WHITE v. COSTCO/SEDGWICK

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE TERRY L. WHITE, a married woman, ) ) Plaintiff/Appellant, ) ) v. ) ) COSTCO WHOLESALE CORPORATION, a ) foreign corporation; and ) SEDGWICK CLAIMS MANAGEMENT ) SERVICES, INC., ) ) Defendants/Appellees. ) __________________________________) DIVISION ONE FILED: 1/31/2013 RUTH A. WILLINGHAM, CLERK BY: mjt 1 CA-CV 12-0040 DEPARTMENT E MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2008-012319 The Honorable Hugh E. Hegyi, Judge AFFIRMED Robert J. Hommel, PC By Robert J. Hommel Attorneys for Plaintiff/Appellant Scottsdale Gallagher By and Attorneys Phoenix & Kennedy, PA Jeffrey T. Pyburn Jonathan T. Hasebe for Defendant/Appellee Costco Jardine Baker Hickman & Houston, PLLC By Kendall D. Steele Attorneys for Defendant/Appellee Sedgwick 1 Phoenix D O W N I E, Judge ¶1 Costco Terry White appeals from a jury verdict in favor of Wholesale Corporation insurance bad faith. ( Costco ) on her claim for She also appeals the denial of her motions for judgment as a matter of law and new trial. Finding no error, we affirm. FACTS AND PROCEDURAL HISTORY ¶2 On June 2, 2005, White suffered an industrial injury while working in Costco s bakery department. self-insured White s for claim, purposes and its of workers third-party Costco, which is compensation, accepted administrator, Sedgwick Claims Management Services, Inc. ( Sedgwick ) began processing benefits. ¶3 White Occupational initially Health and lumbar strains. therapist. Clinic saw a physician ( Banner ), who at Banner diagnosed Desert shoulder The doctor referred White to a physical Several weeks later, Banner staff also identified a contusion to White s coccyx and ordered an MRI. ¶4 White did not progress under Banner s care, and Costco sent her to Dr. Mary Merkel, a physiatrist, who diagnosed a degenerative condition in White s lumbar spine. Dr. Merkel also diagnosed coccydynia and treated White with injections for pain relief. Dr. Merkel ultimately referred White to Dr. Allan Rowley, who administered a coccyx injection that White reported 2 was ineffective. surgeon, Dr. warranted. Dr. Merkel then referred White to a spinal Edward Dohring, who determined surgery was not Dr. Merkel also referred White to chiropractor Eric Neufang. ¶5 At Dr. Merkel s suggestion, Costco asked Dr. Stephen Kaster to conduct an Independent Medical Examination ( IME ) to evaluate White s condition. Dr. Kaster conducted the IME in January 2006 and concluded White required further treatment and could not yet additional return to chiropractic work. Dr. treatment Kaster would did be not believe beneficial but recommended injections to the sacrococcygeal region. ¶6 White declined the recommended injections. Costco then scheduled another IME with Dr. Kaster, who reported that White had sustained a permanent functional impairment of 5%. ¶7 On Industrial medical August 3, Commission care portion 2006, of of Costco Arizona White s filed ( ICA ) claim. a notice closing White with the the active protested and requested a hearing, which the ICA set for November 20, 2006. ¶8 own In the meantime, White obtained a referral from her primary management disc and care physician specialist. coccydynia, injection treatments. Dr. to Dr. Sorosky recommended Susan Sorosky, diagnosed physical a a pain degenerative therapy, and began White then saw Dr. Paul Saiz, a spinal 3 surgeon, who diagnosed a fractured coccygeal and scheduled a coccygectomy to remove part of White s coccyx. ¶9 After White advised Costco that she intended to undergo the coccygectomy, the ICA, at Costco s request, ordered the surgery postponed so that Costco could obtain another IME. Dr. Terry McLean conducted the IME on November 7, 2006. He diagnosed coccydynia and hypermobility of the coccygeal segments and agreed stated that that a coccygectomy White would condition if be chose was not permanent to and appropriate. undergo the stationary Dr. McLean surgery, with a her 5% impairment. ¶10 White advised Costco she had decided to postpone the surgery and instead undergo a coccyx manipulation procedure with a California chiropractor, Christopher Kemper. She asked the ICA to change the authorized physician for her industrial injury to Kemper. The ICA denied her request, and White s challenge to that ruling was added to the issues to be considered at the November 20, 2006 ICA hearing. The hearing did not proceed as scheduled, though, because White s counsel informed Costco that White planned to travel to California and undergo the Kemper procedure at her own expense. Costco s counsel responded that if the procedure were successful, he would recommend to Costco that it reimburse White for the costs. 4 ¶11 In White underwent Kemper s treatment in December 2006. January 2007, White s counsel advised Costco that the treatment was successful but that White would require follow-up care with Kemper. requested He also provided White s medical records and reimbursement for the Kemper procedure expenses incurred by White and her husband. as well as On February 15, 2007, Costco sent White a check for $1,575.53 to reimburse for White s airfare, car rental, meals, and lodging in California, as well as treatment, anesthesiology but it did bills not associated include with the reimbursement Kemper for the chiropractor s bills. ¶12 Costco thereafter scheduled another IME to determine White s health status and work limitations. performed the IME on February 7, 2007. Dr. John Beghin He opined that White had suffered a lumbar strain, found no objective evidence of work restrictions, and stated that White s condition was stationary with no permanent impairment. Costco asked Dr. Beghin to issue a revised report and assume for purposes of that report that White had a coccyx injury that was related to her industrial injury. Dr. Beghin s revised report indicated that assumption did not alter his opinions. 1 Based on Dr. Beghin s report, 1 Dr. Beghin s IME report and addendum indicate he found no coccyx injury at the time of his February 8, 2007 exam but did not rule out a prior injury. 5 Costco filed a notice of claim status closing White s claim. 2 ¶13 On February 8, 2008, the ICA ruled that White was entitled to reimbursement for the Kemper treatment and ordered Costco to pay for any follow-up care that White required with Kemper based on the ICA fee schedule. paid White $3,358 for the outstanding On June 30, 2008, Costco Kemper bills and also tendered $2,000 for anticipated follow-up treatment with Kemper. ¶14 On May 27, 2008, White filed this action against Costco for breach of the implied covenant of good faith and fair dealing in the administration of her claim. 3 After a seven-day trial, the jury returned a verdict in favor of Costco. filed a renewed motion for judgment as a matter of law. also moved for a new trial. White She The superior court denied both motions. ¶15 White timely appealed. We have jurisdiction pursuant to Arizona Revised Statutes ( A.R.S. ) section 12-2101(A)(1) and (A)(5)(a). 2 Costco rescinded its August 3, 2006 notice of claim status and simultaneously closed the claim as of the date of Dr. Beghin s report. 3 White initially asserted an independent claim against Sedgwick, but later dismissed it. White maintained Costco was liable for Sedgwick s actions under an agency theory. 6 DISCUSSION I. Renewed Motion for Judgment as a Matter of Law ( JMOL ) 4 ¶16 A trial court should grant a motion for JMOL if the facts produced in support of the claim or defense have so little probative value, given the quantum of evidence required, that reasonable people could not agree with the conclusion advanced by the proponent of the claim or defense. Acuna v. Kroack, 212 Ariz. 104, 110-11, ¶ 24, 128 P.3d 221, 227-28 (App. 2006). We review the denial of a motion for JMOL de novo, viewing the evidence in a light most favorable to upholding the jury verdict and affirming if any substantial evidence exists that would permit reasonable persons to reach the jury s result. Id. at ¶¶ 23-24. ¶17 Costco presented evidence at trial that its failure to reimburse White oversight. Costco s for Kemper s treatment was the result of an Claims adjuster Pamela Moon testified that after counsel recommended a generous approach to reimbursing White, she increased the medical reserves on the file for purposes of reimbursing the Kemper treatment. Moon explained that because she did not receive the chiropractor s bills directly from Kemper, but from Costco s attorney, she misfiled the bills in the legal file, and they were consequently 4 White moved for JMOL at the close of evidence, in accordance with Rule 50(a), Arizona Rules of Civil Procedure ( Rule ). 7 not processed ongoing for payment. miscommunication She with further Costco s testified counsel about during an the following year about whether White had been fully reimbursed. Although counsel advised that White was complaining Costco had not paid all of the Kemper expenses, Moon believed she had reimbursed all expenses because she had paid all of the travel expenses. Moon did not appreciate that the ongoing requests for reimbursement of expenses included Kemper s bills. She testified: [E]xpenses to me don t include medical costs. The expenses are out-of-pocket cost for travel, hotel, that sort of thing. So I was trying to get through to [Costco s attorney] all of the expenses had been paid. And he kept saying they weren t, so I sent him a copy of the payment history and outlined this is what was paid. So we were just - we weren t communicating. He was using the word expenses, and expenses to me mean expenses. There was a lack of communication. Moon admitted she mishandled White s reimbursement claim, but testified she had increased the reserves specifically to pay the Kemper bills and always intended to pay them. 5 5 White attempted to impeach Moon s trial testimony with her earlier deposition testimony and other evidence. But as noted supra, we review the trial evidence in the light most favorable to affirming the jury s verdict. Acuna, 212 Ariz. at 111, ¶ 24, 128 P.3d at 228 (citation omitted). Additionally, [n]o rule is better established than that the credibility of the witnesses and the weight and value to be given to their testimony are questions exclusively for the jury. State v. Clemons, 110 Ariz. 555, 556-57, 521 P.2d 987, 988-89 (1974). 8 ¶18 White was not entitled to JMOL on her bad faith claim. The evidence established genuine disputes of fact about whether Costco denied investigated White s that reimbursement claim, and whether claim, the whether failure reimburse for the Kemper bills was intentional. to it timely See Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 237, ¶ 20, 995 P.2d 276, 279 (2000) ( The tort of bad faith arises when the insurer intentionally denies, fails to process or pay a claim without a reasonable basis. ); see also Rawlings v. Apodaca, 151 Ariz. 149, 157, 726 P.2d 565, 573 (1986) (insurer should not be held liable for bad faith when it makes a good faith mistake in performance or judgment). The superior court did not err in denying White s JMOL motion. II. Motion for New Trial ¶19 granted White her also motion contends the for trial new superior because court should have the verdict was contrary to the law and unsupported by the evidence. A trial court has substantial latitude in deciding whether to overturn a jury verdict; we review the denial of a motion for new trial for an abuse of discretion, viewing the evidence in the light most favorable to upholding the verdict. Hutcherson v. City of Phoenix, 192 Ariz. 51, 53, ¶¶ 2-13, 961 P.2d 449, 451 (1998) (citations omitted). Absent a clear abuse of discretion, we will affirm the denial of a motion for new trial brought on the 9 grounds that the verdict is against the weight of the evidence. Styles v. Ceranski, 185 Ariz. 448, 450, 916 P.2d 1164, 1166 (App. 1996) (citation omitted). ¶20 that As it previously did reimbursement not claim, discussed, deny but or that Costco presented intentionally its adjustor evidence delay failed White s to timely reimburse a portion of the claim because she misfiled the Kemper bills. that Jurors could also conclude from the evidence presented Costco s counsel and Moon both investigated White s continuing requests for reimbursement, though Moon kept reaching the faulty conclusion that she had fully reimbursed White. ¶21 The jury was entitled to consider Moon s testimony, together with other evidence about, inter alia, benefit payments made since the inception of the claim, Costco s willingness to fund the more expensive coccygectomy, and its increased reserves for the specific purpose of reimbursing the Kemper treatment, in determining that Costco did not act in bad faith. supreme court has held in discussing insurance bad faith: Insurance companies, like other enterprises and all human beings, are far from perfect. Papers get lost, telephone messages misplaced and claims ignored because paperwork was misfiled or improperly processed. Such isolated mischances may result in a claim being unpaid or delayed. None of these mistakes will ordinarily constitute a breach of the implied covenant of good faith and fair dealing . . . . 10 As our As long as [an insurer] acts honestly, on adequate information and does not place paramount importance on its own interests, it should not be held liable because of a good faith mistake in performance or judgment. Rawlings, 151 Ariz. at 157, 726 P.2d at 573. ¶22 The jury s verdict was supported by substantial evidence, and the superior court did not abuse its discretion by denying White s motion for new trial. III. Dr. McLean s Testimony ¶23 White contends the court erred by admitting testimony from Dr. McLean about the Kemper treatment because it unfairly confused jurors on the reasonableness of Costco s denials and state of mind during the denials and litigation. We conclude otherwise. ¶24 We generally review challenges evidence for an abuse of discretion. to the admission of Yauch v. S. Pac. Transp. Co., 198 Ariz. 394, 399, ¶ 10, 10 P.3d 1181, 1186 (App. 2000). The trial court sustained White s objection to Dr. McLean s testimony insofar as it was intended to show that Costco acted reasonably. Dr. The McLean s therefore court opinions could not noted when it rely reasonableness of its conduct. that made on Costco its them did claims to not possess decisions demonstrate and the See Mendoza v. McDonald s Corp., 222 Ariz. 139, 158 n.31, ¶ 60, 213 P.3d 288, 307 n.31 (App. 11 2009) ( The reasonableness of an insurer s actions in handling a claim must be evaluated as of the time of those actions based on what it knew when it acted. ). The court further agreed to instruct the jury not to consider this particular evidence on the point as to the reasonableness of whatever actions the company took. ¶25 We discern no abuse of discretion and find no support in the record for White s contention that Dr. McLean s testimony confused jurors about the propriety of Costco s conduct. See Schwartz v. Farmers Ins. Co. of Ariz., 166 Ariz. 33, 37, 800 P.2d 20, 24 (App. 1990) (trial court s evidentiary ruling will not be overturned absent a clear abuse of discretion and resulting prejudice). IV. ICA Determinations ¶26 Prior to trial, White moved for partial summary judgment on the facts and issues adjudicated by the ICA and asked the court to order that those issues had been established as a matter of law. 6 Costco moved to strike the motion, arguing 6 The specific facts and issues White asked the court establish as a matter of law were: (1) she suffered an injury compensable under the Workers Compensation Act on June 2, 2005; (2) her compensable injury included pathology to the coccyx; (3) White required ongoing medical care as of August 3, 2006, when Costco closed her claim; (4) White was entitled to continuing medical care and wage benefits after February 15, 2007, when Costco closed her claim; (5) White was entitled to have Kemper designated her treating physician; (6) White s displaced coccyx was related to her June 2, 2005 industrial injury; (7) Kemper s 12 it was not a proper Rule 56 motion because it asked the court to establish certain facts, not grant judgment on a claim or defense. The court granted Costco s motion, without prejudice to White s ability to raise the issue in another context. ¶27 White then filed an amended motion for partial summary judgment, or in the alternative motion in limine, in which she argued the ICA s determinations established Costco s breach of contract and certain other facts and issues as a matter of law and asked the court to so instruct the jury. The court denied the motion as premature, without prejudice to White renewing the motion before the comprehensive pretrial management conference. ¶28 asked After the court set the matter for trial, White again it to recognize determinations and determinations in to the the preclusive instruct bad faith the effect jury action. of The ICA s accept to the those court granted White s motion, stating: the jury will be instructed that the Industrial Commission s relevant findings and correct and are to be given preclusive effect. court to include the instruction in the rulings are White asked the preliminary jury instructions. treatment of White s displaced coccyx was reasonable and necessary; and (8) all conflicts of medical opinion regarding diagnosis and treatment between Dr. Beghin and Kemper are resolved in favor of Kemper. 13 ¶29 As relevant, the preliminary instructions given to the jury stated: Ms. White and Costco have already had several hearings about what workers compensation benefits she was entitled to receive. Those hearings were held at the Industrial Commission of Arizona, an agency our Legislature has established to hear these kinds of claims. In this trial, you must assume that the Industrial Commission s decisions were correct. The question you will decide is whether Costco acted in bad faith in denying or delaying treatment or payment of Ms. White s claims. (Emphasis added.) The court further instructed the follows in its final instructions: Plaintiff Terr[y] White filed a claim for benefits as a result of injuries she suffered while working for Defendant Costco. Defendant Costco, through Defendant Sedgwick, and subject to the provisions of the Workers Compensation Laws of this State, timely accepted the claim for benefits by Notice of Claim Status dated August 3, 2005. The parties disagreed about certain matters. They presented evidence in support of their positions to an Administrative Law Judge for the Industrial Commission of Arizona. Following hearings, the Administrative Law Judge decided February 8, 2008 that Ms. White was entitled to receive medical and compensation benefits from June 5, 2005 until such time as her condition was determined to be medically stationary. The Judge also approved Plaintiff s request for change of doctor to Dr. Kemper that the Commission had previously denied. He ordered that Costco reimburse Ms. White for her out-of-pocket costs for treatment to the 14 jury as date of his decision. The Judge ordered that any further costs for Dr. Kemper s services related to her injury were to be paid to Dr. Kemper in compliance with the Commission s medical fee schedule. By notice of claim status filed March 17, 2009, Ms. White s industrial claim was closed with no permanent disability and the need for active medical care was terminated on February 19, 2009 because the plaintiff was discharged. This notice of claim status was not protested by plaintiff or her counsel and has since become final. These issues are now final, and are not in dispute here. You must accept them as true. ¶30 Relying on Mendoza, White argues that the failure to instruct the jury about the preclusive effect of the ICA s determinations at the beginning of trial was prejudicial error. We disagree. ¶31 In company for Mendoza, bad a faith former arising workers compensation claim. 213 P.3d at 291, 296. McDonald s out of employee its sued handling of the her 222 Ariz. at 142, 147, ¶¶ 1, 24, Prior to trial, the ICA determined Mendoza had suffered an industrial injury that disabled her from working and entitled her to temporary disability benefits, and that the injury resulted in further physical compensable under the Workers Compensation Act. ¶ 57, 213 P.3d at 305-06. harm that was Id. at 156-57, The superior court did not instruct the jury that it was required to accept the ICA s determinations as true, and McDonald s argued at trial that Mendoza was not 15 actually injured on the job and that she had perpetrated a fraud by obtaining disability and medical benefits. 213 P.3d at 306. Id. at 157, ¶ 58, On appeal, this Court held that the superior court erred by refusing to instruct the jury to accept the ICA s factual findings as true and by failing to consider Mendoza s objections to McDonald s trial evidence regarding her alleged fraud. ¶32 Id. at 157-58, ¶ 60, 213 P.3d at 306-07. Unlike Mendoza, the court here instructed the jury in both the preliminary and final instructions that it must accept the ICA s determinations as true. White cites no authority for the proposition that the court was required to give the more detailed jury instruction at the outset of trial, rather than after the close of evidence. We review jury instructions as a whole to determine whether the trial court properly guided the jury in its deliberations. Callender v. Transpac. Hotel Corp., 179 Ariz. 557, 560, 880 P.2d 1103, 1106 (App. 1993) (citations omitted); Crackel v. Allstate Ins. Co., 208 Ariz. 252, 270-71, ¶ 68, 92 P.3d 882, 900-01 (App. 2004) (citations omitted). We will not overturn a verdict unless there is substantial doubt about whether the jury was properly guided. at 271, ¶ 68, 92 P.3d at 901. Crackel, 208 Ariz. We have no doubt, let alone substantial doubt that the jury here was properly guided in applying the ICA determinations. 16 CONCLUSION ¶33 We affirm the judgment of the superior court. White s request for because she not is an the award of costs successful and attorneys party. Sedgwick s request for attorneys fees. We deny We also fees deny White dismissed her claim against Sedgwick, and it is not at issue in this appeal. As the successful party, Costco is entitled to its appellate costs upon compliance with ARCAP 21. /s/ MARGARET H. DOWNIE, Presiding Judge CONCURRING: /s/ MAURICE PORTLEY, Judge /s/ PHILIP HALL, Judge 17

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