Weinstein v. Prudential Property and Casualty Insurance Company, Docket No. 34970-2008 (Idaho 6/1/2010)

Decision Date01 June 2010
Docket NumberDocket No. 34970-2008.
CourtIdaho Supreme Court

Appeal from the District Court of the Fourth Judicial District of the State of Idaho, in and for Ada County. The Hon. Darla S. Williamson, District Judge.

The judgment of the district court is affirmed in part and vacated in part.

Anderson, Julian & Hull LLP, Boise, for appellants. Robert A. Anderson argued.

Risch Pisca, PLLC, and Goss Gustavel Goss, PLLC, Boise, for respondents. John Insinger argued.

EISMANN, Chief Justice.

This is an appeal from a judgment for compensatory damages for breach of an insurance contract, from an award of punitive damages for insurance bad faith, and from the award of attorney fees. The district court ordered a new trial on punitive damages unless the plaintiffs accepted a remittitur, and they cross appeal from that order. We affirm the judgment for compensatory damages, we vacate the award of attorney fees, we deny the cross appeal, we affirm the amount of punitive damages determined by the district court to be consistent with due process, and we vacate the plaintiffs' option to request a new trial on punitive damages.


On September 30, 2002, an uninsured, sixteen-year-old driver with a suspended license pulled out of a private driveway onto a public street and negligently failed to yield to a pickup, striking it and causing it to collide with an automobile in which Sarah Weinstein was a passenger. The automobile was owned by Sarah's parents, Leslie and Linda Weinstein ("the Weinsteins"), and was being operated by Mrs. Weinstein. Both Sarah and Mrs. Weinstein were injured in the collision. They were taken by ambulance to a hospital, but were released that day.

At the time of the accident, they were insured under a policy of automobile insurance issued by Prudential Property and Casualty Insurance Company, which was later purchased by Liberty Mutual Insurance Company on November 1, 2003. In this lawsuit, the parties have treated the insurance companies as if they were one company, and so we will refer to them as one company called "Liberty Mutual." The insurance policy provided $5,000 in medical ("MedPay") coverage per person and $250,000 in uninsured motorist ("UM") coverage per person for bodily injury.

The Weinsteins promptly notified Liberty Mutual of the accident, and the following day it determined that the accident had been caused by an uninsured driver. It also sent "Parent of Sarah Weinstein" a letter stating that the MedPay provision required that any medical bills first be submitted to the Weinsteins' health insurance carrier and that it would only pay for any uncovered or disallowed items, assuming they were reasonable and necessary expenses.

Liberty Mutual assigned a UM adjuster to be in contact with the Weinsteins. On November 11, 2002, the adjuster sent the Weinsteins a letter asking for copies of all of their medical bills and for them to sign and return a form authorizing Liberty Mutual to obtain medical records from Sarah's treatment providers. Mrs. Weinstein signed the medical release on December 5, 2002, and sent it to the adjuster along with a list of medical providers. At the adjuster's request, Mrs. Weinstein later provided two other medical authorizations, the last so the adjuster could obtain records from the MedPay unit. Liberty Mutual did not use any of the medical authorizations or attempt to obtain any medical records from any providers. Some of the medical bills and records submitted by the Weinsteins were received by the UM adjuster, who sent them to the MedPay unit. The UM adjuster later attempted unsuccessfully several times to have the MedPay unit send her the MedPay file.

On January 2, 2003, Mrs. Weinstein told the adjuster that the Weinsteins were receiving threatening telephone calls concerning unpaid medical bills and that she and Sarah were still receiving treatment. Liberty Mutual responded on February 12, 2003, by sending the Weinsteins a letter stating that if it did not receive any new medical bills within thirty days it would close the MedPay file. Twelve days later it closed the file because the Weinsteins had not yet responded to the letter.

Sarah had injured her left hip in the accident and had been receiving physical therapy. In February 2003, her therapist released her to resume physical activities as tolerated. When she resumed training for and playing soccer, her favorite sport, her hip pain returned. She was only able to play ten minutes per half, and ultimately had to quit playing entirely. Mrs. Weinstein sought further medical treatment for her.

In April 2003, Mrs. Weinstein notified the adjuster that a magnetic resonance imaging scan indicated that Sarah may require hip surgery. The following month, Mrs. Weinstein informed the adjuster that a second scan showed that Sarah had suffered a labial tear of her left hip and that she would need surgery. Liberty Mutual responded by increasing its reserve for Sarah's UM claim to $25,000. Sarah had the surgery on May 19, 2003.

Prior to April 2003, Liberty Mutual incorrectly believed that the insurance policy provided that it did not have to pay Sarah's medical expenses until the bills were first submitted to and denied or only partially paid by her health insurance carrier. In April 2003, it realized that such provision in the policy did not apply to Sarah. It only applied to the Weinsteins as the named insureds, not to passengers in their insured vehicles. Liberty Mutual did not make any payments under the MedPay coverage until April 2, 2003. Prior to that time, it had sent letters to Sarah's medical providers stating that it was "unable to make payment for these charges at this time," but if Sarah's health carrier denied payment or made only partial payment, the provider should "resubmit the bill along with the health carrier's Explanation of Benefits."

Mr. Weinstein was self-employed in a business providing services to the airline industry, and his business was struggling financially as a result of the terrorist attacks of September 11, 2001. From May 2003 on, the Weinsteins received regular telephone calls and demand letters from medical billing departments and collection agencies regarding the overdue medical bills. On one occasion as Mrs. Weinstein was leaving a doctor's office with Sarah, a staff member loudly and publicly told Mrs. Weinstein that if she did not pay her outstanding bill in full immediately, the doctor would no longer treat Sarah. Although Mrs. Weinstein notified Liberty Mutual of this incident, it did nothing. These events caused Mrs. Weinstein to feel depressed and cry, and the grief, stress, and embarrassment resulted in marital discord and family turmoil.

It was Liberty Mutual's policy to exhaust the MedPay coverage before making any payment under the UM coverage and to not make any payments under the UM coverage until the insured desired to settle the entire UM claim. Sarah's MedPay benefits of $5,000 were exhausted on September 3, 2003, when Liberty Mutual made a partial payment to the hospital for her surgery. Thereafter, Liberty Mutual sent Sarah's medical providers letters stating that her "maximum policy limits of $5,000 for medical expenses related to this accident have been paid and no further payments can be made. You may wish to contact this patient or the appropriate health insurance carrier for payment of future bills." Liberty Mutual did not include in these letters the fact that Sarah had ample UM coverage to pay the medical bills.

On September 3, 2003, Mrs. Weinstein called the adjuster and told her that collection agencies were after them, that their credit was ruined, that Liberty Mutual took a lot of time to decide to pay the bills under the MedPay coverage, and that it should pay the remaining bills under the UM coverage. The adjuster answered that Liberty Mutual would not pay under the UM coverage until the Weinsteins were ready to settle the entire claim.

The Weinsteins contacted attorney Bruce Bistline to represent them. By letter dated October 10, 2003, he informed Liberty Mutual that he was representing the Weinsteins. On October 21, 2003, Liberty Mutual increased its reserve for Sarah's UM claim to $50,000.

On October 28, 2003, Bistline sent the adjuster a letter seeking information, listing unpaid medical bills, and stating that he was not aware of any reason why the bills should not be paid from the UM coverage. The adjuster later responded that it was not Liberty Mutual's practice to do so.

On April 20, 2004, Bistline sent the adjuster a letter accompanied by a notebook containing medical bills and records. In the letter he demanded payment of $16,669.64, which represented the unpaid bills as of November 20, 2003, including interest. Liberty Mutual did not pay any of the bills, but on June 7, 2004, it did increase its reserve for Sarah's UM claim to $75,000.

On June 11, 2004, a new UM adjuster sent Bistline a letter stating that she was now handling Sarah's UM claim, that Liberty Mutual "will afford the policy's Uninsured Motorist coverage with limits of $250,000 per person," that it had "no legal obligation" to pay Sarah's medical expenses, and that it "will offer a $10,000 payment in advance on Ms Weinstein's future settlement" if her parents signed the enclosed form. The letter added, "We will evaluate Ms Weinstein's damages when her medical treatment is completed or when you submit a settlement demand with all the medical documentation and proofs."

The form enclosed with the letter required the Weinsteins to...

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