United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT RE: DKT.
H. KOH, UNITED STATES DISTRICT JUDGE
Fred Sahadi (“Plaintiff”) brings the instant suit
against Liberty Mutual Insurance, Liberty Mutual Fire
Insurance Company, and Liberty Guard Insurance Company
(collectively, “Defendants”). Liberty Mutual Fire
Insurance Company asserts that Liberty Mutual Insurance and
Liberty Guard Insurance Company have never existed and do not
exist, and that the two entities were thus improperly sued by
Plaintiff. See ECF No. 48. Only Liberty Mutual Fire
Insurance Company (“Liberty”) filed the instant
motion for summary judgment. ECF No. 37 (“Mot”).
Having considered the submissions of the parties, the
relevant law, and the record in this case, the Court GRANTS
Liberty's motion for summary judgment.
was covered by an insurance policy (the “Policy”)
issued by Liberty that provided underinsured motorist
coverage with a limit of $500, 000. See ECF No. 43,
Ex. A. at 11. The Policy dictated that Liberty would pay
compensatory damages to Plaintiff if Plaintiff suffered
bodily injury caused by an underinsured motorist. See
Id. at 36. The Policy contained a provision that
required Plaintiff to cooperate with Liberty “in the
investigation, settlement or defense of any claim or
suit.” Id. at 35. The insurance policy
outlined various other requirements for Plaintiff to meet as
a condition of coverage, such as the requirement that
Plaintiff authorize Liberty to obtain medical reports and
other records pertinent to a claim. See Id. The
Policy also contained a provision allowing either Plaintiff
or Liberty to demand binding arbitration to assess
Plaintiff's entitlement to underinsured motorist coverage
as well as the amount of policy benefits owed to Plaintiff.
See Id. at 38-39.
January 19, 2015, while the Policy was in effect, Plaintiff
was rear-ended by another vehicle and pushed into a stopped
vehicle ahead of him. ECF No. 1-1, Ex. A
(“Compl.”) ¶¶ 6, 7. Plaintiff declined
medical attention and chose to leave the scene, but Plaintiff
eventually began to experience pain that Plaintiff attributed
to the accident. See Id. ¶ 9. Plaintiff
consequently pursued a claim against the driver who
rear-ended him. See Id. ¶ 10. Geico, the other
driver's insurer, paid its policy limit of $15, 000 to
Plaintiff on June 10, 2015. Id.
point before May 21, 2015, Plaintiff retained an attorney
named Todd Davis to represent him in connection with
Plaintiff's insurance claim. See ECF No. 39-6
(“Boos Decl.”) Ex. A at 44:15-17. On June 8,
2015, Davis contacted Liberty. ECF No. 41 (“Schwartz
Decl.”) ¶ 5. Davis informed Liberty that his
office had been retained to represent Plaintiff in connection
with personal injuries Plaintiff sustained in the accident.
Id. A Liberty property adjuster then contacted
Plaintiff, and Plaintiff informed the Liberty property
adjuster that Plaintiff intended to use the Policy's
underinsured motorist bodily injury coverage to pay for back
surgery that Plaintiff needed. Id. ¶ 6. On July
6, 2015, Mathieu Schwartz, a Liberty underinsured motorist
adjuster, was assigned to Plaintiff's claim. Id.
¶ 7. Over the following months, Schwartz sent numerous
letters to Davis that went unanswered. Id. ¶
19. Indeed, Schwartz sent letters dated July 6, 2015, August
21, 2015, September 10, 2015, October 5, 2015, and November
2015, and made various phone calls in an attempt to reach
Davis over this same period, but Davis never responded.
See Id. ¶¶ 11-13, 16-20.
January 11, 2016, Davis contacted Schwartz and informed
Schwartz that Plaintiff had retained the Shea & Shea law
firm to handle the matter, and Davis explained that Davis was
no longer involved. Id. ¶ 21. Plaintiff
testified that Plaintiff retained the Shea & Shea
attorneys “well before December 30th, ” 2015,
see Boos Decl. Ex. A at 75:14-15, and that Plaintiff
believed that Plaintiff retained the Shea & Shea
attorneys at some point in “October” 2015,
see Id. at 76:10-11. Plaintiff then executed a fixed
contingency fee agreement with the Shea & Shea law firm
on January 22, 2016, awarding the firm either 33% or 40% of
Plaintiff's net recovery from Liberty, depending on the
timing of recovery. See Id. at Ex. 15.
testified that Davis had represented Plaintiff in connection
with the Policy claim until the Shea & Shea law firm was
hired. See Id. Ex. B at 53:14-17. On January 22,
2016, Plaintiff executed a fixed contingency fee agreement
with the Shea & Shea law firm awarding the firm either
33% or 40% of Plaintiff's net recovery from Liberty,
depending on the timing of recovery. See Id. Ex. A
at Ex. 15.
February 9, 2016, Mark O'Connor, an attorney with Shea
& Shea, sent Schwartz a letter indicating that
O'Connor represented Plaintiff. Schwartz Decl. ¶ 22.
Schwartz responded that same day by sending a letter to
O'Connor that requested information concerning
Plaintiff's insurance claim, such as a medical
authorization form and medical records. Id. ¶
23 Ex. K. On March 18, 2016, Schwartz received a letter from
O'Connor that indicated that Plaintiff's medical
records were voluminous and that O'Connor would send them
to Schwartz during the following week. Id. ¶
24, Ex. L. O'Connor also said that O'Connor would
include a settlement demand and a formal demand for
arbitration pursuant to the Policy. Id.
April 13, 2016, Schwartz had not heard from O'Connor, so
Schwartz called O'Connor's office and left a message
once again requesting the information. Id. ¶
April 14, 2016, Schwartz received a letter from O'Connor,
alongside 4, 600 pages of documents. Id. ¶ 26.
O'Connor's letter demanded the full remaining $485,
000 underinsured motorist policy limit available under the
Policy. Id. ¶ 27 Ex. M. O'Connor's
letter indicated that this offer would expire on May 12,
2016. Id. O'Connor's letter also demanded
arbitration, which triggered the Policy's arbitration
provision and initiated arbitration proceedings.
Id.; ECF No. 39-5 (“Nelch Decl.”)
¶¶ 3, 4.
retained a nurse to review the medical records. Id.
¶ 28. The nurse reported that the records were
voluminous and requested additional time to review them and
to prepare a report for Schwartz. Id. ¶ 29.
Schwartz called O'Connor on April 29, 2016 and requested
an extension until June 10, 2016 to review the material and
respond to the demand. Id. ¶ 30. O'Connor
granted Liberty an extension until May 27, 2016 to respond.
Compl. ¶ 15.
24, 2016, Schwartz finished his review of the nurse's
report. Schwartz Decl. ¶ 35. On May 25, 2016, Schwartz
contacted O'Connor, and Schwartz explained that Liberty
could neither accept nor reject the $485, 000 offer.
Id. ¶ 36. Schwartz believed that the surgery
that formed the basis of Plaintiff's claim might have
been necessitated by a preexisting medical condition, and not
the automobile accident. Id. ¶ 35. On May 25,
2016, Schwartz also requested additional information from
Plaintiff, including medical records relating to a
neurosurgeon to whom Plaintiff was referred in 2005 (a decade
before Plaintiff was rear-ended on January 19, 2015),
previous imaging of Plaintiff's neck and back, and all
records from another one of Plaintiff's doctors.
Id. ¶ 36, Ex. Q.
15, 2016, Schwartz received a letter from O'Connor that
provided some of the information Schwartz requested.
Id. ¶ 38, Ex. S. The letter indicated that the
imaging records would be forthcoming. Id. The letter
also asserted that Plaintiff never saw a neurosurgeon in
2005. Id. Schwartz replied on the following day, and
noted that the medical records Schwartz had previously
received seemed to indicate that Plaintiff was in fact
referred to a neurosurgeon in 2005. Id. ¶ 39,
Ex. T. Schwartz also requested photographs and repair
estimates for other vehicles involved in the accident,
alongside a signed medical authorization so that Liberty
could obtain medical records on its own. Id.
21, 2016, Schwartz received the imaging materials that
Schwartz had requested, and Schwartz retained a doctor to
review the materials. Id. ¶ 40, Ex. U.
23, 2016, Shea & Shea made an offer of judgment in the
ongoing arbitration proceedings for $485, 000. Id.
¶ 41, Ex. V. This offer of judgment was followed by a
letter sent to Schwartz by a Shea & Shea attorney, which
indicated that the attorney had reviewed the medical records
and understood why Schwartz believed that Plaintiff had seen
a neurosurgeon in 2005. Id. ¶ 42, Ex. W.
Nevertheless, the Shea & Shea attorney asserted that
there was “no evidence in [her] possession” that
supported the conclusion that Plaintiff ever saw a
neurosurgeon in 2005. Id. The Shea & Shea
attorney also indicated that a medical authorization would be
forthcoming. Id. Schwartz received a signed medical
authorization on June 24, 2016, alongside various vehicle
photographs that Schwartz had requested. Id. ¶
44, Ex. X. However, the medical authorization was limited to
only two doctors and therefore did not permit Liberty to
review medical records from before the accident. Id.
7, 2016, Schwartz received a written report from the doctor
Schwartz enlisted to review Plaintiff's imaging records.
Id. ¶ 45. This report indicated that the
imaging records did not show any changes caused by the
accident. Id. Thus, on July 11, 2016, Schwartz sent
O'Connor a letter that indicated that Liberty could still
neither accept nor reject the $485, 000 offer. Id.
¶ 47, Ex. Z.
end of July 2016, Schwartz left Liberty for another job,
id. ¶ 49, and Plaintiff's file was
transferred to Scott Crump, another Liberty adjuster, for
processing. ECF No. 43 (“Crump Decl.”) ¶ 6.
While the matter continued in arbitration, Crump reviewed the
file and agreed that Liberty could not accept the $485, 000
offer because of questions about the impact of preexisting
conditions on Plaintiff's claimed symptoms. Id.
point in early November, around November 7, 2016, Crump
contacted O'Connor. ECF No. 45-1 (“O'Connor
Decl.”) ¶ 19. Crump asked whether Plaintiff would
accept an award below the $485, 000 policy limit.
Id. O'Connor replied that O'Connor lacked
authority to reduce the demand amount, but O'Connor
offered to convey any concrete offers to Plaintiff.
Id. Crump indicated that an offer would be
arbitration proceeded, the parties exchanged discovery
requests, and Liberty retained a neurosurgeon to assist in
its evaluation of Plaintiff's claim. Nelch Decl.
¶¶ 6, 9. In the meantime, on January 12, 2017,
O'Connor sent a letter proposing an arbitrator and making
a settlement demand of $750, 000. Id. ¶ 10.
Several weeks later, Crump participated in a conference call
with the neurosurgeon Liberty had retained, in which the
neurosurgeon opined on Plaintiff's case. Id.
January 30, 2017 and February 7, 2017, Liberty's
arbitration attorney took Plaintiff's deposition.
Id. ¶ 12. On January 31, 2017, Liberty's
arbitration attorney also requested that the parties
participate in mediation, which Liberty offered to finance.
Id. ¶ 13, Ex. I. O'Connor rejected this
request and asserted that Liberty should “pay the
remaining policy limits.” Id. ¶ 14, Ex.
J. O'Connor imposed a deadline of February 8, 2017 for
February 8, 2017, Crump completed a written evaluation of
Plaintiff's claim and a request for settlement authority.
Crump Decl. ¶ 21. Crump concluded that the claim had a
valuation range of $348, 754.01 to $490, 225.69. Id.
Crump believed that the opinions of the doctors that Liberty
consulted suggested a claim value at the lower end of the
range, but Crump also believed that Plaintiff had appeared
credible and sympathetic at his deposition. Id.
Accordingly, Crump requested authority to offer settlement up
to the Policy's full $485, 000 limit. Id.
Because this amount exceeded Crump's authority, Crump
participated in a conference call with several supervisors.
Id. ¶ 22. Crump's supervisors approved
Crump's request to settle up to the policy limit.
Id. Later in the same day, on February 8, 2017,
Crump spoke to O'Connor and the two agreed on a
settlement of the full $485, 000 policy limit. Id.
¶ 23. Liberty proceeded to pay the full $485, 000 policy
limit to Plaintiff. Id.
February 16, 2017, Plaintiff notified his excess insurer of
Liberty's settlement. ECF No. 45-1 (“O'Connor
Decl.”) ¶ 27. Over the following months, the
excess insurer took Plaintiff's deposition on two
different occasions. Id. ¶ 29. Over a year
later, on April 30, 2018, Plaintiff's excess insurer paid
Plaintiff an additional $618, 750 award upon the completion
of mediation. Id. ¶ 30. In the course of these
proceedings, the excess insurer expressed many of the same
concerns Liberty had expressed, namely whether
Plaintiff's symptoms were caused by the accident or
Plaintiff's preexisting conditions. Id. ¶
25, 2018, Plaintiff filed an action in the Superior Court of
California for Santa Clara County. ECF No. 1 ¶ 1. The
complaint alleged claims for the breach of the covenant of
good faith and fair dealing, fraud, and breach of California
Insurance Code § 790.03. Compl. ¶¶ 46-69. The
complaint named the following entities as defendants: Liberty
Mutual Fire Insurance Company (“Liberty”);
Liberty Mutual Insurance Company; Matthieu Schwartz; and
Scott Crump. Id. ¶ 1. The complaint also named
as defendants the two allegedly ...