Defense verdict in UIM bad-faith claim against Mid-Century. Napa County.

Facts and Background

• Facts and Background:

  On June 18, 2012 plaintiff Brenda Woods was in a rear-end accident while stopped for a red light at the intersection of Trower and Highway 29 in Napa. Her Nissan Rogue was struck by an F-150 pick-up truck,causing moderate rear-end damage.

  Plaintiff claimed neck and other injuries from the accident and in 2013 filed suit against the driver of the truck that hit her. Her husband also filed suit for loss of consortium. About 18 months after the accident she settled her third party claim for $100,000 (policy limits) and proceeded to make an underinsured motorist (UIM) claim against Mid-Century for the remaining $150,000 of UIM coverage,

  Plaintiff, who was represented by the same lawyer in the underlying third party lawsuit and this bad faith action, had initially requested that Mid-Century settle the UIM claim before settlement with the third party driver, asking them to essentially fund a potential excess verdict against the driver who was related to a prominent Napa Valley wine grower. 

  At that time, plaintiff's attorney sent 3 CDs of information to Mid-Century, which included a computer-aided copy of an MRI that showed congenital stenosis and pre-existing degenerative changes along with two probable herniated discs at C-4 through C-6. Some of the material from the CDs, including the program that allows the viewing of the MRI did not get uploaded into the insurer’s electronic file system and the CDs were ultimately destroyed.

  Mid-Century declined to fund the third party litigation and the settlement against the underinsured driver concluded in January 2014 at which time plaintiffs Woods and Rodriguez made a policy limits demand for the $150,000. 

  Mid-Century countered with a $10,000 new money offer, later increased to $15,000 when plaintiffs’ counsel produced a medical record indicating that a local orthopedic surgeon had seen Woods in December, 2013 and discussed possible artificial disc replacement surgery (ADR).

  Mid-Century thereafter requested a defense medical examination.  The DME, an orthopedic surgeon, said that conservative treatment was the best course, but he did not have a copy of the actual MRI or the most recent records of the treating orthopedic surgeon.  Plaintiffs’ counsel provided the additional records, including a new record indicating that the treating surgeon was now recommending ADR. 

  After reviewing the records the IME physician advised that his opinion had not substantially changed but did concede that if the orthopedic surgeon were to proceed with ADR he would consider such surgery appropriate.

  Mid-Century increased its offer to reflect the recommended additional conservative treatment after which a demand for arbitration was made along with a statutory offer for UIM limits less med-pay offsets. During the pendency of the statutory offer Mid-Century learned that plaintiff Woods had scheduled ADR surgery and based on this new information Mid-Century elected to pay the policy limits and waived its right to med-pay offsets.

• Plaintiff's Contentions:

  Plaintiffs contended that Mid-Century should have paid policy limits within 30 days of the initial demand in January, claiming that the need for surgery was evident from the outset. 

  In addition to alleging that the settlement offers were unreasonably low, plaintiffs claimed that the company failed to adequately investigate the medical issues and had destroyed evidence favorable to the insured.

  Plaintiffs’ claims-handling expert testified that it was the custom and practice in the industry to pay undisputed amounts in UIM claims and that it was unreasonable for Mid-Century not to advance-pay its offers and to defer disputed amounts for arbitration.

  Plaintiffs sued for Brandt fees and costs and also argued that because Mid-Century failed to pay earlier, plaintiff Woods had to delay her surgery, causing increased post-surgical neurologic deficits.

• Defendant's Contentions:

  Defendant contended that the claims handlers (8 Mid-Century witnesses were called by plaintiffs) all acted appropriately and that they were faced with a challenging and complex medical issue. 

  While conceding that some mistakes may have been made (like failure of the national records center to upload all documents initially submitted by plaintiffs’ counsel), these were of no consequence, not bad faith and that the claim was timely resolved in about 6 months.

  Defendant’s claims-handling expert and Mid-Century claims personnel all testified that it was not the custom and practice to pay undisputed amounts in UIM claims and the court also instructed that insurance carriers are not required to do so.

  As for damages, the defense argued that all of the attorney’s fees and costs were incidental to the handling of the UIM claim and not incurred as a result of any bad faith conduct by Mid-Century and that any delay in scheduling cervical surgery was caused by Woods’ own failure to follow medical advice and because of Blue Shield, her medical insurer, which initially denied coverage for the surgery, but later paid for it.