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Zubillaga v. Allstate Indemnity Co.

California Court of Appeals, Fourth District, Third Division

June 19, 2017

CARMEN ZUBILLAGA, Plaintiff and Appellant,
ALLSTATE INDEMNITY COMPANY, Defendant and Respondent.

         Appeal from a judgment of the Superior Court of Orange County No. 30-2013-00695292, John C. Gastelum, Judge. Reversed.

          Law Office of Kyle J. Scott and Kyle J. Scott for Plaintiff and Appellant.

          Sheppard, Mullin, Richter & Hampton, Peter H. Klee, Karin Dougan Vogel and Joseph E. Foss, for Defendant and Respondent.


          THOMPSON, J.

         In this first party insurance bad faith action, the question is whether the court properly granted summary judgment for the insurer, based on the “genuine dispute” doctrine. (See Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 723 (Wilson).)

         Plaintiff Carmen Zubillaga was injured in an automobile accident. The other driver was at fault. Her insurer, defendant Allstate Indemnity Company (Allstate), rejected her demand for $35, 000, the full amount of her remaining underinsured motorist (UIM) coverage, although it made her a series of offers increasing to $15, 584 instead.

         After an arbitrator awarded plaintiff $35, 000, the amount of her demand, she sued Allstate for breach of the implied covenant of good faith and fair dealing.

         We conclude plaintiff demonstrated triable issues of material fact regarding whether Allstate's decision she did not need expensive epidural steroid injections, was made without a good faith investigation and without a reasonable basis for a genuine dispute. Therefore, summary judgment was improper and we reverse.


         “Because this case comes before us after the trial court granted a motion for summary judgment, we take the facts from the record that was before the trial court when it ruled on that motion. [Citation.] ‘“We review the trial court's decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained.”' [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party. [Citation.]” (Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.)

         The summary judgment record reflects the following undisputed facts:

         Plaintiff had an automobile policy with Allstate that included UIM coverage with a $50, 000 per person limit, and with that limit to be reduced by any amounts paid by the owner or operator of the underinsured car. The policy also provided for voluntary binding arbitration of claim disputes.

         Plaintiff was in a serious car accident on March 25, 2011. The other driver ran a red light and struck her car. The police determined the other driver was at fault. Plaintiff reported the accident to Allstate the next day and she retained an attorney two days later.

         According to the police report, plaintiff reported pain to her chest and left arm immediately after the accident. She walked from her car to a gurney, and was then transported by ambulance to the hospital.

         The hospital records state plaintiff complained of pain to her face and arm, and said the pain “does not radiate.” She reported no back injury or back pain, exhibited no spinal tenderness, and had a full range of motion in her back. She was instructed to follow up with her own medical doctor.

         Plaintiff did not follow up with her own medical doctor. Instead she saw Leonard Valentine, D.C., a chiropractor. Over the next four months she saw Valentine 39 times. Plaintiff first told Valentine she had lower back pain on May 3. She stopped seeing Dr. Valentine in July 2011. At that time she reported lower back pain at a level of three on a scale of zero to 10.

         On July 22, plaintiff saw Arlen Green, D.O., an osteopath. Green recommended plaintiff get magnetic resonance imaging (MRI) of her spine, continue her chiropractic treatment, and take over-the-counter pain medications as necessary.

         A month later, Green noted, “An MRI of the cervical spine report was reviewed indicating multiple disc protrusions. An MRI of the lumbar spine was reviewed indicating a disc protrusion at the L5-S1 level measuring 3 mm with neuroforaminal narrowing.” Green further noted, “Due to the fact that there is significant disc protrusion seen in both the cervical and lumbar spines, this patient will most probably require... future medical treatment. This could include more therapy, medications for pain, and cervical/lumbar epidural steroid injections.”

         On November 10, plaintiff's attorney sent Allstate a demand for $35, 000, based on medical bills totaling $17, 645.44 and his claim that plaintiff would have lower back pain for the remaining 52 years of her life expectancy. Plaintiff had settled with the other driver for $15, 000, so the $35, 000 demand represented the full amount of her remaining UIM policy coverage.

         Shortly after receiving the November 10 demand letter, Allstate responded in writing, introduced the claims representative assigned to handle plaintiff's claim, and described the process Allstate would follow.

         On November 29, Allstate wrote to plaintiff's attorney again and stated “although the claim's value is in dispute, we are willing to settle the matter for $9, 367.00.” Allstate arrived at that figure by determining what it felt was the reasonable and customary amount of plaintiff's medical bills ($14, 367), then adding $10, 000 in general damages, and finally subtracting the $15, 000 settlement from the other driver.

         On November 30, plaintiff served a formal offer to compromise (Code Civ. Proc., § 998) for $35, 000. However, plaintiff's counsel did not otherwise respond to Allstate's $9, 367 settlement offer for more than four months, even though Allstate wrote five follow-up letters requesting such a response.

         On April 4, 2012, plaintiff's counsel formally rejected Allstate's $9, 367 offer and again demanded $35, 000. He provided January and March 2012 evaluations of plaintiff by ...

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