Lopez v. American Family Mutual Insurance Company, No. 2:2007cv00957 - Document 54 (D. Nev. 2009)
Court Description: ORDER Granting 35 Motion for Partial Summary Judgment as tothe five claims: (1) intentional infliction of emotional distress; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of the Unfair Claims Practices Act; (4) breach of fiduciary duty, and (4) estoppel. Signed by Judge Robert C. Jones on 7/13/09. (Copies have been distributed pursuant to the NEF - AXM)
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Lopez v. American Family Mutual Insurance Company Doc. 54 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 7 VILMA LOPEZ, 8 9 10 11 12 ) ) Plaintiff, ) ) vs. ) ) AMERICAN FAMILY MUTUAL INSURANCE ) COMPANY, ) ) Defendant. ) ) 13 14 2:07-cv-00957-RCJ-RJJ ORDER I. INTRODUCTION Before the Court is Defendant American Family Insurance Company’s Motion for Partial 15 Summary Judgment pursuant to Federal Rule of Civil Procedure 56 (#35). In the present motion, 16 Defendant moves for summary judgment on all claims except for the breach of contract claim. The 17 Court has considered the pleadings and arguments on behalf of both parties. IT IS HEREBY 18 ORDERED that Defendant’s Motion for Partial Summary Judgment is GRANTED. (#35.) 19 II. BACKGROUND 20 A. Medical Facts 21 On February 12, 2005, Plaintiff Vilma Lopez was involved in an automobile accident with 22 Stephen Sandford (“the tortfeasor”). Plaintiff’s vehicle was seriously damaged and would later be 23 declared a total loss. She was taken by EMS to University Medical Center and underwent CT scans 24 of her brain, facial bones, abdomen, and pelvis, all of which were negative. (#42 Ex. 1, Report of 25 Charles A. Bloom, D.O., at 2.) However, Plaintiff was diagnosed with a “right complex lip Dockets.Justia.com 1 laceration, 2.5 cm in length” which went “through and through her lip.” (#42 Ex. 1, Operative 2 Report of Shawn Tsuda, M.D.) The laceration was repaired with sutures, but Plaintiff was informed 3 that the injury would leave some permanent scarring even after repair. (#42 Ex. 1, Surgical 4 Consultation of Shawn Tsuda, M.D. at 2.) Plaintiff was also diagnosed with low back strain. (#42 5 Ex. 1, Report of Charles A. Bloom, D.O. at 2.) Plaintiff was prescribed Motrin, Lortab, and 6 antibiotics, and was subsequently discharged. (Id.) 7 On February 14, 2005, Plaintiff began treating with chiropractor Neel Khurana, D.C. (#42 8 Ex. 3, Patient Initial Contact Report at 1.) During her initial consultation with Khurana, Plaintiff 9 “rated her overall pain as a 10/10 with 10/10 being the worst pain ever experienced.” (Id.) Khurana 10 diagnosed Plaintiff with “sprain/strain of the cervical, thoracic, lumbar and lumbosacral spine, acute 11 posttraumatic intervertebral segmental dysfunction of the cervical, thoracic, lumbar and lumbosacral 12 spine with associated myospasms, [and] whiplash associated disorder with decreased range of 13 motion and paraspinal point tenderness.” (Id. at 2.) Khurana described Plaintiff’s prognosis as 14 “[g]uarded due to the severity of [her] injuries,” and estimated that Plaintiff’s total treatment time 15 would be “approximately 3–4 months of continuous chiropractic care and physical reconditioning.” 16 (Id. at 2.) Over the ensuing four months, Plaintiff underwent twenty-three treatment sessions with 17 Dr. Khurana. (#42 Ex. 3, Patient Ledger at 1–3.) 18 On March 1, 2005, Plaintiff sought consultation with Dr. Jaswinder Grover at Nevada Spine 19 Institute. (#42 Ex. 4, Report Dated 3/1/2005 at 1.) Plaintiff complained of neck and low back pain, 20 tingling and paresthesias in the upper and lower extremities, and headaches. (Id.) At Dr. Grover’s 21 direction, Plaintiff had a series of MRIs taken. The shoulder MRI was normal. (#42 Ex. 4, MRI of 22 the Left Shoulder Without Contrast.) The wrist MRI revealed a small ganglion cyst, which 23 “correlate[d] with the site of clinical concern.” (#42 Ex. 4, MRI of the Left Wrist Without Contrast.) 24 Dr. Grover hypothesized that Defendant may have injured her wrist by tightly gripping the steering 25 wheel at the time of the collision. (#42 Ex. 4, Report Dated 3/17/2005.) The spine MRIs showed Page 2 of 16 1 various preexisting degenerative and genetic conditions, which apparently made Plaintiff more 2 susceptible to injury in case of trauma. (#42 at 5:4–9.) 3 On June 21, 2005, Plaintiff was discharged from chiropractor Khurana’s care. (#42 Ex. 3, 4 Patient Discharge Report.) At the time of her discharge, Plaintiff’s complaints were apparently 5 limited to “subjective mild stiffness.” (Id.) Khurana’s discharge report described Plaintiff’s range 6 of motion and deep tendon reflexes were both described as being “within normal limits in both the 7 cervical and lumbar spines.” (Id.) Khurana described Plaintiff’s prognosis as “fair.” (Id.) 8 On July 7, 2005, about two weeks after her discharge from Khurana, Plaintiff returned to Dr. 9 Grover. (#42 Ex. 4, Report Dated 7/7/2005.) Plaintiff complained of ongoing pain, difficulty 10 sleeping, and stiffness. (Id.) Dr. Grover determined that Plaintiff was in a substantial amount of 11 pain and was not responding to conservative treatment. (Id.) Dr. Grover recommended that Plaintiff 12 undergo steroid and nerve blocker injection therapy to help control her pain. (#42 Ex. 4, Report 13 Dated 7/7/2005.) 14 Plaintiff did not return to Dr. Grover until March 30, 2006. (#42 Ex. 4, Report Dated 15 3/30/2006.) At that time, Plaintiff complained of back pain, neck pain, interscapular pain, and pain 16 in her extremities. (Id.) Plaintiff was due to deliver a baby, and Dr. Grover delayed additional 17 treatment until Plaintiff was postpartum. (Id.) By May 30, 2006, Plaintiff had delivered her baby, 18 and Dr. Grover ordered another set of MRIs. On August 3, 2006, Dr. Grover analyzed the MRIs and 19 again recommended that Plaintiff undergo steroid injection therapy. (#42 Ex. 4, Report Dated 20 8/3/2006.) Plaintiff’s medical records show no further visits to Dr. Grover, and to this day she has 21 apparently not received any of the recommended injection therapy. (#35 at 9:4–5; see generally #42 22 Ex. 4.) 23 Finally, on July 11, 2006, Plaintiff consulted with plastic surgeon Stephen A. Gordon, M.D. 24 to inquire about scar revision surgery for the scar on her lip. (#35 Ex. W.) Plaintiff was informed 25 Page 3 of 16 1 that the surgery would cost $3,580 (id.), and that the scar’s appearance would be reduced by 2 approximately 75% (#35 at 9:22). Plaintiff has not had the scar revision surgery. (Id. at 9:10–12.) 3 B. 4 Both the tortfeasor and Plaintiff carried auto insurance policies with Defendant American Insurance Facts 5 Family Insurance Company.1 The present lawsuit centers around alleged wrongdoing concerning 6 Plaintiff’s underinsured motorist claim. (“UIM claim.”) 7 On February 15, 2005, three days after the accident, Plaintiff’s attorney sent a letter of 8 representation to Defendant’s claims department. (#35 Ex. A.) The letter requested that Defendant 9 “verify [their] coverage regarding [Plaintiff], including medical payment, UM/UIM coverage and 10 the limits thereof, since it may become necessary to file a claim under the referenced policy.” (Id.) 11 Two days later, on February 17, 2005, Defendant sent the requested information to Plaintiff’s 12 attorney. (#35 Ex. B.) On June 24, 2005, Plaintiff’s attorney again contacted Defendant and 13 requested the medical log sheet for Plaintiff’s policy. (#35 Ex. C.) Defendant provided that 14 information on June 27, 2005. (#35 Ex. D.) There was no further communication between the 15 parties for nearly one year. During this time, Defendant apparently did not perform any additional 16 investigation on Plaintiff’s potential UIM claim. (#42 at 6:23–25.) 17 There is some dispute as to whether Defendant informed Plaintiff that she could use her 18 rental car reimbursement coverage to obtain a rental vehicle after the accident. (#42 at 7:11–8:9.) 19 The tortfeasor driver’s third-party rental coverage expired on March 17, 2005, approximately one 20 month after the accident. (#42 at 7:15.) At that time, Plaintiff’s car had still not been repaired or 21 evaluated as a total loss. (#42 at 7:15–18.) Plaintiff carried $750 worth of rental reimbursement 22 coverage with Defendant. (#42 at 7:12–13.) It is apparently Defendant’s policy to inform their 23 insureds of all of their coverage options. (#43 at 7:19–8:10.) 24 25 1 Some of the materials presented by the parties describe this case as a “double AmFam.” This term refers to a situation where both drivers involved in an automobile accident are insured by American Family. Page 4 of 16 1 On June 19, 2006, Plaintiff’s attorney sent a formal settlement demand package to Defendant 2 and requested that Defendant tender Plaintiff’s UIM policy limit of $100,000. (#35 Ex. E.) The 3 demand letter enumerated $19,874.54 in medical expenses. (Id.) The letter also noted that the 4 records from UMC and Dr. Grover were incomplete, and the expense figures listed for those two 5 providers were “pending” further documentation. (Id.) 6 On June 30, 2006, Defendant acknowledged their receipt of Plaintiff’s demand package and 7 requested further information from Plaintiff. (#35 Ex. F at AF 0072.) Defendant requested: (1) a 8 declaration page confirming the tortfeasor’s policy limit and a copy of a settlement check for that 9 policy limit; (2) a current photo of the scar Plaintiff received in the accident; (3) photographs of the 10 damage to Plaintiff’s vehicle and a copy of the damage report; (4) complete medical records from 11 UMC and Dr. Grover; and (5) a future treatment plan with prospective costs for future care if any 12 was required. (Id.) Plaintiff apparently never returned this release form. (#35 at 5:8.) 13 On July 14, 2006, Plaintiff’s attorney submitted photographs of Plaintiff’s scar and Dr. 14 Grover’s May 30, 2006 report, but none of the other requested information. (#35 at 4:15–16.) The 15 letter from Plaintiff’s attorney also stated that Plaintiff would soon begin the steroid and nerve 16 blocker treatment that Dr. Grover had suggested. (Id.) On July 19, 2006, Defendant acknowledged 17 its receipt of Plaintiff’s July 14 letter and reiterated its request for a copy of a settlement check from 18 the tortfeasor, complete medical records from Dr. Grover and UMC, photos of Plaintiff’s vehicle and 19 a damage report, and a future treatment plan. (#35 Ex. H.) Defendant also requested wage loss 20 verification on Plaintiff’s employer’s letterhead, which was a new request that did not appear in 21 Defendant’s June 30 correspondence. (Id.) 22 In September of 2006, Plaintiff settled with the tortfeasor for his policy maximum of 23 $100,000. (#35 Ex. I.) Of that settlement, Plaintiff apparently received about $60,000 net of medical 24 expenses and attorney’s fees. (#35 Ex. Y at 36:19–21.) The December 10, 2008 deposition of 25 Page 5 of 16 1 Plaintiff’s husband revealed that Plaintiff spent the proceeds from the lawsuit against the tortfeasor 2 on a house. (Id. at 37:1–9.) 3 On September 13, 2006, Plaintiff’s attorney sent to Defendant the MRIs that Dr. Grover 4 ordered on May 30, the invoices for those MRIs, and a cost estimate for Plaintiff’s scar revision 5 surgery. (#35 Ex. J.) On September 28, 2006, Defendant confirmed its receipt of the September 13 6 correspondence and once again reiterated its request for a copy of the settlement check and 7 declaration page, wage loss verification, medical records from UMC and Dr. Grover, and photos of 8 Plaintiff’s vehicle. (#35 Ex. K.) When Defendant received no response, it sent a letter requesting 9 the information a fourth time on October 25, 2006. (#35 Ex. L.) 10 In November of 2006, one of Defendant’s claims adjusters, Brigitte Schrader-Frith, sought 11 authorization to settle Plaintiff’s claim for between $10,000 and $20,000. (#35 Ex. M at 195:14–21.) 12 At her deposition, Ms. Schrader-Frith testified that she did not believe that Plaintiff’s claim 13 presented any UIM liability, but she wanted to “at least give some kind of consideration and see if 14 [she] could settle the claim and get a release.” (Id. at 195:19–21.) In an attempt to get authorization 15 to make the offer, Ms. Schrader-Frith submitted a Casualty Investigation Report to her manager with 16 an attached handwritten note that read, “Total value $110-120, autho to settle 9-19.” (#42 Ex. 21.) 17 The manager did not grant authorization to settle the claim, and the claim was subsequently denied. 18 (#35 Ex. N.) In a letter to Plaintiff, Defendant concluded that Plaintiff was already fairly 19 compensated by $100,00 settlement with the tortfeasor. (Id.) The rejection letter indicated that 20 Defendant would be willing to consider any further information provided by Plaintiff about the 21 claim. (Id.) 22 On June 17, 2007, Plaintiff filed the present lawsuit. By November 14, 2008, Plaintiff had 23 apparently made all of her medical records available to Defendant. (#42 at 20:22.) 24 25 Page 6 of 16 1 III. DISCUSSION 2 A. Legal Standard for Summary Judgment 3 The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as 4 to the material facts before the court. Northwest Motorcycle Ass’n v. U.S. Dep’t of Agric., 18 F.3d 5 1468, 1471 (9th Cir. 1994). Summary judgment is proper if the evidence shows that there is no 6 genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. 7 Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Where reasonable minds 8 could differ on the material facts at issue, summary judgment is not appropriate. Warren v. City of 9 Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). As summary judgment allows a court to dispose of 10 factually unsupported claims, the court construes the evidence in the light most favorable to the 11 nonmoving party. Bagdadi v. Nazari, 84 F.3d 1194, 1197 (9th Cir. 1996). 12 In evaluating the appropriateness of summary judgment, three steps are necessary: (1) 13 determining whether a fact is material; (2) determining whether there is a genuine issue for the trier 14 of fact, as determined by the documents submitted to the court; and (3) considering that evidence in 15 light of the appropriate standard of proof. Id. As to materiality, only disputes over facts that might 16 affect the outcome of the suit under the governing law will properly preclude the entry of summary 17 judgment. Factual disputes which are irrelevant or unnecessary will not be considered. Id. Where 18 there is a complete failure of proof concerning an essential element of the nonmoving party’s case, 19 all other facts are rendered immaterial, and the moving party is entitled to judgment as a matter of 20 law. Celotex, 477 U.S. at 323. Summary judgment is not a disfavored procedural shortcut, but an 21 integral part of the federal rules as a whole. Id. 22 B. Causes of Action 23 Plaintiff asserts six causes of action against Defendant in connection with the denial of her 24 UIM claim: (1) breach of contract (not at issue in this motion); (2) intentional infliction of emotional 25 distress; (3) breach of the implied covenant of good faith and fair dealing; (4) violation of the Unfair Page 7 of 16 1 Claims Practices Act; (5) breach of fiduciary duty, and (6) estoppel. Defendant has moved for 2 summary judgment on all claims except for the breach of contract claim, which Defendant asserts 3 is subject to binding arbitration. Defendant has also moved for summary judgment on punitive 4 damages, claiming that Plaintiff does not meet the standard set out in N.R.S. 42.005 as a matter of 5 law. 6 1. 7 Plaintiff’s complaint included an allegation that Defendant’s handling of her UIM claim Plaintiff’s Intentional Infliction of Emotional Distress Claim 8 amounted to intentional infliction of emotional distress. The Nevada Supreme Court has defined the 9 standard for IIED as follows: 10 11 12 To recover for the intentional infliction of emotional distress, a plaintiff must establish the following elements: (1) that the defendant's conduct was extreme and outrageous; (2) that the defendant either intended or recklessly disregarded the causing of emotional distress; (3) that the plaintiff actually suffered severe or extreme emotional distress; and (4) that the defendant's conduct actually or proximately caused the distress. 13 Nelson v. Las Vegas, 99 Nev. 548, 555 (Nev. 1983). Plaintiff concedes that the evidence presented 14 in the case at bar does not support an IIED claim. (#42 at 3:7–8.) Thus, the Court GRANTS 15 summary judgment to Defendant on the IIED claim. 16 2. Breach of the Implied Covenant of Good Faith and Fair Dealing (“Bad Faith”) 17 Nevada law recognizes an implied covenant of good faith and fair dealing in any contract. 18 A.C. Shaw Constr. v. Washoe County, 105 Nev. 913 (Nev. 1989). “To establish a prima facie case 19 of bad-faith refusal to pay an insurance claim, the plaintiff must establish that the insurer had no 20 reasonable basis for disputing coverage, and that the insurer knew or recklessly disregarded the fact 21 that there was no reasonable basis for disputing coverage.” Falline v. GNLV Corp., 823 P.2d 888 22 (Nev. 1991); see also Powers v. United Servs. Auto. Ass'n, 962 P.2d 604 (Nev. 1998). Stated another 23 way, an insurance company is not liable for bad faith if it had a reasonable basis for denying a claim. 24 See American Excess Ins. Co. v. MGM Grand Hotels, 729 P.2d 1352, 1355 (Nev. 1986) (per curiam). 25 The reasonableness of an insurer’s claims-handling conduct is generally a question of fact. Amadeo Page 8 of 16 1 v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1161 (9th Cir.2002). The Nevada Supreme Court has 2 held that “a jury question on [an] insurer’s bad faith arises when relevant facts are in dispute or when 3 facts permit differing inferences as to the reasonableness of [an] insurer’s conduct.” United Fire Ins. 4 Co. V. McClelland, 780 P.2d 193, 197 (Nev. 1989). See also Amadeo v. Principal Mut. Life Ins. Co., 5 290 F.3d 1152 (9th Cir. 2002). 6 Defendant asserts that, as a matter of law, it behaved reasonably in denying Plaintiff’s claim. 7 Defendant asserts that the medical records that Plaintiff made available indicated that she needed no 8 further medical treatment. Defendant also contends that Plaintiff’s failure to provide medical records 9 and other information central to her claim was indicative of a pattern of deception. The evidence 10 demonstrates a good faith basis for the denial of Plaintiff’s claim on these facts. 11 12 a. Plaintiff’s Medical Records It was reasonable to deny Plaintiff’s UIM claim based on the medical records she provided. 13 The medical records included in Plaintiff’s June 19, 2006 settlement demand package provided an 14 assessment as to her condition and prognosis. The June 21, 2005 discharge report from chiropractor 15 L. Neel Khurana indicated that Plaintiff was experiencing only “mild stiffness.” The report further 16 indicated that Plaintiff’s range of motion and tendon reflexes were normal. These pieces of evidence 17 seem to support the conclusion that Plaintiff was nearly fully recovered, and that she was adequately 18 compensated by the $100,000 settlement she received from the tortfeasor. 19 Defendant points out that Plaintiff had an eight-month lapse in medical treatment between 20 July 7, 2005 and March 30, 2006. (#35 at 8:26.) Such a lapse in treatment seems inconsistent with 21 Plaintiff’s assertion that her pain is severe and uncontrollable. Defendant also emphasizes that, to 22 this day, Plaintiff has not yet had any of the injection therapy recommended by Dr. Grover (id. at 23 9:10–12), which also undermines Plaintiff’s assertion that she has “insidiously progressive” and 24 uncontrollable pain. Defendant notes that Plaintiff has not had the scar revision treatment 25 recommended by Dr. Gordon, which suggests that she may not be as self-conscious about the scar Page 9 of 16 1 as she alleges. (Id.) Finally, Defendant points out that Plaintiff used the proceeds from her $100,000 2 settlement with the tortfeasor to purchase a house rather than obtain medical treatment. Based on 3 the chiropractor’s report, and despite the ongoing physical complaints Plaintiff had for her other 4 physician, Dr. Grover, Defendant was reasonable in denying her claim on these facts. 5 6 b. Plaintiff’s Failure to Provide Medical Records and Other Information Plaintiff’s failure to provide medical records and other information also supports a finding 7 as to the reasonableness of Defendant’s denial of her claim. Defendant alleges that Plaintiff 8 “jealously guarded” her medical records, which is indicative of a “pattern of deception and on the 9 part of Plaintiff Lopez that more than justified American Family’s claims-related decisions.” (# 49 10 at 9:21–24.) Defendant repeatedly requested Plaintiff’s full medical records from UMC and Dr. 11 Grover, and Plaintiff apparently did not provide a full medical release until November 18, 2007, well 12 after litigation had begun. (#42 at 14:20–24.) Defendant had no way of knowing what records it was 13 missing at the time of the denial of the claim and reasonably denied the claim based on the 14 incomplete medical records provided to it. 15 Defendant also asserts that its decision to deny Plaintiff’s claim was reasonable because of 16 “Plaintiff’s consistent refusal to provide information central to her claim.” (#35 at 17:3.) Defendant 17 most likely refers to a copy of the settlement check from the tortfeasor driver, pictures of Plaintiff’s 18 automobile, and wage loss verification, information which Defendant repeatedly requested and was 19 never provided. Without these relevant and important records and other information crucial to her 20 claim, Defendant acted reasonably in denying her claim on these facts. 21 22 c. The Settlement Offer Plaintiff argues that the evidence demonstrates that Defendant valued Plaintiff’s claim at 23 between $110,000–$120,000 before offsets. (#42 at 13:16–21.) On this fact pattern, this evaluation 24 of the claim by an adjuster that was overruled by the adjuster’s supervisor is not an indicia of 25 unreasonableness. Plaintiff bases this assertion on adjuster Schrader-Frith’s attempt to obtain a Page 10 of 16 1 settlement authorization. On her report, Ms. Schrader-Frith attached a handwritten note which read, 2 “Total value $110-120, autho to settle 9-19.” Plaintiff’s position is that this note suggests that 3 Defendant placed the total value of Plaintiff’s claim at between $110,000 – $120,000, which means 4 that, after an offset of $100,000 for the settlement with the tortfeasor, the settlement value of the 5 claim was between $10,000 and $20,000. Plaintiff concludes that Defendant’s unwillingness to 6 settle the claim in spite of this objective evaluation amounts to unreasonable behavior and thus bad 7 faith. Defendant counters that Ms. Schrader-Frith simply sought authorization to “buy a release” 8 from liability and settle the claim, and that the note in no way amounts to an objective evaluation of 9 Plaintiff’s claim. Defendant also contends that Ms. Schrader-Frith’s manager did not grant the 10 authorization in any event, and if anything the handwritten note is merely Ms. Schrader-Frith’s 11 assessment of the claim and not Defendant American Family’s assessment of the claim. (#49 at 12 4:7–11.) The adjuster’s actions do not weigh heavily enough to constitute a genuine issue of 13 material fact as to the good faith basis for the denial of the claim. 14 D. Punitive Damages 15 Defendant has separately moved for summary judgment on the issue of punitive damages. 16 Defendant contends that, even if Plaintiff has raised issues of fact to support a claim for bad faith, 17 she cannot possibly prevail on the issue of punitive damages under N.R.S. 42.005. Plaintiff responds 18 that “evidence of [Defendant] American Family’s oppressive conduct is plentiful.” (#42 at 19:17.) 19 Plaintiff raises three arguments in support of an award for punitive damages. First, Plaintiff claims 20 that Defendant had notice of Plaintiff’s UIM claim when Plaintiff’s attorney submitted a letter of 21 representation on February 15, 2005, but nonetheless failed to investigate the claim until a year later 22 when the formal claim demand package was submitted. (#42 at 19:26–20:3.) Second, Plaintiff 23 suggests that Defendant’s constant requests for information about her claim were intended only to 24 make her “jump through useless hoops,” and that Plaintiff’s failure to provide the requested 25 information was merely a “pretext to deny Plaintiff’s claim. (#42 at 20:17–21.) Third, Plaintiff Page 11 of 16 1 claims that Defendant denied her UIM claim “in spite of [Defendant’s] own evaluation which 2 showed it to have a value between $9,000 and $19,000.” (#42 at 19:18–20.) 3 Proof of an insurer’s bad faith, by itself, is insufficient to support a punitive damage award 4 under Nevada law. United Fire Ins. Co. V. McClelland, 780 P.2d 193, 198 (Nev. 1989.) Rather, 5 punitive damages are awarded only when a Plaintiff can prove “by clear and convincing evidence” 6 that the defendant is guilty of malice, fraud or oppression. N.R.S. 42.005. Clear and convincing 7 evidence is defined as “evidence establishing every factual element to be highly probable.” In re 8 Discipline of Drakulich, 908 P.2d 709 (Nev. 1995) (quoting Butler v. Poulin, 500 A.2d 257, 260 n.5 9 (Me.1985)). Plaintiff claims that punitive damages can be supported by the “oppression” language 10 of the statute. Oppression is defined as “despicable conduct that subjects a person to cruel and unjust 11 hardship with conscious disregard for the rights of that person.” N.R.S. 42.001(4). 12 None of the evidence adduced by Plaintiff suggests that Defendant committed “despicable 13 conduct that subjected [her] to cruel and unjust hardship,” as N.R.S. 42.001(4) requires. None of 14 the specific conduct pointed to by Plaintiff could convince a reasonable factfinder “by clear and 15 convincing evidence” that Plaintiff had been oppressed. Thus, the Court GRANTS summary 16 judgment in favor of the Defendant on the issue of punitive damages. 17 In support of her contention that punitive damages are appropriate in this case, Plaintiff cites 18 United Fire Ins. Co. v. McClelland, 780 P.2d 193, 198 (Nev. 1989). Plaintiff avers that McClelland 19 stands for the proposition that “failure to divulge pertinent information to [a company’s] insured or 20 a failure to investigate may warrant imposition of punitive damages.” (#42 at 19:13–16) (emphasis 21 omitted). However, the facts of McClelland were a good deal more egregious than those in the case 22 at bar. In McClelland, the defendant insurance company had experienced financial difficulties, and 23 was ordered to cease doing business in Nevada. McClelland, 780 P.2d at 194. The insurance 24 company sent correspondence to its insureds, cautioning them not to drop their policy or change their 25 insurance. Id. The letter said nothing about the cease and desist order. Id. The insurance company Page 12 of 16 1 eventually transferred all of its policies to another company, but did nothing to evaluate that 2 company’s reputation or financial condition. Id. at 198. The defendant company’s conduct lead to 3 the plaintiff accumulating unpaid medical bills and delaying treatment for a kidney infection. Id. at 4 195–96. The Nevada Supreme Court determined that the defendant’s failure to disclose the cease 5 and desist letter, combined with its failure to investigate the insurance company to which it 6 transferred its policies, supported a punitive damage award. Id. at 198. 7 It is quite a leap to assert that, under McClelland, Defendant breached duties to disclose and 8 duties to investigate that give rise to a punitive damage award. Plaintiff claims that Defendant’s 9 failure to investigate Plaintiff’s claim between February 15, 2005 (when it received the letter of 10 representation) and June 19, 2006 (when it received the formal demand package) gives rise to a 11 claim of punitive damages. This argument fails for two reasons. First, it is unclear whether 12 Defendant had any duty to begin investigating Plaintiff’s claim when it received the representation 13 letter. Indeed, that letter only asked Defendant to verify its coverage because “it may become 14 necessary to file a claim under [Plaintiff’s UIM] policy.” (#35 Ex. A) (emphasis added). Thus, 15 Defendant had no reason to believe that Plaintiff was seeking recovery under the policy; indeed, the 16 letter expressly said that a claim may be filed at some point in the future. 17 Similarly, Plaintiff’s contention that Defendant’s requests for information constitute 18 harassment or a failure to investigate does not support punitive damages as a matter of law. Plaintiff 19 contends that Defendant’s constant requests for pictures of the vehicle and information about her 20 settlement with the tortfeasor were improper because Defendant had better access to this information 21 than did Plaintiff. Regardless of the access Defendant may have had to the vehicle or other insured 22 in the case, its requests for information were reasonable and performed in the normal course of its 23 duties. 24 Finally, Plaintiff’s contention that claims adjuster Schrader-Frith’s note seeking authorization 25 to settle Plaintiff’s claim for between $9,000 and $19,000, combined with Defendant’s subsequent Page 13 of 16 1 denial of the claim, is oppressive behavior because Defendant is “forcing Plaintiff to sue for the 2 amounts that [Defendant] agrees she is entitled.” (#42 19:22–25.) This argument fails because the 3 hand-written note, which was never ultimately authorized by Ms. Schrader-Frith’s manager, cannot 4 possibly establish by clear and convincing evidence that Defendant “agreed that Plaintiff was 5 entitled” to the settlement. 6 E. 7 Unfair Claims Practices Act Defendant asserts that it is entitled to summary judgment on Plaintiff’s Unfair Claims 8 Practices Act claims because “there is no evidence that Defendant American Family violated any 9 section of the Unfair Claims Practices Act . . . . Instead, Plaintiff Lopez is aggrieved because 10 American Family concluded that her UIM coverage was not available based on the information she 11 provided.” (#35 at 24:18–21.) Plaintiff responds that arguing that Defendant violated the act by: 12 (1) misrepresenting Plaintiff’s coverage by failing to inform Plaintiff of her rental reimbursement 13 coverage (as required by N.R.S. 686A.310(1)(a)); (2) failing to promptly investigate Plaintiff’s claim 14 (as required by N.R.S. 686A.310(1)(b)); (3) attempting to settle the claim for less than the amount 15 that a reasonable person would have believed that he is entitled by reference to written or printed 16 advertising material accompanying or made part of its application (as required by N.R.S. 17 686A.310(1)(g)). 18 The Nevada Unfair Claims Practices Act confers a private cause of action on insured 19 individuals. N.R.S. 686A.310(2); see also Crystal Bay General Imp. Dist. v. Aetna Cas. & Sur. Co., 20 1989, 713 F. Supp. 1371, 1388 (D. Nev.1989). However, the Fair Claims Standards Act sets out a 21 unique standard for violative conduct as compared to bad faith claims. See Pioneer Chlor Alkali Co. 22 v. National Union Fire Ins. Co., 863 F. Supp. 1237, 1243 (D. Nev. 1994). Thus, proving a violation 23 of the Fair Claims Standards Act does not necessarily prove bad faith, or vice versa. See id. 24 Defendant demonstrates no genuine issues of material fact remain as to the rental reimbursement 25 coverage, the time of investigation of Plaintiff’s claim, or the “settlement” claim. Accordingly, Page 14 of 16 1 Defendant did not violate the unfair claims practices act and summary judgment is GRANTED to 2 that effect. 3 F. 4 Plaintiff’s complaint claimed that Defendant, as an insurer, breached its fiduciary duty to Breach of Fiduciary Duty 5 Plaintiff by denying her claim. (#1 at ¶¶ 27–34.) Because Nevada law does not support such a claim 6 against an insurance company, the Court GRANTS summary judgment on this claim. In Powers v. 7 United Services Automobile Association 962 P.2d 596, 603 (Nev. 1998), the Nevada Supreme Court 8 stated that insurance companies owe a duty to their insureds that is “fiduciary in nature.” However, 9 the court explicitly stated that “[they were] not adopting a new cause of action based on an insurance 10 company’s failure to put its insured’s interests above its own; [they were] merely recognizing that 11 breach of the fiduciary nature of the insurer-insured relationship is part of the duty of good faith and 12 fair dealing.” Id. (emphasis added). Thus, Plaintiff’s breach of fiduciary duty claim is essentially 13 a restatement of her bad faith claim. Summary judgment is GRANTED to the claim of a breach of 14 fiduciary duty. 15 G. 16 Finally, Plaintiff’s complaint alleged that Defendant is estopped from denying coverage. Estoppel 17 (#1 at ¶¶ 49–56.) Plaintiff seems to have abandoned this claim, as she does not mention it in her 18 Response. (See generally #42.) In any event, this seems to be a redundant restatement of Plaintiff’s 19 breach of contract claim. Thus, the Court GRANTS summary judgment on the estoppel claim. 20 21 22 23 24 25 Page 15 of 16 1 IV. CONCLUSION 2 IT IS HEREBY ORDERED that Defendant’s Motion for Partial Summary Judgment as to 3 the five claims: (1) intentional infliction of emotional distress; (2) breach of the implied covenant 4 of good faith and fair dealing; (3) violation of the Unfair Claims Practices Act; (4) breach of 5 fiduciary duty, and (4) estoppel is GRANTED. (#35.) 6 DATED: July 13, 2009 7 8 9 ROBERT C. JONES UNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 16 of 16
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