Insurer Reasonable in Ordering Independent Medical Exams of Quadriplegic Insured

A quadriplegic man was struck by a drunk driver while crossing a street in his wheelchair. He was transported by ambulance to a medical center. An emergency medical technician prepared a pre-hospital care report stating that the man was conscious, alert, and oriented and that the technician did not observe any trauma. He was released from the hospital the following day with a diagnosis of three fractured ribs and a left adrenal lesion. His condition on discharge was good.


The man filed an underinsured motorist claim with his insurance company. The insurance company attempted to contact him and gather documentation necessary to process the claim. The documentation was not produced until about two and a half years after the accident.


In communications between the insurer and the insured’s attorney, the insured claimed $315,784 in future medical care. This led the insurer to request a review of the insured’s medical file by a registered nurse who reviews medical records for claims adjusters. She had prior experience with quadriplegic patients and patients with spinal injuries. Regarding the man's future care, the registered nurse concluded that he would have needed the same care he had prior to this loss with or without it. She noted that it would be important to know his Asia Impairment Scale (a classification of how severe the spinal cord injuries are). She also recommended that the adjuster consider requesting additional medical records, including prior primary care and neurosurgeon records and current treatment records.


The insurance company arranged an independent medical evaluation. A neurologist, who specialized in spinal injuries, reviewed the man's medical records and conducted a physical examination of the man about two years and nine months after the accident. In the 17–page Independent Medical Examination of the man that that neurologist provided to the insurance company, he concluded that further medical treatment after three months would be attributed to his preexisting spinal cord injury and would not be related to a rib fracture injury or soft tissue injury from this motor vehicle accident. The neurologist opined that the man had recovered from the effects of the motor vehicle accident to reach his baseline status and no additional permanent disability was found from the motor vehicle accident. He found that that there was no evidence that the man had suffered any brain injury.


After unsuccessful mediation, the parties conducted discovery in advance of the arbitration. The insurer retained another neurologist who reviewed the man’s medical records and issued a report. The insurer’s second neurologist’s report concluded that the man sustained a number of injuries including a concussion. He experienced complete recovery from that concussion over time. The second neurologist opined that he did not believe that this patient, based on the records, required any ongoing treatment in regard to his concussion.


In the week before the arbitration, the man provided three expert reports to the insurer. One opined that the accident caused him mild traumatic brain injury and post-traumatic stress disorder. Another concluded that the accident caused him to suffer chronic lower back pain, exacerbated the man’s right hip pain, sleep disturbance, chronic fatigue, and depression. And a rehabilitation consultant concluded that the accident caused the man’s future care to increase $61,260 a year.


The parties arbitrated the man’s claim. The arbitrator issued his findings in favor of the man. The arbitrator found $2,083,879.40 in damages, but awarded him the policy limit of $485,000 ($500,000 limit minus $15,000 he received from the driver). The insurer paid him $485,000.


After the arbitration, the man sued his insurance company on six causes of action: breach of contract, breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress, negligent infliction of emotional distress, unfair business practices under the California Unfair Competition Law, and discrimination in violation of the Unruh Act. He alleged that the insurer handled his underinsured motorist claim in bad faith because it unreasonably determined that any future medical care he required was due to his pre-existing quadriplegia, rather than the accident. The insurer moved for summary judgment on all of his causes of action. The man sought partial summary judgment only as to his claim for breach of the implied covenant of good faith and fair dealing.


The United States District Court for the Northern District of California granted the insurer’s motion for summary judgment on the ground that the insurer reasonably investigated the man's claim, including appropriately taking into account his quadriplegia. The insurer’s refusal to pay until it was ordered to do so by the arbitrator did not constitute a breach of the insurance contract.


The insurer did not breach the implied covenant of good faith and fair dealing. An insurance company withholding policy benefits that it is ultimately required to pay does not, without more, constitute a breach of the implied covenant of good faith and fair dealing. Withholding benefits due under the policy is not unreasonable if there was a genuine dispute between the insurer and the insured as to coverage or the amount of payment due. The insurer conducted a reasonable investigation and did not delay unreasonably. The insurer's and insured's disparate valuations of the loss reflected a genuine dispute. The insurer's position was maintained on reasonable grounds and was supported by the opinions of three medical professionals, all of whom had experience with quadriplegic patients.


The court held that the man’s intentional infliction of emotional distress claim also failed. The cause of action for intentional infliction of emotional distress required conduct that was outrageous or severe. Three medical professionals with experience with quadriplegics each concluded that the man did not require future medical care as a result of the accident beyond what he had already received by the time of their reports. The man could not present evidence from which a jury could conclude that the insurer’s actions were outrageous or severe. There is no independent tort of negligent infliction of emotional distress in California.


The insurer did not violate the California Unfair Competition Law (UCL). The UCL prohibits any unlawful, unfair, or fraudulent business act or practice. Under the UCL, it is necessary only to show that the plaintiff was likely to be deceived, and suffered economic injury as a result of the deception. The unlawful prong failed because the man's bad faith, contract, discrimination, and emotional distress claims failed, leaving him with no unlawful conduct to tether his UCL claim to. The unfair prong failed because there was no evidence from which a jury could reasonably conclude that the insurer's conduct violated public policy or was immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers, or that the gravity of the harm to the man outweighed the utility of the insurer's conduct. The fraudulent prong failed as the man introduced no evidence that members of the public were likely to be deceived by the insurer's conduct.


The man’s claims under the Unruh Civil Rights Act failed. There was no evidence from which a jury could reasonably conclude that the insurer discriminated against the man.


The United States District Court for the Northern District of California granted the insurer’s motion for summary judgment and denied the quadriplegic man’s motion for partial summary judgment.


See: Morello v. AMCO Insurance Company, 2014 WL 2215754 (N.D.Cal., May 29, 2014) (not designated for publication).


See also Medical Law Perspectives, June 2013 Report: Independent Medical Evaluations: Legal Risks and Responsibilities