Opinion
CASE NO. 00-CV-1505-K (POR).
June 23, 2001
ORDER GRANTING SUMMARY JUDGMENT
On May 9, 2001, Defendants Allstate Insurance Company ("Allstate") and Lucinda Harton (erroneously sued as Lucinda Oline) filed a motion for summary judgment or in the alternative partial summary judgment. Plaintiff opposes this motion. All parties are appearing through counsel,
I. Background
The following background is taken from the parties' papers and does not represent findings of fact by this court.
On March 24, 2000, Plaintiff filed a "First Amended Complaint for Compensatory and Punitive Damages" (FAC) in the Superior Court of California. On March 28, 2000, Defendant Lucinda L. Oline was dismissed from this action with prejudice. On July 27, 2000, Plaintiffs complaint was removed to this court pursuant to diversity jurisdiction.
Plaintiff's first amended complaint alleges two causes of action: (1) breach of the implied covenant of good faith and fair dealing for failing to conduct a prompt investigation of the facts, failing to make a prompt assessment of injuries and offer a fair settlement, and wrongfully following a course of action in connection with these allegations; and (2) injunctive relief pursuant to California Business and Professions Code Section 17200 for unfair or fraudulent business practices.
According to the complaint, prior to January 21, 1997, Defendant Allstate issued Plaintiff an automobile insurance policy. FAC at ¶ 10. This policy provided underinsured motorist coverage with a policy limit of $50,000. Id. The policy further provided that a determination as to whether or not the insured was entitled to recover damages and amount thereof shall be made by agreement between the insured and the insurer or, in the event of a reasonable bona fide disagreement, by arbitration.Id.
On January 21, 1997, Plaintiff was involved in a car accident in California, in which a negligent driver rear-ended Plaintiff's vehicle. FAC at ¶ 11. Plaintiff alleges that as a direct and legal result of that collision she suffered "serious and permanent injuries including carpal tunnel syndrome with surgical intervention, as well as injuries to her neck, shoulder and back." Id. On or about January 8, 1998, the third party insurer for the negligent driver paid Plaintiff that third party's full $25,000 bodily injury policy limits. Id. at ¶ 12. In January of 1998 Plaintiff also made a claim with Allstate under the underinsured motorist provision of her policy. Id.
A. The Injury Involved
The instant dispute arose over whether Plaintiff suffered nerve damage in her arm as a result of the accident or as a result of Plaintiffs job. Defendant argues that several days after Plaintiffs injury, on January 27, 1997, Plaintiff went to her own doctor complaining of neck and shoulder pain, and denying pain in any other part of her body. Exh. 5 at B 438. Plaintiff subsequently retained an attorney who referred her to another doctor, James R. McClurg, M.D. Beltran Depo., Exh. 3 at 20:19-23. At Plaintiffs initial consultation with Dr. McClurg on January 30, 1997, Plaintiff specifically denied having any pain in her upper extremities, and the doctor performed a variety of tests without discovering any problems in Plaintiffs arms. Exh. ¶ at B 398; Exh. 7 at B 374.
Plaintiff continued to have no problems with her arm at her physical therapy session scheduled on February 4, 1997. Beltran Depo., 31:1-3. Plaintiff first complained of arm pain on the following day, February 5, 1997, and this pain interfered with her work and ultimately required surgery. Id. at 10:22-11:4, 40:22-41:5, 45:3-46:24.
After a year-long negotiation, Plaintiff received $25,000 from the insurance company of the other motorist in the accident. Upon this settlement, in January 1998, Plaintiff became eligible to claim underinsured motorist (UIM) benefits from Allstate. Plaintiff claimed that the accident caused her arm's nerve problem and sought the full amount available for UIM claims under her policy with Allstate. Exh. 11. Plaintiffs attorney claimed that: (1) Plaintiff felt "immediate pain to her right arm from the time of the accident"; and (2) that the initial examination of Plaintiffs arm showed damage. Id. Defendant argues that the adjuster assigned to Plaintiff's claim recognized that these two statements were false and could not determine the exact cause of Plaintiffs arm injury. Harton Depo., Exh. 14 at 192:25-194:16.
Plaintiffs insurance contract included a provision that provided that she may have to be medically examined by Defendant's physicians. Exh. 2 at 25. Additionally, the policy provided that the parties would submit any dispute over the amount of underinsured motorist benefits to binding arbitration. Id. at 21. The Allstate adjuster exercised Allstate's right to have Plaintiff submit to an independent medical exam. The parties agreed upon Dr. William E. Bowman to perform the exam. Harton Decl. at ¶ 5. Dr. Bowman informed Allstate that he did not believe that the nerve damage in Plaintiffs arm was the result of the car accident. After receiving and reviewing Plaintiffs medical record, Dr. Bowman came to his medical conclusion partly by relying on Plaintiffs failure to complain of any injury to, or pain in, her arm at the time of, or shortly after, the accident. Harton Decl. at ¶ 17.
Based on Dr. Bowman's evaluation, Allstate's adjuster felt that Plaintiff had already been fully compensated for her injury by the $25,000 payment from the other motorist's insurance company. On July 9, 1998, Plaintiffs counsel requested arbitration and the parties began reciprocal discovery for arbitration. Id. at ¶ 9, ¶ 11.
In February 1999, Allstate offered Plaintiff $10,000 to settle the case. Id. at ¶ 13. Plaintiff found this unreasonable and the parties proceeded to arbitration. Id. On March 8, 1999, the arbitrator found that the full value of Plaintiffs claim was $88,517.87. Id. This was the final award Plaintiff received. Plaintiff filed the initial complaint in this action on January 21, 2000, alleging that Allstate's failure to promptly and fairly investigate and compensate her injuries violated its obligations of good faith under the insurance contract.
II. Legal Standard
Federal Rule of Civil Procedure 56(c) provides that summary judgment is appropriate if there is no genuine issue as to any material fact, and the moving party is entitled to a judgment as a matter of law. Where the plaintiff bears the burden of proof at trial, summary judgment for defendant is appropriate if the defendant shows that there is an absence of evidence to support the plaintiffs claims. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986); see also Garneau v. City of Seattle, 147 F.3d 802, 807 (9th Cir. 1998). The movant has the initial burden of demonstrating that summary judgment is proper. Adickes v. S.H. Kress and Co., 398 U.S. 144, 157 (1970). The burden then shifts to the nonmovant to show that summary judgment is not appropriate. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). To make such a showing, the nonmovant must go beyond the pleadings to designate specific facts showing that there is a genuine issue for trial. See id. However, in considering this motion, the evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in his or her favor. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255 (1986). Courts should be careful not to let a motion for summary judgment become a "trial on affidavits." Id. Determinations regarding credibility, the weighing of evidence, and the drawing of legitimate inferences are jury functions, not appropriate for resolution by the court in a motion for summary judgment. See id. at 255.
Rule 56(a) and (b) provide for "summary adjudication of claims," also called "partial summary judgment." Partial summary judgment is appropriate when, using the standards outlined above, there is no genuine issue of material fact as to a particular claim. When there is no such issue of fact, the court may grant summary judgment in the party's favor "upon all or any part" of a claim. Rule 56(a), (b).
III. Discussion
In its motion for summary judgment, Allstate argues that California courts have established the "genuine dispute" doctrine to permit summary judgment on bad faith claims made against insurers. "[This doctrine] recognizes that an insurer may freely dispute a claim — without fear of bad faith liability — as long as it has a genuine, non pretextual reason for the dispute." Mot. at 1. California courts have upheld summary judgment based on this doctrine: "[a] court can conclude as a matter of law that an insurer's denial of a claim is not unreasonable, so long as there existed a genuine issue as to the insurer's liability. The "genuine dispute" doctrine may be applied where the insurer denies a claim based on the opinions of experts." Fraley v. Allstate Ins. Co., 81 Cal.App.4th 1282, 1292 (2000). Plaintiff argues that Allstate's acts of offering $10,000 to settle the case was "malicious and oppressive." Opp. at 10. Plaintiff argues that the offer to settle, with the attendant warning by Allstate that failure to settle would lead to a dispute over issues of causation at the arbitration, somehow constituted "hostility and threats." Opp. at 10. Plaintiff repeatedly asserts that Defendant's failure to promptly and immediately settle at a high figure constitutes malice. However, Plaintiff fails to address the evidence offered by Defendant that it relied upon the expert advice of a medical doctor in not immediately settling the case. Plaintiff further argues that "Defendant's position at the arbitration that it owed no UIM [underinsured motorist] benefits, when it knew the value of Mrs. Beltran's UIM claim was at least $10,000[,] was unreasonable and malicious." Opp. at 11 (emphasis in original). Plaintiff dismisses the entire "genuine dispute" doctrine argument by arguing that there was " never a `genuine dispute' regarding Mrs. Beltran's right to receive her full policy limits." Opp at 16 (emphasis in original). Plaintiff additionally argues that "there is strong, substantial and compelling evidence that Defendant's receipt of its defense medical examiner's report was merely a pretext for delaying payment of policy benefits." Opp. at 17. Plaintiff then provides a list of her own conclusions and evaluations of the meaning of Defendant's actions and the truthfulness of Defendant's expert.
California courts have repeatedly recognized the "genuine dispute" doctrine. See Fraley, 81 Cal.App.4th at 1292. This doctrine stems from the recognition that insurance companies have to investigate claims, and they should be allowed to do so without fear of accusations of bad faith. See Austero v. Nat. Gas. Co., 84 Cal.App.3d 1, 30 (1978) ("Besides the duty to deal fairly with the insured, the insurer also has a duty to its other policy holders [. . .] not to dissipate its reserves through the payment of merit less claims. Such a practice inevitably would prejudice the insurance seeking public because of the necessity to increase rates, and would finally drive the insurer out of business."). Courts have held that the implied duty to investigate claims allows the insurer to "give its own interests consideration equal to that it gives the interests of its insureds." Fraley, 81 Cal.App.4th at 1282. The "genuine dispute" doctrine protects insurers from bad faith claims where the insurer can show that there was a genuine dispute about coverage. See Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001) ("The key to a bad faith claim is whether or not the insurer's denial of coverage was reasonable. Under California law, a bad faith claim can be dismissed on summary judgment if the defendant can show that there was a genuine dispute as to coverage.").
Defendant argues that it had a genuine dispute over Plaintiff's claim. Defendant relied on the opinion of its expert, Dr. Bowman. The Ninth Circuit held that "The `genuine dispute' doctrine may be applied where the insurer denied a claim based on the opinions of experts." Guebara, 237 F.3d at 993. Plaintiff has offered no evidence that there was any bad faith involved in this case. While Plaintiff argues that Defendant's offer of $10,000 to settle the case before arbitration is inconsistent with Defendant's subsequent denial of liability entirely, there is no law that establishes that a good faith effort to settle is inconsistent with proceeding to dispute liability if settlement falls through. Additionally, Plaintiffs argument that Allstate was somehow admitting liability merely by setting $10,000 aside to settle the claim is legally unsupported. See Lipton v. Superior Ct., 48 Cal.App.4th 1599, 1613 (1996) (recognizing that a reserve of money to deal with the claim cannot be equated with an admission of liability or the value of the claim).
In sum, Plaintiff has presented no evidence of bad faith in any of Defendant's actions. The court notes that the arbitrator in this case specifically commended "both attorneys for their excellent presentation of the facts of this case." Exh. 25 at B 76. The arbitrator did not find any bad faith in the parties dispute over causation and ultimately awarded Plaintiff the full extent of her policy limits, which Allstate promptly paid. In the absence of evidence of bad faith, Defendant has met its burden in seeking summary judgment based on the "genuine dispute" doctrine.
Defendant also moves for summary judgment on Plaintiff s unfair business practices claim. Because Plaintiff has failed to provide any evidence of unfair business practices, this claim also fails. Under this second claim for relief, Plaintiff seeks an injunction requiring Allstate to comply with her own interpretation of the Fair Claims Settlement Practices Regulations Section 2695.7(h). Plaintiff interprets this section as requiring insurers to immediately tender the amount of the settlement offer it may make as this constitutes the "undisputed amount." The court notes that this argument has been rejected by California courts. See Aronson v. State Farm Mut Auto. Ins. Co., 2000 U.S.Dist. LEXIS 6976 at 31-32 (C.D.Cal. 2000). Plaintiff has failed to provide any facts or law that support this claim for unfair business practices, and accordingly summary judgment on this claim is granted.
Because the court has granted the motion for summary judgment, it need not address the parties' arguments as to the request for punitive damages.
IV. Conclusion
For the foregoing reasons, Defendant's motion for summary judgment is GRANTED.
IT IS SO ORDERED.