Avetisyan v. Nat. Specialty Ins. Co. CA2/7

Filed 12/16/13 Avetisyan v. Nat. Specialty Ins. Co. CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
ARTAK AVETISYAN, B245738
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC467133)
v.
NATIONAL SPECIALTY INSURANCE
COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County, Ronald
M. Sohigian, Judge. Reversed.
Jeffrey Korn for Plaintiff and Appellant.
Law Offices of Adrienne D. Cohen, Adrienne D. Cohen and Philip G. Dorn for
Defendant and Respondent.
______________________
INTRODUCTION
Plaintiff Artak Avetisyan appeals from a judgment entered after the trial court
granted a motion by defendant National Specialty Insurance Company (National) for
summary judgment. Avetisyan argues that the trial court erred in granting summary
judgment because whether National’s handling of his uninsured motorist claim breached
the implied covenant of good faith and fair dealing is a question of fact. We agree and
reverse.
FACTUAL AND PROCEDURAL BACKGROUND
A. Avetisyan’s Accident and Uninsured Motorist Claim
On May 4, 2009 Avetisyan suffered severe head injuries when he lost control of
the car he was driving, and the car went over the side of the freeway and rolled down an
embankment. On June 16, 2009 Avetisyan made a claim with his insurer, National,
under his uninsured motorist coverage for $60,000, the policy’s limit for that coverage.1
Avetisyan claimed that the cause of the accident was another vehicle that hit him from
behind and then drove away.
B. The Accident and Medical Reports
Officer James Oberlander arrived at the accident scene and subsequently prepared
a traffic collision report. Officer Oberlander wrote in his report that, during an interview
1 Avetisyan’s business auto policy included $60,000 in coverage for
“uninsured/underinsured motorists.” The definition of an “uninsured motor vehicle”
included “a land motor vehicle or trailer” that “is a hit-and-run vehicle and neither the
driver nor owner can be identified. The vehicle must make physical contact with an
‘insured’, a covered ‘auto’ or a vehicle an ‘insured’ is ‘occupying’ . . . .” The policy
provided that disagreements regarding a claim would be settled by arbitration, initiated
by either party.
2
with Avetisyan at the hospital, Avetisyan “related he simultaneously felt an impact from
the rear and on the left side of his vehicle. . . . [H]e lost control of his vehicle but doesn’t
remember anything else.” Officer Oberlander, who did not see the accident, wrote in his
report that he “was unable to substantiate if [Avetisyan’s car] was hit by any vehicle
before or after [Avetisyan] lost control.” Officer Oberlander also wrote in his report that
Avetisyan “lost control of [his car] as a result of making an unsafe turning movement to
the right for unknown reasons.” On the traffic collision coding page of the report, the
officer marked an “x” by “L Uninvolved Vehicle,” and wrote that Avetisyan “caused this
collision by driving in violation of [Vehicle Code section] 22107[], which states[:] no
person shall turn a vehicle from a direct course or move right or left upon a roadway until
such movement can be made with reasonable safety . . . .” The officer stated that his
summary of the accident and conclusions “were determined by the damage to the
involved vehicle and statements obtained.”
The accident report included summaries of statements by four witnesses who
spoke with Officer Oberlander. None of the witnesses reported seeing another vehicle hit
Avetisyan’s car. Officer Oberlander reported that witness Craig Walendy told him at the
scene that “he did not see any vehicles affect [Avetisyan’s car] prior to the collision.”
Officer Oberlander reported that he also spoke later on the phone with witnesses Tamara
Levy, Michelle Castro, and Andrea Goldman. Officer Oberlander wrote that Levy told
him that “she first heard a ‘thunk’ and then saw [Avetisyan’s car] come across lanes [and
she] hit her brakes to avoid colliding into the [car] as it crossed her path.” He also wrote
that Goldman told him that she “was driving in the #3 lane . . . behind [Avetisyan’s car]
that was in the #2 lane. [She] related it looked like the driver of [Avetisyan’s car] got
‘spooked’ and then swerved to the right. [The car] began fishtailing side to side,
possibl[y] hit a car in the #1 lane and then went across all lanes to the right. [Goldman]
related it appeared to be [Avetisyan’s] own fault.” And he wrote that Castro told him that
“she observed [Avetisyan’s car] in the #1 lane begin skidding across all lanes to the
right. . . . [S]he did not see any vehicle affect the [car] prior to it losing control.”
3
One of the physicians who treated Avetisyan at the hospital prepared a medical
report. The “History” section of the report stated: “The patient . . . was the restrained
driver of a Lincoln town car that was involved in a high-speed solo spin out with rollover.
According to law enforcement authorities, the vehicle rolled over several times before
coming to rest. . . . The patient . . . was conscious when paramedics arrived . . . .
Nevertheless, his level of consciousness was altered. . . . He seemed relatively
confused.”
C. National Denies Avetisyan’s Claim; Avetisyan Prevails in the Arbitration
On approximately June 16, 2009 Avetisyan sent a letter to National demanding
payment of the $60,000 uninsured motorist benefits. On the basis of Officer
Oberlander’s accident report and the physician’s medical report, National, through its
third party administrator Knight Management Insurance Services, LLC (Knight), denied
Avetisyan’s uninsured motorist claim “since there was a genuine dispute between the
claimant and the insurance company as to whether the claimant’s vehicle was struck by
another vehicle . . . .” On August 7, 2009 Eric Cervantes, a claims representative at
Knight, wrote to counsel for Avetisyan: “Please be advised that Knight Management
Insurance Services, LLC has completed its investigation in regards to the matter . . . .
Based on our investigation, we have determined that your client was not involved in a
collision with another vehicle but lost control and collided into the freeway guardrail.
This letter will serve as a formal denial of liability of your client’s claim for Uninsured
Motorist coverage.”
On October 27, 2009 Avetisyan, this time through counsel, again demanded the
$60,000 uninsured motorist policy limit or in the alternative demanded arbitration. On
December 21, 2010 the parties participated in a formal arbitration hearing. The arbitrator
issued an award in Avetisyan’s favor for $60,000, the policy limit for uninsured motorist
benefits. National paid the amount promptly.
4
D. Avetisyan Files This Action
On August 8, 2011 Avetisyan filed this action against National and Knight
alleging breach of contract and breach of the implied covenant of good faith and fair
dealing.2 Avetisyan alleged that a vehicle hit his car and then “fled the scene and was
never identified . . . .” Avetisyan alleged that there was “[s]ubstantial evidence available
to [National and Knight] during the time period May 4, 2009 to August 7, 2009
indicating that the probable cause of the accident was a hit and run vehicle impacting
[his] vehicle,” that “[c]ontact information for the several witnesses . . . was readily
available to [National and Knight] but [National and Knight] made no effort to contact or
interview the witnesses,” and that had National and Knight “conducted an appropriate
investigation, they in fact would have confirmed [Avetisyan] was entitled to benefits.”
Avetisyan alleged that National denied him benefits “with no investigation into the facts
of the incident” and “based on a policy of denying benefits so that its insureds would give
up their claims regardless of merit,” and as part of a pattern and practice of demanding
arbitration rather than timely investigating and paying meritorious claims. Avetisyan
alleged that National “knew that [he] was in a vulnerable position, injured and unable to
work, and would have difficulty obtaining the money necessary to investigate and pursue
his claim and gain policy benefits.” National’s answer asserted several affirmative
defenses, including that there was a genuine dispute “as to whether there was any contact
between the vehicle [Avetisyan] was driving and an alleged phantom vehicle,” and that
National “was justified in taking the position that it did based upon the advice of
counsel.”
National filed a motion for summary judgment or in the alternative for summary
adjudication on the grounds that there was a genuine dispute whether Avetisyan’s claim
was covered and that National had relied on the advice of counsel in denying Avetisyan’s
2 Knight is not a party to this appeal.
5
claim and recommending arbitration.3 National submitted the declaration of Warren
“Chip” Dean, an insurance defense lawyer who had “handled over 100 Uninsured or
Underinsured Motorist Claims in [his] career.” Avetisyan submitted the declaration of
Richard Masters, an expert in the insurance industry. National filed evidentiary
objections to Masters’ declaration.
At the hearing on the summary judgment motion the court sustained most of
National’s evidentiary objections to Masters’ declaration. The trial court then granted
National’s motion, stating: “My view is that . . . , there is no triable issue of material fact
concerning whether there was a genuine dispute as to the existence of liability or
coverage liability. . . . Both the tort and contract causes of action arise out of the same
behavior by [National].” “[Avetisyan] claims he was struck by another vehicle. The
traffic collision report, which appeared to combine the observation[s] of numerous
witnesses and included the officer’[s] conclusion that it was a single vehicle accident.
The findings of that . . . report appeared to me to hold up or stick together under scrutiny
during the deposition of the . . . officer and the witnesses. The reasoning or conclusion of
the . . . report obviously is not dispositive. . . . [T]he question is whether that was
3 National moved for summary judgment and summary adjudication pursuant to
Code of Civil Procedure section 437c, subdivision (o)(2), on the ground that its
affirmative defenses of genuine dispute and advice of counsel barred Avetisyan’s bad
faith cause of action, and pursuant to Code of Civil Procedure section 437c,
subdivision (o)(1), on the ground that Avetisyan could not establish the element of breach
of his bad faith cause of action. The existence of a genuine dispute and the reliance on
the advice of counsel are ways of showing that an insurer’s conduct was reasonable. (See
Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723 [genuine dispute rule is a
“close corollary” of the principle that “an insurer’s denial of or delay in paying benefits
gives rise to tort damages only if the insured shows the denial or delay was
unreasonable”]; FEI Enterprises, Inc. v. Yoon (2011) 194 Cal.App.4th 790, 804 [“the
genuine dispute doctrine is ‘subsumed within the concept of what is reasonable and
unreasonable’”]; Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter
Group 2012) ¶¶ 12:837, 12:837.1, pp. 12C-8, 12C-9 (rev. #1 2013) [“[g]enuine dispute
doctrine” is “[p]art of ‘reasonableness’ analysis” and “one way” the insurer can go
“forward with evidence negating ‘unreasonableness’”].)
6
sufficient for [National] to have been reasonable in its behavior because of the existence
of a good faith, reasonably positioned dispute. It did. . . . It turned out to be
unmeritorious, but it was not unreasonable, and it does not cancel the existence of a good
faith dispute which I think existed on this record.”
The trial court entered judgment in favor of National on October 16, 2012. This
timely appeal followed.
DISCUSSION
Avetisyan contends that the trial court erred in ruling that National’s investigation
and denial of his claim were reasonable as a matter of law, and that therefore National
was not entitled to summary judgment. We agree that the reasonableness of National’s
conduct in this case is a factual issue that cannot be resolved on summary judgment.
A. Standard of Review
We review a trial court’s order granting a motion for summary judgment “de novo,
liberally construing the evidence in support of the party opposing summary judgment and
resolving doubts concerning the evidence in favor of that party.” (State of California v.
Allstate Ins. Co. (2009) 45 Cal.4th 1008, 1017-1018; Shin v. Ahn (2007) 42 Cal.4th 482,
499; Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code of Civil
Procedure section 437c, subdivision (c), provides that a “motion for summary judgment
shall be granted if all the papers submitted show that there is no triable issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.” (See
Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 618 [court may grant a summary
judgment motion only “if no triable issues of material fact appear”]; Aguilar, supra, at
p. 843.)
A moving defendant “‘bears the burden of showing the court that the plaintiff “has
not established, and cannot reasonably expect to establish,”’ the elements of his or her
cause of action. [Citation.]” (Wilson v. 21st Century Ins. Co., supra, 42 Cal.4th at
7
p. 720; see Code Civ. Proc., § 437c, subds. (o) & (p)(1).) If the defendant meets this
initial burden, then the burden shifts to the plaintiff to show that a triable issue of material
fact exists. (See Code Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co.,
supra, 25 Cal.4th at p. 849.) “When a defendant moves for summary judgment on the
ground there is an affirmative defense to the action, the burden shifts to the plaintiff to
show there is one or more triable issues of material fact regarding the defense after the
defendant meets the burden of establishing all the elements of the affirmative defense.”
(Jessen v. Mentor Corp. (2008) 158 Cal.App.4th 1480, 1484.) “There is a triable issue of
material fact if, and only if, the evidence would allow a reasonable trier of fact to find the
underlying fact in favor of the party opposing the motion in accordance with the
applicable standard of proof.” (Aguilar, supra, at p. 850, fn. omitted.) “Where the
evidence submitted by a moving defendant does not support judgment in his favor, the
court must deny the motion without looking at the opposing evidence, if any, submitted
by the plaintiff.” (Y.K.A. Industries, Inc. v. Redevelopment Agency of City of San Jose
(2009) 174 Cal.App.4th 339, 354.)
B. The Implied Covenant of Good Faith and Fair Dealing
“Implied in every contract is a covenant of good faith and fair dealing that neither
party will injure the right of the other to receive the benefits of the agreement.” (PPG
Industries, Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310, 314; accord, Wilson v.
21st Century Ins. Co., supra, 42 Cal.4th at p. 720; Brehm v. 21st Century Ins. Co. (2008)
166 Cal.App.4th 1225, 1235.) If an insurer “‘unreasonably and in bad faith withholds
payment of the claim of its insured, it is subject to liability in tort’” for breach of the
implied covenant. (Wilson, supra, at p. 720; accord, PPG Industries, Inc., supra, at
p. 315; Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 524.)
“Before an insurer can be found to have acted in bad faith for its delay or denial in
the payment of policy benefits, it must be shown that the insurer acted unreasonably or
without proper cause.” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1072.)
“‘[A]n insurer denying or delaying the payment of policy benefits due to the existence of
8
a genuine dispute with its insured as to the existence of coverage liability or the amount
of the insured’s coverage claim is not liable in bad faith even though it might be liable for
breach of contract.’ [Citation.]” (Wilson v. 21st Century Ins. Co., supra, 42 Cal.4th at
p. 723; Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001)
90 Cal.App.4th 335, 347.) In addition, if an insurer reasonably relied on the sound advice
of competent counsel in determining to delay or deny a claim, the insurer may not be
liable for breach of the implied covenant of good faith and fair dealing. (State Farm Mut.
Auto. Ins. Co. v. Superior Court (1991) 228 Cal.App.3d 721, 725.)
“‘[T]he reasonableness of an insurer’s claims-handling conduct is ordinarily a
question of fact,’” except in the “exceptional instance when ‘only one reasonable
inference can be drawn from the evidence.’ [Citation.]” (Lee v. Fidelity National Title
Ins. Co. (2010) 188 Cal.App.4th 583, 599; see Nieto v. Blue Shield of California Life &
Health Ins. Co. (2010) 181 Cal.App.4th 60, 86; Brehm v. 21st Century Ins. Co., supra,166 Cal.App.4th at p. 1241, fn. 8 [“the question whether an insurer unreasonably
withheld benefits due under the policy in a first party coverage context . . . is ordinarily
an issue to be determined by the trier of fact”].) An insurer is not entitled to judgment as
a matter of law on a cause of action for breach of the implied covenant of good faith and
fair dealing where, viewing the evidence in the light most favorable to the plaintiff, a jury
could conclude the insurer acted unreasonably. (Wilson v. 21st Century Ins. Co., supra,42 Cal.4th at p. 724; accord, McCoy v. Progressive West Ins. Co. (2009) 171 Cal.App.4th
785, 794.)
C. Whether National Acted Reasonably in Denying Avetisyan’s Claim Is a
Question of Fact for the Jury
Avetisyan contends that, under the circumstances of this case, whether National’s
denial of his claim was reasonable is a factual issue for the jury. Avetisyan argues that
National failed to conduct a full, fair, and thorough investigation of all factual bases of
his claim, failed to consult counsel prior to denying the claim, and failed to treat his
interests with the same consideration National gave to its interests. National argues that
9
the undisputed evidence shows that its action was reasonable because there was a genuine
factual dispute over whether another car hit Avetisyan’s car and because National relied
on advice of counsel.
Although the implied covenant of good faith and fair dealing does not require an
insurer “to pay every claim its insured makes, the insurer cannot deny the claim ‘without
fully investigating the grounds for its denial.’ [Citation.]” (Wilson v. 21st Century Ins.
Co., supra, 42 Cal.4th at pp. 720-721; see Egan v. Mutual of Omaha Ins. Co. (1979) 24
Cal.3d 809, 818-819.) “Among the most critical factors bearing on the insurer’s good
faith is the adequacy of its investigation of the claim.” (Shade Foods, Inc. v. Innovative
Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 879.) “The genuine
dispute rule does not relieve an insurer from its obligation to thoroughly and fairly
investigate, process and evaluate the insured’s claim.” (Wilson, supra, at p. 723; accord,
Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010) 188 Cal.App.4th 401, 428; see
Brehm v. 21st Century Ins. Co., supra, 166 Cal.App.4th at p. 1238 [“an important
limitation on the genuine dispute rule” is that the insurer must still thoroughly investigate
the claim].) “The insurer cannot claim a ‘genuine dispute’ regarding coverage in such
cases because, by failing to investigate, it has deprived itself of the ability to make a fair
evaluation of the claim.” (Jordan v. Allstate Ins. Co., supra, 148 Cal.App.4th at p. 1072.)
Whether an insurer’s investigation was reasonable depends on the circumstances. (See
Wilson, supra, at p. 723 [“[a]n insurer’s good or bad faith must be evaluated in light of
the totality of the circumstances surrounding its actions”]; Bosetti v. United States Life
Ins. Co. in City of New York (2009) 175 Cal.App.4th 1208, 1237 [“delay or denial of
policy benefits[] must be ‘founded on a basis that is reasonable under all the
circumstances’”].)
An insurer’s investigation can be unreasonable because it is limited to one or two
sources of information about the claim and does not include a review of other available
information. For example, in Mariscal v. Old Republic Life Ins. Co. (1996) 42
Cal.App.4th 1617, the insurer claimed that its investigation was reasonable because it had
“obtained every writing in existence” describing the event giving rise to the claim. (Id. at
10
p. 1624.) The court disagreed, stating that the insurer “did not fulfill its duty to obtain the
readily available statements of all the percipient witnesses” or to contact the insured’s
treating physician. (Ibid.) “Instead of considering all the evidence available to it with a
view towards coverage,” the insurer relied on one document (a death certificate stating
the cause of death). (Id. at p. 1625; see Wilson v. 21st Century Ins. Co., supra, 42 Cal.4th
at p. 721 [summary judgment for insurer was inappropriate because a jury could find the
insurer’s exclusive reliance on a medical report and claims examiner’s opinion was an
unreasonable investigation]; Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p.
819 [investigation of the claim was unreasonable because the insurer failed to consult
with the insured’s physicians or obtain an independent medical examination]; Bosetti v.
United States Life Ins. Co. in City of New York, supra, 175 Cal.App.4th at p. 1237 [“[a]n
insurer cannot claim the benefit of the genuine dispute doctrine based on an investigation
or evaluation of the insured’s claim that is not full, fair and thorough”]; Jordan v. Allstate
Ins. Co., supra, 148 Cal.App.4th at p. 1072 [summary judgment was improper where
there were factual issues regarding the reasonableness of the insurer’s limited
investigation].)
Here, National relied solely on the accident report by Officer Oberlander and the
medical report by an emergency room physician, without further investigation, to deny
Avetisyan’s claim. The accident report, however, was the product of one person, Officer
Oberlander, who was not present at the time of the accident. The accident report
included conflicting information about whether another vehicle was involved in the
accident. The report included a statement by Avetisyan, who was present at the time of
the accident, that there was another car involved in the accident that hit his car and
caused him to lose control. Although the officer wrote that he thought it was a single-
vehicle accident caused by Avetisyan making an unsafe turning movement, he also
included the qualifier that he was unable to substantiate if Avetisyan’s car was hit by
another vehicle. In addition, although none of the four witnesses whose hearsay
statements Officer Oberlander included in his report saw another vehicle hit Avetisyan’s
car, one of the witnesses (Levy) told the officer that she heard a sound (a “thunk”) that
11
could indicate a collision with another car. The medical report, written by an emergency
room physician who also did not witness the accident and who reported that it “was
difficult to obtain [a] history from the patient initially due to his confusion,” does not
state how or from whom the doctor obtained the information in the report about the
accident. The doctor also acknowledged that Avetisyan was confused, had an altered
level of consciousness, and “was oriented to his name but did not give reproducible
answers with respect to his age or the date.”
National’s decision to deny Avetisyan’s claim based on the conflicting
information in a single police report and the conclusions of two people who were not
witnesses to the accident is not enough to show that National’s investigation was
complete, thorough, and reasonable as a matter of law. National did not present any
evidence that it made any efforts to contact any of the four witnesses to the accident,
Officer Oberlander, or even Avetisyan, to obtain any additional information. In
particular, National did not take any steps to follow up on Levy’s statement about the
loud “thunk” or inquire about whether the witnesses were even in a position to see
whether another car collided with Avetisyan’s car. National did not contact Castro, who
subsequently testified in a deposition in connection with the arbitration: “I did see . . . a
large SUV, I don’t know if it was a Lincoln or a Navigator, a black SUV, that was in the
first lane near the center divider, near [Avetisyan’s] car. . . . He must have been behind, I
think. I’m not sure. But I remember as soon as the car started rolling I did notice that
black large SUV, either a Lincoln or a Navigator, right in that lane.
National did not even speak with or interview Avetisyan to ask about the impact
he said he felt, why he believed another car had hit him on the freeway, or even to
evaluate Avetisyan’s credibility and make an informed decision about whether he was
telling the truth. National admitted in discovery responses that it did not interview
anyone or obtain any statements regarding Avetisyan’s claim. Indeed, the evidence
showed that National did not do anything to investigate Avetisyan’s claim other than
have one claims representative and his supervisor read two reports by individuals with
second and third hand knowledge. This is not one of those “exceptional” situations
12
where a court can conclude that the insurer’s investigation was reasonable as a matter of
law. (Lee v. Fidelity Nat. Title Ins. Co., supra, 188 Cal.App.4th at p. 599; see
Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 220 [insurer breached
implied covenant where it “failed to investigate . . . after . . . it learned of the existence of
the witnesses” who had knowledge about the claim].)4
The trial court found that some of the evidence subsequently obtained from
depositions taken in connection with the arbitration appeared to support Officer
Oberlander’s conclusions. National also points to arbitration testimony and to the fact
that, after the arbitrator ruled in favor of Avetisyan and awarded him full policy benefits,
National “then promptly paid the arbitration award.” This evidence is not relevant to the
evaluation of the reasonableness of National’s denial of Avetisyan’s claim because, as
noted above, “‘[t]he reasonableness of the insurer’s decisions and actions must be
evaluated as of the time that they were made . . . .’ [Citation.]” (Jordan v. Allstate Ins.
Co., supra, 148 Cal.App.4th at p. 1073, quoting Chateau Chamberay Homeowners Assn.
v. Associated Internat. Ins. Co., supra, 90 Cal.App.4th at p. 347.) Moreover, “‘[e]ven an
insurer that pays the full limits of its policy may be liable for breach of the implied
covenant, if improper claims handling causes detriment to the insured.’ [Citations.]”
(Brehm v. 21st Century Ins. Co., supra, 166 Cal.App.4th at p. 1236.) “[A]n insurer’s
obligations extend beyond simply paying the benefits to which its insured is entitled:
‘[W]hen benefits are due an insured, “delayed payment based on inadequate or tardy
investigations, oppressive conduct by claims adjusters seeking to reduce the amounts
legitimately payable and numerous other tactics may breach the implied covenant
because” they frustrate the insured’s right to receive the benefits of the contract in
“prompt compensation for losses.”’ [Citations.]” (Ibid.)
4 There are “some cases [where] review of the insured’s submitted medical records
might reveal an indisputably reasonable basis to deny the claim without further
investigation.” (Wilson v. 21st Century Ins. Co., supra, 42 Cal.4th at p. 723; accord,
Bosetti v. United States Life Ins. Co. in City of New York, supra, 175 Cal.App.4th at
p. 1240, fn. 27.) This is not one of those cases.
13
Moreover, National’s duty to investigate was not limited to obtaining information
to support the denial of Avetisyan’s claim. National had a duty to seek information that
might support Avetisyan’s claim. “[I]n order to protect the interests of its insured, it [is]
‘essential that an insurer fully inquire into possible bases that might support the insured’s
claim.’” (Jordan v. Allstate Ins. Co., supra, 148 Cal.App.4th at p. 1072, quoting Egan v.
Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 819; accord, Frommoethelydo v. Fire
Ins. Exchange, supra, 42 Cal.3d at p. 220.) This is because an insurer must consider “all
the evidence available to it with a view towards coverage.” (Mariscal v. Old Republic
Life Ins. Co., supra, 42 Cal.App.4th at p. 1625.) “‘An insurance company may not ignore
evidence which supports coverage. If it does so, it acts unreasonably towards its insured
and breaches the covenant of good faith and fair dealing.’” (Jordan, supra, at p. 1074.)
“A trier of fact may find that an insurer acted unreasonably if the insurer ignores
evidence available to it which supports the claim. The insurer may not just focus on
those facts which justify denial of the claim.” (Mariscal, supra, at p. 1623; see Wilson v.
21st Century Ins. Co., supra, 42 Cal.4th at p. 721.)
National did not make any effort to investigate possible bases of support for
Avetisyan’s claim beyond the reports of Officer Oberlander and the emergency room
physician, neither of whom was seeking information that might support Avetisyan’s
claim. National failed to investigate information contained in the police report that might
support the claim, such as Avetisyan’s statement that there was a collision and Levy’s
statement about a noise that could indicate that there was a collision. As Avetisyan
argued in the trial court, it was a reasonable inference that National “‘cherry picked’ the
strongest ‘evidence’” and “ignored all other sources of information so that it could deny
the claim . . . .” (See Wilson v. 21st Century Ins. Co., supra, 42 Cal.4th at p. 724 & fn. 8
[“a jury could reasonably find” that the insurer “had unfairly ignored . . . evidence
submitted by its insured”]; Gentry v. State Farm Mut. Auto. Ins. Co. (E.D.Cal. 2010) 726
F.Supp.2d 1160, 1166 [“[a]n insurer cannot just focus on facts that support its position”].)
14
Finally, Avetisyan’s policy, like the policy in Brehm, required a disagreement
between the insurer and the insured before either side could demand an arbitration.5 (See
Brehm v. 21st Century Ins. Co., supra, 166 Cal.App.4th at p. 1242.) This court in Brehm
held that “by making lack of agreement as to the value of the claim an express
precondition to demanding arbitration, the policy itself contemplates the parties will first
make an affirmative effort to resolve their dispute, in effect creating a contractual duty to
discuss the claim to which the implied covenant of good faith and fair dealing properly
attaches.” (Id. at p. 1242.) Therefore, National had an obligation not only to investigate
and “honestly assess [Avetisyan’s] claim,” but also “to make a reasonable effort to
resolve any dispute with him . . before invoking” the right to arbitrate under the policy.
(Ibid.) National has not cited to any evidence in the record that it made a reasonable
effort to resolve its dispute with Avetisyan prior to arbitration.
“‘The genuine [dispute] rule in the context of bad faith claims allows a [trial] court
to grant summary judgment when it is undisputed or indisputable that the basis for the
insurer’s denial of benefits was reasonable—for example, where even under the
plaintiff’s version of the facts there is a genuine issue as to the insurer’s liability under
California law. [Citation.]’” (Wilson v. 21st Century Ins. Co., supra, 42 Cal.4th at
p. 724.) Under the circumstances of this case, it was for a trier of fact to decide “whether
the disputed position upon which the insurer denied the claim was reached reasonably
and in good faith.” (Ibid.) Viewing the evidence in the light most favorable to
Avetisyan, a jury could conclude that National acted unreasonably in its limited
investigation and its lack of effort to resolve the coverage dispute prior to arbitration.
5 The arbitration provision, section 5a, states “If we and an ‘insured’ disagree
whether the ‘insured’ is legally entitled to recover damages . . . or do not agree as to the
amount of damages . . . , the disagreement will be settled by arbitration. Such arbitration
may be initiated by a written demand for arbitration made by either party.”
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D. Whether National Acted Reasonably in Relying on the Advice of Counsel
National also argues that its denial of Avetisyan’s claim was reasonable as a
matter of law because National relied on its attorney’s advice to arbitrate rather than pay
the claim. Citing the declarations of John Duffy, National’s counsel in the arbitration,
and Howard Hirsch, Knight’s Vice-President and General Counsel, National argues: “In
the underlying claim, [National], after denying liability based upon the aforementioned
genuine dispute, hired competent and experienced defense counsel who, consistently
advised that the underlying claim should be arbitrated because the defense counsel did
not believe that [Avetisyan] would be able to meet his burden of proof at the arbitration.”
It is undisputed, however, that National did not obtain or rely on any advice of
counsel until after National had already denied Avetisyan’s claim on August 7, 2009. As
National conceded in its motion and concedes on appeal, National “hired defense counsel
after it denied the claim.” Hirsch explained why: “It is not our practice to have outside
counsel review factual issues,” like the one in this case. National’s reliance on the advice
of counsel cannot support its argument that it acted reasonably in denying Avetisyan’s
claim, because counsel gave the advice after National had denied the claim. (See Jordan
v. Allstate Ins. Co., supra, 148 Cal.App.4th at p. 1073; State Farm Mut. Auto. Ins. Co. v.
Superior Court, supra, 228 Cal.App.3d at p. 725 [advice of counsel defense requires that
“the insurer relied on the advice of competent counsel”].) Therefore, National was not
entitled to summary judgment on the ground that it relied on the advice of counsel.6
6 The trial court granted National’s motion “in its entirety,” including on
Avetisyan’s claim for punitive damages. Avetisyan does not present any argument in his
briefs that the trial court erred in summarily adjudicating his claim for punitive damages.
Therefore, he has forfeited any claim of error relating to this claim. (See Frittelli, Inc. v.
350 North Canon Drive, LP (2011) 202 Cal.App.4th 35, 41 & fn. 1 [failure to challenge
trial court rulings on appeal “forfeit[s] any contentions of error regarding them”]; Roberts
v. Assurance Co. of America (2008) 163 Cal.App.4th 1398, 1410 [insured waived
challenge to order granting summary adjudication on punitive damages claim against
insurer by failing to raise the issue in his opening brief].) In addition, because we
conclude that National did not meet its burden in moving for summary judgment,
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DISPOSITION
The judgment is reversed. The trial court is directed to vacate its order granting
National’s motion for summary judgment and to enter a new order granting National’s
motion for summary adjudication on Avetisyan’s claim for punitive damages, denying
National’s motion for summary adjudication on Avetisyan’s causes of action for breach
of contract and breach of the implied covenant of good faith and fair dealing, and denying
National’s motion for summary judgment. Avetisyan is to recover his costs on appeal.
SEGAL, J.*
We concur:
PERLUSS, P. J.
WOODS, J.
Avetisyan’s challenges to the trial court’s evidentiary rulings sustaining National’s
objections to Masters’ declaration are moot.
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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