1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF ALASKA 6 7 8 MICHELLE LEIBOLD, ) ) 9 Plaintiff, ) 3:18-CV-00209 JWS ) 10 vs. ) ORDER AND OPINION ) 11 ) [Re: Motion at docket 13 ] STATE FARM MUTUAL ) 12 AUTOMOBILE INSURANCE ) COMPANY, ) 13 ) Defendant. ) 14 ) 15 16 I. MOTION PRESENTED 17 At docket 13, Defendant State Farm Mutual Automobile Insurance Company 18 (State Farm) filed a motion for Partial Summary Judgment in which it seeks dismissal of 19 the bad faith claim against it or, alternatively, seeks bifurcation of the bad faith claim 20 from other claims in the complaint. Plaintiff Michelle Leibold (Leibold) responds at 21 docket 19. State Farm replies at docket 20. Oral argument was not requested and 22 would not be of assistance to the court. 23 II. BACKGROUND 24 On June 1, 2016, Leibold was involved in a three-car accident in Anchorage, 25 Alaska. Leibold was hit from behind and pushed into the vehicle in front of her. Leibold 26 was insured by State Farm and had an auto policy with Underinsured 27 Motorist/Uninsured Motorist (UIM) Coverage of $100,000 and Medical Payments 28 Coverage of $25,000. Following the accident, Leibold sought and received Medical -1- 1 Payments Coverage under her policy for injuries to her back, neck, left knee, and right 2 shoulder, as well as for headaches. She continued to receive treatment for residual 3 neck and shoulder injuries throughout 2017 which her State Farm policy covered. In 4 total, at the time of the parties' briefing, State Farm had paid $19,203.41 for Leibold's 5 medical treatment and had pre-approved medical expenses up to the policy's limit of 6 $25,000. 7 In May of 2018, Leibold reached a tentative agreement with USAA, the insurer of 8 the driver who had caused Leibold's car accident, whereby USAA offered to pay the 9 liability limit of $50,000 under the driver's policy. In order to finalize the agreement, 10 Leibold needed to obtain a medical payments lien waiver from State Farm to ensure 11 that State Farm would not seek to recoup the medical payments already made under 12 Leibold's State Farm policy. Leibold believed State Farm would provide the waiver 13 because USAA's payment $50,000—the upper limit of the policy—was not enough to 14 cover her alleged damages and make her whole. She believed that her past and future 15 damages totaled $150,000. She intended to recover the remainder of her damages 16 from her State Farm UIM coverage. 17 Leibold, through her counsel, informed State Farm about the proposed USAA 18 settlement. She asked State Farm for the necessary waiver and stated her intention to 19 file a UIM claim for the remainder of her damages. On August 7, 2018, after a few 20 months of communications between State Farm representatives and Leibold's counsel, 21 State Farm formally declined to issue a waiver, stating that it did not have information to 22 prove that the USAA settlement failed to make her whole. 23 Leibold filed this lawsuit against State Farm on August 14, 2018, claiming that 24 State Farm's denial was made in bad faith. Two days after the complaint was filed, 25 State Farm proposed to close Leibold's UIM claim for $5,000, explaining that it 26 calculated her total past and future damages to be about $74,000 and therefore, 27 between the $19,000 already paid plus the $50,000 from USAA, an additional $5,000 28 from her UIM coverage would make her whole. State Farm's proposal to pay $5,000, in -2- 1 addition to what it had already paid for her medical care and what Leibold would receive 2 from USAA, effectively waived any medical payment claim lien it had previously 3 asserted. That is, State Farm's calculations and ultimate offer conveyed its intent not to 4 recoup past medical payments. Leibold asserts that this after-the-fact proposal 5 supports her bad faith claim against State Farm, arguing that its post-complaint offer 6 demonstrates that State Farm "tr[ied] to leverage waiver of the [medical payment claim] 7 in exchange for closure of the plaintiff's UIM . . . claim."1 8 III. STANDARD OF REVIEW 9 Summary judgment is appropriate where “there is no genuine dispute as to any 10 material fact and the movant is entitled to judgment as a matter of law.”2 The materiality 11 requirement ensures that “[o]nly disputes over facts that might affect the outcome of the 12 suit under the governing law will properly preclude the entry of summary judgment.”3 13 Ultimately, “summary judgment will not lie if the . . . evidence is such that a reasonable 14 jury could return a verdict for the nonmoving party.”4 However, summary judgment is 15 mandated “against a party who fails to make a showing sufficient to establish the 16 existence of an element essential to that party’s case, and on which that party will bear 17 the burden of proof at trial.”5 18 The moving party has the burden of showing that there is no genuine dispute as 19 to any material fact.6 Where the nonmoving party will bear the burden of proof at trial on 20 a dispositive issue, the moving party need not present evidence to show that summary 21 judgment is warranted; it need only point out the lack of any genuine dispute as to 22 1Doc. 19 at p. 5. 23 2Fed. R. Civ. P. 56(a). 24 25 3Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 26 4Id. 27 5Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 28 6Id. at 323. -3- 1 material fact.7 Once the moving party has met this burden, the nonmoving party must 2 set forth evidence of specific facts showing the existence of a genuine issue for trial.8 3 All evidence presented by the non-movant must be believed for purposes of summary 4 judgment, and all justifiable inferences must be drawn in favor of the non-movant.9 5 However, the non-moving party may not rest upon mere allegations or denials but must 6 show that there is sufficient evidence supporting the claimed factual dispute to require a 7 fact-finder to resolve the parties’ differing versions of the truth at trial.10 8 IV. DISCUSSION 9 A. Request for Summary Judgment on the Bad Faith Claim 10 Leibold alleges that State Farm's handling and denial of her request for a medical 11 payments lien waiver constitutes a breach of the duty of good faith and fair dealing. 12 She alleges that State Farm delayed its response to her request for a waiver and that 13 State Farm then denied her request without an investigation into her assertion that the 14 USAA settlement failed to make her whole and without a reasonable basis. Leibold 15 alleges State Farm's denial of her request for a waiver was used to compel her to 16 resolve her UIM claim on terms more favorable to State Farm. 17 Alaska recognizes a cause of action against insurers for a breach of the duty of 18 good faith and fair dealing.11 "Although [the Alaska Supreme Court has] declined to 19 define the elements of the tort of bad faith in an insurance contract, [its] precedent 20 makes clear that the element of breach at least requires the insured to show that the 21 22 23 7Id. at 323-25. 24 25 8Anderson, 477 U.S. at 248-49. 26 9Id. at 255. 27 10Id. at 248-49. 28 11State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d 1152, 1156 (Alaska 1989).
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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF ALASKA 6 7 8 MICHELLE LEIBOLD, ) ) 9 Plaintiff, ) 3:18-CV-00209 JWS ) 10 vs. ) ORDER AND OPINION ) 11 ) [Re: Motion at docket 13 ] STATE FARM MUTUAL ) 12 AUTOMOBILE INSURANCE ) COMPANY, ) 13 ) Defendant. ) 14 ) 15 16 I. MOTION PRESENTED 17 At docket 13, Defendant State Farm Mutual Automobile Insurance Company 18 (State Farm) filed a motion for Partial Summary Judgment in which it seeks dismissal of 19 the bad faith claim against it or, alternatively, seeks bifurcation of the bad faith claim 20 from other claims in the complaint. Plaintiff Michelle Leibold (Leibold) responds at 21 docket 19. State Farm replies at docket 20. Oral argument was not requested and 22 would not be of assistance to the court. 23 II. BACKGROUND 24 On June 1, 2016, Leibold was involved in a three-car accident in Anchorage, 25 Alaska. Leibold was hit from behind and pushed into the vehicle in front of her. Leibold 26 was insured by State Farm and had an auto policy with Underinsured 27 Motorist/Uninsured Motorist (UIM) Coverage of $100,000 and Medical Payments 28 Coverage of $25,000. Following the accident, Leibold sought and received Medical -1- 1 Payments Coverage under her policy for injuries to her back, neck, left knee, and right 2 shoulder, as well as for headaches. She continued to receive treatment for residual 3 neck and shoulder injuries throughout 2017 which her State Farm policy covered. In 4 total, at the time of the parties' briefing, State Farm had paid $19,203.41 for Leibold's 5 medical treatment and had pre-approved medical expenses up to the policy's limit of 6 $25,000. 7 In May of 2018, Leibold reached a tentative agreement with USAA, the insurer of 8 the driver who had caused Leibold's car accident, whereby USAA offered to pay the 9 liability limit of $50,000 under the driver's policy. In order to finalize the agreement, 10 Leibold needed to obtain a medical payments lien waiver from State Farm to ensure 11 that State Farm would not seek to recoup the medical payments already made under 12 Leibold's State Farm policy. Leibold believed State Farm would provide the waiver 13 because USAA's payment $50,000—the upper limit of the policy—was not enough to 14 cover her alleged damages and make her whole. She believed that her past and future 15 damages totaled $150,000. She intended to recover the remainder of her damages 16 from her State Farm UIM coverage. 17 Leibold, through her counsel, informed State Farm about the proposed USAA 18 settlement. She asked State Farm for the necessary waiver and stated her intention to 19 file a UIM claim for the remainder of her damages. On August 7, 2018, after a few 20 months of communications between State Farm representatives and Leibold's counsel, 21 State Farm formally declined to issue a waiver, stating that it did not have information to 22 prove that the USAA settlement failed to make her whole. 23 Leibold filed this lawsuit against State Farm on August 14, 2018, claiming that 24 State Farm's denial was made in bad faith. Two days after the complaint was filed, 25 State Farm proposed to close Leibold's UIM claim for $5,000, explaining that it 26 calculated her total past and future damages to be about $74,000 and therefore, 27 between the $19,000 already paid plus the $50,000 from USAA, an additional $5,000 28 from her UIM coverage would make her whole. State Farm's proposal to pay $5,000, in -2- 1 addition to what it had already paid for her medical care and what Leibold would receive 2 from USAA, effectively waived any medical payment claim lien it had previously 3 asserted. That is, State Farm's calculations and ultimate offer conveyed its intent not to 4 recoup past medical payments. Leibold asserts that this after-the-fact proposal 5 supports her bad faith claim against State Farm, arguing that its post-complaint offer 6 demonstrates that State Farm "tr[ied] to leverage waiver of the [medical payment claim] 7 in exchange for closure of the plaintiff's UIM . . . claim."1 8 III. STANDARD OF REVIEW 9 Summary judgment is appropriate where “there is no genuine dispute as to any 10 material fact and the movant is entitled to judgment as a matter of law.”2 The materiality 11 requirement ensures that “[o]nly disputes over facts that might affect the outcome of the 12 suit under the governing law will properly preclude the entry of summary judgment.”3 13 Ultimately, “summary judgment will not lie if the . . . evidence is such that a reasonable 14 jury could return a verdict for the nonmoving party.”4 However, summary judgment is 15 mandated “against a party who fails to make a showing sufficient to establish the 16 existence of an element essential to that party’s case, and on which that party will bear 17 the burden of proof at trial.”5 18 The moving party has the burden of showing that there is no genuine dispute as 19 to any material fact.6 Where the nonmoving party will bear the burden of proof at trial on 20 a dispositive issue, the moving party need not present evidence to show that summary 21 judgment is warranted; it need only point out the lack of any genuine dispute as to 22 1Doc. 19 at p. 5. 23 2Fed. R. Civ. P. 56(a). 24 25 3Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 26 4Id. 27 5Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 28 6Id. at 323. -3- 1 material fact.7 Once the moving party has met this burden, the nonmoving party must 2 set forth evidence of specific facts showing the existence of a genuine issue for trial.8 3 All evidence presented by the non-movant must be believed for purposes of summary 4 judgment, and all justifiable inferences must be drawn in favor of the non-movant.9 5 However, the non-moving party may not rest upon mere allegations or denials but must 6 show that there is sufficient evidence supporting the claimed factual dispute to require a 7 fact-finder to resolve the parties’ differing versions of the truth at trial.10 8 IV. DISCUSSION 9 A. Request for Summary Judgment on the Bad Faith Claim 10 Leibold alleges that State Farm's handling and denial of her request for a medical 11 payments lien waiver constitutes a breach of the duty of good faith and fair dealing. 12 She alleges that State Farm delayed its response to her request for a waiver and that 13 State Farm then denied her request without an investigation into her assertion that the 14 USAA settlement failed to make her whole and without a reasonable basis. Leibold 15 alleges State Farm's denial of her request for a waiver was used to compel her to 16 resolve her UIM claim on terms more favorable to State Farm. 17 Alaska recognizes a cause of action against insurers for a breach of the duty of 18 good faith and fair dealing.11 "Although [the Alaska Supreme Court has] declined to 19 define the elements of the tort of bad faith in an insurance contract, [its] precedent 20 makes clear that the element of breach at least requires the insured to show that the 21 22 23 7Id. at 323-25. 24 25 8Anderson, 477 U.S. at 248-49. 26 9Id. at 255. 27 10Id. at 248-49. 28 11State Farm Fire & Cas. Co. v. Nicholson, 777 P.2d 1152, 1156 (Alaska 1989). -4- 1 insurer's actions were objectively unreasonable under the circumstances."12 To prove 2 bad faith, the insured must show that the insurer's delay or denial of a claim was "made 3 without a reasonable basis."13 While an insurer does not act in bad faith simply by 4 challenging a debatable claim, it must still act reasonably in processing the claim.14 An 5 insurer's violations of Alaska's Unfair Claim Settlement Practices Act does not require a 6 finding of bad faith, but conduct that is described in that statute—for example, failure to 7 acknowledge and act promptly upon communications regarding a claim, refusing to pay 8 a claim without a reasonable investigation of all of the available information and without 9 an explanation of the basis for the denial of the claim—could constitute evidence of 10 unreasonableness on the part of an insurer.15 Summary judgement in favor of the 11 insurer on a bad faith claim is only appropriate if the insurer "establishes that no 12 reasonable jury could regard its conduct as unreasonable."16 13 In support of its motion for summary judgment, State Farm relies on its 14 communications with Leibold's counsel and some file notes. The letters between State 15 Farm and Leibold's counsel began on May 28, 2018. Leibold's counsel wrote State 16 Farm to inform it of the tentative agreement with USAA and to ask for the necessary 17 waiver so USAA could pay out the $50,000. Counsel also indicated that he was seeking 18 additional payment from State Farm under Leibold's UIM coverage. On June 5, a State 19 Farm subrogation department representative wrote a letter to Leibold's counsel and 20 stated that she would not waive the medical payments lien and would pursue 21 22 23 12Lockwood v. Geico Gen. Ins. Co., 323 P.3d 691, 697 (Alaska 2014) 24 13Hillman v. Nationwide Mut. Fire. Ins. Co., 855 P.2d 1321, 1324 (Alaska 1993). 25 14Allen v. State Farm Mut. Auto. Ins. Co., No. 3:15-cv-0019, 2018 WL 1474526, at *5 (D. 26 Alaska Mar. 26, 2018). 27 15Id.; AS 21.36.125(a). 28 16Hillman, 855 P.2d at 1325. -5- 1 subrogation. There was no explanation provided and the letter did not request any 2 additional information. 3 On June 13, 2018, Leibold's counsel faxed a letter asking for a more direct 4 response to his initial demand letter. On June 14, a State Farm UIM claim specialist 5 sent a letter to Leibold's counsel requesting information needed to process the UIM 6 claim but said nothing about the waiver. Subsequent letters demonstrate that Leibold's 7 counsel had talked to someone at State Farm who mentioned that he should have 8 received a letter dated June 11, 2018, from Laura Perales, a State Farm representative 9 in the medical payments coverage department, waiving State Farm's right to 10 reimbursement. Counsel then talked to Ms. Perales who stated that the letter had been 11 written in error and destroyed. Ms. Perales alleges that she explicitly told counsel that 12 State Farm was still pursuing subrogation until it had more information to help it 13 determine whether Leibold would be made whole with the addition of the $50,000. A 14 letter from Leibold's counsel indicates that Ms. Perales agreed to talk to the assigned 15 UIM claim adjuster and respond to Leibold's waiver request. Subsequent letters, 16 wherein Ms. Perales asks Leibold's counsel about the status of Leibold's UIM claim, 17 suggest that Ms. Perales did not in fact communicate with her colleague in the UIM 18 department. 19 Then, on July 2, 2018, State Farm faxed Ms. Perales' June 11, 2018 letter that 20 waived State Farm's intention to seek reimbursement for Leibold's medical payments, 21 but on July 16, Leibold's counsel received a different letter from her asking for the total 22 amount of medical bills incurred by Leibold. Counsel faxed a response on July 30, 23 pointing out State Farm's confusing communications and noting the failure to provide 24 the waiver was preventing Leibold from receiving her USAA recovery. Ms. Perales 25 apologized for the confusion and asked for information about Leibold's treatment. 26 Counsel followed up by forwarding the letter and information he had sent to USAA. 27 That letter indicated Leibold was being treated for a chronic neck and shoulder injury 28 and calculated what her future non-economic and medical damages would be as a -6- 1 result of her chronic condition. On August 7, 2018, State Farm issued a letter formally 2 denying the waiver request based on "information we currently have."17 3 These communications between State Farm and Leibold's counsel do not 4 support State Farm's request for summary judgment. Rather, taking these letters in the 5 light most favorable to Leibold, they raise an issue of fact as to the reasonableness of 6 State Farm's evaluation of Leibold's waiver request. The letters could reasonably be 7 viewed as unresponsive and provide support for her position that State Farm was 8 delaying action on her request for a waiver. Leibold received letters from different 9 departments and different people saying different things. The letters could be viewed 10 as not adequately communicating to Leibold the problems it was having processesing 11 her request and never stated a reason for State Farm's denial. 12 The letters also provide support for Leibold's argument that State Farm did not 13 make an adequate effort to evaluate her assertion that USAA's payout would not make 14 her whole. While State Farm made some general inquiries for information and asked 15 Leibold for "the total amount of medical bills incurred," such a request could be viewed 16 by a jury as unreasonable given that State Farm's medical payments coverage 17 department had been receiving and paying for Leibold's medical bills through 2017 and 18 therefore already possessed the requested information. Moreover, the file notes show 19 that State Farm knew about her residual neck and shoulder injuries that required 20 ongoing treatment and were aware that as of November 2017, her doctors attributed her 21 residual injuries to the June 1, 2016 accident.18 22 While the medical billing information State Farm possessed may have been 23 insufficient to resolve the waiver issue, the evidence could support a finding that State 24 Farm failed to make adequate efforts to gather what information was in fact needed and 25 to move forward with its evaluation of Leibold's claim that her injuries were chronic and 26 27 17Doc. 14-12. 28 18Doc. 19-2 at p. 2. -7- 1 treatment costs would far exceed the USAA payout. There is no evidence it gathered 2 records or sought more information about her treatment from medical providers, despite 3 the fact that State Farm possessed knowledge about who Leibold's doctors were and 4 where she was being treated. In the letters denying Leibold's request for a medical 5 payments claim waiver, State Farm did not provide any explanation for its decision. The 6 lack of any specific justification lends support to Leibold's argument that it did not 7 conduct a full evaluation of Leibold's damages. 8 In its reply, State Farm points to the fact that it reasonably believed that the 9 $50,000 USAA settlement could cover Leibold's injuries given that her treatment had up 10 to that point only cost $19,000 and it had not yet received any medical bills from 2018. 11 However, there is no evidence in the record making it clear to State Farm that Leibold's 12 treatment was in fact complete; instead, there is evidence in the record that State Farm 13 knew Leibold had residual injuries attributed to the accident. Additionally, Leibold made 14 clear to State Farm that her injuries and treatment were ongoing. This evidence, when 15 viewed in favor of Leibold, creates an issue of fact as to whether it was reasonable to 16 simply assume without conducting an investigation that $50,000 would cover Leibold's 17 total damages despite the assertion of chronic injury. 18 In support of its position, State Farm attaches to its reply brief a physical therapy 19 order from October 2016. The order notes that on July 25, 2016, about two months 20 after the car accident, Leibold fell from a ladder and down some stairs. She landed on 21 her low back and hip area and complained of pain in her arms, neck, back, and 22 buttocks. State Farm appears to argue that this was part of the reason it questioned the 23 damages Leibold sustained as a result of the car accident. There is no evidence in 24 State Farm's file notes that this medical order was relied upon in its initial denial of the 25 waiver or that State Farm communicated this reason to Leibold. Moreover, State 26 Farm's evidence must be weighed against evidence that as of 2017 "all providers" were 27 attributing Leibold's lingering neck and shoulder injuries to the car accident, which 28 -8- 1 occurred before the fall.19 The court therefore cannot conclude that the physical therapy 2 order precludes a jury from finding that State Farm acted unreasonably in responding to 3 Leibold's waiver request. 4 State Farm also takes issue with Leibold's argument that it should have simply 5 presumed Leibold's damages exceeded USAA's settlement amount simply because 6 USAA offered the full policy limits.20 It argues that it has an obligation to perform its own 7 evaluation of the claim. Again, however, the letters relied on by State Farm in support 8 of summary judgment do not reflect what efforts State Farm took to evaluate Leibold's 9 damages. 10 Taking all of the evidence together and drawing all inferences in favor of Leibold, 11 issues regarding the reasonableness of State Farm's conduct remain. Therefore, 12 summary judgment is not warranted as to Leibold's allegation that State Farm engaged 13 in bad faith with regard to her request that State Farm waive any claim for 14 reimbursement under the medical payment provisions in her policy. 15 B. Request to Bifurcate Trial 16 State Farm alternatively "seeks to have the claims asserted by Leibold bifurcated 17 in order to avoid prejudice and allow a just resolution of each claim."21 The request for 18 bifurcation stems from State Farm's reading of the complaint to include both a UIM 19 breach of contract claim and a bad faith claim. While the court understands State 20 Farm's confusion given the timeline of events and the wording used, the complaint does 21 not contain a claim related to her UIM coverage and State Farm's offer. It cannot, 22 23 19Doc. 19-2 at p. 2. 24 20In arguing that her request for a medical payments claim waiver from State Farm was 25 consistent with USAA's offer of the driver's policy limits, Leibold relies on Schultz v. Travelers Indem. Co., 754 P.2d 265, 266-67 (Alaska 1988) (per curiam), which recognizes that if an 26 insurance company believes there is a "substantial likelihood" that a person's claim may exceed its policy limits, then the insurance company has a duty to tender its policy limits as a settlement 27 offer. 28 21Doc. 14 at p. 9. -9- 1 because at the time the complaint was filed, State Farm had not yet offered to settle the 2 UIM claim for $5,000. Indeed, Leibold's response brief disavows any UIM claim against 3 State Farm in the complaint as written. 4 V. CONCLUSION 5 Based on the preceding discussion, State Farm's motion for Summary Judgment 6 at docket 13 is DENIED. However, to the extent State Farm moves for a bifurcated trial, 7 it may renew such a request in the event Leibold seeks and is granted leave to amend 8 her complaint to include a claim related to her UIM coverage. 9 10 DATED this 17th day of May 2019. 11 /s/ JOHN W. SEDWICK 12 SENIOR JUDGE, UNITED STATES DISTRICT COURT 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -10-