An uninsured motorist policy allowed an insurer to reduce payments to an insured by the amount of medical expenses that were eligible for payment through workers’ compensation, regardless of whether the insured actually sought payment of those expenses through workers’ compensation. (Case v. State Farm Mutual Auto. Ins. Co. (2018) 30 Cal.App.5th 397)
Facts
In March 2013, Melissa Case was employed by Lawry’s Restaurant, Inc., and was insured under a personal automobile policy issued by State Farm Mutual Insurance Company. The State Farm policy had uninsured motorist (UM) bodily injury limits of $100,000 per person. In late March 2013, while returning to Lawry’s from an off-site catering location, Case was injured in a car accident involving an uninsured driver. The next day, Case sought benefits through Lawry’s workers’ compensation policy and Case submitted a claim for benefits under the UM section of her State Farm auto policy.
In July 2014, Case through her counsel sent State Farm a demand for UM benefits totaling approximately $67,000, which included almost $40,000 for alleged past and future medical expenses. In August 2014, Case submitted documentation showing that there was a workers’ compensation lien for about $1,900. Between October and November 2014, Case and the workers’ compensation insurer submitted more documentation showing that the workers’ compensation lien had increased to about $2,200.
In November 2014, Case made a demand for UM arbitration, and her counsel simultaneously submitted a declaration stating that Case did not expect to receive any additional workers’ compensation benefits. State Farm responded that State Farm still needed to determine “to what extent workers’ compensation benefits continue to be owed” to Case before State Farm could determine whether it might owe any UM benefits to Case.
In May 2015, Case sued State Farm for breach of contract and bad faith. Case essentially alleged that although she had already provided State Farm with information concerning the workers’ compensation lien, State Farm had failed to pay her claim for UM benefits.
In September 2015, the workers’ compensation insurer finally determined that in fact Case did not have any additional medical expenses that were payable through workers’ compensation. Case’s counsel promptly informed State Farm that Case had exhausted the possibility of receiving additional payments through workers’ compensation. Two months later, in November 2015, State Farm settled Case’s UM claim for $35,000.
State Farm then moved for summary judgment, contending that (1) it had paid all policy benefits due and thus it could not be liable for breach of contract, and (2) its refusal to pay Case’s UM claim before Case’s claim for workers’ compensation benefits had been resolved did not constitute bad faith. The trial court granted State Farm’s motion. Case appealed.
Holding
The California Court of Appeal affirmed.
With respect to the Case’s claim for breach of contract, Case had not shown that State Farm still owed her any benefits under the UM section of the policy. Thus, the trial court properly found that Case had no claim for breach of contract.
With respect to Case’s claim for bad faith, consistent with Insurance Code section 11580.2, the State Farm policy’s UM section provided that “any amount payable … shall be reduced by any amount paid or payable to … the insured … under any workers’ compensation, disability benefits, or similar law.” Italics added. This policy provision authorized State Farm to request a determination regarding the extent to which Case’s past and future medical expenses were eligible for payment through worker’s compensation, regardless of whether Case actually sought payment through workers’ compensation. Here, it was not until September 2015 that the workers’ compensation insurer finally determined that Case was not entitled to any additional benefits through workers’ compensation. A mere two months later, in November 2015, State Farm settled Case’s UM claim. Because State Farm resolved Case’s UM claim “shortly after” the determination that Case was not entitled to any further medical expenses through workers’ compensation, as a matter of law, State Farm had not unreasonably delayed payment of UM benefits to Case. Thus, Case could not recover from State Farm for “bad faith.”
Comment
Under a UM policy’s standard loss-payable-reduction provision, the insurer is liable only for any difference between the UM policy limits and the amount of workers’ compensation benefits that have been paid or are “payable” to the insured. Notably, this provision allows benefits owed under a UM policy to be reduced by the amount of medical expenses that are eligible for payment through workers’ compensation, regardless of whether the insured actually seeks payment of such expenses through workers’ compensation benefits. As the amount of the medical expenses that are eligible for payment through the workers’ compensation increases, the insurer’s obligation to pay UM benefits decreases.