Martinez v. Mercury Ins. Co. CA2/1
B261003
| Cal. Ct. App. | Aug 24, 2016Background
- Martinez purchased an auto policy from Mercury that included $5,000 "no excess, no reimbursement" medical payments coverage (Mercury must pay medical bills regardless of third‑party recovery).
- After a March 17, 2011 collision, Martinez sought medical care and was incorrectly told by Mercury’s adjuster he had only liability or secondary coverage; he then pursued the tortfeasor’s insurer and retained counsel who provided lien providers.
- Martinez treated with Mednet and obtained an MRI; medical bills totaled about $8,512, later reduced to roughly $4,323 and paid from the tortfeasor settlement.
- Mercury’s special investigation unit later investigated suspected billing fraud, requested medical records, reported the matter to insurers/authorities, and ultimately closed the claim without payment in December 2012.
- Martinez sued for breach of contract and breach of the implied covenant of good faith and fair dealing (bad faith). At trial the jury awarded $4,323 (contract), $56,360 (attorney fees), and $600,000 (emotional distress). Mercury appealed the emotional distress award as unsupported by evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether substantial evidence supported $600,000 emotional distress damages for insurer bad faith | Martinez argued his emotional distress (anger, frustration, humiliation) could be inferred from Mercury’s bad faith handling and the loss of $5,000 benefits | Mercury argued Martinez offered no competent evidence of emotional distress (no testimony of symptoms, no medical/psychological treatment), so award is unsupported and excessive | Reversed as to emotional distress: no substantial evidence Martinez actually suffered emotional distress, so $600,000 award vacated |
| Whether other challenges (jury passion/prejudice; record augmentation) warrant relief | Martinez implicitly relied on jury verdict | Mercury argued award reflected passion/prejudice and sought to augment record with additional documents | Court found passion/prejudice argument moot after reversal; denied Mercury’s motion to augment the record (procedural) |
Key Cases Cited
- Cates Construction, Inc. v. Talbot Partners, 21 Cal.4th 28 (contractual covenant of good faith; tort damages available for insurer bad faith)
- Gourley v. State Farm Mut. Auto. Ins. Co., 53 Cal.3d 121 (emotional distress recoverable as incidental damages in insurance bad faith)
- Austero v. Washington Nat. Ins. Co., 132 Cal.App.3d 408 (insufficient to infer plaintiff actually suffered emotional distress solely from defendant’s bad faith)
- Fleming v. Safeco Ins. Co., 160 Cal.App.3d 31 (sufficient emotional distress evidence where plaintiff testified to anxiety and corroborating hospitalization)
- Major v. Western Home Ins. Co., 169 Cal.App.4th 1197 (insurer’s duties in first‑party claim investigation and timely payment)