The California Court of Appeal has reversed a summary judgment in favor of an insurer, holding that there were factual issues as to whether the insurer unreasonably handled the insured’s claim for underinsured motorist benefits. (Wilson v. 21st Century Insurance Company (2006) 38 Cal.Rptr.3d 514)
Facts
In November 2000 Reagan Wilson suffered injuries to her back and neck in a collision caused by a drunk driver. There was never any question that the other driver was at fault. The only issue was the extent of Wilson’s injuries.
Wilson presented a claim to the responsible driver’s liability insurer, which paid its $15,000 policy limit. Wilson also presented a claim to her own insurer, 21st Century Insurance Company, under a policy with medical payment coverage limits of $5,000 and underinsured motorist (UIM) coverage limits of $100,000.
21st Century paid Wilson $5,000 under the med pay coverage. However, 21st Century initially declined to pay Wilson anything under the UIM coverage on the ground that she had only suffered “soft tissue” injuries and the sums she had already received “fully compensated for her injuries.” In making this determination about Wilson’s injuries and damages, 21st Century relied solely on its own in-house review of her medical records. 21st Century did not have Wilson examined by a doctor of its choice or consult with Wilson’s treating doctor to determine the scope of her injuries; did not have the case evaluated by its own attorneys or consult with Wilson’s attorney to determine the value of the case; and despite having access to the “Colossus” computer software program to assist in determining the value of the case, did not use that program.
Over the next two years Wilson’s own doctors concluded that she had undergone “slight” cervical disc changes, but they disagreed as to whether she only required physical therapy or instead needed surgery. Ultimately, in June 2003, a doctor retained by 21st Century examined Wilson and concluded that she would benefit from surgery. At that point, 21st Century paid Wilson $85,000, the remaining amount of her UIM coverage.
Wilson then sued 21st Century for breach of contract and bad faith, asserting that 21st Century had unreasonably investigated her claim and unreasonably delayed in paying her the UIM policy limits. The trial court entered summary judgment in favor of 21st Century.
Holding
The Court of Appeal reversed the summary judgment in favor of 21st Century, holding that there were triable issues of fact as to whether 21st Century had reasonably investigated Wilson’s UIM claim and timely tendered the UIM policy limits to her. The Court emphasized that during the first two years Wilson’s claim was pending, 21st Century had relied solely on its own in-house review of Wilson’s medical records to determine the extent of her injuries and damages. During that time period, 21st Century did not consult with its own doctors or Wilson’s doctors about the claimed injuries; did not consult with its own lawyers or Wilson’s lawyers about the value of the case; and did not utilize its “Colossus” computer software program for guidance in establishing the value of the claim. According to the Court, there were triable issues of fact from which a jury might find that 21st Century acted in bad faith in handling Wilson’s UIM claim.
Comment
This case suggests that when proper adjustment of a claim turns on a medical evaluation of the insured’s condition, the insurer can breach its duty to thoroughly investigate the claim if it fails to have the insured examined by a doctor of the insurer’s choice or fails to at least consult with the insured’s treating physician. The case also suggests that valuation of a claim by a claim adjuster without input from experienced trial counsel may be insufficient to discharge the insurer’s duty to perform a complete review of the claim.