30 Cal. App. 5th 397
Cal. Ct. App. 5th2018Background
- In March 2013 Case (insured) was injured by an uninsured driver; she held UM coverage ($100,000/$300,000) in a personal auto policy issued by State Farm.
- Case pursued both workers' compensation (WC) benefits and UM benefits; she demanded UM benefits in July 2014 and requested arbitration in November 2014.
- State Farm sought verification of a final WC lien and whether claimed past and future medical expenses were payable under the WC system before determining UM liability; Gallagher Bassett (WC administrator) initially reported only modest WC payments and that the claim remained open.
- Case eventually settled her UM claim for $35,000 in November 2015 after Gallagher Bassett determined the contested medical bills were not payable through WC.
- Case sued State Farm for breach of contract and insurance bad faith (and sought punitive damages); the trial court granted summary adjudication for State Farm and entered judgment, which Case appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract — unpaid benefits | Case contended she was owed UM benefits and did not meaningfully contest State Farm's showing of payment. | State Farm showed it paid/settled the UM exposure and no unpaid benefits remained. | Forfeited by plaintiff on appeal; no triable issue on breach because plaintiff did not contest unpaid benefits. |
| Bad faith for delaying payment/arbitration | Case argued State Farm unreasonably delayed payment (and should have paid or at least the nondisputed noneconomic portion) instead of waiting on WC verification. | State Farm argued it reasonably delayed because the policy and Ins. Code permit reduction of UM by WC "paid or payable" amounts, so it had to determine WC-payable amounts first. | Affirmed for State Farm: no triable issue of bad faith; insurer reasonably sought WC-payable determination before fixing UM exposure. |
| Construction of "payable" in loss-payable-reduction clause | Case argued insurer could not withhold UM for bills that were never WC-payable. | State Farm argued "payable" covers WC benefits for which insured is eligible (even if not yet submitted), so it could seek verification before paying UM. | Court construed "payable" to include determinable WC-eligible medical expenses (whether submitted or not); insurer may seek determination before paying. |
| Regulatory duties (10 C.C.R. §2695.7) | Case relied on regulations requiring prompt payment/explanations to argue delay was unjustified. | State Farm argued regulations do not forbid delay when policy/statute expressly allow coordination of benefits. | Court held regulations did not prohibit delay here because the policy/statute authorized reduction for WC-payable amounts; State Farm’s explanation was adequate. |
Key Cases Cited
- Rangel v. Interinsurance Exchange, 4 Cal.4th 1 (Cal. 1992) (section 11580.2 arbitration-stay and coordination-of-benefits rules can justify insurer’s delay when WC claim unresolved)
- Wilson v. 21st Century Ins. Co., 42 Cal.4th 713 (Cal. 2007) (insurer’s reasonableness in claims handling assessed under totality-of-circumstances; bad faith requires unreasonable denial/delay)
- Waggaman v. Northwestern Security Ins. Co., 16 Cal.App.3d 571 (Cal. Ct. App. 1971) (policy clauses may reduce UM by WC benefits; valuation issues of future WC awards can affect arbitrability)
- Bailey v. Interinsurance Exchange, 49 Cal.App.3d 399 (Cal. Ct. App. 1975) ("payable"/WC exclusion construed to bar coverage where insured is eligible for WC benefits)