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Adding Insult to Injury: Insurance Bad Faith in 1st Party Claims

Imagine you are making your usual commute to work, driving in LA traffic for an hour and a half at 7 in the morning to the office that is only 10 miles from your home. All of a sudden, you hear screeching tires before being violently jerked forward as the sounds of shattering glass and crumpling metal surround you. While you are busy collecting yourself, police arrive and discover the at-fault party is uninsured. Fortunately, you purchased Uninsured/Underinsured Motorist (“UIM”) Coverage through your own insurer and you feel somewhat at ease knowing you are covered. After months of meeting with your doctor, physical therapy, chiropractic treatment, x-rays, and MRIs, your doctor recommends a series of epidural injections if the pain persists. Throughout your treatment, you have been in contact with your insurer and providing them with medical records from the doctors. You chose not to engage a lawyer to assist you because you have had the same insurance for years and trust them to pay your claim just as you have consistently paid premiums over the years. Surprise! Your insurance company offers to settle your UIM claim for 80% of your actual medical expenses. You try to contact the adjuster assigned to your claim, and after navigating the automated phone directory and waiting on hold for 15 minutes, the adjuster gives you a new offer for 90% of your medical bills. The fear, stress, anxiety, and pain come rushing back as though you were just rear-ended a second time. In an effort to put the collision behind you once and for all, you decide to cut your losses and accept the offer.

While the above scenario does not reflect what happened in Mazik v. GEICO General Insurance Co., it is one potential way that this case may be relevant in the future. In Mazik, the claimant was involved in a head-on collision resulting in serious injuries and the death of the at-fault party. Among the claimant’s injuries was the “grossly comminuted fracture” of his left heel bone. His treatment included physical therapy and regular visits with an orthopedic specialist over a ten-month period wherein a final exam noted continuous pain as well as a “very limited range of motion” rendering him “temporarily totally disabled.” Over a year later, the claimant still experienced pain while walking and working and was re-evaluated by a different doctor who observed “severely restricted range of motion and arthritis” in the claimant’s left ankle. Having exhausted the at-fault party’s coverage, the claimant began pursuing recovery through his UIM coverage.

In the UIM claim, claimant included medical records and other documentation supporting substantial damages incurred as a result of the collision and requested the policy limits of his coverage offset by the amount received from the at-fault party’s insurance. The claimant’s insurer responded by preparing an evaluation of his claim (considering his “medical expenses, lost income, and ‘pain and suffering.’” The evaluation came back with a “negotiation range” which centered around the at-fault party’s policy limits (i.e. the low end was within the policy limits and the high end exceeded the policy limits). Later it was established that the evaluation purposely ignored information in the medical records provided by the claimant. The below table shows the progress of negotiations between claimant’s attorney and his insurer:

*The insurer did not agree to $50,000, it was awarded by an arbitrator and was not paid out until 2 months after the arbitrator’s decision.

Almost five years from the date of the collision, the claimant received the maximum amount which his insurer contractually agreed to pay out under the circumstances. Moreover, the court here found that claimant’s insurer acted in bad faith by “cherry-picking” facts from medical records and implementing “an improper adversary approach to resolving [the] claim.” A bad faith expert explained that by offering an amount lower than the maximum amount the insurer was prepared to pay on the claim, the insurer has acted inconsistently with its obligations under the policy. These actions and tactics were ultimately ratified by a managing agent of the insurer, cumulating into “oppression” under California Civil Code Section 3294 and in turn, opening the door for punitive damages.

So, do you trust your insurance company not to hold out on you, let alone "cherry-pick" what injuries they believe you suffered? Resources are available through the California Department of Insurance for consumers facing difficulties with insurers and their agents.

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