In Zubillaga v. Allstate Indemnity Company (No. G052603, filed 6/19/17), a California appeals court ruled that triable issues about the insurer’s reliance on expert medical opinions precluded summary judgment on the genuine dispute doctrine in a bad faith lawsuit arising out of an underinsured motorist (“UIM”) claim.
In Zubillaga, the insured was injured in an accident with an underinsured motorist. She saw a chiropractor and an osteopath, complaining of back pain. She had a MRI and received a recommendation for further chiropractic treatment and over-the-counter medications.
After settling for the other driver’s $15,000 limit, the insured’s attorney made a UIM claim to Allstate and submitted $17,645 in bills with a demand for the $35,000 balance of her UIM limit. Allstate made an offer of $9,367 by determining $14,367 as the reasonable and customary amount for the treatments, adding $10,000 for general damages and subtracting the $15,000 the insured had received from the other driver’s insurer.
The offer was rejected and the insured’s attorney again demanded the policy limit, providing an additional evaluation from a board certified orthopedic surgeon who recommended steroid treatments and weight loss. The surgeon’s charge added $1,200 to the medical bills, prompting Allstate to increase its offer to $10,000.
That was rejected with a demand for the policy limit or for arbitration, which then commenced. In discovery, the insured produced additional records from a physician pain specialist who had recommended epidural injections, medication and physical therapy. The physician estimated the epidural injections from $15,000 to $60,000. Based on the new information Allstate reevaluated the insured’s claim as worth $27,084 which, after deduction of the other driver’s $15,000, resulted in an offer of $12,084.
Allstate then obtained a defense medical examination, with Allstate’s expert detailing his disagreements with the insured’s experts, in particular the opinion calling for epidural injections.
With arbitration approaching Allstate’s counsel requested any additional records and received a report from a physician who had subsequently given the insured an epidural injection, with bills for $7,900. The medical bills submitted then totaled $26,455, and Allstate offered the insured $14,500. The insured’s counsel provided a further report from the physician who gave the epidural injection recommending more injections, physical therapy and medications.
Allstate did not have the reports or recommendations from the physician who gave the epidural injection reviewed by its own expert, but did increase its valuation of the insured’s claim to $30,584 which, after the other driver’s $15,000 was deducted, resulted in an offer of $15,584.
The claim proceeded to arbitration, where the insured’s counsel submitted a report that had never been produced to Allstate showing the results of leg raise tests that counsel argued proved the necessity for epidural injections. The arbitrator found for the insured and awarded her the $35,000 balance on the policy, which Allstate paid.
In the subsequent bad faith lawsuit Allstate was granted summary judgment on the genuine dispute doctrine, with the trial court stating: “The decision to not offer any more money was based on the [DME’s] determination that Plaintiff did not need expensive epidural injections. Defendant is entitled to rely on this expert report. Allstate had legitimate bases for disputing Plaintiff’s claim in regards to the need for future epidural shots. This was not a case where Allstate was simply unwilling to pay off on a policy; rather, on the table was an offer for $12,084…. It does not appear unreasonable that Defendant did not offer up the entire $35,000 at this point since Defendant’s [DME] concluded Plaintiff’s treatment thus far had been excessive and epidural injections were unnecessary.”
But the appeals court disagreed and reversed the summary judgment, stating:
“When Allstate moved for summary judgment, it presented evidence consisting primarily of declarations, medical records and correspondence, which spelled out in considerable detail the entire adjustment process as it unfolded. Allstate argued, and the court agreed, the evidence revealed a reasonable and good faith dispute about the value of plaintiff’s claim, particularly as it related to her claimed need for epidural injections, based upon the opinions of Allstate’s medical expert, Legome.
The problem is the undisputed facts show Legome’s opinions were rendered in October and November 2012, but Allstate continued to rely on them through the arbitration in September 2013, without ever consulting with Legome again or conducting any further investigation. In the meantime, plaintiff had received one lumbar steroidal epidural injection that cost $6,850, and Soni had recommended three more, if drug therapy proved ineffective. Soni estimated these injections would each cost $12,000, and the medications and physical therapy would each cost $6,000 per year.
Because it never asked Legome to review Soni’s epidural treatments and recommendations, Allstate’s continued reliance upon Legome’s opinions as the basis for disputing the medical necessity or reasonable value of those treatments and recommendations may have been unreasonable.”
The appeals court went on:
“Of course, Allstate was not obliged to accept Soni’s treatments and recommendations ‘without scrutiny or investigation.’  To the extent it had good faith doubts, Allstate had the right to further investigate the basis for plaintiff’s claim by having Legome reexamine his 2012 opinions, having another physician review all of plaintiff’s medical records and offer opinions, or, if necessary, having plaintiff further examined by Legome or another defense doctor.
What Allstate could not do, consistent with the implied covenant of good faith and fair dealing, was to ignore Soni’s treatments and recommendations, without adequately investigating them.  To be clear, we are not saying Allstate breached the implied covenant. We are saying a reasonable jury could conclude it did so.”
Consequently, the summary judgment for Allstate was reversed and the matter remanded for trial.
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