Wood v. Provident Life and Accident Insurance Company

Filing 287

ORDER- IT IS ORDERED: 1. Plaintiff is precluded from presenting the Page Anesthesia tax returns and the statement by the western region CMO. 2. Plaintiff's MIL (Doc. 257 ) is granted to the extent it seeks to preclude Defendant from prese nting evidence regarding its internal investigation of Plaintiffs claim that is contrary to the testimony of Ms. Daniels. Defendant is not precluded from arguing that its decision to await the decision of the Court, while continuing to pay benefits to Plaintiff, does not constitute bad faith. See attachment for further details. Signed by Senior Judge David G Campbell on 2/19/2021. (CLB)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Thomas Scott Wood,
Plaintiff,

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ORDER

v.

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No. CV-17-02330-PHX-DGC

Provident Life and Accident Insurance
Company,

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Defendant.

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The Court held a final pretrial conference yesterday. This order will, in light of the

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discussion during the conference and additional research, address some issues left open in

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the Court’s ruling on motions in limine. See Doc. 282.
Defendant’s MIL 2 (Doc. 246).

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1.

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Defendant sought to exclude six categories of documents on the basis of untimely

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disclosure. The Court deferred decision on the Page Anesthesia tax returns. Plaintiff

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initially argued that the tax returns became available to him only shortly before they were

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disclosed on February 25, 2021. During the final pretrial conference, however, Plaintiff’s

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counsel stated that they had reviewed additional files and found that the records were

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available earlier. Plaintiff conceded that Defendant’s motion should be granted with

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respect to these records.
Defendant’s MIL 3 (Doc. 247).

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2.

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Defendant sought to exclude several subjects of Plaintiff’s testimony on the basis of

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untimely disclosure. The Court deferred ruling on the third subject – a statement by the

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western region CMO.

Plaintiff conceded during the final pretrial conference that

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Defendant’s motion should be granted with respect to this statement.
Defendant’s MIL 4 (Doc. 248).

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Defendant sought to preclude Plaintiff from presenting evidence of Defendant’s

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litigation conduct in support of Plaintiff’s bad faith claim. The Court resolved Defendant’s

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arguments regarding the untimely disclosure of Plaintiff’s positions, and provided some

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additional discussion on the issue of whether a bad faith claim can be premised on insurer

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conduct during the course of litigation between the parties.

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The Court noted:
“In Arizona, an insurer‘s contractual duty of good faith does not
terminate when the parties become litigation adversaries. An insurer has
continuing claims-handling responsibilities even while coverage litigation
proceeds.” Safety Dynamics Inc. v. Gen. Star Indem. Co., No. CV-09-00695TUC-CKJ, 2015 WL 10714048, at *12 (D. Ariz. Feb. 6, 2015) (citation
omitted). But there is a difference between a duty of continuing good faith
and litigation conduct. “Several out-of-state courts other than those in
Arizona have held that the insurer’s conduct in the coverage litigation should
not be the basis of a bad-faith claim and that the relevant inquiry is the
insurer’s decisions and actions at the time it made the decision to deny
coverage.” Id. at *11 (citation omitted).
Doc. 282 at 5.

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Following the final pretrial conference, the Court reviewed additional case law. The

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Court found helpful guidance in Lennar Corp. v. Transamerica Ins. Co., 256 P.3d 635

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(Ariz. Ct. App. 2011). Lennar recognized “the principle that in the usual case, an insurer

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that objects to coverage may not for that reason disregard its claims-handling

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responsibilities pending resolution of the coverage issue.” Id. at 642. Lennar rejected the

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proposition that an insurer “has no claims-handling responsibilities while the coverage

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litigation proceeds,” and noted that, “depending on the circumstances, the insurer may have

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continuing obligations under Zilisch in the meantime.”

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recognized in Lennar include the following:

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Id. The Zilisch obligations

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The carrier has an obligation to immediately conduct an adequate
investigation, act reasonably in evaluating the claim, and act promptly in
paying a legitimate claim. It should do nothing that jeopardizes the insured’s
security under the policy. It should not force an insured to go through
needless adversarial hoops to achieve its rights under the policy. It cannot
lowball claims or delay claims hoping that the insured will settle for less.
Equal consideration of the insured requires more than that.
Zilisch v. State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 280 (Ariz. 2000) (quoted in Lennar
at 256 P.3d at 639).
Arizona law thus makes clear that Provident Life’s good faith obligations did not
cease when this litigation commenced. Lennar recognizes “that an insured may suffer
injury” when the insurer “effectively ignores an obligation to reasonably investigate the
claim during the ensuing protracted legal proceedings.” Id. at 643. The Court also
continues to recognize, however, that “the insurer’s conduct in the coverage litigation
should not be the basis of a bad-faith claim[.]” Safety Dynamics, 2015 WL 10714048, at
*11. The Court views this latter statement as applying to the manner in which Provident
Life’s counsel have conducted this litigation. In short, Plaintiff may argue at trial that
Provident Life breached the duty of good faith by not conducting an internal investigation
of the extent of his disability after the litigation was filed, but may not point to counsel’s
conduct of the litigation as constituting bad faith. The Court will seek to apply this
distinction in its evidentiary rulings during trial.
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Plaintiff’s MIL (Doc. 257).

Plaintiff sought “an order barring Provident from presenting at trial any testimony
of a corporate representative . . . regarding any conclusions or determinations made by
Provident following the filing of the complaint in this action, to the effect that Plaintiff is
either ‘residually disabled’ or not ‘totally disabled’ for the purpose of Plaintiff’s insurance
policy, other than testimony that is consistent with the deposition testimony given by
Provident’s Rule 30(b)(6) designee regarding that subject, Carolyn Daniels.” Doc. 257
at 3. The Court took the motion under advisement and directed the parties to address it at
the final pretrial conference.
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The conference discussion made clear that Defendant’s position has not changed

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since the testimony of Ms. Daniels – its claims department has not made a residual

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disability decision, and Defendant instead is awaiting the outcome of this case where

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Defendant is contending, through counsel, that Plaintiff is residually disabled. Plaintiff

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will argue at trial that the claims department’s failure to continue investigating his claim

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constitutes bad faith, and Defendant will argue that it does not.

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IT IS ORDERED:

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1.

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Plaintiff is precluded from presenting the Page Anesthesia tax returns and the

statement by the western region CMO.
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Plaintiff’s MIL (Doc. 257) is granted to the extent it seeks to preclude

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Defendant from presenting evidence regarding its internal investigation of Plaintiff’s claim

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that is contrary to the testimony of Ms. Daniels. Defendant is not precluded from arguing

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that its decision to await the decision of the Court, while continuing to pay benefits to

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Plaintiff, does not constitute bad faith.

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Dated this 19th day of February, 2021.

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