Wood v. Provident Life and Accident Insurance Company

Opinion

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

9 Thomas Scott Wood, No. CV-17-02330-PHX-DGC

10 Plaintiff, ORDER

11 v.

12 Provident Life and Accident Insurance Company, 13 Defendant. 14 15 The Court held a final pretrial conference yesterday. This order will, in light of the 16 discussion during the conference and additional research, address some issues left open in 17 the Court’s ruling on motions in limine. See Doc. 282. 18 1. Defendant’s MIL 2 (Doc. 246). 19 Defendant sought to exclude six categories of documents on the basis of untimely 20 disclosure. The Court deferred decision on the Page Anesthesia tax returns. Plaintiff 21 initially argued that the tax returns became available to him only shortly before they were 22 disclosed on February 25, 2021. During the final pretrial conference, however, Plaintiff’s 23 counsel stated that they had reviewed additional files and found that the records were 24 available earlier. Plaintiff conceded that Defendant’s motion should be granted with 25 respect to these records. 26 2. Defendant’s MIL 3 (Doc. 247). 27 Defendant sought to exclude several subjects of Plaintiff’s testimony on the basis of 28 untimely disclosure. The Court deferred ruling on the third subject – a statement by the 1 western region CMO. Plaintiff conceded during the final pretrial conference that 2 Defendant’s motion should be granted with respect to this statement. 3 3. Defendant’s MIL 4 (Doc. 248). 4 Defendant sought to preclude Plaintiff from presenting evidence of Defendant’s 5 litigation conduct in support of Plaintiff’s bad faith claim. The Court resolved Defendant’s 6 arguments regarding the untimely disclosure of Plaintiff’s positions, and provided some 7 additional discussion on the issue of whether a bad faith claim can be premised on insurer 8 conduct during the course of litigation between the parties. 9 The Court noted: 10 “In Arizona, an insurer‘s contractual duty of good faith does not 11 terminate when the parties become litigation adversaries. An insurer has continuing claims-handling responsibilities even while coverage litigation 12 proceeds.” Safety Dynamics Inc. v. Gen. Star Indem. Co., No. CV-09-00695- 13 TUC-CKJ, 2015 WL 10714048, at *12 (D. Ariz. Feb. 6, 2015) (citation omitted). But there is a difference between a duty of continuing good faith 14 and litigation conduct. “Several out-of-state courts other than those in 15 Arizona have held that the insurer’s conduct in the coverage litigation should not be the basis of a bad-faith claim and that the relevant inquiry is the 16 insurer’s decisions and actions at the time it made the decision to deny coverage.” Id. at *11 (citation omitted). 17 18 Doc. 282 at 5. 19 Following the final pretrial conference, the Court reviewed additional case law. The 20 Court found helpful guidance in Lennar Corp. v. Transamerica Ins. Co., 256 P.3d 635 21 (Ariz. Ct. App. 2011). Lennar recognized “the principle that in the usual case, an insurer 22 that objects to coverage may not for that reason disregard its claims-handling 23 responsibilities pending resolution of the coverage issue.” Id. at 642. Lennar rejected the 24 proposition that an insurer “has no claims-handling responsibilities while the coverage 25 litigation proceeds,” and noted that, “depending on the circumstances, the insurer may have 26 continuing obligations under Zilisch in the meantime.” Id. The Zilisch obligations 27 recognized in Lennar include the following: 28 1 The carrier has an obligation to immediately conduct an adequate investigation, act reasonably in evaluating the claim, and act promptly in 2 paying a legitimate claim. It should do nothing that jeopardizes the insured’s 3 security under the policy. It should not force an insured to go through needless adversarial hoops to achieve its rights under the policy. It cannot 4 lowball claims or delay claims hoping that the insured will settle for less. 5 Equal consideration of the insured requires more than that. 6 Zilisch v. State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 280 (Ariz. 2000) (quoted in Lennar 7 at 256 P.3d at 639). 8 Arizona law thus makes clear that Provident Life’s good faith obligations did not 9 cease when this litigation commenced. Lennar recognizes “that an insured may suffer 10 injury” when the insurer “effectively ignores an obligation to reasonably investigate the 11 claim during the ensuing protracted legal proceedings.” Id. at 643. The Court also 12 continues to recognize, however, that “the insurer’s conduct in the coverage litigation 13 should not be the basis of a bad-faith claim[.]” Safety Dynamics, 2015 WL 10714048, at 14 *11. The Court views this latter statement as applying to the manner in which Provident 15 Life’s counsel have conducted this litigation. In short, Plaintiff may argue at trial that 16 Provident Life breached the duty of good faith by not conducting an internal investigation 17 of the extent of his disability after the litigation was filed, but may not point to counsel’s 18 conduct of the litigation as constituting bad faith. The Court will seek to apply this 19 distinction in its evidentiary rulings during trial. 20 4. Plaintiff’s MIL (Doc. 257). 21 Plaintiff sought “an order barring Provident from presenting at trial any testimony 22 of a corporate representative . . . regarding any conclusions or determinations made by 23 Provident following the filing of the complaint in this action, to the effect that Plaintiff is 24 either ‘residually disabled’ or not ‘totally disabled’ for the purpose of Plaintiff’s insurance 25 policy, other than testimony that is consistent with the deposition testimony given by 26 Provident’s Rule 30(b)(6) designee regarding that subject, Carolyn Daniels.” Doc. 257 27 at 3. The Court took the motion under advisement and directed the parties to address it at 28 the final pretrial conference. 1 The conference discussion made clear that Defendant’s position has not changed 2|| since the testimony of Ms. Daniels — its claims department has not made a residual 3|| disability decision, and Defendant instead is awaiting the outcome of this case where 4|| Defendant is contending, through counsel, that Plaintiff is residually disabled. Plaintiff 5 || will argue at trial that the claims department’s failure to continue investigating his claim 6|| constitutes bad faith, and Defendant will argue that it does not. 7 IT IS ORDERED: 8 l. Plaintiff is precluded from presenting the Page Anesthesia tax returns and the || statement by the western region CMO. 10 2. Plaintiff's MIL (Doc. 257) is granted to the extent it seeks to preclude 11 || Defendant from presenting evidence regarding its internal investigation of Plaintiffs claim that is contrary to the testimony of Ms. Daniels. Defendant is not precluded from arguing 13 || that its decision to await the decision of the Court, while continuing to pay benefits to Plaintiff, does not constitute bad faith. 15 Dated this 19th day of February, 2021. 16 Saul Canpllt i David 6: Campbell 19 Senior United States District Judge 20 21 22 23 24 25 26 27 28

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