July 2013 Bad Faith Cases: COURT FINDS INSURED’S DELAY IN PRODUCTION AND EFFECT ON INSURER’S CLAIM PROCESSING CREATE QUESTIONS OF FACT FOR JURY; NO FIDUCIARY RELATIONSHIP EXISTS BETWEEN THE INSURER AND INSURED IN UIM CLAIMS (Middle District)
Plaintiff and his wife were injured in an automobile accident on July 11, 2006. Plaintiff made a claim against the other driver, and settled at the limits of the other driver’s policy, $95,000. Plaintiff subsequently made a claim with his carrier (“the carrier”) under his underinsured motorist policy which carried limits of $300,000 per person and $600,000 per accident.
On June 1, 2007, the carrier informed plaintiff that based on the documentation produced so far, it did not value the claim at more than $100,000 and as such the other driver was not underinsured. At that time plaintiff had not produced authorizations to obtain his medical or employment records, prior medical providers, information about additional employment or prior tax returns. Despite these missing documents, the carrier continued to investigate the claim for the next 20 months, and on February 23, 2009, made a settlement offer of $35,000. Plaintiff rejected the offer and sought arbitration of the claim. At that time, plaintiff executed the medical release forms, submitted information regarding his additional employment, underwent a sworn examination, and submitted to an evaluation by the carrier’s vocational expert. After receiving this information, the carrier made a settlement offer of $120,000. Nine days later, the carrier increased its offer to $150,000. Five days after that, the case went in front of an arbitration panel and plaintiff was awarded $450,000 in damages. This award was reduced to $300,000 to reflect the applicable policy limit.
On August 31, 2011, plaintiff filed suit against the carrier alleging breach of contract and bad faith for delaying the payment of plaintiff’s full benefits. Plaintiff claimed the carrier’s bad faith was evidenced by the prolonged processing of his claim and unreasonably low settlement offers given the severity of his injuries. Defendant argued that plaintiff caused the delays by failing to produce the requested documents and information, the plaintiff’s claims were subjective and uncertain, and the settlement offers were reasonable based on the information available to the carrier when the offers were made.
In evaluating the motion for summary judgment, the court determined there were three remaining questions of fact which should be presented to a jury. Specifically, the court found issues of fact remained as to, “whether the plaintiff delayed in producing necessary documents,” and if so, “whether any delay effected the defendant’s basis for making settlement offers.” Finally, the “reasonableness of the defendant’s acts” was also a question of fact for the jury. The court also stated that, generally, “the level of complexity [of a claim] and what constitutes a reasonable period to investigate are questions of fact” which should be presented to the jury. Based on these findings, the court denied summary judgment.
Additionally, in the breach of contract claim, the court considered whether the carrier had breached a fiduciary duty to the plaintiff in the handling of his claim. However, based on precedent, the carrier has “no duty to act as a fiduciary when negotiating with its own insured,” and therefore “did not have a fiduciary duty to the plaintiff when resolving the UIM claims.” Rather, insurers only assume a fiduciary role in cases of third party claims where the insurer asserts a right under the policy to handle claims against the insured.