Ferro, M.D. v. Safeco Insurance Company of America
1:22-cv-00885
E.D. Cal.Mar 29, 2024Background
- Dr. Thomas Ferro was involved in an automobile accident and sustained injuries, settling with the at-fault driver for the policy maximum ($100,000).
- Dr. Ferro sought $400,000 under his underinsured motorist (UIM) coverage from Safeco Insurance, which Safeco refused to pay initially.
- Dr. Ferro demanded arbitration, ultimately winning an arbitrator's award of $1,075,742.90, with $400,000 payable under the UIM policy.
- Safeco paid the $400,000 after arbitration.
- Dr. Ferro sued Safeco for breach of the covenant of good faith and fair dealing, alleging unreasonable delay and mishandling of his claim.
- Safeco moved for judgment on the pleadings, arguing that precedent precludes a bad faith claim due to a "genuine dispute" based on a disparity between claimed and awarded damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a disparity between claimed damages and arbitration award creates a "genuine dispute" precluding bad faith | The disparity does not establish a genuine dispute when the arbitration award exceeds the policy limit | The disparity, as in Rappaport-Scott, shows a "genuine dispute" and precludes bad faith as a matter of law | The award exceeding the policy limit distinguishes this case; the disparity is not dispositive—a genuine dispute is not established |
Key Cases Cited
- Frommoethelydo v. Fire Ins. Exch., 42 Cal. 3d 208 (implied covenant of good faith and fair dealing in insurance contracts)
- Rappaport-Scott v. Interinsurance Exchange of the Auto. Club, 146 Cal. App. 4th 831 (a large disparity between claimed damages and arbitration award can establish a genuine dispute, barring bad faith claims)
- Chateau Chamberay Homeowners Ass'n v. Associated Int'l Ins. Co., 90 Cal. App. 4th 335 (bad faith liability arises only if policy benefits are unreasonably withheld, not merely because the amount is disputed)