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Defrenza v. Progressive Express Insurance Co.

United States District Court, E.D. California

November 14, 2017



         Defendant Progressive Express Insurance Company (“Progressive” or “Defendant”) submits to this Court a motion for summary judgment, or in the alternative, partial summary judgment (Doc. 16), on Plaintiff John Michael DeFrenza's (“DeFrenza” or “Plaintiff”) single claim that Progressive acted in bad faith in resolving his uninsured motorist insurance claim. DeFrenza was in an accident on September 18, 2011 and did not receive a settlement from Progressive until April 2, 2015, almost 3 and a half years later. This matter is now fully briefed. For the reasons that follow, Progressive's motion for summary adjudication will be granted in part and denied in part.


         DeFrenza was a “Rated Driver” under a Progressive Commercial Automobile Insurance Policy, Number 06764199-5 (the “Policy”), issued to DeFrenza's employer, Ross Fabrication and Welding Inc. (“Ross”), with a policy period of June 12, 2011 through December 12, 2011, and including Underinsured Motorist coverage with a combined single limit of $750, 000. SUMF 1. DeFrenza had underinsured motorist coverage through his own carrier, AAA, with a limit of $250, 000/500, 000. SUMF 2. Coverage was pro-rated between the two carriers. SUMF 3.

         On September 18, 2011, DeFrenza and a co-worker were driving a pickup truck owned by Ross to a jobsite, when it was struck by a 1999 Chevrolet Astro Van. SUMF 4. The driver of the Astro Van, who was at fault, struck DeFrenza's vehicle at 30 to 35 miles per hour while running a red light, and spun DeFrenza's vehicle clockwise. Doc. 20 at 6-7. The 2011 Ford F-150 pickup truck DeFrenza was driving, which was less than a year old, was totaled. Doc. 20 at 6.

         On August 13, 2012, Progressive confirmed DeFrenza would present an Uninsured Motorist (“UIM”) claim through his attorney, Brandon Holladay. SUMF 5. DeFrenza filed a first party UIM claim on or about October 10, 2012. Doc. 20 at 8. On October 10, 2012, after confirming DeFrenza's policy-limits settlement with the at-fault driver, Progressive opened the UIM claim. SUMF 6.

         On October 12, 2012, three days after the claim was opened, Emy Liberty (“Liberty”) confirmed UIM coverage was in order, with limits of $735, 000 ($750, 000 - 15, 000), and documented the amount of coverage in the claim file. DSUF 7. While confirming coverage, Liberty noted initial questions about DeFrenza's own UIM coverage and a possible offset for worker's compensation coverage. DSUF 8. On October 23, 2012, Rowena Pavlinac entered her own coverage statement again affirming the amount of UIM coverage and noting the need to rule out worker's compensation and whether DeFrenza had his own UIM coverage. Pavlinac documented the amount of UIM coverage in the claim file. DSUF 9.

         On October 25, 2012, Holladay's office told Pavlinac they had no medical records for DeFrenza but would send them when they became available. SUMF 10. On November 20, 2012, Pavlinac wrote and left a voicemail message for Holladay following up on her requests for information. SUMF 11. On January 24, 2013, Pavlinac again spoke with Holladay, who represented that he would provide medical authorizations and confirmation of DeFrenza's personal UIM coverage. SUMF 12. On February 4, 2013, Holladay sent a demand letter for the policy limits of $735, 000. SUMF 13. On February 4, 2013, Holladay represented that DeFrenza had no personal UIM coverage. SUMF 14. On February 4, 2013, Holladay stated that DeFrenza was anticipated to undergo two additional surgeries. SUMF 15. On February 4, 2013, Holladay did not return the medical authorizations. SUMF 16. On February 4, 2013, Holladay provided 365 pages of medical records relating to DeFrenza's treatment, along with wage information. SUMF 17. On or about February 8, 2013, [2] DeFrenza made a demand to Progressive to pay the underlying UIM policy limits of $735, 000. Doc. 20 at 8.

         On February 15, 2013, Pavlinac told Holladay she required all of DeFrenza's prior Kaiser records, not just the surgery records. SUMF 18. On March 8, 2013, at Progressive's request, Holladay provided what he represented were DeFrenza's medical records for three years prior to the accident. SUMF 19. On April 10, 2013, Pavlinac sent Holladay a letter requesting the promised medical authorizations and AAA declarations page. SUMF 20. On April 10, 2013, after speaking with Holladay and explaining the medical records provided were incomplete, Pavlinac again asked for complete medical records and billings. SUMF 21. Holladay never returned the signed medical authorizations. SUMF 22.

         On April 29, 2013, Holladay asked for Progressive's settlement position, Pavlinac advised Holladay that she needed to review specific coverage issues, including whether worker's compensation applied, and possible additional UMBI coverage through DeFrenza's policy with AAA, which up to that date had not been notified of a potential claim. SUMF 23. On June 14, 2013, Holladay-while continuing to demand policy limits-asked that Progressive make an offer of the “undisputed value” of DeFrenza's injuries “even if they are keeping believe [sic] that a reduction should be taken against the worker's compensation benefit.” SUMF 24.

         On July 31, 2013, Pavlinac advised Holladay that Progressive would “not be able to make any payments . . . until we reach an agreement for the full amount of the claim.” SUMF 25. On August 2, 2013, Pavlinac informed Holladay that Progressive still had not received DeFrenza's post-operative reports and requested updated medical records and billing. Holladay said he was unaware that Progressive did not have the updated medical records. SUMF 26. On August 13, 2013, Pavlinac advised Holladay that Progressive would not assert a workers' compensation offset and renewed her request for updated medical records. SUMF 27. August 26, 2013, Pavlinac received the updated Kaiser records and began her evaluation of DeFrenza's injury and medical records and billings. SUMF 28.

         On August 27, 2013, assuming pro-rata coverage with AAA, Pavlinac arrived at a settlement range of $219, 942 - 294, 742 as Progressive's 88% share. SUMF 29. On September 4, 2013, using, inter alia, a different loss of earnings component, Pavlinac's manager reached a settlement range of $152, 791 - 327, 791. SUMF 30. On September 10, 2013, Holladay made a formal arbitration demand. SUMF 31. On September 17, 2013, Progressive offered the low end of its evaluation, $152, 791 (as its pro-rated share), to settle DeFrenza's entire claim. SUMF 32.

         On September 17, 2013, while making her offer of settlement, Pavlinac advised Holladay that the medical records he provided were neither numbered nor Bates-stamped, and that they made references to numerous procedures for which there were no corresponding records. SUMF 33. On September 17, 2013, Holladay told Progressive that it could obtain any additional necessary records via subpoena. SUMF 34. In a letter dated September 17, 2013, Holladay rejected the $152, 791 offer, asserted that it constituted an “undisputed amount, ” and demanded immediate advance payment “while we move forward with the demanded arbitration.” SUMF 35.

         The basis for Holladay's demand for immediate payment of the settlement offer was language from the implementing regulations of the Fair Claims Practices Act found at Cal. Code.Regs. tit. 10 § 2695.7(h). SUMF 36. Progressive referred the arbitration defense to Richard Phillips (“Phillips”). SUMF 37. On October 11, 2013, Rowena Pavlinac (“Pavlinac”) spoke with [Phillips] who had further researched Insurance Code 2695.7(h), and noted on its face it appears Progressive ought to pay out its undisputed offer of $152, 791. PSUF 6. On October 14, 2013, Phillips communicated to Holladay that the authority he relied upon for his argument that Progressive had a duty to advance an undisputed amount was inapposite. SUMF 38.

         On October 28, 2013, Phillips and Pavlinac discussed the case and confirmed the value of the case was at a range of $350, 000 to $450, 000 with a target range of $390, 000. However, no new offer was made after the original offer of $152, 791 (offered on September 17, 2013). PSUF 7. Carolyn Nogy (“Nogy”) PMQ for Progressive testified that each time a new value was placed on a claim the adjuster was to start at the low end of the settlement value and Progressive encouraged assertive negotiations as Progressive's goal was to settle the claims quickly as it was not Progressive's aim to delay claims in any manner. SUMF 9. Progressive failed to follow and/or comply with its own policy of adjusting its previous offers once new information was obtained that increased the projected settlement value of the case. PSUF 10.

         During discovery, Kaiser provided nearly 1, 500 pages of medical records pursuant to subpoena. SUMF 39. Progressive and AAA retained an expert, Brian Grossman, M.D., who opined that DeFrenza's injury-related complaints about his back and spine related back to previous injuries, prior surgery, and a history of strenuous work. DSUF 40. Michael Tivnon, M.D., a shoulder expert, performed an IME and opined that the need for both shoulder replacement surgeries was due to degeneration not the automobile accident. DSUF 41. Geoffrey Miller, M.D., an orthopedic surgeon, opined that at least one shoulder surgery and treatment to both shoulders and the cervical spine were directly related to the auto accident. Declaration of Seth O'Dell, Exh. C., Doc. 20-1 (“Miller Report”) at 26-27.

         On March 11, 2015, when the new adjuster Paul Nummelin (“Nummelin”) completed a new evaluation for the DeFrenza case, and based on his review of the file information, he placed a settlement range with $243, 232 at the low range and $518, 232 as the high range for settlement. PSUF 8. On April 2, 2015, the parties resolved the claim at mediation for $400, 000 ($300, 000 from Progressive and $100, 000 from AAA). SUMF 42. The settlement agreement, executed April 2, 2015, included a release of all claims “arising out of or in any way connected with [the accident], including all injuries and deaths, loss of services and consortium, and property damage, resulting therefrom . . . .” SUMF 43.[3] AAA advised Progressive that it placed a maximum value of $400, 000 on DeFrenza's claim. DSUF 44.[4]


         Summary judgment is proper when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Fortyune v. American Multi-Cinema, Inc., 364 F.3d 1075, 1080 (9th Cir. 2004). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying the portions of the declarations (if any), pleadings, and discovery that demonstrate an absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). A fact is “material” if it might affect the outcome of the suit under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986); United States v. Kapp, 564 F.3d 1103, 1114 (9th Cir. 2009). A dispute is “genuine” as to a material fact if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. Anderson, 477 U.S. at 248; Freecycle Sunnyvale v. Freecycle Network, 626 F.3d 509, 514 (9th Cir. 2010).

         Where the moving party will have the burden of proof on an issue at trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other than for the movant. Soremekun, 509 F.3d at 984. Where the non-moving party will have the burden of proof on an issue at trial, the movant may prevail by presenting evidence that negates an essential element of the non-moving party's claim or by merely pointing out that there is an absence of evidence to support an essential element of the non-moving party's claim. See James River Ins. Co. v. Herbert Schenk, P.C., 523 F.3d 915, 923 (9th Cir. 2008); Soremekun, 509 F.3d at 984. If a moving party fails to carry its burden of production, then “the non-moving party has no obligation to produce anything, even if the non-moving party would have the ultimate burden of persuasion.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1105-06 (9th Cir. 2000). If the moving party meets its initial burden, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Nissan Fire, 210 F.3d at 1103. The opposing party cannot “‘rest upon the mere allegations or denials of [its] pleading' but must instead produce evidence that ‘sets forth specific facts showing that there is a genuine issue for trial.'” Estate of Tucker v. Interscope Records, 515 F.3d 1019, 1030 (9th Cir. 2008).

         The opposing party's evidence is to be believed, and all justifiable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. See Anderson, 477 U.S. at 255; Matsushita, 475 U.S. at 587; Narayan v. EGL, Inc., 616 F.3d 895, 899 (9th Cir. 2010). While a “justifiable inference” need not be the most likely or the most persuasive inference, a "justifiable inference" must still be rational or reasonable. See Narayan, 616 F.3d at 899. Summary judgment may not be granted “where divergent ultimate inferences may reasonably be drawn from the undisputed facts.” Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2015); see also Holly D. v. Cal. Inst. of Tech., 339 F.3d 1158, 1175 (9th Cir. 2003). Inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. See Fitzgerald v. El Dorado Cnty., 94 F.Supp.3d 1155, 1163 (E.D. Cal. 2015); Sanders v. City of Fresno, 551 F.Supp.2d 1149, 1163 (E.D. Cal. 2008). “A genuine issue of material fact does not spring into being simply because a litigant claims that one exists or promises to produce admissible evidence at trial.” Del Carmen Guadalupe v. Agosto, 299 F.3d 15, 23 (1st Cir. 2002); see Bryant v. Adventist Health System/West, 289 F.3d 1162, 1167 (9th Cir. 2002). The parties have the obligation to particularly identify material facts, and the court is not required to scour the record in search of a genuine disputed material fact. Simmons v. Navajo Cnty., 609 F.3d 1011, 1017 (9th Cir. 2010). Further, a “motion for summary judgment may not be defeated . . . by evidence that is ‘merely colorable' or ‘is not significantly probative.'” Anderson, 477 U.S. at 249-50; Hardage v. CBS Broad. Inc., 427 F.3d 1177, 1183 (9th Cir. 2006). If the nonmoving party fails to produce evidence sufficient to create a genuine issue of material fact, the moving party is entitled to summary judgment. Nissan Fire, 210 F.3d at 1103.


         1. Summary of the Parties' Positions on the Current Dispute

         Progressive characterizes DeFrenza's claim for breach of the covenant of good faith and fair dealing (“bad faith”) as based upon three distinct theories: (1) Progressive failed to immediately tender its initial settlement offer - what DeFrenza terms “failure to pay undisputed covered parts of the claim;” (2) Progressive made an unreasonably low initial offer of settlement; and (3) Progressive unreasonably delayed resolution of the claim. If the Court is unable to grant the motion in full, Progressive requests discrete rulings that it did not commit bad faith based on one or more of DeFrenza's three theories for purposes of narrowing the case for trial. Progressive maintains that their actions were reasonable, timely, and thorough, and that they had no obligation to make advance payments on a claim in the absence of a settlement.

         In DeFrenza's opposition to the motion (“Doc. 20”), DeFrenza addresses the three main theories of bad faith as outlined by Progressive, and argues that there are at least seven issues of fact that the jury must decide, namely:

1. Did Progressive intentionally delay its investigation into the facts and circumstances of ...

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