Bowman v. Country Preferred Insurance Company

Filing 83

ORDER denying 62 Motion for Summary Judgment. See order for details. Signed by Senior Judge Stephen M McNamee on 3/31/2015.(LMR)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Catherine Bowman,

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No. CV-12-02720-PHX-SMM
Plaintiff,

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v.

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Country Preferred Ins. Co.,

ORDER

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Defendant.

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Pending before the Court is Defendant Country Preferred Insurance Company’s

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(“Country”) motion for summary judgment. (Doc. 62.) The motion is fully briefed.

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(Docs. 80; 82.) Having reviewed the parties’ briefing, the Court will deny Country’s

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motion.

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I. Factual and Procedural Background

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This1 first-party underinsured motorist (“UIM”) bad faith action arises out of a car

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accident that occurred in 2009. Plaintiff Catherine Bowman’s (“Bowman”) vehicle was

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hit by a vehicle driven by Johnny Goodwyn (“Goodwyn”) after Goodwyn ran a red light.

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(Doc. 1 at 7.) Both Bowman and Goodwyn were insured by Country. (Doc. 1 at 6, 11.)

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Goodwyn had a liability policy with $100,000 limits; Bowman had UIM coverage with

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$250,000 limits. (Id.)

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The following facts are undisputed, unless indicated otherwise.

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The day after the accident, June 26, 2009, Bowman contacted Country and

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informed Diane Carrigan, a Country claims representative, that she suffered from

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stiffness in her body and planned to visit a physical therapist. (Doc. 81-6 at 6, 26.) Later

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that day, Carrigan noted that “Catherine was injured in this accident and will be making a

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bodily injury claim.” (Doc. 81-1 at 31.)

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A few days later, Barry Janckes, the Country claims representative for Goodwyn,

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informed Bowman that Country had accepted liability for the crash. (Docs. 1 at 12; 81-1

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at 2.) Near the end of July 2009, Country paid for the damage to Bowman’s vehicle.

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(Doc. 63 at 9.)

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Over the next two years, Bowman’s claim remained dormant, with only periodic

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calls or letters between Country and Bowman. (Docs. 63-1 at 31; 81-1 at 54.) Then, on

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June 7, 2011,—19 days before the statute of limitation expired—Bowman hand delivered

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a “demand package” to Country alleging that she suffered from thoracic outlet syndrome

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(“TOS”), cracked teeth, and a number of other injuries as a result of the accident. (Doc.

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81-2 at 7-42.) The claim also included medical opinions confirming the existence of

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Bowman’s alleged injuries and causation testimony from two vascular surgeons (Doc.

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81-5 at 49, 50), a report from Susan Sorosky, P’s treating M.D., (Doc. 81-4 at 2-8), a

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report from certified neuromuscular massage therapist (“NMT”)(Doc. 81-4 at 10-11), and

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the findings from Dr. Hurt, Bowman’s dentist (Doc. 81-3 at 65-66). (See Doc. 81-2 at

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17.), Soon after, Bowman filed a third-party action against Goodwyn in Superior Court.

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(Doc. 63 at 15.)

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On August 9, 2011, Bowman allegedly called Country to inquire about the status

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of the first party UIM claim, and was asked for further medical authorization so that

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Country “[could] begin the evaluation of the underinsured motorist claim.” (Doc. 81-1 at

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35.) The next day, Bowman sent additional information and authorization to Country.

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(Doc. 63 at 19.) Three weeks later, Carrigan informed Bowman that the records review

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was complete, and that the claim would be sent to a review team. (Doc. 81-1 at 36.)

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Carrigan also indicated that Country would “likely” request an independent medical

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exam (“IME”) shortly following the records review. (Id.)

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On September 6, 2011, Carrigan extended a $10,000 offer to Bowman in an effort

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to settle the UIM claim. (Doc. 81-1 at 28.) The claim notes do not indicate Carrigan’s

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reasoning for the offer amount. (Doc. 81-1 at 26-29.) Bowman rejected the offer. (Id.)

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The next day, Carrigan sent a letter to Dr. Sorosky inquiring about Bowman’s alleged

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TOS. (Doc. 81-4 at 2.) Dr. Sorosky responded that it was her opinion that Bowman’s

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TOS was related to injuries sustained in the June 2009 car accident. (Doc. 81-4 at 4.)

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On September 22, 2011, Carrigan informed Bowman that Country would include

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her dental costs in the claim, confirmed receipt of the additional reports from Dr. Sorosky

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and the NMT, and indicated that Country would have an independent medical records

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review performed to evaluate the records. (Doc. 81-1 at 39.) Carrigan retired the

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following day and the UIM claim was transferred to Country claims representative Leslie

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Sinatra. (Id.)

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On September 27, 2011, Sinatra informed Bowman that Carrigan had not

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forwarded the materials for an independent medical records review, and that the review

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would require more time. (Doc. 81-1 at 40.)

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On October 4, 2011, Bowman notified Country that she would demand arbitration

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if the UIM claim were not resolved by October 18, 2011. (Doc. 81-2 at 44-45.) After

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learning of the impending arbitration, Jim Shaffer, Country Claims attorney responsible

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for the Goodwyn action pending in Superior Court, instructed Sinatra to forward the UIM

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claim to him. (Docs. 81-1 at 48; 81-1 at 54.) After turning the claim over to Shaffer,

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Sinatra informed Bowman that Country “did not have enough prior records to

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appropriately evaluate the causation issues…” and that the claim would proceed to

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arbitration. (Doc. 81-1 at 44.) Bowman asked Sinatra to identify which medical

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documents were missing, but Sinatra responded that the claim now fell under the purview

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of Country’s litigation team. (Doc. 81-1 at 43.)

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After receiving the file, Shaffer contacted Steve Venezia, outside counsel

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contracted to represent the Goodwyns in the Superior Court case, to talk about an

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“interesting development” in the claim. (Doc. 63-3 at 6.) Shaffer asked Venezia if he

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would handle both claims, reasoning that Country could “simply resolve both claims in

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arbitration with the [bodily injury] limits ahead of the UIM limits.” (Id.) Shaffer

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explained further that “[i]f the award is over the [bodily injury] limit, then we simply pay

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the remaining amount under UIM, without the concern for an excess verdict.” (Doc. 63-3

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at 6.) Venezia responded that he did not see a conflict. (Doc. 81-1 at 49.)

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Venezia thereafter assumed responsibility as counsel for both the UIM and third

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party claim. (Id.) As defense counsel for both claims, Venezia denied coverage on the

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third-party claim on November 4, 2011, based on a sudden incapacitation defense. (Doc.

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81-4 at 63, ¶ 23.)

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On December 7, 2011, Bowman complained to Shafer about the joining of her

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claims. (Doc. 81-2 at 56-59.) A few days later, Douglas Hundman, Country Claims

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Supervising Attorney, informed Bowman that Pete Bangay (claims representative) and

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Paul McGoldrick (attorney) would continue with the UIM claim, and Kristi Lewis

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(claims representative) and Tom Burke (replaced by David Matheson) (attorney) would

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be handling the Goodwyn case. (Doc. 81-1 at 54). Hundman also acknowledged that

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Country did not notify Bowman that liability had been in dispute and that Country had

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become aware of the potential for a liability defense from a letter Country had received

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from Bowman in May, 2011. (Id.)

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On January 20, 2012, McGoldrick met with Bangay and decided to forgo the

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sudden incapacity defense raised by Venezia and re-admit liability. (Doc. 81-3 at 9.)

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Notes from that meeting provide: “Maybe in [bad faith] claim down the road to minimize

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exposure. Admit Liab.” (Doc. 81-3 at 8.)

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Later that day, McGoldrick notified Bowman that Country would not contest

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liability on the UIM claim and the arbitration would proceed on causation and damages

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only. (Doc. 81-3 at 7.)

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On January 23, 2012, Matheson offered the $100,000 policy limits in the

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Goodwyn case. (Docs. 81-3 at 9; 81-4 at 65, ¶¶ 33-34.) Bowman accepted the settlement,

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but retained her right to pursue payment and a bad faith action for the UIM claim. (Doc.

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63-4 at 4.)

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By March 2012, McGoldrick had arranged to submit Bowman to an IME

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performed by Dr. Brown. (Doc. 81-3 at 32-34.) On March 23, McGoldrick sent Dr.

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Brown Bowman’s medical records, noting that “the primary issue in the case is the causal

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relation of the [TOS] to the accident, the treatment for this condition…, and whether this

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condition impacts the ability of Ms. Bowman to work.” (Id. at 33.) Dr. Brown performed

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the IME on March 27. (Doc. 63-5 at 14.) In his report, he indicated that he found “no

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evidence this patient developed thoracic outlet syndrome as a result of the … accident”

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primarily because the “onset of symptoms [was] not consistent with the diagnosis of

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TOS….” (Id.) McGoldrick forwarded Dr. Brown’s IME report, without reference to the

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contradictory positions of Bowman’s medical experts, noting that the report was

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“favorable.” (Doc. 81-3 at 35.)

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On May 16, 2012, Dr. Enrico DiVito signed a letter drafted by McGoldrick

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opining that he could not conclude to a reasonable degree of medical probability that the

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2009 accident caused Bowman’s tooth damage because Dr. Hunt had not referenced the

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accident in his report. (Doc. 81-3 at 40-41.) Dr. DiVito did not address explanations for

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the omission or subsequent treatment done by Dr. Hurt that link Bowman’s dental issues

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with the accident. (Doc. 81-3 at 65-74).

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On June 11, 2012, McGoldrick performed the only known financial evaluation of

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Bowman’s UIM claim, estimating the claim value to be from $110,000 to $150,000.

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(Doc. 81-3 at 51.) In his briefing to the arbiters, McGoldrick allegedly referenced the

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available policy limits. (Doc. 81-5 at 93 § 89.) Four days later, the parties arbitrated the

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UIM claim and Bowman was awarded the $250,000 policy limits. (Doc. 81-5 at 46.)

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On December 26, 2012, Bowman filed this action for bad faith against Country.
(Doc. 1.)

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II. Standard of Review
a. Summary Judgment
A court must grant summary judgment if the pleadings and supporting documents,
viewed in the light most favorable to the nonmoving party, “show that there is no genuine
issue as to any material fact and that the moving party is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);
Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir. 1994). Substantive
law determines which facts are material. See Anderson v. Liberty Lobby, 477 U.S. 242,
248 (1986); see also Jesinger, 24 F.3d at 1130. “Only disputes over facts that might
affect the outcome of the suit under the governing law will properly preclude the entry of
summary judgment.” Anderson, 477 U.S. at 248. The dispute must also be genuine, that
is, the evidence must be “such that a reasonable jury could return a verdict for the
nonmoving party.” Id.; see Jesinger, 24 F.3d at 1130.
A principal purpose of summary judgment is “to isolate and dispose of factually
unsupported claims.” Celotex, 477 U.S. at 323-24. Summary judgment is appropriate
against a party who “fails to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Id. at 322; see also Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th
Cir. 1994). The moving party need not disprove matters on which the opponent has the
burden of proof at trial. See Celotex, 477 U.S. at 323-24. The party opposing summary
judgment need not produce evidence “in a form that would be admissible at trial in order
to avoid summary judgment.” Id. at 324. However, the nonmovant “may not rest upon
the mere allegations or denials of [the party’s] pleadings, but . . . must set forth specific
facts showing that there is a genuine issue for trial.” Fed. R. Civ. P. 56(e); see Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-88 (1986); Brinson v.
Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995).

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b. Bad Faith
Under Arizona law2, an insurer implicitly owes a covenant of good faith and fair
dealing to its insureds. Rawlings v. Apodaca, 151 Ariz. 149, 154, 726 P.2d 565, 570
(1986). “[A]n insurance company's duty of good faith means that “an insurer must deal
fairly with an insured, giving equal consideration in all matters to the insured's interest.”
Deese v. State Farm Mut. Auto. Ins. Co., 172 Ariz. 504, 507, 838 P.2d 1265, 1268 (1992)
(citing Tank v. State Farm Fire & Casualty Co., 715 P.2d 1133, 1136 (Wash.
1986)(emphasis in original).
An insured breaches its duties—i.e. acts in bad faith--when it “unreasonably
investigates, evaluates, or processes a claim (an ‘objective’ test), and either knows it is
acting unreasonably or acts with such reckless disregard that such knowledge may be
imputed to it (a ‘subjective’ test).” Nardelli v. Metro. Group Prop. & Cas. Ins. Co., 230
Ariz. 592, 597–98, 277 P.3d 789, 794–95 (App. 2012) (citing Zilisch, 196 Ariz. at 238,
995 P.2d at 280). Common examples of bad faith are “deceit, nondisclosure, reneging on
promises, violation of industry custom, and deliberate attempts to obfuscate.” Rawlings,
151 Ariz. at 161, 726 P.2d at 577. Further, “groundless” or inadequately investigated
reasons for a position and delayed evaluations despite having all relevant medical records
are also generally considered signs of bad faith. Lange v. Penn Mut. Life Ins. Co., 843
F.2d 1175, 1182 (9th Cir. 1988); see Zilisch, 196 Ariz. at 280–81, 995 P.2d at 238–39;
see also Nardelli, 230 Ariz. at 599, 277 P.3d at 796 (an insurer may not ignore conflicting
evidence but must continually give equal consideration to the available evidence
shedding light on the claim.).
An insured may avoid a claim of bad faith by arguing that its decision to decline or
withhold coverage was justified because the claim was “fairly debatable.” Generally,
“[w]hile an insurer may challenge claims which are fairly debatable…its belief in fair

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A federal court sitting in diversity applies state substantive law. See Hambleton Bros.
Lumber Co. v. Balkin Enterprises, Inc., 397 F.3d 1217, 1227 (9th Cir. 2005). Arizona law
therefore applies to Plaintiff’s state-law claim.

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debatability is a question of fact to be determined by the jury.” Zilisch, 196 Ariz. at 280,

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995 P.2d at 279 (further citation and quotation omitted). However, if the insured offers no

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significantly probative evidence that calls into question the insurer's belief regarding fair

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debatability, the court may rule on the issue as matter of law. See Knoell v. Metropolitan

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Life Ins. Co., 163 F.Supp.2d 1072, 1076 (D.Ariz. 2001); see also Aetna Cas. & Sur. Co.

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v. Superior Court In & For Cnty. Of Maricopa, 161 Ariz. 437, 440, 778 P.2d 1333, 1336

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(App.1989) (stating that “there are times when the issue of bad faith is not a question

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appropriate for determination by the jury.”).

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III. Discussion

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a. Bad Faith

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As a threshold matter, the Court must address Country’s opening argument.

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Country argues that Bowman “does not have a direct cause of action to bring a third-

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party [bad faith] claim….” (Doc. 62 at 7.) Finding that Bowman has neither pled nor

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argued a third-party bad faith claim (Doc. 1), the Court disregards Country’s irrelevant

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arguments.

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Country argues that it should be granted summary judgment on Bowman’s first-

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party bad faith claim because Country conducted a timely, reasonable investigation.

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(Doc. 62 at 10-14.) Specifically, Country argues that the scope of the initial investigation

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was proper in light of neither party to the 2009 accident reporting injuries (Id. at 12.);

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Country Claims Representative Diane Carrigan began investigating Bowman’s claim

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immediately after Bowman delivered her “demand package” (Id.); Country subjected

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Bowman to an IME (Id. at 13); disclosure of the policy limits to the arbiter was not

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against industry custom (Id. at 11); Country was “entitled” to deny liability in the

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Goodwyn case (Id. at 13); and no evidence supports Bowman’s allegation that combining

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the first and third party claims was done in bad faith (Id. at 10)3. Bowman argues that the

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This last argument actually appears under Country’s third-party claim arguments
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facts put forward by Country do not tell the full story and that a jury could find that

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Country engaged in bad faith by improperly denying coverage, disregarding relevant

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evidence, and failing to give equal consideration to the claim after Bowman requested

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arbitration. (Id. at 14-18.) The Court agrees with Bowman.

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Preliminarily, the Court finds that two factual assertions in Country’s arguments

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are unsupported by the record. First, Bowman reported that she was injured and planned

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to pursue a bodily injury claim soon after the 2009 accident. (Docs. 81-6 at 6, 26; 81-1 at

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31.) Second, Diane Carrigan did not begin investigating Bowman’s UIM claim until two

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months after Bowman had submitted the “demand package.” (Doc. 81-1 at 35.) Further,

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the Court finds that the propriety of Country’s 2009 investigation is immaterial to the

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issues surrounding Bowman’s UIM claim filed in 2011. (See Doc. 81-2 at 7-42.)

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Turning its analysis to issues and facts in dispute, the Court is mindful of the

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circumstances that, in effect, allowed Country to assume an adversarial stance. A UIM

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bad faith claim raises unique issues regarding the relationship between the insured and

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the insurer. The Voland Court explained,

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“Uninsured motorist coverage...is a hybrid in that it blends the features of both
first-party and third-party coverage. The first-party aspect is evident in that the
insured makes a claim under his own contract. At the same time, however, thirdparty liability principles also are operating in that the coverage requires the insured
to be “legally entitled” to collect-that is, the insured must be able to establish fault
on the part of the uninsured motorist and must be able to prove the extent of the
damages to which he or she would be entitled. The question arises: when is a
carrier of uninsured motorist coverage under a duty to pay its insured's damages?
There is no universally definitive answer to this question or to the question when
an action alleging bad faith may be maintained for the improper handling of an
uninsured or underinsured motorist claim; the answer is, of course, dependent
upon the facts of each case. Clearly, there is a covenant of good faith and fair
dealing between the insurer and the insured, as with direct insurance, but the
insurer and the insured occupy adverse positions until the uninsured motorist's
liability is fixed....”

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Voland v. Farmers Ins. Co. of Arizona, 189 Ariz. 448, 451, 943 P.2d 808, 811 (App.

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and not under the UIM bad faith section. (Doc. 62 at 10.) Country appears to extend the
argument to the UIM claim in its Reply. (Doc. 82 at 4-5.) The Court may, in the interests
of judicial economy and a fair hearing on the merits, refuse to consider new arguments
raised for the first time in a reply brief. Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir.
2007). However, given the UIM claim’s inherent interdependence on the Goodwyn case,
see Voland, 189 Ariz. at 451, 943 P.2d at 811, the Court will consider Country’s
argument.
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1997)(citing LeFevre v. Westberry, 590 So.2d 154, 159 (Ala. 1991)). Further, Bowman

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exercised her right to request arbitration, thus reinforcing the adversarial nature of her

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claim. Also, Country was required to give an “undeviating and single allegiance” to

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Goodwyn and Bowman because both were Country insurers. See Parsons v. Cont'l Nat.

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Am. Grp., 113 Ariz. 223, 227, 550 P.2d 94, 98 (1976) (citing Newcomb v. Meiss, 263

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Minn. 315, 116 N.W.2d 593 (1962)). However, none of these circumstances obviated

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Country’s duty to “giv[e] equal consideration in all matters” to Bowman’s interests.

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Deese, 172 Ariz. at 507, 838 P.2d at 1268. Indeed, it is beyond question that, along with

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receiving financial security from purchasing insurance, “the insured also is entitled to

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receive the additional security of knowing that she will be dealt with fairly and in good

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faith.” Id. at 508, 838 P.2d at 1269. In other words, the insurer may do what is necessary

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to investigate and evaluate and even arbitrate an insured’s claim; but the inherent

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adversarial nature of such actions does not allow an insured to engage in bad faith. Id.;

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see also Zilisch, 196 Ariz. at 238, 995 P.2d at 280. (“[An insurer] should do nothing that

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jeopardizes the insured's security under the policy.”) Therefore, keeping in mind

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Country’s justified adversarial position, the Court focuses its analysis on the two-prong

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analysis of insurance bad faith: an insurer’s objective reasonableness and subjective

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intent. See Nardelli, 230 Ariz. at 597–98, 277 P.3d at 794–95.

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1. Objective Test

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The Court looks to Zilisch for initial guidance regarding Country’s objective

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reasonableness. In Zilicsh, the court found that an insurer’s 10-month delay in formally

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evaluating a claim despite having all available medical records and failure to submit the

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insured to an IME until after already offering settlement were objective indicators of bad

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faith. Zilisch, 196 Ariz. at 238. Here, Country waited 12 months to formally evaluate the

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UIM claim despite Bowman’s cooperation and Country extended a settlement offer

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before submitting Bowman to an IME. The Court therefore finds that sufficient facts exist

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for a jury to find that Country acted objectively unreasonable. The Court will continue its

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analysis by discussing the facts pertaining to Country’s UIM investigation and

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evaluation.

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A. Investigation

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A genuine dispute of material fact exists regarding the objective reasonableness of

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Country’s investigation. In a UIM claim, coverage depends on two factors: (1) fault of

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the under-insured motorist and (2) whether the claimant’s damages exceed the under-

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insured’s motorist’s available coverage. Voland, 189 Ariz. at 451, 943 P.2d at 811.

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Further, in Arizona, “entitlement to UIM benefits is based on damages that exceed the

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applicable liability limits rather than being based on payment or exhaustion of those

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limits.” Country Mut. Ins. Co. v. Fonk, 198 Ariz. 167, 170, 7 P.3d 973, 976 (App. 2000).

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To reiterate, “[t]he carrier has an obligation to immediately conduct an adequate

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investigation…” Zilisch, 196 Ariz. at 280, 995 P.2d at 238. Common examples of bad

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faith are “deceit, nondisclosure, reneging on promises,…and deliberate attempts to

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obfuscate.” Rawlings, 151 Ariz. at 161, 726 P.2d at 577. Further, “groundless” or

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inadequately investigated reason for an insurer’s position is an example of bad faith.

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Lange, 843 F.2d at 1182 (9th Cir. 1988); See Zilisch, 196 Ariz. at 280–81, 995 P.2d at

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238–39.

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Upon receiving Bowman’s first-party claim, Country had a duty to immediately
and adequately investigate both whether Goodwyn was at fault and whether Bowman’s
damages exceeded Goodwyn’s $100,000 policy limit. Voland, 189 Ariz. at 451, 943 P.2d
at 811; Fonk, 198 Ariz. at 170, 7 P.3d at 976; Zilisch, 196 Ariz. at 280, 995 P.2d at 238.
However, the facts suggest that Country investigated Bowman’s UIM claim two months
after receiving it (Doc. 81-2 at 35, 44); denied liability—after more than two years of
concession—without alerting Bowman that liability was in dispute (Doc. 81-1 at 54); and
did not investigate the factual predicate (Goodwyn’s sudden incapacitation) for denying
liability (Doc. 81-3 at 8). Thus, a reasonable jury could find that Country unreasonably
delayed its investigation, “reneged” its position of admitting coverage, and denied
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coverage using inadequately investigated premises. Therefore, a material dispute of fact

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exists as to whether Country investigated Bowman’s UIM claim in bad faith.

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Moreover, Country’s investigation may suggest that the insurer did not give equal
consideration to Bowman’s claim. “An insurance company's duty of good faith means
that an insurer must deal fairly with an insured, giving equal consideration in all matters
to the insured's interest.” Deese, 172 Ariz. at 507, 838 P.2d at 1268. For example, an
insurer may not ignore conflicting evidence when investigating an insured’s claim.
Nardelli, 230 Ariz. at 599, 277 P.3d at 796. Country denied that Bowman suffered from
TOS despite four medical providers opining that Bowman presented symptoms of the
injury (compare Doc. 63-5 at 14 with Docs. 81-4 at 2-11; 81-5 at 49, 50.) and claimed
that Bowman’s dental records were inconclusive despite additional records that offer
clarification (Doc. 81-3 at 40-41, 65-74). Accordingly, as a jury could find that Country
put its interests ahead of Bowman’s from these facts, the Court finds that a genuine
dispute of material fact exist regarding whether Country acted objectively reasonable in
its investigation of the UIM claim.
B. Evaluation

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A genuine dispute of material fact exists regarding the objective reasonableness of

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Country’s evaluation. “The carrier has an obligation to…act reasonably in evaluating the

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claim….” Zilisch, 196 Ariz. at 280, 995 P.2d at 238. “[An insurer] cannot lowball claims

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or delay claims hoping that the insured will settle for less.” (Id.) Indeed, “equal

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consideration” requires that an insurer evaluate a claim when sufficient information is

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available. Id; Lange, 843 F.2d at 1182. The facts show that Country offered Bowman

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$10,000 to settle the UIM claim (Doc. 81-1 at 28.); claimed that missing medical records

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prevented it from evaluating Bowman’s UIM claim (Docs. 81-1 at 44; 81-3 at 32-34.);

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and failed to formally evaluate the claim until four days before arbitration (Doc. 80 at

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15). Considering that the UIM claim was arbitrated for $250,000 and Bowman gave

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Country her complete cooperation to retrieve any missing documents, a jury could

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conclude that Country evaluated the claim in bad faith. Therefore, the Court finds that

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summary judgment to Country on this issue of evaluation is improper.

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2. Subjective Test

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The Court finds that a genuine dispute of material fact exists concerning whether
Country knew it acted in bad faith. Again, “[t]he appropriate inquiry [to bad faith] is
whether there is sufficient evidence from which reasonable jurors could conclude
that…the insurer acted unreasonably and either knew or was conscious of the fact that its
conduct was unreasonable.” Zilisch, 196 Ariz. at 280, 995 P.2d at 238 (emphasis added).
Country combined the claims with the intent to avoid an excess verdict (Doc. 63-3 at 6.)
and chose to pay Bowman’s underlying policy limits in order to “minimize exposure” to
a future bad faith claim. (Doc. 81-3 at 8.) A jury could find that these facts, viewed in
context of Country’s objectively unreasonable actions, suggest that Country knowingly
placed its interests above Bowman’s. See Deese, 172 Ariz. at 507, 838 P.2d at 1268
(“[A]n insurance company's duty of good faith means that an insurer must deal fairly
with an insured, giving equal consideration in all matters to the insured's interest.”).
Therefore, a genuine dispute of material facts exists regarding Country’s knowledge of
bad faith.

19

In sum, the Court finds that the record, when viewed in Bowman’s favor, suggests

20

that Country acted both objectively and subjectively unreasonable in handling the UIM

21

claim. The Court is unconvinced by Country’s recurrent argument that “[i]n this case, the

22

process worked.” (Doc. 82 at 11)(emphasis in Motion). Of course, a cursory telling of the

23

facts may suggests that Country’s process did work as Bowman received the policy limits

24

on her UIM claim roughly one year after disclosing her injuries. However, as made clear

25

by the Arizona Supreme Court, the ends of a claim’s investigation and evaluation will not

26

always justify the means. Zilisch, 196 Ariz. at 280, 995 P.2d at 238. As the offered

27

evidence creates a genuine issue of material fact as to whether Country acted in bad faith,

28

the Court will deny Country’s motion for summary judgment.

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1

b. Evidentiary Disputes

2

Country argues that the opinion and testimony of Bowman’s bad faith expert

3

should be stricken because the expert’s analysis was not based on the record. (Doc. 62 at

4

14.) The Court finds that the issue of striking expert witnesses is for another day. As a

5

determination of this issue will not assist in the outcome of the dispositive issues

6

presently submitted, the Court finds it prudent to provide the parties further opportunity

7

to present more substantiated arguments concerning expert witnesses before trial.

8

Country also, for the first time its Reply, objects to Bowman’s submittal of

9

Wieneke’s declaration, select arbitration exhibits, and Bowman’s CV and personal

10

declaration as evidence. (Doc. 82 at 8-10.) A court need not consider new arguments

11

raised for the first time in a reply brief. Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir.

12

2007). The Court will therefore defer judgment on these evidentiary matters until trial.

13

c. Damages

14

Country argues that Bowman has not offered sufficient evidence to support her

15

claim that she suffered “impaired or limited credit” and was forced to make unnecessary

16

interest payments on loans because of Country’s alleged bad faith. (Doc. 62 at 15.)

17

Bowman responds that she is entitled to have a jury determine what amount, if any, she is

18

entitled to recover of the interest she paid. The Court agrees with Bowman. Sufficient

19

facts have been put forward to suggest that Country acted in bad faith; therefore, the issue

20

of damages will go to the jury. See Farr v. Transamerica Occidental Life Ins. Co. of

21

California, 145 Ariz. 1, 6, 699 P.2d 376, 381 (Ct. App. 1984) (Plaintiff may recover all the

22

losses caused by defendant's conduct, including damages for pain, humiliation and

23

inconvenience, as well as for pecuniary losses.)

24

Country also contends that Bowman’s emotional damages claim should be denied

25

because Bowman failed to offer evidence of either negligent or intentional infliction of

26

emotional distress. (Doc. 62 at 15-16.) Bowman argues that she is not required to prove

27

the elements of negligent or intentional infliction of emotional distress. (Doc. 80 at 14.)

28

The Court agrees with Bowman. Rawlings v. Apodaca, 151 Ariz. 149, 161, 726 P.2d 565,

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1

577 (1986) (“When…tort damages are recoverable, plaintiff is not limited to the

2

economic damages within the contemplation of the parties at the time the contract was

3

made.”); Farr, 145 Ariz. at 6, 699 P.2d at 381.

4

Country also contends that punitive damages are unjustified, arguing—without

5

factual support or legal analysis—that Bowman fails to offer evidence to support a claim

6

for punitive damages. (Doc. 62 at 17.) Bowman argues that punitive damages are proper

7

because a jury could infer malice from Country’s claims handling. (Doc. 80 at 18-19.)

8

In a bad faith tort case against an insurance company, punitive damages may only

9

be awarded if the evidence reflects “something more” than the conduct necessary to

10

establish the tort. Rawlings, 151 Ariz. at 160, 726 P.2d at 576. In Rawlings, the Arizona

11

Supreme Court explained the parameters of punitive damages as follows:

12

15

We restrict [the availability of punitive damages] to those cases in which the
defendant’s wrongful conduct was guided by evil motives. Thus, to obtain
punitive damages, plaintiff must prove that defendant’s evil hand was guided by
an evil mind. . . . [P]unitive damages will be awarded on proof from which the
jury may find that the defendant was ‘aware of and consciously disregard[ed] a
substantial and unjustifiable risk that’ significant harm would occur.

16

Id. at 162, 726 P.2d at 578 (internal citations omitted). Summary judgment on the issue of

17

punitive damages must be denied if a reasonable jury could find the requisite evil mind

18

by clear and convincing evidence; summary judgment should be granted if no reasonable

19

jury could find the requisite evil mind by clear and convincing evidence. See Thompson

20

v. Better-Bilt Aluminum Prod. Co., 171 Ariz. 550, 558, 832 P.2d 203, 211 (1992). The

21

court construes the evidence and all reasonable inferences drawn from the evidence in a

22

light most favorable to the non-moving party. Id.

13
14

23

To establish a claim for punitive damages, the evidence must support a showing

24

that Defendant either (1) intended to cause injury; (2) engaged in wrongful conduct

25

motivated by spite or ill will; or (3) acted to serve its own interests, having reason to

26

know and consciously disregarding a substantial risk that its conduct might significantly

27

injure the rights of others, even though defendant had neither desire nor motive to injure.

28

See Bradshaw v. State Farm Mut. Auto. Ins. Co., 157 Ariz. 411, 422, 758 P.2d 1313,

- 15 -

1

1324 (1988). To obtain summary judgment on the punitive damages issue in the instant

2

case, Defendants must show there is a complete failure of proof, Celotex, 477 U.S. at

3

323, such that no reasonable jury could find the requisite evil mind required for punitive

4

damages by clear and convincing evidence. See Thompson, 171 Ariz. at 558, 832 P.2d at

5

211.

6

In its threshold review of the evidence, the Court finds that the third avenue for

7

punitive damages presents a close question. Country offered a settlement 25 times less

8

than the eventual award before even submitting Bowman to an IME, reversed its position

9

on liability multiple times without factual change, and arbitrated the UIM claim on the

10

basis of a causation expert who concluded that, despite Bowman’s indicative signs of

11

TOS, no diagnosis could be made without further testing. These and other facts lead the

12

Court to find that a reasonable jury could conclude by clear and convincing evidence that

13

Country acted to serve its own interests, having reason to know and consciously

14

disregarding a substantial risk that its conduct might significantly injure Bowman’s

15

rights, even though Defendant had neither desire nor motive to injure. Id. Therefore, the

16

Court will deny Country’s arguments concerning punitive damages and permit

17

Bowman’s claim to continue.

18

IV. Conclusion

19

For the reasons set forth above, the Court finds that a material dispute exists

20

regarding whether Country failed to give equal consideration to Bowman’s UIM claim at

21

all times. Accordingly,

22

IT IS HEREBY ORDERED denying Country’s motion for summary judgment

23

(Doc. 62.) This action is now ready for trial. The Pretrial order shall be provided in an

24

accompanying order.

25

DATED this 31st day of March, 2015.

26
27

Honorable Stephen M. McNamee
Senior United States District Judge

28

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