• Zubillaga v. Allstate Indemnity Co. (4th Dist Ct. App.2017) ____Cal. App. 4th ___, 2017 Daily Journal 5863, Case No. G052603
  • August 15, 2017

    Zubillaga (Plaintiff), who was insured under an auto policy issued by Allstate, was involved in a serious automobile accident when another driver ran a red light and struck her car. She reported the accident to Allstate and retained an attorney. Plaintiff settled her claim against the adverse driver for his policy limits of $15,000 and in November, 2011 made a demand to Allstate, through her counsel, for $35,000 under her UIM coverage which represented the full amount of her remaining coverage. Allstate responded by offering $9,367.00 which represented what it thought was the reasonable amount of medical bills ($14,367), plus $10,000 in general damages, minus the $15,000 received from the adverse party. Plaintiff responded with a 998 offer of $35,000. Five months later plaintiff's counsel formally rejected Allstate's offer, again demanded $35,000, and provided evaluations by Plaintiff's orthopedic surgeon stating that Plaintiff could benefit from anti-inflammatory medication, physical therapy and weight loss. This evaluation increased Plaintiff's medical expenses by $1,200 and Allstate increased its settlement offer to $10,000. Plaintiff rejected the offer, again demanded $35,000, and demanded arbitration.

    Allstate assigned counsel and served written discovery. Plaintiff's discovery responses indicated that she had been seen by a board certified pain management specialist who opined she would need epidural injections, anti-inflammatory and pain medications, and physical therapy. The cost of the epidural injections would be between $15,000 and $60,000, depending on how many injections were needed. Based on this information, Allstate increased its evaluation of the claim to $27,084 and offered $12,084.

    In October 2012 Allstate retained a defense medical expert to examine Plaintiff and review her medical records. He concluded that although Plaintiff's complaints of neck and back pain were the result of the accident, there was no way to determine whether a disc protrusion was the cause of the back pain. He also noted that she was overweight which could be contributing to her chronic back pain. He saw no need for the recommended injections. In June 2013 Plaintiff's counsel requested that the arbitration be scheduled for September or October because Plaintiff was scheduled for an epidural in the next few weeks. Allstate requested any new records and bills pertaining to the epidural. On July 12, 2013 Allstate received medical records supporting an additional $6,850 in medical expenses for the epidural. This brought Plaintiff's medical expenses total to $26,455.44. Allstate then offered plaintiff $14,500 to settle the claim. In September, Plaintiff's counsel forwarded to Allstate a report from Plaintiff's doctor stating that Plaintiff required continued pain management and that if drug therapy did not work, she would need a series of three epidural injections at an approximate cost of $36,000. Furthermore, continued medication and physical therapy would be approximately $12,000 per year. Allstate did not have its expert review this additional information but increased its valuation of the claim to $30,584 and offered $15,584.

    At the arbitration, plaintiff was awarded $35,000, the full amount of her remaining policy limits. Allstate paid the award and Plaintiff sued Allstate for breach of contract and bad faith for failure to properly investigate the claim and failure to pay the limits sooner. The trial court granted Allstate's motion for summary judgment on the bad faith cause of action based on the genuine dispute doctrine, finding that Allstate was entitled to rely on its expert that the costly epidural shots were not necessary. Plaintiff appealed.


    The appellate court evaluated past decisions dealing with the genuine dispute doctrine and noted that the doctrine does not relieve the insurer of its obligation to thoroughly and fairly investigate the claim; that the insurer is not entitled to judgment as a matter of law where the facts, viewed most favorably for the plaintiff, could lead a jury to find the insurer acted unreasonably; the reasonableness of the insurer's decisions must be evaluated in the context of the time they were made; and an expert's testimony does not automatically save the insurer from a finding of bad faith.

    Applying these principles to the present case, the appellate court found that there were triable issues of fact as to whether Allstate's continued refusal to pay the policy limit was reasonable. The appellate court noted that the opinions of Allstate's expert, upon which it relied, were rendered in October and November 2012. Allstate never requested that the expert review subsequent treatments or recommendations by the Plaintiff's doctor. Allstate's continued reliance on the expert's arguably outdated opinions may have been unreasonable. Although the appellate court did not conclude that this conduct was unreasonable, it did conclude that a reasonable jury could so find. "Considering the objective facts known to Allstate at the time its final decision to deny plaintiff's $35,000 demand was made, and viewing the evidence in the light most favorable to plaintiff as required, we are convinced 'a jury could conclude that the insurer acted unreasonably.' (citation.)" Therefore, the judgment of the trial court was reversed.


    The appellate court's ruling in this case was to be expected in light of the reported facts. It is presumed that had Allstate forwarded the medical records subsequently received from Plaintiff to its own expert and had the expert, at that time, stood by his prior opinion about the Plaintiff's treatment, the result likely would have been different. As the appellate court found, the facts did not necessarily show unreasonable conduct on the part of Allstate. However, its failure to conduct any further investigation after receiving additional medical reports supporting a higher case value raised a triable question of fact as to the reasonableness of the insurer's conduct sufficient to defeat a summary judgment motion. Consequently, an insurer believing itself to be protected by the genuine dispute doctrine must ensure that it conducts further investigation when it receives additional information from the claimant related to the value of the claim.