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FAILURE TO INVESTIGATE OPENS THE DOOR TO ALLEGATIONS OF BAD FAITH!
In the recent case of Wilson v. 21st Century Ins. Co., (2007) WL 4200527 (Cal.), the California Supreme Court placed limitations on the “genuine dispute” defense that insurers had been relying on to defeat claims of bad faith based on disputes over the nature and extent of injuries suffered by claimants that submit first party claims. However, this case is yet another example of how bad facts make bad law.
In the Wilson case, the facts indicated that a UIM insurer refused to make payment of any UIM benefits to its insured in spite of the fact that a MRI taken of the insured’s neck 2 months after an auto accident revealed mild desiccated discs at 5 levels in the insured’s neck and 2mm disc bulges at 3 levels in her neck. The insurer, without any investigation (other than an adjuster’s review of the medical reports), concluded that the MRI showed only pre-existing degenerative changes in a 21 year old woman with no history of neck pain.
The Court held that on these facts, there was a triable question of fact as to whether the insurer had acted reasonably in refusing payment of any UIM benefits to its insured. The Court also found the adjuster had no basis for his conclusion that these desiccated or bulging discs were unrelated to the auto accident. The fact that the conditions turned out later to be confirmed as having been caused by the auto accident did not help the insurer’s cause.
The Court indicated that the insurer should have asked for a further report from the insured’s treating physician explaining his findings, or should have obtained a medical records review, or should have asked the insured to submit to an independent medical examination before denying the UIM claim. The Court stated the “genuine dispute” rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured’s claim. It noted that an insurer is entitled to Summary Judgment based on a “genuine dispute” over the value of an insured’s claim only where the facts demonstrate the absence of triable issues as to whether the disputed position upon which the insurer denied the claim was reached reasonably and in good faith.
Here, the Court found that the insurer’s conclusion that the disc damage was pre-existing was not based on any actual medical facts or reports. The insurer rejected the opinions of the insured’s doctor and failed to obtain and rely on the opinion of a doctor retained by the insurer. Had the insurer obtained and relied on the opinion of a different physician whose opinions were reasonable medically, then the insurer may have been able to prevail on a Motion for Summary Judgment.
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LOS ANGELES ORANGE COUNTY VENTURA/OXNARD CENTRAL COAST
BAY AREA SACRAMENTO LAS VEGAS RENO PHOENIX
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