Baires v. State Farm Mutual Automobile Insurance Co.
231 F. Supp. 3d 299
E.D. Wis.2017Background
- Mrs. Elizabeth Moctezuma Baires was injured in a September 2, 2010 auto accident caused by Eric Steele; Steele’s carrier (American Family) paid its $100,000 policy and State Farm had two stacked UIM policies totaling $200,000.
- Plaintiffs submitted medical records and an expert report (Dr. McNett) claiming substantial past and future medical needs and permanent aggravation of preexisting cervical disease.
- State Farm obtained an IME from Dr. Christopher Noonan, who concluded the accident caused only a temporary aggravation and that most ongoing care was due to preexisting degeneration.
- State Farm investigated, exchanged offers with Plaintiffs’ counsel (initially contested; offers ranged from $0 to $40,000), and ultimately made a $5,000 UIM advance after suit was filed.
- Plaintiffs sued for breach of contract, loss of consortium, and first-party bad faith and sought prejudgment interest under Wis. Stat. § 628.46; State Farm moved for partial summary judgment to dismiss the bad-faith claim and the prejudgment interest demand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Farm’s denial/compromise was in bad faith | Baires: insurer unreasonably refused to pay/advance UIM funds, relied on delay tactics and an unreliable IME | State Farm: reasonable investigation and competing expert opinions made claim fairly debatable; no contractual breach | Court: No bad faith — claim was fairly debatable and investigation reasonable |
| Whether reliance on Dr. Noonan’s IME was unreasonable | Baires: Noonan’s opinion was unreliable and insurer could not reasonably rely on it | State Farm: Noonan provided a reasonable, conflicting medical opinion and insurer may rely on IME | Court: Reliance reasonable; competing expert opinions render causation debatable |
| Whether investigatory delays support bad faith | Baires: delays in scheduling IME, getting reports, and making offers were unreasonable | State Farm: investigation and scheduling took reasonable time given dispute; plaintiffs’ counsel also delayed response | Court: Delays not shown to be objectively unreasonable or malicious; insufficient for bad faith |
| Whether failure to advance initial compromise offer breached contract / supports bad faith | Baires: State Farm’s business practice required advancing the first compromise offer (allegedly $5,000); failure = bad faith | State Farm: No contractual obligation to advance offers; internal practice does not create insured’s contractual rights | Court: No policy provision required advance; under Brethorst insurer’s contractual breach is prerequisite to first-party bad faith, so no bad-faith claim |
Key Cases Cited
- Brethorst v. Allstate Prop. & Cas. Ins. Co., 798 N.W.2d 467 (Wis. 2011) (first-party bad-faith requires some contractual breach; insurer’s bad conduct alone insufficient)
- Anderson v. Continental Ins. Co., 271 N.W.2d 368 (Wis. 1978) (elements of bad-faith refusal: no reasonable basis and knowledge or reckless disregard)
- Danner v. Auto-Owners Ins. Co., 629 N.W.2d 159 (Wis. 2001) (egregious insurer conduct can support bad-faith finding; example of inadequate investigation and weak opposing expert)
- Tripalin v. American Family Mut. Ins. Co., 880 N.W.2d 183 (Wis. Ct. App. 2016) (insurer may reasonably rely on opposing expert unless that expert is obviously wrong)
- Kontowicz v. American Standard Ins. Co., 714 N.W.2d 105 (Wis. 2006) (§ 628.46 "reasonable proof" standard parallels that claim is fairly debatable)