Lockwood v. Geico General Insurance Company

Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
JENNIFER LOCKWOOD, )
) Supreme Court No. S-14552
Appellant, )
) Superior Court No. 3AN-09-07127 CI
v. )
) OPINION
GEICO GENERAL INSURANCE )
COMPANY, ) No. 6904 – May 2, 2014
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Patrick J. McKay, Judge.
Appearances: Jeffrey J. Jarvi, Anchorage, for Appellant.
David S. Carter, Hughes Gorski Seedorf Odsen & Tervooren,
LLC, Anchorage, for Appellee.
Before: Fabe, Chief Justice, Winfree, Stowers, and Maassen,
Justices. [Carpeneti, Justice, not participating.]
FABE, Chief Justice.
I. INTRODUCTION
Jennifer Lockwood was injured in a car accident caused by an uninsured
drunk driver. Lockwood had car insurance through Geico General Insurance Company.
After exhausting her policy’s medical payments coverage, Lockwood sought payment
under her uninsured motorist coverage. Geico offered $750 to settle the uninsured
motorist claim, and Lockwood declined. Geico questioned Lockwood’s medical bills
because they seemed “high” to the adjusters and refused to make additional medical
payments outside of a total settlement of Lockwood’s uninsured motorist claim. Geico
pointed to the fact that Lockwood had received treatment for a prior back problem, but
it took no action to resolve the alleged medical uncertainty, such as requesting an
independent medical exam or voluntary arbitration, before refusing to pay for medical
expenses. Lockwood paid out of pocket for some of her treatment costs and took out a
loan for her remaining medical bills. She later ceased treatment due to its prohibitive
cost and experienced ongoing pain.
The parties eventually settled Lockwood’s uninsured motorist claim for
$25,000. Lockwood brought a tort claim against Geico for alleged breach of the duty of
good faith and fair dealing implied in her insurance contract, arguing that Geico
unreasonably delayed payment of Lockwood’s uninsured motorist claim. Lockwood
sought to discover Geico’s training and claims-handling manuals, but the superior court
denied her request. The superior court subsequently granted summary judgment in favor
of Geico on the bad-faith tort claim and awarded attorney’s fees.
We reverse the superior court’s grant of summary judgment because there
is a genuine issue of material fact regarding whether Geico lacked a reasonable basis for
delaying payment on Lockwood’s uninsured motorist claim. Because we reverse the
grant of summary judgment, we vacate the award of attorney’s fees and we remand for
further proceedings. We also conclude that it was an abuse of discretion to deny
discovery of Geico’s manuals because they contain information that could be relevant
to Lockwood’s bad-faith claim.
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II. FACTS AND PROCEEDINGS1
A. Car Accident And Injuries
On May 21, 2007, a drunk driver in a large van rear-ended Lockwood while
she was stopped at a red light in her Nissan Sentra. It was undisputed that the drunk
driver was entirely responsible for the accident.
Lockwood sustained injuries in the accident. According to the emergency
room report, Lockwood felt tenderness in her neck that night. The emergency room
doctor diagnosed Lockwood with a cervical spine injury and strain of the muscles near
the neck.2 An X-ray of her neck showed no spinal or “soft tissue abnormalit[ies].”
Lockwood also filled out an injury form for the accident. In the form Lockwood
reported that she experienced a headache, dizziness, and pain in her left wrist, neck, and
back. Lockwood indicated in her affidavit that she continued to experience pain the day
after the accident, particularly in her back, neck, and wrist.3
B. Geico Insurance Policy
The drunk driver was an uninsured motorist, but Lockwood had an
automobile insurance policy with Geico General Insurance Company. Lockwood’s
policy provided two categories of coverage that are relevant here: (1) medical payments
coverage and (2) uninsured motorist coverage. The medical payments coverage covered
1
When reviewing a grant of summary judgment, we view the facts in the
light most favorable to the nonmoving party. See McCormick v. City of Dillingham, 16
P.3d 735, 738 (Alaska 2001).
2
The hospital report lists two diagnoses: “[c]ervical spine injury” and
“[p]aracervical muscle strain.” Cervical means “[r]elating to a neck.” STEDMAN ’S
M EDICAL D ICTIONARY 351 (28th ed. 2006).
3
A contemporary report that Lockwood made to her insurer described the
same injuries.
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“all reasonable [medical] expenses actually incurred by an insured” due to “bodily injury
caused by accident,” with payments capped at $10,000.4 The uninsured motorist
coverage would “pay damages for bodily injury, caused by an accident, which the
insured is legally entitled to recover from the owner or operator of an uninsured motor
vehicle,” provided that this benefit would not pay out “until the limits of liability of all
bodily injury . . . policies that apply have been used up.”5 The maximum benefit for
uninsured motorist coverage was $50,000 per person. The insurance policy established
several conditions for receipt of payment under the uninsured motorist coverage,
including notice to Geico, “written proof of claim, under oath if required,” and
willingness to submit to a medical exam if required. The Geico policy explained that
“[t]his [proof of claim] will include details of the nature and extent of injuries, treatment
and other facts which may affect the amount payable.”
C. Medical Treatment
The day after the accident, Lockwood went to a local chiropractor. He
diagnosed Lockwood with neck and shoulder muscle strains. He ordered an MRI and
performed x-rays of Lockwood’s neck; both were normal. He informed Geico that his
treatment plan for Lockwood consisted of daily chiropractic treatment for two weeks,
tapering to three treatment sessions per week. But when Lockwood’s back pain
continued, she continued her treatment from her chiropractor beyond the initial treatment
period.
In July 2007 Geico sent a letter to Lockwood’s chiropractor requesting that
he provide a complete billing history and all previous treatment records for Lockwood.
Geico informed the chiropractor that it was unable to issue payment for services from
4
Emphasis omitted.
5
Emphasis omitted.
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June 11, 2007 to July 2, 2007 until Geico received the requested information. Geico’s
log notes indicate that Geico received the requested records from the chiropractor’s
office within the month, by August 1, 2007. The records showed that Lockwood had
received treatment from the chiropractor before the May 21, 2007 accident for a prior
back injury but that Lockwood had last seen the chiropractor on January 5, 2007, about
five months before the accident. According to Lockwood’s medical records, an
orthopedic surgeon determined that Lockwood was medically stable in December 2006.
By July 25, 2007, the chiropractor had released Lockwood to work.
Lockwood’s back felt sore from her return to work. In the summer of 2008, over a year
after the accident, Lockwood was still receiving treatment from her chiropractor for her
neck strain and back pain. Lockwood’s back pain persisted, and her chiropractor
referred her to a medical doctor about a year after the accident.
D. Exhaustion Of Medical Payments Coverage
Geico initially paid for Lockwood’s bills under the medical payments
coverage of her insurance policy. Geico paid $2,867 for medical visits and examinations
within the first five days of the accident and $7,133 for Lockwood’s chiropractic care
from May 22, 2007 to August 17, 2007. By August 2007, about 12 weeks after the
accident, these medical payments totaled $10,000, and Lockwood exhausted her medical
payments coverage. Geico then informed Lockwood about her uninsured motorist
coverage and the settlement process.
E. Dispute Over Uninsured Motorist Coverage And Settlement Of
Uninsured Motorist Claim
Lockwood sought payment for her medical costs under her uninsured
motorist coverage. But Geico never paid Lockwood’s medical bills under her uninsured
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motorist policy.6 Lockwood paid for $1,000 of her unpaid medical expenses and took
out a loan for about $5,000 to cover the rest. Because she could not afford to pay for
continuing treatment, Lockwood eventually stopped treatment even though she
maintained that she still suffered back pain.
By May 2008 Lockwood had retained an attorney to pursue medical
payments from Geico. Lockwood’s claim for benefits under her uninsured motorist
policy was eventually settled after three years of negotiations and the early stages of
litigation of her lawsuit against Geico. Geico had first offered to settle Lockwood’s
uninsured motorist claim for $750 in June 2007, before she retained counsel. According
to Geico, it based this settlement offer on Lockwood’s request for the cost of her son’s
day care while she was in treatment. Lockwood declined the offer.
In May 2008 Geico advised Lockwood that it would not consider paying
her medical bills “[o]utside [o]f [t]otal [s]ettlement.” A Geico supervisor advised the
claims adjuster for Lockwood’s case “to try to move the U[ninsured] M[otorist] claim
in a posture to attempt to settle.” In July 2008 Geico advised Lockwood’s attorney that
Lockwood’s medical bills seemed “[h]igh.” In April 2009 Lockwood offered to settle
6
Lockwood alleges that, in addition to denying her coverage, the Geico
representatives were abusive, rude, and unprofessional in their dealings with her.
Lockwood alleges that during phone calls about her claim, a Geico adjuster hung up on
her on two occasions. She further maintains that when she called Geico about her claim,
the Geico adjuster was “sarcastic,” “abusive,” and “unprofessional” in handling her
claim. She stated in her deposition that, because of the adjuster’s negative demeanor, she
felt “physically ill.” The Geico adjuster acknowledged that “calls were ended abruptly”
but denied hanging up on her. Lockwood alleged in her affidavit that the Geico
adjuster’s “rude and unprofessional behavior in handling [her] claim discouraged [her]
from working with him to pursue [her] insurance claim after [she] was hit by a drunk
driver.”
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for the policy limit of $50,000, and a month later Geico responded with an offer to settle
for $12,000. Lockwood refused the offer.
Lockwood filed her first amended complaint on January 15, 2010, asserting
a breach of contract claim under her uninsured motorist coverage and a tort claim for
Geico’s “breach of the covenant of good faith and fair dealing” implied in the insurance
policy.
Faced with a lawsuit, Geico requested for the first time in May 2010, nearly
three years after the accident, that a doctor perform an independent medical evaluation
of Lockwood. The doctor found that Lockwood experienced “mild discomfort” in her
lower back in a range-of-motion test and diagnosed neck muscle and ligament strain or
sprain as well as lower back muscle or ligament strain. At the same time, the doctor
reported that “[b]ased upon the medical records reviewed, my history taken from
Ms. Lockwood, and the physical examination, I could find no objective evidence to
support Ms. Lockwood’s contention that she hurt her lower back in the accident of
May 21, 2007.” He further concluded that he would have expected the “[s]oft tissue
injuries sustained by Ms. Lockwood in the accident of May 21, 2007, [to be] resolved
within six to eight weeks following the date of the accident.” His review of her records
and medical history “provide[d] no reason to suspect extenuating circumstances which
could delay recovery of the soft tissue injuries she sustained.”
In August 2010 Geico increased its settlement offer for Lockwood’s
uninsured motorist claim to $25,000. Lockwood accepted the offer in October 2010 and
signed the $25,000 settlement agreement in return for the release of her contract claim
against Geico arising from the May 21, 2007 accident. This release expressly preserved
Lockwood’s “claims for alleged extracontractual/bad faith damages.” Lockwood
resumed treatment for her back pain after she settled with Geico and reported that
resuming treatment “has helped my pain and my condition.”
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F. Discovery Dispute In Lockwood’s Bad-Faith Tort Action
With the bad-faith tort claim before the superior court, Lockwood requested
that Geico “produce all claims handling manuals that GEICO provides to, makes
available to, or gives access to Alaska adjusters . . . for their use and reference in
handling automobile collision claims.” Geico objected, denying that the manuals were
relevant “to any legitimate issue in this case.” Lockwood filed a motion to compel the
requested discovery, which the superior court found “exceed[ed] the directive from the
court” for “narrowly drafted discovery requests.” The superior court directed Lockwood
to “either redraft the discovery, or submit further argument as to why . . . the proposed
discovery fits the parameters for which the court allowed the [Alaska Civil Rule] 56(f)
continuance.” After additional briefing, the superior court found that Lockwood’s
request for the manuals was “still overbroad and requests undiscoverable information
and documents” because Lockwood was unable to identify “what specific portions or
topics of the materials would be relevant to the very narrow issues before the court.” But
the superior court also ordered Geico to produce relevant portions of any training
materials for in camera review.
In response, Lockwood suggested that the superior court order a “standard,
reasonable protective order” providing that “all materials designated ‘confidential’ by
the other side may only be used in this litigation; may not be viewed by anyone other
than plaintiff’s counsel, their staff, experts and clients in this litigation; must be filed
under seal; and must be returned at the end of this litigation.”
Geico opposed discovery of the manual but requested that the superior
court require a confidentiality agreement and protective order “[i]n the event that the
court determines that some portion of the in camera materials should be disclosed to
plaintiff.” Geico submitted to the superior court the “Claims Function” chapter of its
manual. After the superior court’s in camera review, it concluded:
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Generally, there is nothing contained within the reviewed
materials that would expand (if they could) any statutory or
common law duty owed by GEICO to [its] insured.
Specifically, the documents require the GEICO claims
examiners to deal with insurance issues ethically, fairly, and
promptly. . . . This hardly novel concept does not justify the
release of proprietary information contained in the produced
documents. The Court found nothing within the materials
that would directly lead to any admissible evidence regarding
any complaints concerning payments from different available
coverages. The documents will remain sealed within the
court file available for further review should plaintiff be able
to more particularly state her bad faith allegations against
GEICO.
The Court has been informed there are no letters of
reprimand or discipline in the requested personnel file.
Lockwood appeals the discovery order, arguing that the Geico’s manuals are relevant
and discoverable under Alaska Civil Rule 26(b)(1).
G. Summary Judgment
On February 5, 2010, Geico moved for summary judgment on Lockwood’s
bad-faith claim, and Lockwood opposed. The superior court granted Geico’s motion for
summary judgment, reasoning that “none of these facts suffice to raise a factual question
as to whether [Geico] lacked a reasonable basis in failing to pay the demanded settlement
amount.” The superior court cited several reasonable bases for Geico’s conduct:
“GEICO had ample reason to delay further payments to Plaintiff pending further
investigation into the medical necessity of further treatment and a determination
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regarding causation of her injuries” and the “extent of damages.”7 Lockwood appeals
the grant of summary judgment to Geico.
III. STANDARDS OF REVIEW
We review rulings on motions for summary judgment de novo, “reading the
record in the light most favorable to the non-moving party and making all reasonable
inferences in its favor.”8 “A party is entitled to summary judgment only if there is no
genuine issue of material fact and if the party is entitled to judgment as a matter of law.”9
“[T]he burden of showing the absence of a genuine issue as to any material fact is upon
the moving party.”10 Defeating a motion for summary judgment “only requires a
showing that a genuine issue of material fact exists to be litigated, and not a showing that
a party will ultimately prevail.”11 “Whether the evidence presented a genuine issue of
material fact is a question of law that we independently review.”12
7
The superior court also awarded Geico $4,657.40 in partial attorney’s fees
based on the superior court’s determination of reasonable fees related to the bad-faith
claim after the settlement of the contractual uninsured motorist claim. Lockwood appeals
the Rule 82 attorney’s fee award, claiming that she received a “substantial affirmative
recovery” in her settlement with Geico.
8
Lum v. Koles, 314 P.3d 546, 552 (Alaska 2013) (citation omitted).
9
ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc., __ P.3d __,
Op. No. 6874, 2014 WL 995971, at *5 (Alaska, Mar. 14, 2014) (citation omitted).
10
Wilson v. Pollet, 416 P.2d 381, 383 (Alaska 1966).
11
Moffatt v. Brown, 751 P.2d 939, 943-44 (Alaska 1988).
12
Kalenka v. Jadon, Inc., 305 P.3d 346, 349 (Alaska 2013).
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“We review the denial of a motion to compel discovery for abuse of
discretion.”13 “We generally review discovery orders under the deferential abuse of
discretion standard, but we apply our independent judgment in deciding whether the trial
court weighed the appropriate factors, because that is a legal question.”14
IV. DISCUSSION
Lockwood raises two main arguments that we address in this appeal. First,
Lockwood challenges the summary judgment order, arguing that there were genuine
issues of material fact as to whether Geico unreasonably delayed payment.15 Second,
Lockwood claims that “[t]he superior court erred in not ordering production of [Geico’s]
claims and training manuals so Lockwood could examine the adjusters about their
contents at deposition and so that evidence and testimony could be presented and
evaluated at summary judgment and at trial before the jury.”
13
Coulson v. Marsh & McLennan, Inc., 973 P.2d 1142, 1146 (Alaska 1999)
(citing Stone v. Int’l Marine Carriers, Inc., 918 P.2d 551, 554 (Alaska 1996)).
14
Id. (citing In re Mendel, 897 P.2d 68, 72 n.7 (Alaska 1995)).
15
Lockwood also argues that the “record evidence raises fact issues about
whether [Geico] violated various provisions of AS 21.36.125 with its pattern of conduct
in delaying payment.” But that statute “do[es] not create or imply a private cause of
action for a violation of this [statute].” AS 21.36.125(b); see also O.K. Lumber Co. v.
Providence Wash. Ins. Co., 759 P.2d 523, 527 (Alaska 1988) (holding that the Unfair
Claim Settlement Practices Act does not provide a private cause of action for insureds
or third-party claimants). Accordingly, Lockwood’s statutory argument on appeal is
without merit. Even if there were genuine issues of material fact regarding Geico’s
violation of AS 21.36.125, Lockwood would have no cause of action under that statute
and summary judgment for Geico on the statutory claim would have been proper.
In addition, Lockwood contends that the superior court’s award of
attorney’s fees was improper. Because we reverse the superior court’s grant of summary
judgment, we also vacate the award of attorney’s fees to Geico without reaching the
question whether that award was proper.
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A. It Was Error To Grant Summary Judgment To Geico.
Under Alaska’s contract law, “the covenant of good faith and fair
dealing . . . is implied in all contracts.”16 For insurance contracts, breach of this covenant
by the insurer gives the insured a cause of action sounding in tort because of “[t]he
special relationship between the insured and insurer in the insurance context”17 and
because tort liability “provide[s] needed incentive to insurers to honor their implied
covenant to their insureds.”18 “[W]ithout such a cause of action insurers can arbitrarily
deny coverage and delay payment of a claim with no more penalty than interest on the
amount owed.”19
Although we have declined to define the elements of the tort of bad faith
in an insurance contract,20 our precedent makes clear that the element of breach at least
requires the insured to show that the insurer’s actions were objectively unreasonable
16
State Farm Mut. Auto. Ins. Co. v. Weiford, 831 P.2d 1264, 1266 (Alaska
1992) (citing Alaska Pac. Assur. Co. v. Collins, 794 P.2d 936, 947 (Alaska 1990)).
17
State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d 1152, 1156 (Alaska
1989).
18
Id. at 1157.
19
Ennen v. Integon Indem. Corp., 268 P.3d 277, 291 (Alaska 2012) (alteration
in original) (quoting Nicholson, 777 P.2d at1156).
We note that an insurer’s breach of the covenant of good faith and fair
dealing gives the insured the ability to sue in tort as well as contract, with the distinction
determining, among other things, which types of damages will be available. See
Weiford, 831 P.2d at 1266.
20
See Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321, 1323 (Alaska
1993) (“We had no occasion to comprehensively define the elements of the tort of bad
faith in a first-party insurance context in Nicholson; we have not done so in subsequent
cases, see e.g., [Weiford]; nor do we do so now.”).
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under the circumstances.21 Thus, in order to prevail on her bad-faith claim at trial,
Lockwood will have to show that Geico’s delay in payment of her claims breached the
covenant of good faith and fair dealing because it was “made without a reasonable
basis.”22
The superior court in this case granted Geico’s motion for summary
judgment, concluding that there was no genuine issue of material fact as to whether
21
See Hillman, 855 P.2d at 1324 (“[T]he tort of bad faith in first-party
insurance cases . . . necessarily requires that the insurance company’s refusal to honor
a claim be made without a reasonable basis.”).
Whether the insured must also show some sort of culpable mental state in
addition to objective unreasonableness in a bad-faith insurance tort action is a matter left
open by our case law. See, e.g., Nicholson, 777 P.2d at 1154 n.3 (reviewing jury verdict
finding breach of duty of good faith and fair dealing by insurer under first-party
insurance contract where jury was instructed that “[b]ad faith does not mean bad
judgment or negligence, but means having a dishonest purpose through some motive of
self-interest or ill will, or having maliciousness or hostile feelings toward its insureds,
or acting with reckless indifference to the interests or rights of its insureds,” but
disposing of case on other grounds and not reviewing propriety of jury instruction);
Ennen, 268 P.3d at 287-88 (upholding bench trial decision that insurer tortiously
breached duty of good faith and fair dealing owed to insured where insurer engaged in
no “ ‘intentional’ scheme to ‘deceive and deny [underinsured motorist] claims’ ” but
nonetheless acted objectively unreasonably under the circumstances and was reckless
with regard to its unreasonableness); cf. Jackson v. Am. Equity Ins. Co., 90 P.3d 136,
143-45 (Alaska 2004) (disapproving use of Nicholson jury instruction in bad-faith tort
action against insurer for failure to settle third-party claim against insured within policy
limits); Cont’l Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 293 (Alaska 1980)
(holding “that an insurer, defending an action against the insured, is bound to exercise
that degree of care which a man of ordinary prudence would exercise in the management
of his own affairs . . . irrespective of fraud or bad faith.” (citation omitted)). We decline
to address this issue now because it is unnecessary for us to do so in the course of
reversing the superior court’s grant of summary judgment.
22
Hillman, 855 P.2d at 1324.
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Geico acted unreasonably by delaying payment on Lockwood’s uninsured motorist
benefits. We conclude that summary judgment was improperly granted in this case.
Looking at the circumstances of this case as a whole and viewing the
evidence and reasonable inferences therefrom in a light most favorable to the non­
moving party, we conclude that there is a genuine issue of material fact as to Geico’s
reasonableness in delaying payment on Lockwood’s uninsured motorist claim. First,
Geico initially offered to settle Lockwood’s uninsured motorist claim in June 2007 for
just $750. Geico based this offer solely on Lockwood’s childcare expenses and not on
her medical condition, the connection of that condition to the car accident, her expected
medical bills, general damages, or lost wages. After exhaustion of her medical payment
benefits, Lockwood was continuing to incur medical expenses and suffer lost wages and
other non-economic general damages. Under these circumstances, in conjunction with
the other factors discussed below, a genuine issue of material fact exists as to whether
an offer of $750 was unreasonable behavior on the part of an insurer subject to the duty
of good faith and fair dealing.23
Second, Geico decided in May 2008 not to pay any of Lockwood’s medical
bills after exhaustion of the medical payments benefits without a total settlement of the
uninsured motorist claim. Drawing all reasonable inferences in favor of Lockwood, a
genuine issue of material fact exists as to whether the basis for Geico’s decision was
unconnected to Lockwood’s actual medical condition but rather motivated by the
exhaustion of the medical payments benefits. If Geico had legitimate concerns about the
extent of Lockwood’s injuries, an inference can be drawn that a reasonable insurer would
advise her of those concerns with specificity and either ask Lockwood for more medical
23
Cf. Weiford, 831 P.2d at 1268-69 (concluding that an initial settlement offer
of $5,000, which was low in the context of the damages and ultimate outcome in that
case, “might support a fact finder’s conclusion that [the insurer] was guilty of bad faith”).
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information or ask for an independent medical exam. Geico took no such actions at the
time it demanded a global settlement. This could raise the question whether Geico’s
decision to condition additional medical payments on a global settlement actually was
connected to Lockwood’s medical situation and the accident.
Third, Geico denied any further payment under the uninsured motorist
policy and declined to make any further attempts to reach a settlement, based solely on
its unsubstantiated doubts about the necessity of medical care for injuries sustained in the
accident. Lockwood presented evidence in her deposition, affidavit, and medical records
that she experienced ongoing, life-changing pain as a result of the accident and having
to cease treatment.24 Geico noted that she had had a prior back injury 25 and expressed
concern that her medical bills were “high” in the context of this accident. But other than
asserting these doubts, Geico did nothing to reduce the alleged medical uncertainty about
the cause of Lockwood’s pain or to clarify the necessity of further treatment from the
chiropractor. Geico did not request a second medical opinion or an independent medical
exam until 2010, about three years after it stopped paying Lockwood’s medical bills.
Indeed, Geico’s staff did not cite a medical basis of any kind to call into question the
chiropractor’s treatment for Lockwood’s injuries in 2007. Geico did not seek to use the
voluntary-arbitration clause present in the insurance contract to resolve the issue of
medical uncertainty. Nor did Geico inform Lockwood what she would have to do to
resolve the medical uncertainty to Geico’s satisfaction. Geico took none of these
24
She explained in her deposition that her back pain has “definitely cut[]
down on” her “every day activities” and “changed . . . [her] way of life.” She claimed
that even daily activities were difficult: “[f]olding laundry, after a while I’m in pain, I
can’t finish it.” Three years after the accident, she described her back as “hurt[ing] about
six out of seven days a week.” She reported that she finds “it difficult to roll over in bed
without pain” and that her “lower back pain is worse than [her] neck pain.”
25
A doctor had pronounced her prior back injury stable as of 2006.
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affirmative steps to clarify the alleged medical uncertainty after Lockwood presented all
requested information to Geico.26
Taking these circumstances and all reasonable inferences that may be drawn
from the facts favorable to Lockwood, we conclude that a genuine issue of material fact
exists as to whether Geico acted unreasonably by delaying payment on Lockwood’s
uninsured motorist benefits. Geico argues that it had several reasonable bases to delay
payment in this case: the severity of the car accident that “did not involve a heavy
impact,” Lockwood’s “high” medical bills in light of “a diagnosis of a neck strain,” and
the fact that “Lockwood had recently treated with her chiropractor for more than a year,
with similar complaints.” Whether or not Geico’s arguments ultimately prevail at trial,
they are insufficient to justify summary judgment. We conclude that, under the three
circumstances discussed above, there is a genuine issue of material fact on the questions
whether Geico had a reasonable basis for delaying payment of Lockwood’s uninsured
motorist benefits and whether Geico breached its duty of good faith and fair dealing. We
therefore reverse the superior court’s grant of summary judgment and remand for further
proceedings.27
B. It Was An Abuse Of Discretion To Deny Lockwood’s Motion To
Compel Discovery Of Geico’s Manuals.
After its in camera review, the superior court concluded that the claims
function chapter of Geico’s manual requires “the GEICO claims examiners to deal with
26
See Wilson v. 21st Century Ins. Co., 171 P.3d 1082, 1084-89 (Cal. 2007)
(affirming reversal of summary judgment for the insurer in a bad-faith insurance tort suit
where the insurer delayed payment for two years as a result of its failure to launch a
timely investigation to support its medical assertions of a preexisting injury).
27
This does not imply that Geico’s delay of payment was necessarily
unreasonable and thus will constitute bad faith in a trial on the merits. That question can
be answered only by the ultimate finder of fact.
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insurance issues ethically, fairly, and promptly. . . . This hardly novel concept does not
justify the release of proprietary information . . . .” As a result, the superior court denied
Lockwood’s motion to compel discovery of Geico’s manuals, concluding that the
manuals would not “directly lead to any admissible evidence regarding any complaints
concerning payments from different available coverages.” On appeal, Lockwood argues
that Geico’s manuals are relevant and discoverable under Alaska Civil Rule 26(b)(1)
because (1) the “relevancy standard is to be broadly construed at the discovery stage”
and (2) “the court impliedly noted that the materials were relevant to [Geico]’s handling
of Lockwood’s approved [uninsured motorist] claim.” Geico replies that, despite the
superior court’s direction that Lockwood narrow her discovery, she only requested
“generic” documents and “failed to articulate the relevance of her demand.”
We conclude that the superior court abused its discretion by not compelling
relevant discovery. Alaska Civil Rule 26(b)(1) provides:
Parties may obtain discovery regarding any matter, not
privileged which is relevant to the subject matter involved in
the pending action . . . . The information sought need not be
admissible at the trial if the information sought appears
reasonably calculated to lead to the discovery of admissible
evidence.
As we have stated, our “discovery rules are to be broadly construed and ‘relevance for
purposes of discovery is broader than for purposes of trial.’ ”28
28
Lee v. State, 141 P.3d 342, 347 (Alaska 2006) (quoting Hazen v.
Municipality of Anchorage, 718 P.2d 456, 461 (Alaska 1986)) (holding that the superior
court did not abuse its discretion by granting discovery of corporate documents and
information about companies’ technologies and employees because they related to
liability and a defense); see also Langdon v. Champion, 752 P.2d 999, 1004 (Alaska
1988) (construing the attorney-client privilege narrowly in light of “ ‘our commitment
to liberal pre-trial discovery’ ” (quoting United Servs. Auto. Ass’n v. Werley, 526 P.2d
(continued...)
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After conducting an in camera review of the materials, we conclude that the
claims handling chapter of Geico’s manual contains information that is arguably relevant
to Lockwood’s claims. In particular, the portions of the manual that address professional
ethics, settlement practices, and negotiations may prove relevant to Lockwood’s bad-
faith claim. These portions shed light on Geico’s standard practices and could lead to
admissible evidence as to what a typical investigation entails and whether the Geico
adjusters followed standard procedures.29 We therefore conclude that, under our broad
discovery rules, Lockwood is entitled to discover portions of Geico’s manuals relevant
to Geico’s claims-handling practices.
Finally, we note that Lockwood offered to stipulate to a protective order
and that Geico requested a confidentiality agreement and protective order to protect
confidential information in the manual if the superior court were to compel discovery.
The superior court, at its discretion, may issue a protective order to protect confidential
information in the materials.
V. CONCLUSION
Because a reasonable inference could be drawn that Geico did not have a
reasonable basis for delaying payment of Lockwood’s uninsured motorist benefits, we
conclude that there is a genuine issue of material fact as to Geico’s bad faith.
Accordingly, we REVERSE the superior court’s grant of summary judgment and
28
(...continued)
28, 31 (Alaska 1974))).
29
While allegations in Hillman that the insurer’s agents violated company
guidelines failed to raise a factual question as to whether the insurer’s denial of coverage
lacked a reasonable basis because “[t]he denial was based on an explicit exclusion in the
policy,” Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321, 1325 (Alaska 1993),
the guidelines here may assist the fact finder in developing a complete understanding of
Geico’s handling of Lockwood’s claim.
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VACATE the award of attorney’s fees. We also REVERSE the superior court’s denial
of Lockwood’s motion to compel discovery of Geico’s claims-handling and training
materials. The case is REMANDED for further proceedings consistent with this opinion.
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