Bussen v. North Pointe Insurance Company

• Court: District Court, D. Arizona
• Decided: February 8, 2022
• Docket: 2:20-cv-00486
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Geofry Bussen, No. CV-20-00486-PHX-JJT

10 Plaintiff, ORDER

11 v.

12 North Pointe Insurance Company, et al.,

13 Defendants. 14 15 At issue is Defendant’s Motion for Summary Judgment (Doc. 77, DMSJ), supported 16 by Defendant’s Statement of Facts (Doc. 78, DSOF), to which Plaintiff filed a Response 17 (Doc. 81, Resp.) with an Additional Statement of Facts (Doc. 82, PSOF), and Defendant 18 filed a Reply (Doc. 88, Reply). For the reasons that follow, the Court grants in part and 19 denies in part Defendant’s Motion. 20 I. BACKGROUND 21 This is a bad faith case against Defendant North Pointe Insurance Company alleging 22 improper handling of Plaintiff Geofry Bussen’s worker’s compensation claim. In March 23 2018, Plaintiff was hired by Launch Technical Workforce (“Launch”), a staffing company 24 that provides employees in the aviation, aerospace, industrial, and ground transportation 25 industry. (DMSJ at 3.) Plaintiff was hired as an aviation mechanic at Yuma Airport for a 26 company called Blue Air Training. (DMSJ at 3.) In March 2018, Plaintiff signed a 27 Certification of Per Diem Substantiation Agreement. (“Per Diem Agreement”) (DSOF 28 1 ¶ 2.) In the agreement, Plaintiff attested to certain statements making him eligible to receive 2 a per diem allowance in addition to regular pay. (DSOF ¶ 5.) 3 On January 16, 2019, Plaintiff was seen in the emergency room of the Yuma 4 Regional Medical Center (“YRMC”) complaining of, among other things, “acute right 5 posterior leg pain for the past several days.” (DSOF ¶ 9.) X-rays showed sclerotic changes 6 at spinal levels L4 and L5 that appeared “to be more than just degenerative arthritic 7 changes, questionable possible sclerotic changes due to metastasis such as prostatic 8 disease, degenerative/arthritic changes of lumbar spine, degenerative disc disease, [and] 9 atherosclerotic vascular disease per radiologist’s review.” (DSOF ¶ 12.) The diagnosis was 10 acute right lower leg pain secondary to sciatica and acute arthritis/sclerotic lesions of the 11 lower spine. (DSOF ¶ 13.) Initially, Dr. Drew Paulson, the physician at YRMC who cared 12 for Plaintiff, did not include that the injury occurred on-the-job; later, on March 26, 2019, 13 Dr. Paulson updated his notes to include Plaintiff suffered an injury at work “moving a 14 pallet of practice bombs.” (DSOF ¶ 31; PSOF ¶ 4.) After Plaintiff’s visit, YRMC referred 15 Plaintiff to Dr. Shawn Hermanau, a spine surgeon with Desert Spine Institute. (DSOF 16 ¶ 14.) 17 On January 22, 2019, Plaintiff reported to his employer, Launch, that he suffered a 18 work-related injury on January 15, 2019. (DSOF ¶ 15.) That same day Plaintiff faxed the 19 YRMC records to Ms. Kailee Ellis, Launch’s risk manager. (DSOF ¶ 16.) The next day, 20 Plaintiff was seen at NextCare Urgent Care where he reported suffering an injury after 21 lifting a heavy object at work and was diagnosed with back pain and right-sided sciatica. 22 (DSOF ¶¶ 17-18.) On January 28, 2019, Launch submitted Plaintiff’s claim to Sedgwick, 23 the adjuster for the claim, to “review[] for denial.” (DSOF ¶ 20; PSOF ¶ 7.) Ms. Shanna 24 Garrett, a Sedgwick employee, was assigned to review the claim. (PSOF ¶ 13.) During her 25 investigation, Ms. Garrett reviewed the ER and Urgent Care records but, despite 26 considering the condition as pre-existing, did not speak to Plaintiff or obtain his Veterans 27 Affairs (“VA”) records. (PSOF ¶¶ 16-24.) On February 28, 2019, Plaintiff was informed 28 his claim was denied because it was a pre-existing condition. (PSOF ¶ 23.) After initially 1 denying the claim, Defendant hired Dr. Dilla to conduct an independent medical exam 2 (“IME”) on Plaintiff to address medical causation for Plaintiff’s worker’s compensation 3 claim. (DSOF ¶ 33.) After Dr. Dilla’s examination, Defendant issued a notice accepting 4 Plaintiff’s claim for worker’s compensation benefits. (DSOF ¶ 36.) 5 Plaintiff also filed a claim with the Industrial Commission of Arizona (“ICA”) 6 (DSOF ¶ 29.) Using the payroll history provided by Launch, Defendant sent the 7 recommended Average Monthly Wage (“AMW”) calculation to the ICA for purposes of 8 establishing Plaintiff’s AMW. (DSOF ¶ 37.) Based on those figures, Defendant calculated 9 Plaintiff’s AMW to be $1,906.22. (DSOF ¶ 39.) Plaintiff protested the AMW, insisting he 10 was entitled to $4,741.57. (DMSJ at 6.) During this time, both parties filed a stipulation 11 with the ICA attesting “that there is a bona fide dispute regarding [the] [a]pplicant’s AMW 12 and whether the per diem should be included in the AMW.” (DMSJ at 12.) On May 12, 13 2020, the parties filed a stipulation with the ICA agreeing to resolve the AMW issue at 14 $3,556.17. (DSOF ¶ 40.) 15 Plaintiff has brought the present case alleging the Defendant did not engage in good 16 faith when evaluating Plaintiff’s worker’s compensation benefits as they relate to medical 17 treatment and wage calculations. 18 II. LEGAL STANDARD 19 Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is 20 appropriate when: (1) the movant shows that there is no genuine dispute as to any material 21 fact; and (2) after viewing the evidence most favorably to the non-moving party, the 22 movant is entitled to prevail as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 23 477 U.S. 317, 322-23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th 24 Cir. 1987). Under this standard, “[o]nly disputes over facts that might affect the outcome 25 of the suit under governing [substantive] law will properly preclude the entry of summary 26 judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A “genuine issue” 27 of material fact arises only “if the evidence is such that a reasonable jury could return a 28 verdict for the nonmoving party.” Id. 1 In considering a motion for summary judgment, the court must regard as true the 2 non-moving party’s evidence, if it is supported by affidavits or other evidentiary material. 3 Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d at 1289. However, the non-moving party 4 may not merely rest on its pleadings; it must produce some significant probative evidence 5 tending to contradict the moving party’s allegations, thereby creating a material question 6 of fact. Anderson, 477 U.S. at 256-57 (holding that the plaintiff must present affirmative 7 evidence in order to defeat a properly supported motion for summary judgment); First Nat’l 8 Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968). 9 “A summary judgment motion cannot be defeated by relying solely on conclusory 10 allegations unsupported by factual data.” Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 11 1989). “Summary judgment must be entered ‘against a party who fails to make a showing 12 sufficient to establish the existence of an element essential to that party’s case, and on 13 which that party will bear the burden of proof at trial.’” United States v. Carter, 906 F.2d 14 1375, 1376 (9th Cir. 1990) (quoting Celotex, 477 U.S. at 322). 15 III. ANALYSIS 16 Defendant seeks “summary judgment on the following issues: (1) bad faith related 17 to the investigation, evaluation[,] and initial denial of Plaintiff’s claim; (2) bad faith related 18 to underpayment of wages; (3) bad faith related to the alleged delay in surgery; and 19 (4) punitive damages.” (Reply at 1.) The Court will begin with the bad faith issues and then 20 turn to punitive damages. 21 A. Bad Faith 22 Arizona law “implies a covenant of good faith and fair dealing in every contract.” 23 Rawlings v. Apodaca, 726 P.2d 565, 569 (Ariz. 1986). On summary judgment, the 24 “appropriate inquiry is whether there is sufficient evidence from which reasonable jurors 25 could conclude that in the investigation, evaluation, and processing of the claim, the insurer 26 acted unreasonably and either knew or was conscious of the fact that its conduct was 27 unreasonable.” Id. at 1010. “Under Arizona law, the tort of bad faith arises when an insurer 28 ‘intentionally denies, fails to process[,] or pay a claim without a reasonable basis.’” 1 Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113, at *10 (D. Ariz. 2 2020), aff'd, No. 20-15910, 2021 WL 3784268 (9th Cir. Aug. 26, 2021) (quoting Zilisch v. 3 State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 279 (Ariz. 2000)). Generally, the “essence 4 of the duty of good faith and fair dealing is that neither party will act to impair the right of 5 the other to receive the benefits which flow from their agreement or contractual 6 relationship.” Rawlings, 726 P.2d at 565. Accordingly, claims for insurance bad faith 7 “only arise[] when an insurance company intentionally denies or fails to process or pay a 8 claim without a reasonable basis for such action.” Lasma Corp. v. Monarch Ins. Co. of 9 Ohio, 764 P.2d 1118, 1122 (Ariz. 1988). “Negligent conduct which results solely from 10 honest mistakes, oversight or carelessness do[] not necessarily create bad faith liability 11 even though it may be objectively unreasonable. Some form of consciously 12 unreasonable conduct is required.” Trus Joist Corp. v. Safeco Ins. Co., 735 P.2d 125 (Ariz. 13 Ct. App. 1986) (emphasis added). 14 To prove a claim of bad faith, a plaintiff must show that the defendant’s handling of 15 his claim was unreasonable, and that defendant intended to act unreasonably towards the 16 plaintiff. Milhone v. Allstate Inc., 289 F. Supp. 2d 1089, 1095–1103 (D. Ariz. 2003); Lopez 17 v. Allstate Ins. Co., 282 F. Supp. 2d 1095, 1100–1104 (D. Ariz. 2003); Knoell v. 18 Metropolitan Life Insurance Co., 163 F. Supp. 2d 1072 (D. Ariz. 2001). The inquiry 19 involves both an objective finding and a subjective finding. Lopez, 282 F. Supp. 2d at 1100. 20 When the actions taken on the part of the insurance company are reasonable, the insurance 21 company will not be found to have acted in bad faith. See Lopez, 282 F. Supp. 2d at 1100– 22 1104; Milhone, 289 F. Supp. 2d at 1095–1103; Trus Joist Corp., 735 P.2d at 134 (“[s]ome 23 form of consciously unreasonable conduct is required.”). 24 As Plaintiff asserts, in 2000, Zilisch modified the test to determine bad faith, holding 25 that the “fair debatability” of the insurer’s coverage decision is not sufficient to defeat a 26 bad faith claim. 995 P.2d at 280; see also Jeffers v. Farm Bureau Prop. & Cas. Ins. Co., 27 2014 WL 4259485, at *4 (D. Ariz. 2014). “Instead, Zilisch held that bad faith liability 28 extends not only to coverage decisions, but to any instances where the insurer (1) acted 1 unreasonably ‘in the investigation, evaluation, and processing of the claim’ and (2) ‘either 2 knew or was conscious of the fact that its conduct was unreasonable.’ The first element is 3 analyzed objectively, the second is analyzed subjectively, and both elements present fact 4 questions ordinarily reserved for the jury.” Id. (quoting Zilisch, 995 P.2d at 280). 5 Defendant cites Judge Teilborg’s decision in Knoell to argue Arizona has not 6 abandoned the ‘fairly debatable’ standard when analyzing claims of bad faith. (Reply at 2.) 7 Instead, according to Defendant, Knoell recognized “when there is a question of fact as to 8 liability on the underlying policy, then as a matter of law, the insurance company is not 9 liable for bad faith.” (Reply at 2 (internal citations omitted).) Contrary to Defendant’s 10 assertion, Judge Teilborg made clear that though the court “found that ‘fair debatability’ 11 was the applicable standard based on the particular facts in Knoell, it recognized that bad 12 faith claims must also be analyzed ‘applying a general standard of reasonableness.’” Young 13 v. Allstate Ins. Co., 296 F. Supp. 2d at 1124 (D. Ariz. 2014) (quoting Knoell, 163 F. Supp. 14 2d at 1077). Accordingly, fair debatability of an insurer’s coverage decision is not by itself 15 sufficient to defeat a bad faith claim. 16 1. There is a Genuine Dispute of Material Fact Whether Defendant 17 Exercised Bad Faith Related to Its Investigation, Evaluation, and Initial Denial of Plaintiff’s Claim 18 19 As articulated in Zilisch, the first prong of the test for bad faith is an objective test 20 based on reasonableness. 995 P.2d at 280. Defendant argues “Plaintiff’s claim exhibits 21 several “red flags” making his claim for compensability ‘debatable,’ e.g. (1) conflicting 22 reports of injury; (2) gradual onset of pain; (3) delayed reporting; and (4) evidence of pre- 23 existing condition without clear confirmation of aggravation.” (PMSJ at 7.) Accordingly, 24 Defendant argues, its actions were reasonable as a matter of law. Plaintiff contends there 25 is a genuine issue of material fact whether Defendant’s actions were objectively reasonable. 26 In an effort to survive summary judgment, Plaintiff cites Demetrulias v. Wal-Mart Stores, 27 917 F. Supp. 2d 993 (D. Ariz. 2013). 28 1 In Demetrulias, plaintiff filed a worker’s compensation claim with her employer, 2 Wal-Mart, after sustaining an injury at work. Id. at 998. Over the next year, plaintiff made 3 multiple visits to doctors for treatment and diagnosis, and there was a significant amount 4 of back and forth between plaintiff, her doctors, and Wal-Mart’s claims adjusters. See id. 5 at 998-1003. Plaintiff sued Wal-Mart for bad faith, and Wal-Mart moved for summary 6 judgment. Id. at 1003. 7 Wal-Mart refused to cover the plaintiff’s carpel tunnel injury because it alleged the 8 injury was pre-existing and no medical evidence supported a hand or wrist problem. Id. at 9 1006. In her opposition to summary judgment, plaintiff showed that her doctor reported hand 10 and wrist issues six weeks after the injury and that, though the medical records did not specify 11 which wrist the older carpal tunnel diagnosis applied to, it was eventually understood the 12 pre-existing condition related to the opposite hand. Id. at 999. The court held that the plaintiff 13 “presented enough evidence to raise questions about the thoroughness of [defendant’s] 14 investigation.” Id. The court held that this evidence supported plaintiff’s bad faith claim and, 15 based on this and other evidence, denied summary judgment to Wal-Mart. 16 Plaintiff argues, like in Demetrulias, Defendant “failed to investigate [Plaintiff’s] 17 claim and instead denied the clams as ‘pre-existing.’” (Resp. at 11.) To support Plaintiff’s 18 argument, he points to deposition testimony from Ms. Garrett, the claim adjuster, where 19 she admits Defendant did not reach out to Plaintiff or obtain Plaintiff’s VA records prior 20 to issuing a denial. (Resp. at 11-12.) In the present case, the initial emergency room records 21 describe Plaintiff’s injury as an “acute right posterior leg pain for the past several days.” 22 (DMSJ at 7.) Plaintiff “denie[d] any trauma [and] describe[d] the onset of pain as gradual.” 23 (DMSJ at 7.) Later, Plaintiff reported a history of swelling in his lower legs and complained 24 of “lower back pain.” (DMSJ at 8.) Like in Demetrulias, Plaintiff presented enough 25 evidence to raise questions about his injury, and Defendant was obligated to investigate 26 such claims. Indeed, Defendant admits as much in its briefings, stating “[o]bjectivley, this 27 claim needed further investigation and compensability was not a forgone conclusion.” 28 (DMSJ at 8.) A reasonable juror could find Defendant’s lack of investigation into 1 Plaintiff’s VA records as objectively unreasonable. Accordingly, Plaintiff has presented 2 enough evidence to raise issues of fact as to whether Defendant’s conduct was objectively 3 unreasonable. 4 The second prong is a subjective test. To survive Plaintiff must show Defendant was 5 “conscious of the fact that its conduct was unreasonable.” Zilisch, 995 P.2d 276 at 280. 6 “Where a plaintiff proceeds on a theory that her claim was denied or delayed because the 7 insurer failed to adequately investigate her claim, the evidence may support both the 8 objective unreasonableness of the insurer’s actions and also the existence of the 9 subjective.” Demetrulias, 917 F. Supp. 2d at 1006-7. Thus, Plaintiff, who already has 10 presented evidence to support his allegation that Defendant failed to adequately investigate 11 his claim, has raised a genuine issue of material fact sufficient to defeat Defendant’s 12 Motion. 13 Nevertheless, Plaintiff submits additional facts showing a reasonable juror could 14 find Defendant’s conduct subjectively unreasonable because Defendant “established 15 arbitrary metrics to encourage [Ms.] Garrett to deny the claim.” (Resp. at 14.) Again, 16 Demetrulias is instructive. In her opposition to the summary judgment motion, the plaintiff 17 in Demetrulias produced evidence of Wal-Mart’s claims management practices and 18 policies. Id. at 1009. Specifically, she demonstrated that Wal-Mart claims supervisors “set 19 monthly and annual goals to close workers’ compensation files,” with a typical goal of 20 “clos[ing] the same number of claims that are opened.” Id. One of the supervisors who 21 worked on plaintiff's claim “constantly kept his team informed on where they were in 22 relation to [this] goal.” Id. And on “Blitz Wednesday” toward the end of each month, extra 23 effort was expended to close files. Id. The court held that this evidence supported plaintiff's 24 bad faith claim and denied summary judgment to Wal-Mart. 25 Like in Demetrulias, Plaintiff alleges Defendant “also established a 100% claims- 26 closed ratio – an arbitrary goal for [an] adjuster to close one claim for every new claim.” 27 (Resp. at 14.) According to Plaintiff, Defendant “set this metric as a ‘goal’ for [Ms.] Garrett 28 in 2018” and in previous years Ms. Garrett had met the “claims-close[d] ratio requirements 1 in her evaluations, including obtaining a 105% closing ratio in 2016.” (Resp. at 14.) 2 Additionally, Plaintiff claims statements from Ms. Ellis, a representative of Launch, also 3 show Defendant was subjectively unreasonable. For example, Ms. Ellis told Ms. Garrett 4 “to get this claim over and done with, in the quickest, cost effective way possible…[l]ets 5 get this claim closed!” (Resp. at 14.) Further, at the outset of the claim, Ms. Ellis provided 6 the claim “to be reviewed for denial” and later expressed she would “like to get some 7 movement on issuing the denial based on the medical findings and no witnesses, as we 8 previously discussed.” (Resp. at 14.) Accordingly, viewed as a whole, Plaintiff has 9 presented enough evidence to raise issues of fact as to whether Defendant’s conduct was 10 subjectively unreasonable. 11 2. There is No Genuine Dispute of Material Fact Whether Defendant 12 Exercised Bad Faith Related to Its Initial Underpayment of Wages 13 14 “The ICA has exclusive jurisdiction to adjudicate workers’ compensation benefits, 15 and a plaintiff generally cannot bring an action for bad faith denial of benefits if he has not 16 first sought relief through the ICA.” Hunton v. Am. Zurich Ins. Co., 2017 WL 527278, at 17 *2 (D. Ariz. Feb. 9, 2017); see also Merkens v. Fed. Ins. Co., 349 P.3d 1111, 1115 (Ariz. 18 Ct. App. 2015). Arizona’s Workers’ Compensation Act, however, “does not bar a common 19 law tort action that is independent of the workers’ benefit claim process if the conduct does 20 not fall within the coverage of the Act.” Merkens, 349 P.3d at 1113 (internal quotation and 21 citation omitted). 22 Relying on Merkens, Defendant argues that the Court lacks jurisdiction to decide 23 the compensability issues alleged because Plaintiff did not “seek a compensability 24 determination from the ICA.” (Reply at 8.) In Merkens, the plaintiff had not sought a 25 compensability determination from the ICA, and instead sued to recover unpaid 26 compensation and benefits post termination. Id. at 1114. Thus, the plaintiff sought a jury 27 to determine both her entitlement to benefits and the amount to which she was entitled. Id. 28 at 1115-16. Notably, the plaintiff abandoned her bad faith handling claims and “t[ied] all 1 of her damages to the denial of benefits.” Id. at 1114. On those facts, the Arizona Court of 2 Appeals held that the plaintiff was required to pursue administrative remedies before 3 pursing her claim for bad faith because she asserted damages based solely on the 4 termination of benefits. Id. at 1115-16. 5 In this case, however, Plaintiff does not claim that his damages are tied to the 6 termination of benefits. Instead, he alleges that Defendant improperly handled his claim. 7 “Put differently, [Plaintiff] is not disputing the amount of his benefits that he is owed. 8 Rather, [Plaintiff is alleging] that the delay in payment of those benefits from August 2019 9 to May 2020 harmed him.” (Resp. at 16.) The present case does not tread on the exclusive 10 jurisdiction of the ICA since the finder of fact in this case is not asked to determine whether 11 the injured worker is entitled to benefits or the amount of those benefits. Accordingly, so 12 long as Plaintiff raises a genuine issue of material fact as to Defendant’s bad faith conduct 13 related to underpaying Plaintiff’s wages, the claim may proceed to trial. 14 To defeat summary judgment, Plaintiff argues Defendant’s underpayment coincided 15 with “improper pressure from Launch based on arbitrary reasons.” (Resp. at 15.) To 16 support this allegation Plaintiff cites statements from Ms. Patty Rhoads, a consultant hired 17 by Launch to allegedly control the cost of worker’s compensation, seeking to limit 18 Plaintiff’s indemnity benefits. (Resp. at 15.) Specifically, Ms. Rhoads stated she did not 19 agree with the Temporary Total Disability (“TTD”) payment due to the Plaintiff. (Resp. at 20 7.) Plaintiff alleges, without citing any support, that consistent with Ms. Rhoads’ demand, 21 Sedgwick, the adjuster for the claim, refused to consider Plaintiff’s per diem as part of his 22 average wages. (Resp. at 15.) 23 Defendant, relying on Free v. Indus. Comm'n of Arizona, contends it was objectively 24 reasonable for Defendant to exclude Plaintiff’s per diem. 471 P.3d 1038, 1040–41 (Ct. 25 App. 2020) (“Arizona case law … establishes that expense reimbursements are excluded 26 from [AMW] if they are reasonably related to the worker’s costs, but that unjustified, 27 excessive or sham reimbursements may qualify as wages regardless of their label.”). 28 Defendant states “Plaintiff offered no evidence ‘establishing the per diem was unjustified, 1 excessive[,] or sham reimbursements.’” (DMSJ at 11 (quoting Free, 471 P.3d at 1040– 2 41).) Thus, according to the Defendant, it was reasonable to not include Plaintiff’s per diem 3 allowances in the AMW calculations. (DMSJ at 11.) Further, Defendant emphasizes that 4 the parities filed a stipulation with the ICA attesting “that there is a bona fide dispute 5 regarding [Plaintiff’s] AMW and whether the per diem should be included in the AMW.” 6 (DMSJ at 12.) Black’s Law Dictionary defines “bona fide” as “made in good faith; without 7 fraud or deceit.” Black’s Law Dictionary (11th ed. 2019). The Court concludes that 8 Plaintiff, though this stipulation to the ICA, admits Defendant’s conduct was - at the very 9 least - subjectively reasonable. In fact, the stipulation acknowledges Defendant’s conduct 10 was in good faith. As a result, since both Plaintiff and Defendant at the time of negotiating 11 understood the disagreement was in good faith, no reasonable juror could find Defendant’s 12 conduct subjectively unreasonable. Accordingly, Plaintiff’s bad faith claims related to 13 underpaid wages are dismissed. 14 3. Plaintiff’s Bad Faith Claim Related to Defendant’s Alleged Delay in Surgery Will Proceed to Trial 15 16 Plaintiff has also pled that Defendant unreasonably delayed his surgery. (Resp. at 14.) 17 Defendant, in its Motion, does not bring this claim before the Court. (DMSJ.) Only after 18 Plaintiff’s Response does Defendant identify its omission and address this issue for the first 19 time in its Reply. (Reply at 8-11.) “It is well established in this circuit that courts will not 20 consider new arguments raised for the first time in a reply brief.” Surowiec v. Capital Title 21 Agency, Inc., 790 F. Supp. 2d 997, 1002 (D. Ariz. 2011) (quoting Bach v. Forever Living 22 Prods. U.S., Inc., 473 F. Supp. 2d 1110, 1122 n.6 (W.D. Wash. 2007)). Because Defendant 23 did not raise the issue until its Reply, the Court will not consider this argument. Plaintiff’s 24 bad faith claims as they relate to delays in surgery will proceed to trial. 25 B. Plaintiff’s Punitive Damages Claim is Dismissed 26 Under Arizona law, evidence of “gross negligence” or “reckless disregard of the 27 circumstances” is not sufficient for punitive damages. Bauerlein v. Equity Residential 28 Properties Management Corp., 2009 WL 89531, at *3 (D. Ariz. 2009) (quoting Volz v. 1 Coleman Co., 748 P.2d 1191 (1987).). Rather, the punitive damages standard requires 2 “something more” than gross negligence. Id. (citing Rawlings, 726 P.2d at 565). “The 3 ‘something more’ is the evil mind, which is satisfied by evidence that ‘defendant’s 4 wrongful conduct was motivated by spite, actual malice, or intent to defraud’ or 5 defendant’s ‘conscious and deliberate disregard of the interest and rights of others.’” Id. 6 (quoting Volz, 748 P.2d at 1191). Punitive damages are not warranted unless “defendant 7 acted with a knowing or culpable state of mind, or defendant’s conduct was so egregious 8 that an evil mind can be inferred.” Id. Proof of bad faith does not automatically trigger the 9 recoverability of punitive damages. See Rawlings, 726 P.2d at 577 (“The argument is 10 advanced that since bad faith is a species of intentional tort, punitive damages are 11 automatically recoverable in every case in which the plaintiff proves that the tort was 12 committed. We reject that contention.”). 13 Plaintiff argues that because there was an arbitrary metric to encourage adjusters to 14 close claims Plaintiff should be allowed to pursue punitive damages. To support this 15 assertion Plaintiff points to the fact that Sedgwick had a policy that encouraged adjusters 16 to close one claim for every new claim and that statements from Ms. Garrett, Ms. Ellis, and 17 Ms. Rhoads all encouraged claim closure. (Resp. at 14-15.) “The evolution of the law of 18 bad faith has not reached the point where it is wrong for an insurance company to make a 19 profit, much less follow good business practices. … Additionally, a company keeping 20 statistics on resolution of claims and looking to their ‘bottom line’ are reasonable internal 21 procedures.” Knoell, 163 F. Supp. 2d at 1078. As a result, evidence of Sedgwick 22 encouraging claim closure is not sufficient for punitive damages. 23 Further, courts have held a procedure encouraging adjusters to close claims does not 24 equate to a procedure encouraging adjusters to deny claims. Ortiz v. Zurich Am. Ins. Co., 25 2015 WL 5646606, *7 (D. Ariz. 2015) (“Even if the allegedly tainted program created a 26 slight incentive for claims adjusters to close claims, [p]laintiff presents no evidence that 27 the program encouraged adjusters to deny claims.”). Similarly, here Plaintiff does not cite 28 any facts suggesting Defendant had a policy to deny claims. Though Ms. Ellis provided the 1|| claim “to be reviewed for denial,” she was an employee of Launch, not Defendant. || Additionally, as Defendant points out, Ms. Ellis acknowledged “that Defendant would || make its own claim decision regardless of her comments to deny. [Pls. Ex. 16, pg. 27:2-6 and 28:1-11 ‘What the insurance company does, though, is up to them.’]” (Reply at 7.) 5 || More, there are no facts suggesting Defendant arbitrarily issued a denial following Ellis’s 6|| or anyone else’s request.! Plaintiff also points to statements from Dr. Sharma and Dr. Scott 7\| stating delays impacted Plaintiff's health. These statements, however, do not show that 8 || Defendant’s conduct was motivated by “spite, actual malice, or [an] intent to defraud.” 9|| Bauerlein, 2009 WL 89531 at *3. Without “something more,” Plaintiff fails to show □□ sufficient evidence to support punitive damages. Accordingly, Defendant’s motion for |} summary judgment regarding punitive damages is granted. IV. CONCLUSION 13 The Court grants summary judgment on bad faith claims related to the underpayment of wages and on punitive damages. The other claims will proceed to trial. 15 IT IS THEREFORE ORDERED granting in part and denying in part Defendant’s 16 || Motion for Summary Judgment (Doc. 77). 17 IT IS FURTHER ORDERED that the Court will set a pre-trial conference by 18 || separate Order. 19 Dated this 8th day of February, 2022. CN 20 i . 1 Hon le Jot J. Tuchi Unig State#District Judge 22 23 24 25 ' In his Response Plaintiff states, “Defendant collaborated with employer-Launch’s 26 arbitrary goal to reduce worker’s compensation costs and limit the claim” yet does not provide a citation to the record that supports this assertion. (Resp. at 17.) Rule 56 provides 271) that the respondent must cite “to particular parts of materials in the record,” and “[t]he court need consider only the cited materials” in the briefings. Fed. R. Civ. P. 56(c)(1), (3); see also Indep. Towers of Wash. v. Wash., 350 F.3d 925, 929 (9th Cir. 2003) (“Judges are not like pigs, hunting for truffles buried in briefs.”’). -13-