2018 CO 87
Colo.2018Background
- Feb 2015 auto collision; Schultz later underwent multiple knee replacement surgeries.
- Schultz settled with the other driver’s insurer and sought UM/UIM benefits ($25,000) from GEICO.
- GEICO obtained medical records, reviewed an April 2015 MRI, and in April 2017 offered Schultz the full policy limit without requesting an IME (claim logs show GEICO decided peer review wasn’t necessary).
- Schultz sued for bad-faith breach and statutory unreasonable delay/denial of benefits under §§ 10-3-1115–1116 C.R.S.; GEICO defended by asserting causation was “fairly debatable” because of preexisting arthritis.
- Over a year after GEICO’s coverage decision and three years after the accident, GEICO requested a C.R.C.P. 35 IME; the district court ordered the IME over Schultz’s objection.
- Colorado Supreme Court granted C.A.R. 21 relief and held the district court abused its discretion: an insurer’s reasonableness must be judged on the evidence it had when it made its coverage decision, and it may not create new post-decision evidence via a late IME to justify that earlier decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court could order a C.R.C.P. 35 IME long after the insurer’s coverage decision | Schultz: IME is improper because her physical condition is no longer "in controversy" and reasonableness must be judged by what GEICO knew when it decided to pay | GEICO: Causation is again a live issue in litigation; insurer may obtain IME to defend against bad-faith/statutory claims and show its decision was reasonable or fairly debatable | Court: IME was improper—insurer cannot create new evidence after the fact; reasonableness is measured by information available at the time of the coverage decision; district court abused its discretion |
| Whether review by C.A.R. 21 was appropriate for this discovery order | Schultz: bodily and medical privacy interests make the order irreparable on appeal, so original relief is appropriate | GEICO: discovery rulings are normally reviewed on appeal | Court: C.A.R. 21 jurisdiction appropriate because forced medical exam implicates privacy that cannot be remedied on appeal |
Key Cases Cited
- Belle Bonfils Mem’l Blood Ctr. v. Dist. Court, 763 P.2d 1003 (Colo. 1988) (original proceedings appropriate when discovery ruling could cause irreparable harm)
- Reyher v. State Farm Mut. Auto. Ins. Co., 266 P.3d 383 (Colo. 2011) (reasonableness of insurer’s decision judged by information before insurer at time of decision)
- Peiffer v. State Farm Mut. Auto. Ins. Co., 940 P.2d 967 (Colo. App. 1996) (admission of evidence tied to records insurer had before its decision; distinguished)
- Fireman’s Fund Ins. Cos. v. Alaskan Pride P’ship, 106 F.3d 1465 (9th Cir. 1997) (bad-faith inquiry focuses on reasonableness when denial occurred, not later developments)
- Buzzard v. Farmers Ins. Co., 824 P.2d 1105 (Okla. 1991) (insurer may not rely on information obtained after denial to defend bad-faith claim)
- Goodson v. Am. Standard Ins. Co., 89 P.3d 409 (Colo. 2004) (bad-faith tort recognized; reasonableness determined objectively)