
:
Plaintiff, : K19C-09-026 JJC
:
v. :
:
AMERICAN ZURICH INSURANCE :
COMPANY , :
:
Defendant. :
Submitted: February 5, 2021
Decided: April 28, 2021
MEMORANDUM OPINION AND ORDER
Defendant’s Motion for Partial Summary Judgment – DENIED
Phillip T. Edwards, Esquire, Murphy & Landon, Wilmington, Delaware, Attorney
for the Plaintiff.
Bruce W. McCullough, Esquire, Bodell Bove, LLC, Wilmington, Delaware,
Attorney for the Defendant.
Clark, J.
Plaintiff Michael Moyer (“Mr. Moyer”) sues Defendant American Zurich
Insurance Company (“AZIC”) for alleged bad faith adjustment of his workers’
compensation claim. For purposes of summary judgment, AZIC concedes that
genuine issues of material fact exist regarding whether it delayed investigating and
paying Mr. Moyer’s claim in bad faith. That is, there will be a factual issue at trial
regarding whether it delayed its investigation and payment without reasonable
justification. AZIC contests, however, whether a factual issue exists regarding the
potential for punitive damages.1
Here, the summary judgment record read in the light most favorable to Mr.
Moyer will permit a reasonable jury to infer that AZIC recklessly disregarded Mr.
Moyer’s rights as an insured. As a result, AZIC’s motion for partial summary
judgment regarding the issue of punitive damages must be DENIED.
I. FACTS OF RECORD
The facts referenced herein are those of record viewed in the light most
favorable to Mr. Moyer, as the non-movant. The claim results from a work injury
he suffered on March 5, 2019. While troubleshooting a heat pump on a ladder, he
received an electrical shock. As a result, he suffered a fractured scapula and other
shoulder injuries. His employer, CBRE, submitted a claim to AZIC, its workers’
compensation insurer, on the same day.2 AZIC then sent a letter to Mr. Moyer the
next day. It acknowledged Mr. Moyer’s claim and assigned Monique Redman as
his claims adjuster.3
1
AZIC also initially sought partial summary judgment regarding the scope of potential
compensatory damages. At oral argument, Mr. Moyer conceded that his compensatory damages
will be capped at the interest payable as a result of AZIC’s alleged three-month delay in paying
him Temporary Total Disability (“TTD”) benefits. As a result, AZIC withdrew that portion of its
motion as moot.
2
Pl’s Opp. to Def’s Motion for Part. Sum. J., Ex. C, AZIC 915-16.
3
Def’s Motion for Part. Sum. J., Ex. B, AZIC 903.
2
There were discrepancies in how Mr. Moyer described the events surrounding
his injury. The initial claim stated that he had been electrocuted.4 Subsequent
reports indicated he may have suffered his injury from a fall caused by the
electrocution.5 Regardless, he sustained work injuries while in the course of his
employment.6
On March 8, 2019, within three days of Mr. Moyer’s accident, an AZIC
employee acknowledged in writing that two women witnessed the incident.7
Furthermore, on March 11, 2019, Ms. Redman created a file titled "Compensability"
where she recorded the location and cause of Mr. Moyer’s injury.8 The file also
noted a “Y” in the field that answered the question regarding whether the injury was
compensable.9 At a Rule 30(b)(6) deposition, AZIC’s designee would not
acknowledge that "Y" meant yes in this case.10 The designee nevertheless
acknowledged that "Y" typically stands for "yes."11 Despite that entry, on March
27, 2019, Ms. Redman sent an email to CBRE's risk manager that recommended
denying Mr. Moyer's claim.12 The reasons she provided in the email were as follows:
(1) Mr. Moyer described the mechanism of injury inconsistently; (2) Mr. Moyer
retained a lawyer; and (3) Mr. Moyer was a a bodybuilder.13
At some point late in March, Mr. Moyer became inpatient regarding the lack
of action taken on his claim. He left an unanswered message with Ms. Redman.
When he did reach her, at the end of March, she told Mr. Moyer “I don’t work on
4
Pl’s Opp. to Def’s Motion for Part. Sum. J., Ex. C, AZIC 915-16.
5
Def’s Motion for Part. Sum. J., Ex. I, AZIC 585-87.
6
Robles Dep. at 51-52; see also Pl’s Opp. to Def’s Motion for Part. Sum. J., Ex. C.
7
Claim Notes, AZIC 531.
8
Id. at AZIC 528.
9
Id.
10
Robles Dep. at 74-82.
11
Id. at 76-79.
12
Pl’s Opp. To Def’s Motion for Part. Sum. J., Ex. F., AZIC 717.
13
Id.
3
your schedule” and “I don’t check my voicemail.”14 Separately, she also allegedly
engaged in a “screaming match” at one point with Mr. Moyer’s doctor’s office.15
Following those exchanges, at CBRE’s request, AZIC replaced Ms. Redman with
Melissa Robles. Ms. Robles later served as the insurer’s Rule 30(b)(6) designee in
this litigation.16
On April 2, 2019, Mr. Moyer underwent surgery on his left shoulder to address
a dislocated shoulder and fractured shoulder blade.17 On the same day as the surgery,
AZIC belatedly sent a statutorily required 19 Del. C. §2362(a) (“Section 2362(a)”)
letter to Mr. Moyer informing him that it could neither accept nor deny the claim for
two reasons.18 These new reasons differed from the three reasons Ms. Redman cited
in her email to CBRE. Namely, AZIC informed Mr. Moyer that it could not accept
the claim because it lacked medical documentation and because it needed to
investigate the claim further.19 Furthermore, AZIC sent the letter outside the
statutorily required 15-day time frame for doing so, and also failed to provide an
estimate of how long it would take to provide a final decision.20 As to the later
statutory deficiency, it merely informed Mr. Moyer that its “investigation [would be]
completed as soon as possible.”21
14
Letter from J. Spadaro to the Court (Feb. 5, 2021), Ex. B (email from A. Boga, Sr. Risk Analyst,
CBRE, discussing Mr. Moyer’s concerns and requesting a new claims adjuster (Mar. 27, 2019)),
AZIC 1940.
15
Email from A. Boga, Senior Risk Analyst, CBRE, discussing Mr. Moyer’s concerns and
requesting a new claims adjuster (Mar. 27, 2019).
16
Robles Dep. at 13:5-16.
17
Pl’s Opp. To Def’s Motion for Part. Sum. J., Ex. B, AZIC 344-46.
18
Id. at Ex. E, MM 58-59.
19
Id.
20
Id. at Ex. A, Robles Dep. at 218:7-20; see also 19 Del. C. §2362 (a) (providing that “[a]n
employer or its insurance carrier shall within 15 days after receipt of knowledge of a work-related
injury notify the Department and the claimant in writing of; . . . whether the claim is accepted or
denied; if denied, the reason for the denial; or if it cannot accept or deny the claim, the reasons
therefor and approximately when a determination will be made.”) (emphasis added). There is no
dispute that AZIC failed to comply with these requirements.
21
Id. at Ex. E, MM 58-59.
4
On April 3, 2019, Mr. Moyer's attorney filed an IAB petition.22 Although
AZIC had notice of at least two witnesses to the accident from the outset, Mr.
Moyer’s attorney followed-up by identifying three witnesses. Despite that, AZIC
still did not contact any witnesses to the accident until the middle of May. At that
point, AZIC acknowledged the claim to be compensable.23 That acknowledgment
included AZIC’s acceptance of Mr. Moyer’s total disability from April 2, 2019 until
he returned to work June 10, 2019.24 AZIC then issued two payments to Mr. Moyer,
one for $7,136.50 on June 18, 2019 for total disability,25 and one for $22,684.06 on
July 14, 2020 for permanent partial disability. 26
II. THE PARTIES’ ARGUMENTS
AZIC argues that Mr. Moyer made inconsistent statements about the
mechanism of his injury. According to AZIC, those statements prompted it to
investigate the claim further, which in turn contributed to its delay in paying his
claim. Furthermore, AZIC emphasizes that the claim was accepted as compensable
approximately three months after the injury, which itself was not an unreasonable
delay. While AZIC acknowledges there will be a factual issue regarding whether
the delay constituted bad faith, it contends that the evidence is insufficient to submit
the issue of punitive damages to the jury.
Mr. Moyer counters by identifying facts he alleges are sufficient to support a
reasonable jury’s finding that AZIC acted with reckless indifference to Mr. Moyer’s
rights as an insured. He alleges those facts support a finding that AZIC acted with
22
Def’s Motion for Sum. J., Ex. I, AZIC 585-87.
23
Letter from B. McCullough to the Court (Feb. 5, 2021), Ex. A (email from AZIC counsel
confirming conversation with M. Robles accepting Mr. Moyer’s claim), AZIC 267-68.
24
Pl’s Opp. To Def’s Motion for Part. Sum. J., Ex. P, (receipt for compensation paid, June 18,
2019), AZIC 192.
25
Id.
26
Def’s Motion for Sum. J., Ex. P (receipt for compensation paid, July 14, 2020), AZIC 1621.
5
such disregard when it both investigated and delinquently paid his claim.
Specifically, he cites evidence that AZIC withheld the true reason for its initial
denial, including the three reasons provided by Ms. Redman in her email. Those
reasons, he contends, included impermissible theories for denying the claim such as
penalizing Mr. Moyer for hiring an attorney. Furthermore, he argues that despite
AZIC’s quick, written admission that the claim was compensable, it nevertheless
withheld benefits, and then failed to comply with statutory notice requirements.
Finally, he contends that the evidence supports that AZIC understood by March 2019
that it was harming Mr. Moyer, but, nevertheless, refused to accept his claim for two
additional months.
III. PARTIAL SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate only if there is no genuine issue of material
fact and if the movant is entitled to judgment as a matter of law.27 This motion is
one for partial summary judgment which is also available pursuant to Superior Court
Civil Rule 56; that mechanism may address individual claims.28 When considering
a partial summary judgment motion, the Court must consider the evidence of record
in the light most favorable to the non-moving party.29 Furthermore, the moving party
bears the initial burden of proof.30 However, if the movant meets its initial burden
regarding an issue, the burden then shifts to the non-moving party to demonstrate
the existence of a material issue of fact regarding that issue.31 At that point, the non-
movant must demonstrate material facts in dispute that are sufficient to withstand a
27
Super. Ct. Civ. R. 56(c); Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
28
See Super. Ct. Civ. R. 56(a)-(b) (providing that either the claimant or defending party may move
for summary judgment as to all of a case, or any part thereof).
29
Brozaka v. Olsen, 668 A.2d 1355, 1364 (Del. 1995).
30
Super. Ct. Civ. R. 56(e); Moore, 405 A.2d at 680 (Del. 1979).
31
Id. at 681 (citing Hurtt v. Goleburn, A.2d 134 (Del. 1974)).
6
motion for a judgment as a matter of law and support the verdict of a reasonable
jury.32
IV. ANALYSIS
The Court’s analysis turns on the reasonable inferences that will be available
regarding AZIC’s state of mind. To explain its decision, the Court first summarizes
Delaware law regarding bad faith insurance litigation. It then evaluates the evidence
of record in light of that law. Here, the facts and circumstances of this case,
considered in the light most favorable to Mr. Moyer, permit an inference that AZIC
recklessly disregarded the rights of its insured.
A. Bad Faith Insurance Claims, Punitive Damages, and the Question of the
Insurer’s State of Mind
An insurance policy is a contract between an insurer and insured; as a result,
it includes an implied covenant of good faith and fair dealing.33 This duty of good
faith extends to third-party beneficiaries of the insurance contract. In the workers’
compensation context, those beneficiaries include the policy holder’s employees.34
When an insurer unjustifiably delays investigating, processing, or paying a claim, it
breaches its implied contractual obligations.35 Nevertheless, a mere delay when
investigating a claim or paying benefits does not alone amount to insurer bad faith
so long as the insurer had a reasonable justification for the failure.36 On the other
hand, an insured need not produce “smoking gun” evidence to survive summary
32
Lum v. Anderson, 2004 WL 772074, at *2 (Del. Super. Mar. 10, 2004).
33
Connelly v. State Farm Mut. Auto. Ins. Co., 135 A.3d 1271, 1274-75 (Del. 2016).
34
Pierce v. International Ins. Co. of Ill., 671 A.2d 1361, 1366 (Del. 1996) (citing Restatement
(Second) of Contracts § 304).
35
Tackett v. State Farm Fire & Casualty Ins., Co., 653 A.2d 254, 264 (Del. 1995) (citing Merrill
v. Crothall-American, Inc., 606 A.2d 96 (Del. 1992).
36
Id. at 266.
7
judgment.37 Rather, “[i]n an appropriate case, inferences from facts can lead to a
triable bad faith claim.”38
Generally, in claims for breaches of good faith and fair dealing, compensatory
damages are limited to those that are direct or consequential because such claims are
contract actions.39 In addition, because of the special nature of insurance
relationships, punitive damages may at times be available if a plaintiff can
demonstrate that the insurer breached its obligations with malice or reckless
indifference to the plight of its insured.40
In Tackett v. State Farm, the Delaware Supreme Court described the state of
mind necessary to support a punitive damages claim against an insurer. There, the
Supreme Court observed that:
[t]he penal aspect and public policy considerations that justify the
imposition of punitive damages require that they be imposed only after
a close examination of whether the defendant's conduct is "outrageous,"
because of "evil motive" or "reckless indifference to the rights of
others." . . . Mere inadvertence, mistake or errors of judgment which
constitute mere negligence will not suffice. It is not enough that a
decision is wrong. It must result from a conscious indifference to the
decision's foreseeable effect.41
Furthermore, punitive damages are appropriate only where the defendant
showed a willful or wanton disregard of the plaintiff's rights.42 To prove a
defendant’s conduct to have been willful or wanton, the plaintiff must at a minimum
produce evidence of the defendant’s “conscious indifference” or “I don’t care”
37
Enrique v. State Farm Mut. Auto. Ins. Co., 142 A.3d 506, 516 (2016).
38
Id.39
Id. at 512.
40
Enrique, 142 A.3d at 512; Pierce, 671 A.2d at 1367.
41
Tackett, 653 A.2d at 265 (quoting Jardel v. Huges, 523 A.2d 518, 529 (Del. 1087) and
Restatement (Second) of Torts § 908, cmt. B (1979) (citations omitted)).
42
Estate of Rae v. Murphy, 956 A.2d 1266, 1270 (Del. 2008) (citing Porter v. Turner, 954 A.2d
308, 312 (Del. 2008) (quoting Cloroben Chem. Corp. v. Comegys, 464 A.2d 887, 891 (Del. 1983)).
8
attitude.43 Thus, the least level of culpability necessary to impose punitive damages
against a bad faith insurer requires an elevated state of mind over the one necessary
to demonstrate bad faith - that is, at a minimum, the bad faith insurer must have
consciously disregarded the insured’s rights with an “I don’t care attitude.”
Where a litigant's state of mind is an element of a claim, summary judgment
is frequently inappropriate because of its fact-intensive nature.44 Furthermore, when
an artificial entity such as an insurance company is involved, the state of mind
inquiry can be answered only by examining the state of mind of the company’s
employees.45
State of mind determinations often require a trier of fact to infer or decline to
infer a subjective matter based upon objective facts. Superior Court Criminal Pattern
Jury Instruction 2.5 provides the following helpful guidance:
[i]t is of course difficult to know what is going on in another person’s
mind. Therefore, you are permitted to draw an inference, or in other
words, reach a conclusion about a defendant's state of mind from the
facts and circumstances. In reaching this conclusion, you may consider
whether a reasonable person acting in the defendant’s circumstances
would have or would not have had the required state of mind.46
43
Id.44
10B Charles Alan Wright et al., Federal Practice and Procedure §2730 (4th ed. 2019); See also
Id. § 2730.2 (citing decision from multiple jurisdictions denying summary judgment in the bad
faith insurance context including instances involving claims for punitive damages); see e.g., James
v. State Farm Mut. Auto. Ins. Co., 743 F.3d 65 (5th Cir. 2014); Overstreet v. Kentucky Cent. Life
Ins. Co., 950 F.2d 931 (4th Cir. 1991) (reasoning “where states of mind are decisive as elements
of a claim or defense, summary judgment ordinarily does not lie”); O’Donnell v. Fin. Am. Life Ins.
Co., 171 F. Supp. 3d 711 (S.D. Ohio 2016) (finding genuine issues of material fact existed
regarding defendant’s knowledge and motivations); Atlas Carriers, Inc. v. Transp. Ins. Co., 584
F. Supp. 50 (E.D. Ark. 1983) (determining that "[a]t this stage, the Court cannot say that, given
the factual background in this case, a jury could not infer bad faith from such conduct . . . at this
point, the Court simply cannot say that the evidence and the reasonable inferences permitted will
not present a jury issue under the applicable law").
45
Wright et al., at § 2730 (quoting Croley v. Matson Nav. Co., 434 F.2d 73, 77 (5th Cir. 1970)).
46
Del. Super. Crim. P.J.I. 2.5 (2015).
9
While Mr. Moyer claims are civil and not criminal, the jury’s role in
determining a party’s state of mind is the same for either. Because the Court’s
summary judgment decision must turn on the sufficiency of the evidence to justify
submitting a state of mind question to the jury, the Court must evaluate the record
evidence with these principles in mind.
B. The evidence of record supports a reasonable inference that AZIC had a
reckless state of mind.
For summary judgment purposes, AZIC concedes that the record supports a
reasonable inference that it acted in bad faith. Regarding the separate issue of
punitive damages, Mr. Moyer does not allege that AZIC acted with malice; rather,
he alleges that AZIC acted with reckless indifference toward him. In this case, the
two claims, for bad faith and for punitive damages, require the Court to examine the
same interwoven evidence. Namely, the Court must consider the facts that are
relevant to the issue of bad faith when it decides if those same facts rise to the higher
level of culpability necessary to generate a factual issue as to punitive damages.
Here, AZIC satisfies its initial burden as movant. It emphasizes that it
accepted Mr. Moyer’s claim within three months of the accident and paid it shortly
thereafter. It also identifies actions it took to investigate the claim - although those
actions first occurred two and one-half months after the accident. Furthermore,
AZIC correctly contends that mere mistakes or inadvertence to do not justify a
finding of bad faith, or relevant to this partial summary judgment motion, the
imposition of punitive damages.47 In furtherance of its argument regarding mere
neglect, it cites its internal correspondence in May, sent two months after the
accident, where its employees were confused about the claim. On this record, a jury
47
Tackett, 653 A.2d at 266.
10
may decline to find that AZIC acted in bad faith. If the jury finds no bad faith at the
outset, it will not reach the issue of punitive damages.
In any event, because AZIC meets its initial burden on summary judgment,
the burden shifts to Mr. Moyer to demonstrate a genuine issue of material fact
regarding punitive damages. Here, Mr. Moyer demonstrates such a factual issue.
Namely, when considered in their totality, the facts of record will permit a reasonable
jury to find recklessness. These facts include that AZIC had notice of the claim
almost immediately after Mr. Moyer’s accident. Within three days of the accident,
AZIC knew the identities of two disinterested witnesses but did not contact them for
three months. Furthermore, within ten days of the injury, still in March 2019,
AZIC’s claims notes recorded “Compensable: Y.” That evidence alone, could lead
a reasonable jury to infer that AZIC knew it should pay the claim at that point, yet
failed to further investigate it or pay it for another two months.
AZIC contends that Mr. Moyer’s allegedly varied descriptions of the incident
provided it a good faith basis to delay payment. A jury may find that to be the case.
On the other hand, AZIC provided inconsistent reasons for its delay. When those
reasons are examined in their totality, they support an inference of recklessness on
AZIC’s part. Namely, approximately two weeks after AZIC’s adjuster typed in a
“Y” regarding compensability in her claim notes, she emailed CBRE to recommend
denial. She cited three reasons, but two of those three reasons were patently
unsupportable on their face. Namely, she recommended denying the claim because
Mr. Moyer exercised his right to hire an attorney to present his claim. She also
recommended denying it because Mr. Moyer was a body builder, presumably
because he could conceivably have injured himself lifting weights. While the third
reason she provided was not as patently improper, the jury could infer an “I don’t
care” attitude from it as well. In her third reason, she cited Mr. Moyer’s allegedly
inconsistent accounts of whether the electrical shock itself, or his body’s natural
11
reaction to the shock, caused his injuries. A reasonable jury could find AZIC’s
inquiry to be irrelevant since either would constitute a work injury.
There are further facts that cumulatively support an inference of AZIC’s
reckless conduct. For instance, approximately two weeks after Ms. Redman’s email
recommending denial, AZIC wrote to Mr. Moyer and told him differently. There, it
gave him two reasons, not reasons to deny his claim, but rather reasons why it could
not yet accept or deny it. AZIC had the statutory duty, pursuant Section 2362(a) to
notify Mr. Moyer within fifteen days of notice of his claim if it could not yet accept
it.48 It did not send the letter until approximately thirty days after it learned of the
accident. Furthermore, when it did, it did not give Mr. Moyer an estimate of the
time needed to inform him of its decision. AZIC identifies no rationale for why it
violated both of Section 2362(a)’s requirements. Notably, while Section 2362(a)
provides no express penalty for an insurer’s failure to comply with its mandates, at
a minimum, AZIC’s noncompliance with the statute’s requirements may provide
additional support for a jury’s inference that AZIC did not care about Mr. Moyer’s
rights as an insured.
Finally, for AZIC to have held a reckless state of mind, it must have had
awareness that its conduct created a substantial risk of harm to Mr. Moyer. Here,
Mr. Moyer’s contacts with AZIC in March 2019 demonstrate such awareness. For
instance, the record includes March 26, 2019 emails between Mr. Moyer’s employer
and AZIC that demonstrate how frustrated Mr. Moyer was with AZIC’s refusal to
act. Moreover, CBRE notified AZIC the next day that Mr. Moyer was upset and
anxious because Ms. Redman told him that she did not regularly check her voice
mails, she did not work for him, and that she would handle his claim on her schedule.
By the time of that exchange with Ms. Redman, the statutorily required fifteen-day
48
19 Del. C. § 2362(a). Failing to abide by this statutory provision requiring AZIC to provide a
timely, full reason for the delay supports an inference of AZIC’s “I don’t care” attitude.”
12
notice period had already expired. Furthermore, AZIC’s claim records record an
allegation that Ms. Redman had engaged in a shouting match with one of Mr.
Moyer’s medical providers. In response to Mr. Moyer’s complaints regarding Ms.
Redman’s conduct, AZIC removed her from his case. AZIC’s substitution of
adjusters constitutes an admission by conduct that supports an inference that AZIC
recognized the effect its delay had on Mr. Moyer. It further supports an inference of
an “I don’t care” attitude because AZIC identifies no investigative or other action
that it took to advance the claim for the next forty-five days, other than sending its
late Section 2362(a) letter.
On balance, a reasonable jury may conclude based upon the totality of the
evidence that AZIC handled this claim with an “I don’t care” attitude. Once AZIC
received confirmation that Mr. Moyer was in fact electrocuted, it knew or reasonably
should have known that the injury occurred in the course of his employment. Mr.
Moyer earned a modest wage and suffered a significant work injury. The claims
adjuster's initial indifference to Mr. Moyer’s predicament, followed by extended
claims inactivity after that initial indifference, will permit a reasonable inference
justifying punitive damages.
V. CONCLUSION
When viewing the facts in the light most favorable to Mr. Moyer, genuine
issues of material fact exist as to (1) whether AZIC acted in bad faith, and if it did
act in bad faith, (2) whether it acted with reckless indifference towards Mr. Moyer’s
rights. As a result, AZIC’s partial Motion for Summary Judgment must be
DENIED.
IT IS SO ORDERED.
/s/Jeffrey J Clark
Judge
13