ORDER
1. INTRODUCTION
Plaintiff Elizabeth Moctezuma Baires (“Mrs. Baires”) was injured in a car accident in September 2010. The other driver was underinsured. After his insurance company paid Baires what it could under its policy, Baires turned to her own insurance company, Defendant State Farm Mutual Automobile Insurance Company (“State Farm”). Her policy with State Farm included underinsured motorist (“UIM”) benefits. In this action, she and her husband allege that State Farm failed to pay as required under the UIM policy. Plaintiffs bring three separate claims: (1) breach of contract; (2) loss of consortium; and (3) bad faith refusal to pay on Plaintiffs’ claim.
2. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56 provides that the court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Boss v. Castro,
3. RELEVANT FACTS
As noted above, Mrs. Baires was involved in a severe automobile accident with Eric Steele (“Steele”) on September 2, 2010. (Docket # 54 ¶¶ 8—10)
The parties agree that the accident was Steele’s fault. (Docket # 54 ¶ 10). Steele was insured by American Family Mutual Insurance Company (“American Family”) with a $100,000 policy. Id. ¶ 11. Plaintiffs brought an action in Wisconsin state court against Steele and American Family to recover damages for Mrs. Baires’ injuries sustained in the accident. Id. ¶ 12.
Plaintiffs also had two insurance policies with State Farm in effect on the date of
[State Farm] will pay compensatory damages for bodily injury an insured is legally entitled to recover from the owner or driver of an underinsured motor vehicle. The bbdily injury must be:
1. sustained by an insured, and
2. caused by an accident that involves the ownership, maintenance, or use of an underinsured motor vehicle as a motor vehicle.
We will pay only if the full amount of all available limits of all bodily injury liability bonds, policies, and self-insurance plans that apply to the insured’s bodily injury have been used up by payment of judgments or settlements, or have been offered to the insured in writing.
Id. ¶ 15.
In April 2014, State Farm received notice from Plaintiffs’ attorney, Mark Thom-sen (“Thomsen”), that American Family had offered the $100,000 limit of Steele’s liability coverage to settle Plaintiffs’ claims against Steele and American Family. Id. ¶ 18. A note in State Farm’s claim file, written by State Farm employee Mary Medicus (“Medicus”) on April 16, 2014, reads:
Per recent correspondence in documents Elizabeth’s specials w/ wage loss exceed $87,000 O/C AmFam has $100,000 BI limit C/V is a UIM as defined due to the 6949B endorsement. I'see a brain scan was done — we will want to r/o the need for SIR. Please also address reserves. I note we’ve tiered the claim as a 3 as we learned of the UIM in conjunction w/ suit. I note that we have not been served with an amended summons for UIM yet.
(Docket #53 ¶ 12). Rae Lynn Kahle (“Kahle”), a State Farm auto claim representative, was assigned to handle Plaintiffs’ claim. (Docket # 54 ¶ 19). On April 17, 2014, Kahle wrote to Thomsen, acknowledging receipt of notice of American Family’s settlement offer and providing State Farm’s consent to the settlement. Id. ¶20. Plaintiffs’ action against Steele and American Family was dismissed on September 5, 2014. Id. ¶ 22.
On May 12, 2014, State Farm received a demand letter from Thomsen, in which he demanded that State Farm pay the full $200,000 available under Plaintiffs’ UIM policies. Id. ¶ 23. Attached to the letter were some of Mrs. Baires’ pre-and post-accident medical records, post-accident healthcare bills, and other documents purporting to evidence costs to date of $430,860.61. Id. Also enclosed with the letter was a medical expert report authored by Michael McNett, M.D. (“Dr. McNett”), dated March 14, 2014. Id. ¶ 24.
Dr. McNett first saw Mrs. Baires on January 16, 2012, sixteen months after the accident. Id. ¶ 25. He diagnosed Mrs. Baires with cervical spinal stenosis and cervical radiculopathy. Id. ¶ 26. The report further stated that Mrs. Baires was reporting bilateral hand numbness. Id. Dr. McNett concluded that “there was at least some radiographic evidence for degenerative disc disease... prior to her accident” and that “there were some early signs possibly of right carpal tunnel syndrome prior to the accident.” Id. ¶ 27. However, he attributed her current symptoms to the accident, noting that her post-accident symptoms “were clearly more significant, as indicated by the fact that she required multiple cervical epidurals and treated by a comprehensive pain clinic.” Id. He found that the accident represented a “significant
In July 2016, Dr. McNett drafted an updated report on Mrs. Baires’ conditions and treatment. (Docket #53 ¶ 18). In March 2015, she returned to Dr. McNett, complaining of neck pain radiating to her left elbow. Id. He prescribed medication and physical therapy. Id. She was rechecked regularly after that time until as late as June 2016, but she continued to report pain and Dr. McNett continued to try different medications and other treatments. Id. Similar to the March 2014 report, Dr. McNett believed that although Mrs. Baires had suffered “minor neck problems” before the accident, the “dramatic worsening of symptoms starting very shortly after the incident and persisting to this day” meant that the accident caused a permanent aggravation of her neck problems. Id. He also noted that her “use of health care accelerated dramatically within a reasonably short time after the accident, which to me indicates that there was a significant worsening of her clinical condition following the accident.” Id. ¶ 19; (Docket # 48-10 51:13-25). He prescribed ongoing follow-up appointments with physicians, medications, and other treatments for Mrs. Baires’ neck pain. (Docket # 53 ¶ 19).
At his deposition in this case in October 2016, Dr. McNett expressed less certainty than in his earlier reports. He testified that he has no opinion as to whether the accident was a cause of Mrs. Baires’ spinal stenosis, one of the two major conditions he identified in that report. (Docket # 54 ¶ 29). Dr. McNett also acknowledged that his diagnosis of cervical radiculopathy was one about which reasonable medical experts could disagree. Id. ¶ 30.
Returning to the investigation timeline, on May 19, 2014, a week after receiving Thomsen’s demand package, Cindy Boyer, another State Farm employee, documented in the claim file that Plaintiffs’ demand has “claimed futures [that] exceed available coverage. I suggest setting up a stacking file.... Let’s provide available coverage to the [insured’s attorney]. I note evaluation is in process.” (Docket # 53 ¶ 16). On June 21, 2014, Kahle noted in the claim file that she “reviewed all of the submitted medical bills and records for Elizabeth Baires. This was a significant impact which resulted in the DV rolling over.” Id. ¶ 17. She also wrote that “[p]ast specials are nearly 84k with more than 35k of diagnostics and future treatment in excess of $341k.” Id.
In light of Dr. McNett’s March 2014 analysis and the records provided, Kahle determined that she needed to investigate further to determine what part of Mrs. Baires’ symptoms were attributable to the accident and what part was the natural progression of her pre-existing conditions. (Docket # 54 ¶ 32). To that end, she requested a recorded statement from Mrs. Baires and indicated that State Farm may want to obtain an examination of Mrs. Baires by its own physician. Id.
On August 24, 2014, according to Plaintiffs, Kahle changed Mrs. Baires’ injury evaluation from “Current [range of value (“ROV”) ] Low” to “Current ROV High” in the claim file. (Docket # 53 ¶ 20). Plaintiffs offer this fact without much explanation. The Court gathers that these changes to the claim file, in Plaintiffs’ view, represent Kahle increasing her valuation of the claim. Yet, as State Farm notes, the change log for the claim file only shows that a change was made to each of these fields, not that the “ROV High” figure replaced the “ROV Low.” Id. The entries are unclear in this regard. See (Docket #48-8 at 27). Thus, it is not possible to discern that Kahle increased her valuation of Plaintiffs’ claim solely on the ground that these changes were made to the claim file.
On August 28, 2014, State Farm sent Thomsen a check in the amount of $4,139.64. Id. at 10 ¶ 22.
State Farm received Dr. Noonan’s report of his IME on October 7, 2014 and mailed Thomsen a copy the next day. Id. ¶ 36. Dr. Noonan did not agree with Dr. McNett’s report. Id. ¶ 36.
On October 10, 2014, Medicus wrote the following in the claim file:
[Kahle] and I discussed at length. Roll over MVA with a physically and emotionally fragile insured. Four years of [treatment] including [chiropractic], [physical therapy], injections/pain management. Her pain specialist Dr. McNett acknowledges the related prior complaints, but concludes they were mild when compared to MVA [treatment]. He opines permanency with the need for significant future care. On the other hand, IME Dr. Noonan relates 6 months before attributing the remaining care as related to her pre-existing degeneration. We are not sure we have all of the prior records. [Kahle] will complete her evaluation attempting to balance both views and in consideration of the risks. [Insured’s attorney’s] firm is a competent, successful able litigators [sic]. If a pre-suit compromise can’t be reached discovery will afford us a thorough review of records and NID’s deposition. Whether she continues to treat will also be a factor.
(Docket # 53 ¶ 21).
On December 1, 2014, Kahle requested from Medicus, her superior, authority of $50,000 to resolve Plaintiffs’ claims. Id. ¶ 22. She arrived at this figure by first evaluating the bodily injury damages a jury would likely award to Mrs. Baires. (Docket # 45 ¶¶ 17-18). Based on Dr. Noo-nan’s opinions, she estimated Mrs. Baires’ damages to be $35,378.11 in healthcare costs and $10,000 in pain and suffering, for a total of $45,378.11. Id. That represented the low end of her damages range. Id. The high end, $160,504.13, was determined in part by valuing Mrs. Baires’ to-date healthcare expenses with the assumption that the “aggravation” Dr. Noonan referred to persisted until May 2014. Id. Thus, Mrs. Baires’ total damages, in Kahle’s opinion, fell between $45,378.11 and $160,504.13. Id. She then subtracted what Mrs. Baires had already been paid— $110,000 — to arrive at her compromise range, which was zero to approximately $50,000. Id.) (Docket # 53 ¶ 22).
Also on December 1, 2014, Kahle discussed Dr. Noonan’s report with Thomsen. (Docket # 54 ¶ 39). She stated that the $110,000 that had already been paid had fully compensated Mrs. Baires for the injuries sustained as a result of the accident. (Docket # 54 ¶ 39). Thomsen’s response is not provided in the record, but it is clear that he disagreed with Kahle’s assessment.
On December 2, 2014, Medicus granted Kahle the requested $50,000 in settlement authority. (Docket # 53 ¶ 23). On January 6, 2015, Kahle .extended a compromise offer of $5,000 to Thomsen by telephone. (Docket # 54 ¶ 40). She sent him a letter on January 8, 2015, confirming the conversation. Id. ¶ 41. In it, she stated State Farm “believe[s] that a jury could find she has been fully compensated for this accident” since “[m]any of her complaints were present prior to the accident.” Id. Nevertheless, she agreed to “increase [State Farm’s] offer to $5,000.00.” Id. On February 9, 2015, Thomsen made a counteroffer of $175,000. Id. ¶ 42. State Farm responded that same day with a counteroffer of $40,000, which Kahle confirmed in writing. Id. On February 18, 2015, Medicus commented in the claim file that “[t]here is no benefit to advancing our current offer of $40k.... Rae will call [insured’s attorney] and discuss. If [he] made a demand under $100k, we would consider recommending an increase in authority.” (Docket # 53 ¶ 24).
Thomsen did not respond to State Farm’s $40,000 counteroffer until August 4, 2015. (Docket # 54 ¶ 44). That day, he
In the follow-up report, Dr. Noonan confirmed his opinion that, as a result of the accident, Mrs. Baires had sustained temporary aggravation of pre-existing degenerative changes to her cervical spine. Id. ¶ 48. Consequently, the follow-up report did not change Kahle’s view that State Farm did not owe Plaintiffs any UIM benefits. Id. ¶ 49. Thomsen did not make any further attempts to negotiate a settlement. Id. at 17 ¶ 24. Instead, in a letter dated December 1, 2015, he demanded that State Farm pay the amount of its last offer, $40,000, or provide “a prompt reasonable explanation of the basis in the policy contract or applicable law for denial of [the Baires’] claim for UIM benefits.” Id.; (Docket # 53 ¶ 27). On December 24, 2015, Kahle wrote to Thomsen, explaining that (1) she was unaware of any law or contract provision requiring that State Farm provide advance payment of UIM benefits; and (2) no advance payment was available under State Farm’s business practice as State Farm’s initial offer was zero and because it was fairly debatable whether Mrs. Baires had been made whole by prior insurance payments. (Docket # 54 ¶¶ 50-51). On February 5, 2016, Plaintiffs initiated this suit in Milwaukee County Circuit Court. (Docket # 53 ¶ 28). On May 17, 2016, three months after this suit was filed, State Farm made an advance payment of $5,000 under the policy’s UIM coverage. (Docket # 54 ¶ 52).
It was State Farm’s business practice that, for first-party UIM claims like Plaintiffs, where the parties reach a “bona fide impasse” in their compromise negotiations, State Farm will advance the initial compromise offer it had made. (Docket # 53 ¶ 13); (Docket # 48-5 41:20-24). According to Medicus, the initial compromise offer is an amount that State Farm knows it owes “without a doubt.” (Docket #48-5 158:3-19). Of course, according to State Farm, its first “offer,” made on December 1, 2014, was zero. See (Docket # 53 ¶¶ 13, 25); (Docket # 48-7 59:7-23). Plaintiffs disagree, arguing that the first offer was the $5,000 offered on January 6, 2015. (Docket #53 ¶ 25).
4. ANALYSIS
Plaintiffs’ bad-faith claim arises under Wisconsin law, and the Court, sitting in diversity, is obliged to apply that law to the claim. In Wisconsin, “every insurance contract has an implied duty of good faith and fair dealing between the insurer and insured.” Brethorst v. Allstate Prop. & Cas. Ins. Co.,
Plaintiffs’ bad-faith claim has several component parts, but whether considered alone or combination, they fall markedly short of establishing that State Farm’s denial lacked a reasonable basis for denying their claim. The Court will address each part of Plaintiffs’ theory in turn to demonstrate why none of them hold water.
4.1 Dr. Noonan’s Opinion
First, Plaintiffs allege that State Farm could not reasonably have relied on the opinion of Dr. Noonan to deny their claim. (Docket # 47 at 10-14). Their expert, Dr. McNett, believed that while Mrs. Baires had some preexisting cervical spine problems, the accident permanently aggravated them. Dr. Noonan, by contrast, opined that the accident caused only a temporary aggravation of those conditions. In his view, Mrs. Baires’ ongoing healthcare needs are related mostly to the natural progression of her conditions, not the accident.
Without deciding which physician is correct, the Court concludes that Plaintiffs’ evidence does not show that the extent and permanency of Mrs. Baires’ injuries was beyond debate. Other than pointing to the opinion of their own expert, Plaintiffs do little to question Dr. Noonan’s conclusions. Moreover, despite his conviction in the March 2014 and mid-2016 reports, Dr. McNett conceded at his deposition that reasonable physicians could disagree as to his cervical radiculopathy diagnosis and that he has no opinion about the cause of her spinal stenosis. Without a greater showing that Dr. Noonan was mistaken, the Court is obliged to conclude that the claim was fairly debatable. Tripalin v. American Fam. Mut. Ins. Co.,
Nor does the record reveal that State Farm failed to adequately investigate and address Plaintiffs’ views re
4.2 Investigation Delays
Plaintiffs also impugn State Farm’s work ethic in investigating their claim. According to them, it was unreasonable for State Farm to cause the following delays: (1) one month between receiving Thom-sen’s first demand letter and arranging Dr. Noonan’s IME — an IME which Plaintiffs believe was itself an unnecessary delay tactic; (2) four months between the IME evaluation and receiving Dr. Noo-nan’s report; (3) two months after that to communicate to Plaintiffs on December 1, 2014, the denial of their claim; (4) an additional month before Kahle exercised any of the settlement authority she requested on December 1, 2014, and then only an initial offer of ten percent of the total authority, or $5,000; and (5) one more month before Kahle offered $40,000 to compromise the claim — apparently the first reasonable action State Farm took in this whole process, according to Plaintiffs. (Docket # 47 at 11-12).
These delays are not enough to permit an inference of bad faith. Conducting a thorough investigation takes time. While overlong or deliberate delays might, in part, contribute to a viable bad-faith claim, Plaintiffs offer no more than their own dissatisfaction with the timeline — a dissatisfaction that they never expressed during the course of the investigation — to support their allegations of impermissible delay. They also fail to mention that the single longest delay during the entire process was their own attorney’s six-month delay in responding to State Farm’s $40,000 compromise offer from February 2015.
State Farm’s conduct is a far cry from that of the insurer in Danner v. Auto-Owners Ins.,
Plaintiffs focus on the timeline of Dan-ner, apparently contending that it was the years-long investigation in that case which undergirded the bad-faith determination. (Docket # 47 at 12-14). But reading Dan-ner, it is hard to see how the pace of the investigation had much impact in light of the insurer’s other conduct. The court did not expressly mention the delay as being probative on the bad-faith question. Danner,
Additionally, Plaintiffs do no more than state that Dr. Noonan’s IME was itself a delay tactic, without corroborating evidence. This Court is not ready to deny insurers the right, under appropriate circumstances, to seek an independent medical opinion when evaluating a claim. Indeed, in Brethorst, the plaintiffs included in their theory of bad faith the fact that the insurer in that case did not seek an IME before denying their claim. Brethorst,
4.3 Admissions by State Farm Employees
Next, Plaintiffs believe that State Farm’s employees recognized the extent of the damages Mrs. Baires sustained and willfully ignored them when denying and compromising the claim. Plaintiffs appear to reference the various claims file notes in which Kahle, Medicus, and others wrote about Plaintiffs’ claimed damages. These notes reflect Plaintiffs’ valuation of the claim, not necessarily State Farm’s agreement with the valuation. For example, the October 10, 2014 note written by Medicus includes statements about Dr. McNett’s diagnosis and the competing report from Dr. Noonan, as well as analysis of how to proceed in light of the record as a whole at that time. The reflections of State Farm employees on the facts of the claim and the best strategic approach are not admissions of liability, such as those at issue in Davis v. Allstate Ins. Co.,
4.4 Failure to Advance Initial Compromise Offer
Finally, Plaintiffs assert that State Farm acted in bad faith when it
More importantly, however, they dispute whether State Farm was required to advance a compromise offer in the first place. State Farm does not believe so, arguing that although its business practice was to advance an offer when an impasse occurred, it was not contractually obligated to do so under the policy. (Docket # 41 at 22-23). Without making the threshold showing that its actions were a breach of the policy, State Farm reasons, Plaintiffs cannot maintain a bad-faith claim based on the failure to advance the compromise offer. Plaintiffs, however, believe that State Farm has an affirmative duty to settle claims, the violation of which can give rise to a bad-faith claim. (Docket # 47 at 14-15). Moreover, Plaintiffs assert that State Farm knew “without a doubt” that it must advance the original offer—$5,000—so they can maintain a bad-faith claim for State Farm’s failure to do so. Id. at 17.
State Farm has the better argument. The Wisconsin Supreme Court has held that “some breach of contract by an insurer is a fundamental prerequisite for a first-party bad faith claim against the insurer by the insured.” Brethorst,
Brethorst⅛ reasoning forecloses Plaintiffs’ theory regarding State Farm’s failure to advance its compromise offer, for they point to no provision in the policy that requires such an advance. See LeFevre v. Westberry,
Alt v. American Family Mut. Ins. Co.,
Plaintiffs’ reliance on Alt is misplaced because they neglect the important distinction between third-party claims like that in Alt and Hilker and first-party claims like the one presented here. In third-party cases, the insurer defends the insured and has a , duty to engage in good-faith settlement efforts to protect the insured. For a first-party claim like Plaintiffs’, however, the relationship between insurer and insured is merely contractual. Brethorst makes this plain, noting that “[i]n circumstances like Hilker, the insurer’s complete takeover of the insured’s defense creates a quasi-fiduciary relationship. That relationship is different from the insurer-insured relationship in a first-party claim. In a first-party bad faith claim, the insured insists that the insurer wrongfully denied benefits or intentionally mishandled a legitimate claim for benefits.” Brethorst,
Similarly, Government Employees Ins. Co. v. Quine, No. CIV-08-1140-C,
4.5 Pre-Judgment Interest Under Section 628.46
Because Plaintiffs’ bad-faith claim will be dismissed, the Court must also dismiss their prayer for pre-judgment interest. Section 628.46 provides, in pertinent part, that an insurance claim is overdue if not paid within thirty days, unless the insurer has “reasonable proof to establish that [it] is not responsible for the payment.” Wis. Stat. § 628.46(1). “Reasonable proof’ here means evidence “sufficient to allow a reasonable insurer to conclude that it may not be responsible for payment of a claim.” Kontowicz v. Am. Standard Ins. Co.,
5. CONCLUSION
Plaintiffs’ evidence of alleged bad faith does not pass the high bar required to show that State Farm lacked a reasonable basis on which to dispute and ultimately deny their claim. Thus, their bad-faith claim cannot go to the jury. Neither can their claim for pre-judgment interest, which is dependent on the survival of the bad-faith claim.
Accordingly,
IT IS ORDERED that Defendant State Farm’s motion for partial summary judgment (Docket #39) be and the same is hereby GRANTED;
IT IS FURTHER ORDERED that Plaintiffs’ motion to seal documents (Docket # 49) be and the same is hereby GRANTED; and
IT IS FURTHER ORDERED that Count III of Plaintiffs’ Amended Complaint and Plaintiffs’ prayer for prejudgment interest pursuant to Wis. Stat. § 628.46 (Docket # 15) be and the same are hereby DISMISSED with prejudice.
Notes
. In their response to State Farm’s motion, Plaintiffs themselves request summary judgment on these issues. (Docket # 47 at 19, 21). Plaintiffs’ response was not filed until well after the dispositive motion deadline, and the Court will not consider Plaintiffs’ belated and passing request for judgment in their favor. In any event, it would not matter if the Court treated Plaintiffs’ request as timely, since it finds below that summary judgment is appropriate in State Farm’s favor on the matters raised herein.
. State Farm filed a reply in support of its statement of material facts. (Docket # 54). The Local Rules do not contemplate a reply in support of the moving party’s own statement of facts, see Civil L. R. 56(b)(3)(B), but Plaintiffs did not object to its filing and the document succinctly presents the parties’ competing views of the record evidence. As a result, the Court will reference it here.
. Plaintiffs question her motives, arguing that Kahle was not trying to determine how to fairly apportion the cause of Mrs. Baires’ injuries but was instead looking for evidence on
. This paragraph number and the next were typographical errors by State Farm. The Court preserves them for the sake of clarity.
. This should be numbered paragraph 37, but the Court will again preserve State Farm’s typographical error for consistency's sake.
. It should be noted that the case was appealed from a jury verdict in favor of the insureds, meaning that the Wisconsin Supreme Court was merely determining whether there was evidence from which the jury could have found bad faith, not for a prima facie showing thereof. See Danner,
. The actual holding of Brethorst concerned a slightly different scenario than that presented here. In that case, the court was concerned with whether a bad-faith claim could be maintained where the injury was ultimately determined to not be covered under the policy. See Brethorst,