HALE v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
1:14-cv-00036
S.D. Ind.May 13, 2015Background
- December 12, 2011 low‑impact collision; Hale’s vehicle damaged and tortfeasor’s insurer paid $25,000; Hale was insured by State Farm (MedPay $25,000; UIM $300,000).
- Hale sought treatment beginning four days after the crash; MRI showed multilevel degenerative cervical disease; she had a 4½‑month gap in care, later underwent C5‑6 anterior cervical discectomy and fusion (Oct. 30, 2012).
- State Farm paid initial medical payments ($2,775) in early 2012, then investigated causation after the long treatment gap and low‑impact nature of the crash; requested records, obtained utilization review, and questioned whether workers’ compensation applied.
- Hale’s counsel revoked earlier authorizations, collected records, notified State Farm of a potential UIM claim in Jan. 2013, and provided a demand (Sept. 17, 2013) after extended exchanges with insurer.
- State Farm authorized MedPay payments up to $25,000 in Dec. 2013–Feb. 2014 and settled the UIM claim for $163,201.40 in Dec. 2013 after claim evaluation; Hale sued for breach of contract, bad faith, and punitive damages; State Farm moved for partial summary judgment.
- The court found no genuine factual dispute that State Farm reasonably investigated and processed the claims, granted summary judgment for State Farm on bad faith and punitive damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Farm committed insurer bad faith by causing an unfounded delay/refusal to pay | Hale: State Farm unreasonably delayed paying policy proceeds (should have advanced MedPay and UIM sooner) | State Farm: investigation of causation and requests for records were reasonable given low‑impact crash, treatment gap, and preexisting degeneration | Court: No bad faith—investigation and phased payments were reasonable; no unfounded delay or refusal |
| Whether punitive damages are recoverable | Hale: punitive damages appropriate because of alleged bad faith/delay | State Farm: punitive damages unavailable absent independent tort and clear & convincing evidence of malice/gross negligence | Court: Denied—no underlying tort (bad faith) proven; no clear and convincing evidence of malice or gross negligence |
Key Cases Cited
- Erie Ins. Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993) (establishes insurer duty of good faith and outlines standards for bad faith and punitive damages)
- Johnston v. State Farm Mut. Auto. Ins. Co., 667 N.E.2d 802 (Ind. Ct. App. 1996) (bad faith requires conscious wrongdoing, not mere dispute)
- Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487 (7th Cir. 2007) (summary judgment standard: nonmoving party must show genuine issue of material fact)