Nager v. Allstate Ins.

• Decision Date: 31 July 2000
• Citation: 99 Cal.Rptr.2d 348,83 Cal.App.4th 284
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 4 Dist. 2000) BRAM NAGER, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant a nd Respondent. G024720 Filed

99 Cal.Rptr.2d 348 (Cal.App. 4 Dist. 2000)

BRAM NAGER, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant a

nd Respondent.

G024720

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, FOURTH APPELLATE

DISTRICT, DIVISION THREE

Filed 7/31/00

Pub. order 8/23/00

Appeal from a judgment of the Superior Court of Orange County, Theodore E. Millard, Judge. Affirmed.

(Super. Ct. No. 752855)

Glickman & Glickman and Steven C. Glickman for Plaintiff and Appellant.

Luce, Forward, Hamilton & Scripps, Charles A. Bird, Peter H. Klee and Ronald D. Getchey for Defendant and Respondent.

CROSBY, J.

O P I N I O N

The trial court properly granted summary judgment in an insured's bad faith claim arising out of $2,000 in disputed no-fault medical payment benefits to a chiropractor lien claimant. The insurer promptly paid what appeared to be the chiropractor's reasonable and necessary bills, and the remainder of the lien was satisfied from the proceeds of the insured's settlement with the negligent driver.

I

Plaintiff Bram Nager was the named insured under an automobile policy with defendant Allstate Insurance Company for his 1984 500 SEC Mercedes Benz. In addition to third party liability coverage, the policy provided no-fault medical payments (med-pay) coverage for up to $10,000 for expenses "actually incurred" by an insured for "necessary" medical treatment for bodily injury arising out of an automobile accident.¹ The drunk driver was insured by Farmers Insurance Company. Nager sued the driver and an adjacent property owner for damages arising out of the accident.

While Nager did not seek medical treatment at the accident scene, he went to Michael Weinstein, an orthopedist, three days later, complaining of stiffness and pain in his neck, stabbing pains in his low back and numbness in his right leg. Weinstein suggested physical therapy and chiropractic treatment. Nager was first seen by a chiropractor, John Vostmyer, in late October 1994.

Vostmyer frequently testified as an expert in personal injury matters, having done so in over 100 cases. Nager signed a contractual lien against the proceeds of any settlement, judgment or verdict he might obtain. In November 1994, Vostmyer prepared an initial evaluation report for Nager's trial counsel.

Allstate initially paid some $470 to Vostmyer for his services. In January 1995, he billed Allstate an additional $705. Allstate cut this charge by $400 because the treatments "exceed[ed] frequency guidelines from the initial date of service" and because "physical therapy exceed[ed] expected duration for the diagnosis indicated."

In April 1995, Allstate paid $500 of a new bill for $775, declining to pay for the attorney report. Vostmyer sent Allstate new statements for an additional $1,400 for treatments from January through May 1995, which the carrier did not pay. The combined contested balance totaled approximately $2,000.

Nager sued Allstate for bad faith in September 1995. His expert, Frank Orma, an insurance claims consultant, opined that Allstate's claims handling practices were unreasonable because it relied upon standardized expectations of the duration of treatment, based on a diagnosis code. He criticized Allstate for not obtaining "an independent medical (or in this case, chiropractic) review of the bills and records."

In February 1996, Vostmyer was paid in full from the proceeds of Nager's settlement with Farmers, acting on the other motorist's behalf. Farmers paid a total of $21,000 to settle Nager's personal injury claim and had earlier entered into a settlement of $20,000 for the property damage claim.

II

We consider the totality of the circumstances involving Allstate's handling of Nager's med-pay claim. Not every first party insurance claim is transmogrified into a bad faith suit simply because an insurer questions the amount of a bill before paying it. To give rise to tort liability for bad faith, the insurer's conduct not only must be erroneous but "unreasonable" or "without proper cause" as well (Dalrymple v. United Services Auto. Assn. (1995) 40 Cal.App.4th 497, 513-514 [affirming summary judgment for insurer which raised legitimate third party coverage dispute]; Opsal v. United Services Auto. Assn. (1991) 2 Cal.App.4th 1197, 1205 [reversing bad faith verdict of over $1.7 million in compensatory and punitive against homeowner's insurer which declined to pay property damage claim based on "genuine" policy dispute].)

The reasonableness of an insurer's claims handling conduct in a first-party coverage case becomes a question of law, properly determined on summary judgment, where the evidence is undisputed and but one inference can be drawn. (Lee v. Crusader Ins. Co. (1996) 49 Cal.App.4th 1750 [summary judgment affirmed]; Carlton v. St. Paul Mercury Ins. Co. (1994) 30 Cal.App.4th 1450, 1459 [same]; Globe Indemnity Co. v. Superior Court (1992) 6 Cal.App.4th 725 [writ issued to compel summary judgment].)

In Lee v. Crusader Ins. Co., supra, 49 Cal.App.4th 1750, the court affirmed a summary judgment for an insurer in a first-party bad faith claim arising out of an arson fire that destroyed the insured's liquor store during the Los Angeles riots. Although the insurer strongly doubted the validity of the arson charges, it conducted no independent investigation, choosing to wait until the insureds were acquitted in a criminal prosecution. Lee held the insurer had a "reasonable basis for deferring action on the [insureds'] claim." (Id. at p. 1759.)

In like fashion, in Carlton v. St. Paul Mercury Ins. Co., supra, 30 Cal.App.4th 1450, the court affirmed an automobile insurer's summary judgment in a bad faith case alleging unreasonable delays in the payment of the insured's collision claim for damages to an antique car. The court noted that the insurer promptly paid the initial cost estimates for repairing the car, and then reopened its file once the insured reported that the anticipated costs would be greater. While agreeing that the insurer might have handled the claim more "expeditiously in the period after . . . [the insurer] indicated it would reinspect the car," Carlton held the delay was not so unreasonable as to give rise to bad faith liability, particularly since the insured himself delayed in submitting the requested paperwork. (Id. at p. 1459.)

In Globe Indemnity Co. v. Superior Court, supra, 6 Cal.App.4th 725, the court directed that summary judgment be granted to an automobile insurer which delayed paying any first-party benefits until the insured submitted to an examination under oath and agreed to a medical examination. (The insured had been injured while riding as a passenger on a stolen motorcycle.) According to the court, "There can be no 'unreasonable delay' until the insurer receives adequate information to process the claim and reach an agreement with the insureds." (Id. at pp. 730-731.)

Finally, in Waters v. United Services Auto. Assn. (1996) 41 Cal.App.4th 1063, the court reversed a judgment of $1.3 million in emotional distress damages for insureds who became embroiled in a protracted dispute with their homeowner's insurer regarding rebuilding costs for their fire-damaged home. The insureds never put on any evidence that they "spent a penny of their own" as a result of the insurer's delayed payments. (Id. at p. 1069.) Waters declined to adopt a rule that a first party insurer "which refuses to pay benefits claimed to be due under the policy did so at its own risk. Clearly, both logic and good policy dictate that no such rule ever be applied in first party cases." (Id. at p. 1081.)

The principles articulated in Lee, Carlton, Globe Indemnity, and Waters apply with equal force here. We look to the nature of the coverage provided, the reasonably justified expectations of the parties, and the particular conduct in question to determine whether there is a triable issue of material disputed fact that Allstate consciously and deliberately failed to discharge its contractual responsibilities. (Careau & Co. v. Security Pac. Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) But courts are not at liberty to imply covenants "directly at odds with a contract's express grant of discretionary power. . . ." (New Hampshire Ins. Co. v. Ridout Roofing Co. (1998) 68 Cal.App.4th 495, 504-505; see also Carma Developers, Inc. v. Marathon Develop. Calif., Inc. (1992) 2 Cal.4th 342, 374 ["if defendants were given the right to do what they did by the express provisions of the contract there can be no breach"].)

III

Automobile med-pay insurance provides first party coverage on a no-fault basis for relatively low policy limits (generally ranging from $5,000 to $10,000) at relatively low premiums. (Jones v. California Casualty Indem. Exch. (1970) 13 Cal.App.3d Supp. 1, 3 ["There is no fault or liability connected with this provision"]; see Croskey & Kaufman, Cal. Practice Guide: Insurance Litigation (The Rutter Group 1999) 6:707 [". . . coverage does not depend on the insured's liability . . . benefits are payable regardless of whether the insured was at fault"].) The coverage is primarily designed to provide an additional source of funds for medical expenses for injured automobile occupants without all the burdens of a fault-based payment system. (Croskey & Kaufman, Cal. Practice Guide: Insurance Litigation, supra, 6:1221.) There is no statutory obligation for med-pay benefits.

Allstate's med-pay coverage followed these general parameters, although (as Nager himself pointed out) there were notable differences in its policy language from other carriers' forms. Allstate's policy extended coverage only for medical expenses that were "actually incurred" by an insured. (Italics added.) It imposed a further requirement that such medical expenses be both "reasonable" and "necessary." "Unreasonable" med-pay expenses were defined as fees "which are substantially higher than the usual and customary charges for those services." "Unnecessary" med-pay...