United States District Court, D. Alaska
ORDER
H.
Russel Holland United States District Judge
Motion
for Summary Judgment
Defendants
move for summary judgment on plaintiff's bad faith
claims.[1] In the alternative, defendants move for
partial summary judgment on some of plaintiff's damages
claims.[2] Defendants' motion is
opposed.[3] Oral argument was not requested and is not
deemed necessary.
Facts
Plaintiff
is Abraham Allen. Defendants are State Farm Mutual Automobile
Insurance Company and Michael Yount.
On
October 17, 2012, plaintiff was working for Alaska's Best
Water and was driving a vehicle owned and insured by
Alaska's Best Water. Plaintiff was rear-ended at the
intersection of Abbott Road and 88th Avenue in Anchorage,
Alaska. The insurance policy covering the vehicle was issued
by State Farm and provided up to $100, 000 in Underinsured
Motorist (UIM) coverage.
The
driver of the vehicle that rear-ended plaintiff was Kris
Brandon, who was also insured by State Farm. Brandon was
determined to be at fault for the accident. Plaintiff settled
his liability claim against Brandon for $100, 000, plus
interest and attorney's fees. Plaintiff also received
$143, 817.21 in Worker's Comp benefits for his injuries
arising out of the accident.
State
Farm was first advised that plaintiff had a potential UIM
claim when his attorney called State Farm on October 22,
2013. On October 24, 2013, State Farm acknowledged that it
had received plaintiff's claim, [4] and on October 25, 2013,
State Farm opened a UIM claim in its system.[5]
On
December 26, 2013, plaintiff requested State Farm's
consent to settle his liability claim against Brandon for
liability policy limits of $100, 000.[6] After performing an asset
check on Brandon, on January 6, 2014, State Farm gave its
consent for plaintiff to settle with Brandon for available
liability limits.[7]
On
March 6, 2014, plaintiff advised State Farm that he was still
working on his demand package and that he would send it to
State Farm by the end of the month.[8] The settlement demand
package was provided on April 21, 2014.[9] Plaintiff offered
to settle his UIM claim for policy limits of $100,
000.[10]
State
Farm then began to evaluate plaintiff's UIM claim. Yount
was the adjuster assigned to plaintiff's UIM claim. On
April 29, 2014, Yount started attempting to find photos of
the vehicles involved in the accident.[11] Although it
did not have any photos of plaintiff's vehicle,
Alaska's Best Water told Yount that there was no physical
damage to the vehicle and that the only damage was to the
fuel pump assembly.[12] Brandon told Yount that the damage to
her car that showed up in photos was from driving over snow
berms and a prior accident.[13]
On
April 30, 2014, Yount requested authorization to deny
plaintiff's UIM claim for a number of reasons. First,
Yount noted that there was no damage to plaintiff's
vehicle.[14]Second, Yount noted that all of the
damage to Brandon's vehicle was from another accident or
other incidents.[15] Third, Yount noted that plaintiff
claimed that he was rear-ended at 35 miles per hour, but that
damages to the vehicles did not support a 35 mph
impact.[16] Yount also noted that although plaintiff
claimed he had injured his head, damages to the vehicles did
not support sufficient force for him to have struck his head
on the interior pillar and there was no evidence that
plaintiff remained unconscious for any length of time after
the accident.[17] Fourth, Yount noted that plaintiff's
claim that the steel rear bumper of his vehicle was
pushed/curled up into the vehicle was not supported by what
Yount had been told by Alaska's Best Water.[18] Fifth, Yount
noted that the main injury claimed was midline disc
protrusion to C5-6 but that he “unable to find a
mechanism from this loss to cause this
injury.”[19] Sixth, Yount noted that the IME doctor
who examined plaintiff in connection with his Worker's
Comp claim found that the accident was one of the causes of
plaintiff's neck injury but that the IME doctor was
“under [the] impression” that the accident
occurred at 35 mph and that plaintiff lost consciousness,
[20]
facts which Yount believed were not supported.[21]
On May
12, 2014, Jeff Isaacson, Yount's Team Manager, noted that
“there appears to be some causation questions for this
loss.”[22] Isaacson noted that the “IME and
PA [plaintiff's attorney] indicate that this was a
significant impact of over 35 MPH, however V1 photos indicate
no damage, and the only damage claimed by the insured ... was
for a fuel pump.”[23] Yount was instructed to
“[f]ollow up with PA for list of prior medical
providers and auths to obtain records. We will also need to
request WC file, and any damage photos and estimates PA has
for vehicle damage.”[24]
On May
14, 2014, Yount informed plaintiff's attorney that he
“currently d[id] not see any mechanism for significant
inj.” and requested that plaintiff provide any photos
he might have of the vehicle he was driving, a copy of his
Worker's Comp file, and the past two years of his medical
records.[25]
On May
23, 2014, plaintiff's attorney “emailed copies of
photographs of damage to the van plaintiff was allegedly
driving at the time of the accident.”[26] Again, on May
29, 2014, plaintiff's attorney emailed Yount photographs
of the van that plaintiff was allegedly driving at the time
of the accident.[27] Yount avers that “[w]hen I
reviewed them, ... the damage to the vehicle bumper did not
appear to be from the accident, since the damage was
inconsistent with a rear-end accident by a smaller vehicle.
The damage also did not appear severe enough to cause the
injuries being claimed by plaintiff.”[28]
On June
5, 2014, plaintiff's attorney advised Yount that
plaintiff said “he has not been to doctor since year
2000 for kidney stones. Had a broken arm prior to that. No
PCP prior to MVA.”[29]
Sometime
between June 5, 2014 and June 10, 2014, plaintiff's
attorney advised State Farm that plaintiff had had a life
insurance physical in 2012.[30] On June 10, 2014, Yount noted
that “[a]t this time, evidence does not support the inj
being claimed. Also, DO [plaintiff] does not appear credible
as he has claimed LOC and 35mph impact which appears to be
false. At this time, recomm denial of claim on basis that DO
has been fully compensated by liability limits of D/W
claim.”[31]
On July
10, 2014, Yount noted that plaintiff “denies any
medical history over the last 14 years except for physical in
2012 (this was found to be false as records indicate inj from
a fall 5 days prior to physical in
2012).”[32] Plaintiff's medical records showed
that he had been seen at Mat-Su Regional 5 days before the
September 2012 physical.[33]
On
August 18, 2014, Yount discussed plaintiff's claim with
Isaacson and Isaacson noted that “[g]iven causation
questions, and uncertainty of prior medical treatment, with a
questionable relatedness of surgery to the accident, we will
need an IME.”[34] Yount then discussed plaintiff's
claim with a defense attorney (Stacy Walker) who recommended
having a biomechanical engineer “determine if any
causation for inj and if none then possibly records review
for doctor to look over the Biomechanical Expert review and
formulate a medical opinion.”[35] Yount discussed the
defense attorney's recommendations with Isaacson who
advised him to write a letter retaining the defense attorney
and then have her retain the biomechanical
engineer.[36]
On
August 22, 2014, Walker noted that the question is causation.
There is an IME done by Dr.
[Dietrich] wherein he opines that Allen's problem relates
to this accident. His treating physician is of a similar mind
set. The adjuster has real questions regarding the file
because the impact forces were so low and the plaintiff's
damages so high. The claimant's neurosurgeon is also of
the opinion that this accident caused [plaintiff's]
problems. We don't have many pre[-] accident records and
so it's hard to say whether his problems relate to a
prior problem or if they were caused by the
accident.[37]
On
September 22, 2014, Walker advised Yount that there had been
some delay in getting a report from the biomechanical
engineer.[38] She also advised that “proceeding
w/ an Examination Under Oath of [plaintiff] would be
beneficial to answer some questions and confirm ... if he
did/didn't have any pre-existing neck problems before
this MVA, as well as some mechanical questions about the MVA
and how he was positioned upon impact.”[39]Yount's
request to do an Examination under Oath was approved on
September 22, 2014[40] and scheduled for October 8,
2014.[41] Yount avers that he requested that
“Walker confirm causation, the mechanics of the loss,
plaintiff's claim of loss of consciousness,
plaintiff's past medical history and
providers.”[42]
At the
Examination Under Oath, plaintiff showed State Farm four
pictures that plaintiff had of the vehicle that he had been
driving on the day of the accident.[43] These pictures
“confirmed there is no separate head rest ... and there
is a flat piece of metal (a driver wall) directly behind the
seat.”[44]
After
the Examination Under Oath, State Farm determined that it
needed to try to get measurements of plaintiff's vehicle
in order to compare measurements of the seat height “w/
[plaintiff's] height regarding his claim that his head
went backwards and hit the metal cage behind the
driver[']s seat.”[45]
On
October 14, 2014, State Farm learned that Alaska's Best
Water no longer owned the vehicle that plaintiff had been
driving.[46] State Farm then began attempting to
locate the current owner of the vehicle.[47]
On
October 28, 2014, plaintiff filed suit against defendants.
Plaintiff asserted a UIM claim as well as bad faith claims
against defendants. Although defendants were not served with
plaintiff's complaint until January 2015, they were aware
that plaintiff had filed suit prior to being
served.[48]
On
November 21, 2014, Yount noted that Walker had informed him
that the “accident reconstruction expert Toby Hayes has
confirmed forces are about 5mph if the damg to r/e of V1 is
actually related to this MVA.”[49] Yount avers that at this
point, he “considered that, if the claimed injury were
found to be truly related, an expected award of general
damages would be estimated at $100, 000.”[50] Yount and
Walker decided that “based on info we have we should
deny claim stating DD fully comp'd by underlying liab
carrier. Then through discovery we can obtain further docs to
see if it changes impressions of claim or
not.”[51] Yount also noted that “PA has
filed bad faith claim and named me in the suit. No concerns
w/ this as nothing has been handled in bad faith, simply
investigating a claim. DA will work to stay bad faith claim.
Explnd I will req TM auth to deny DD's UIM claim and then
will f/u to advise if approved.”[52]
On
December 3, 2014, Yount noted that he was still awaiting
approval to deny plaintiff's UIM claim.[53]
On
December 4, 2014, State Farm learned that plaintiff had been
treated by a chiropractor and attempted to obtain these
records.[54]
Yount
avers that by this time,
based on Dr. Hayes' opinions and the other information
gathered during our investigation, we evaluated the range of
damages for the UIM claim from a low of zero if the claimed
neck injury was not caused by the accident to a high of $330,
384, before off-sets, if a jury were to accept that the neck
injury was caused by the accident.[55]
Yount
further avers that “[b]ased on the totality of the
investigation and the resulting evaluation, State Farm
advised Mr. Allen, through counsel, that State Farm believed
Mr. Allen had been fairly compensated for any injuries caused
by the October 17, 2017 motor vehicle
accident.”[56]
Plaintiff's
bad faith claims were severed pending outcome of his UIM
claim, which he tried to a jury. On September 2, 2016, the
jury awarded plaintiff $354, 480.23 for damages caused by the
October 17, 2012 motor vehicle collision.[57]
Defendants
now move for summary judgment on plaintiff's bad faith
claims. In the alternative, defendants move for summary
judgment on plaintiff's request for punitive damages and
summary judgment that plaintiff is not entitled to seek
damages based on the stress of the litigation process,
emotional distress caused by the motor vehicle accident, and
attorney's fees incurred in connection with his UIM
claim.
Discussion
Summary
judgment is appropriate when there are no genuine issues of
material fact and the moving party is entitled to judgment as
a matter of law. Fed.R.Civ.P. 56(a). The initial burden is on
the moving party to show that there is an absence of genuine
issues of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 325 (1986). If the moving party meets its
initial burden, then the non-moving party must set forth
specific facts showing that there is a genuine issue for
trial. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247-48 (1986). In deciding a motion for summary
judgment, the court views the evidence of the non-movant in
the light most favorable to that party, and all justifiable
inferences are also to be drawn in its favor. Id. at
255. “[T]he court's ultimate inquiry is to
determine whether the ‘specific facts' set forth by
the nonmoving party, coupled with undisputed background or
contextual facts, are such that a rational or reasonable jury
might return a verdict in its favor based on that
evidence.” T.W. Elec. Service, Inc. v. Pacific
Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir.
1987).
First,
defendants move for summary judgment on plaintiff's bad
faith claims. “Under Alaska's contract law,
‘the covenant of good faith and fair dealing ... is
implied in all contracts.'” Lockwood v. Geico
General Ins. Co., 323 P.3d 691, 697 (Alaska 2014)
(quoting State Farm Mut. Auto. Ins. Co. v. Weiford,
831 P.2d 1264, 1266 (Alaska 1992)). “Although [the
Alaska Supreme Court has] declined to define the elements of
the tort of bad faith in an insurance contract, [its]
precedent makes clear that the element of breach at least
requires the insured to show that the insurer's actions
were objectively unreasonable under the circumstances.”
Id. In order to prevail on his bad faith claims,
plaintiff will have to show that the decision to deny his UIM
claim was “‘made without a reasonable
basis.'” Id. at 698 (quoting Hillman
v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321, 1324
(Alaska 1993)).
As an
initial matter, there is some disagreement as to whether
plaintiff's bad faith claims can be based on violations
of the Unfair Claim Settlement Practices Act, AS 21.36.125,
and its implementing regulations, 3 AAC 26. In his complaint,
plaintiff alleges that such violations are a “breach of
the covenant of good faith and fair
dealing....”[58]However, there is no private cause of
action for violations of AS 21.36.125. O.K. Lumber Co.,
Inc. v. Providence Washington Ins. Co., 759 P.2d 523,
527 (Alaska 1988). But, plaintiff has also alleged that
violations of AS 21.36.125 are evidence of an
insurer's breach of the implied covenant of good faith
and fair dealing.[59] Violations of AS 21.36.125 and its
implementing regulations could be evidence of bad faith.
Defendants
argue that plaintiff's bad faith claims are primarily
based on allegations that they acted in bad faith because
they investigated and evaluated his UIM claim, rather than
just paying it. Defendants argue, however, that there was
nothing improper about them investigating and evaluating
plaintiff's UIM claim because this claim was fairly
debatable. “[A]n insurance company may ... challenge
claims which are fairly debatable” without acting in
bad faith. Hillman, 855 P.2d at 1324 (citation
omitted). “[I]f reasonable minds can differ on the
coverage-determining facts or law, then [a] claim is fairly
debatable.” Bellville v. Farm Bureau Mut. Ins.
Co., 702 N.W.2d 468, 473 (Iowa 2005). “The fact
that the insurer's position is ultimately found to lack
merit is not sufficient by itself to establish ... a bad
faith claim.” Id.
In
support of their argument that plaintiff's UIM claim was
fairly debatable, defendants rely heavily on the fact that
they hired a causation expert because some courts have found
that an insurer's reliance on an expert is evidence that
the claim in question is fairly debatable. See,
e.g., Lakehurst Condominium Owners Ass'n v.
State Farm Fire and Cas. Co., 486 F.Supp.2d 1205, 1214
(W.D. Wash. 2007) (“There is no question that the
investigations performed by American and Trinity were
reasonable. Both insurers hired qualified experts, and the
experts conducted extensive inspections of the subject
property.”); Maynard v. State Farm Mut. Auto. Ins.
Co., 499 F.Supp.2d 1154, 1160 (C.D. Cal. 2007)
(“An insurer may also demonstrate a genuine dispute if
it relied on opinions from experts while evaluating the
insured's claim”); Prince v. Bear River Mut.
Ins. Co., 56 P.3d 524, 535 (Utah 2002) (“[d]enying
benefits under an insurance policy in ...