Lemaster v. Hartford Insurance Company of the Midwest et al, No. 2:2013cv02017 - Document 158 (D. Ariz. 2016)
Court Description: ORDER denying Defendants' Hartford Insurance Company of the Midwest and Twin City Fire Insurance Co.'s First Amended Memorandum of Law in Support of Motion for Summary Judgment (Doc. 144 ). This matter will proceed to trial on Plaintif f's claims against these Defendants, and the Court will set a Pretrial Conference by separate order. IT IS FURTHER ORDERED granting Defendants' Gallagher Bassett Services, Inc. and Jennifer Green's First Amended Memorandum of Law in Support of Motion for Summary Judgment (Doc. 146 ). Plaintiff's claims against these Defendants are dismissed. Signed by Judge John J Tuchi on 02/23/16.(GAR)
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Lemaster v. Hartford Insurance Company of the Midwest et al 1 WO Doc. 158 NOT FOR PUBLICATION 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Kenneth Lemaster, No. CV-13-02017-PHX-JJT Plaintiff, 10 11 v. 12 ORDER Hartford Insurance Company of the Midwest, et al., 13 14 Defendants. 15 At issue are the following Motions: Defendants Hartford Insurance Company of 16 the Midwest and Twin City Fire Insurance Co.’s First Amended Memorandum of Law in 17 Support of Motion for Summary Judgment (Doc. 144, Carrier Defs.’ Mot.). to which 18 Plaintiff filed a Response (Doc. 151, Resp. to Carrier Defs.’ Mot.), and Defendants filed a 19 Reply (Doc. 156, Carrier Defs.’ Reply); and Defendants Gallagher Bassett Services, Inc. 20 and Jennifer Green’s First Amended Memorandum of Law in Support of Motion for 21 Summary Judgment (Doc. 146, Administrators’ Mot.), to which Plaintiff filed a Response 22 (Doc. 152, Resp. to Administrators’ Mot.), and Defendants filed a Reply (Doc. 155, 23 Administrators’ Reply). The Court finds this matter appropriate for resolution without 24 oral argument. See LRCiv 7.2(f). For the reasons that follow, the Court denies Hartford 25 Insurance Company of the Midwest and Twin City Fire Insurance Co.’s Motion for 26 Summary Judgment and grants Gallagher Bassett Services, Inc. and Jennifer Green’s 27 Motion for Summary Judgment. 28 Dockets.Justia.com 1 I. BACKGROUND 2 As a threshold matter, the Court notes that given Plaintiff’s and Defendants’ less 3 than clear citations and frequent lack of pincites, especially when citing to various 4 documents contained in single exhibits, the Court had to scour the record to find the 5 information the parties tried to reference, causing significant delay in the Court’s 6 resolution of the Motions at issue. The Court notes that it was under no obligation to do 7 so. See Simmons v. Navajo Cnty., Ariz., 609 F.3d 1011, 1017 (9th Cir. 2010). The Court 8 also notes that both parties failed to set forth the facts of this case in a cohesive manner. 9 At trial, the parties must remedy this issue so that a reasonable jury will be able to 10 understand the facts and resolve the claims at issue. 11 The following facts are undisputed unless otherwise indicated.1 Plaintiff Kenneth 12 Lemaster alleges he sustained an injury while working with R&L Carriers (“R&L”) and 13 unloading a ceramic barbeque grill from a truck without a lift gate on December 9, 2011. 14 Plaintiff alleges that Hartford Insurance Company of the Midwest (“Hartford”) and Twin 15 City Fire Insurance Company (“Twin City”) are both responsible to pay for his injuries as 16 insurers to R&L. Defendants contend that Twin City did not issue a policy of insurance to 17 R&L. Gallagher Bassett Services, Inc. (“Gallagher”) is a third party administrator, not an 18 insurance company, and Jennifer Green is an adjuster employed by Gallagher who was 19 assigned to Plaintiff’s workers’ compensation claim. 20 Gallagher initially accepted Plaintiff’s workers compensation claim. Defendants 21 assert that they paid medical and income benefits to Plaintiff, but Plaintiff contends that 22 Gallagher refused to pay all benefits owed to him based upon his medical records and the 23 Industrial Commission of Arizona’s later orders. From January 2012 to October 2012, 24 Plaintiff worked light duty. During that period, wage calculations were made to 25 determine and pay any income benefits due. After Plaintiff returned to work, Gallagher 26 27 28 1 Defendants Hartford, Twin City, Gallagher, and Ms. Green submitted the same Statement of Facts in support of their respective Motions for Summary Judgment. The Court considers their Statements of Facts together and references all four Defendants collectively as “Defendants” in the Background section. -2- 1 adjusters continued to monitor wages and determined no additional income benefits were 2 owed based on wages earned and personal vacation time. 3 On February 5, 2014, a Gallagher adjuster performed a wage calculation of 4 benefits and issued a check on February 10, 2014; benefits were paid through June 4, 5 2014, when Gallagher states the claim was closed based on a finding that Plaintiff was 6 stationary.2 Plaintiff has also received long term disability payments since May 2013, 7 which Plaintiff asserts he had to seek because Gallagher refused to issue the required 8 indemnity payments. 9 A. Plaintiff’s Medical Treatment History 10 After Plaintiff sustained his injury on December 9, 2011, he saw numerous doctors 11 both of his own accord and at the request of Gallagher. Generally, Defendants found that 12 the medical reports indicated that Plaintiff was medically stationary without any 13 permanent injury for which further benefits were due, and that his work-related injuries 14 were confined to what he originally reported – an injury to the groin, which was 15 diagnosed as a hernia. Plaintiff states that he initially had pain in his groin and abdomen 16 and that medical reports show he was justified in seeking continued treatment, including 17 physical therapy and pain management. He states that after he reported his injury to R&L 18 on December 14, 2011, he sought medical treatment at Concentra, where he underwent 19 physical therapy and Dr. Jacquelyn Island put him on light duty, diagnosing him with a 20 groin strain and umbilical hernia. Plaintiff testified that Concentra doctors released him in 21 July 2012, advised him that they did not know what was wrong with him, and refused to 22 see him in the future. 23 Plaintiff saw many other health care providers, including Doctors Zacher, Gagnon, 24 Dilla, and Glass. Plaintiff alleges that Dr. Zacher ordered hernia repair surgery on 25 February 22, 2012, but that Gallagher delayed and did not approve the surgery until 26 27 28 2 A workers’ compensation claimant’s condition is considered “stationary” when it has reached relatively stable status and nothing further in the way of medical treatment is indicated to improve the condition. Tsosie v. Indus. Comm’n of Ariz., 905 P.2d 548, 549 (Ariz. Ct. App. 1995). -3- 1 March 22, 2012. Plaintiff underwent a hernia repair with Dr. Zacher on March 22, 2012, 2 and Dr. Zacher found Plaintiff had recovered from hernia surgery as of May 2, 2012. 3 Plaintiff alleges that after surgery, he returned to Dr. Island for treatment, and she noted 4 that Plaintiff continued to suffer pain in his abdomen and placed him on light work duty. 5 On May 15, 2012, Dr. Gagnon reported that he found no strong evidence of any 6 ongoing nerve root impingement and Plaintiff’s hernia had healed. Dr. Gagnon 7 recommended physical therapy, and estimated Plaintiff would be stationary in four to six 8 weeks with no permanent impairment. On June 4, 2012, Dr. Gagnon performed a follow 9 up evaluation and found that objectively, Plaintiff’s issues were subacute, even though 10 Plaintiff continued with subjective complaints. On June 25, 2012, Dr. Gagnon opined 11 Plaintiff had no subjective improvements and agreed to order an MRI. 12 Dr. Gary Dilla, who initially performed an Independent Medical Examination 13 (“IME”) on Plaintiff on July 19, 2012, issued several reports, with changing medical 14 opinions. Based on the July 19, 2012 IME, Dr. Dilla diagnosed Plaintiff with a diffuse 15 left lower quadrant abdominal/groin sprain/strain, persistent diffuse left lower quadrant 16 abdominal, groin and medial thigh tenderness of undetermined etiology, and post 17 umbilical hernia surgical repair. Dr. Dilla was unable to explain Plaintiff’s widespread 18 non-localizing pain and withheld further opinion pending review of Plaintiff’s MRI from 19 July 18, 2012. Upon review of the MRI, which Ms. Green sent to Dr. Dilla on July 26, 20 2012, Dr. Dilla issued an addendum dated August 8, 2012, in which he found it was not 21 clear what the exact objective basis of Plaintiff’s ongoing symptoms were and found no 22 objective basis for work restrictions. He recommended that Plaintiff seek an evaluation 23 from general surgeon Dr. Lou Glass and consultation with a pain management 24 interventionalist. Plaintiff alleges that Dr. James Madura examined him on October 4, 25 2012 and agreed with Dr. Dilla’s opinion that Plaintiff suffered an ilioinguinal nerve 26 injury, but Plaintiff only cites to his own declaration to support this assertion. On August 27 21, 2102, Ms. Green forwarded Dr. Dilla’s August 8, 2012 report to Dr. Gagnon and 28 authorized treatment consistent with the report. -4- 1 From November 2012 to February 2014, Plaintiff received numerous treatments at 2 Arizona Pain Specialists (“APS”), including nerve block treatments, from Dr. McJunkin 3 as well as other doctors. 4 On November 19, 2012, Dr. Glass conducted an IME. Dr. Glass opined that there 5 was no evidence of ilioinguinal nerve entrapment syndrome and no ongoing medical 6 treatment was necessary for the work-related injury. He also opined that Plaintiff was 7 medically stationary with no permanent impairment and that there was no need for work 8 restrictions or supportive care from a general surgery standpoint. 9 Upon review of Dr. Glass’s report, Dr. Dilla wrote another report dated November 10 29, 2012, in which he found: there was no objective explanation for Plaintiff’s subjective 11 symptoms; there was no clinical evidence of ilioinguinal nerve entrapment; nerve blocks 12 were not indicated and if performed, were unlikely to result in any symptomatic 13 improvement; and Plaintiff was permanent and stationary, with no evidence of permanent 14 impairment and no need for work restrictions or supportive care. In response, Ms. Green 15 filed a Notice of Claim Status on December 4, 2012, and testified that she understood that 16 Dr. Dilla released Plaintiff to full duty and found no further medical treatment was 17 necessary. Plaintiff requested a hearing protesting the Notice of Claim Status. 18 On April 2, 2013, Dr. Dilla issued yet another report based on his review of 19 additional medical records including the following: notes from APS, including notes 20 regarding Dr. McJunkin’s treatment of Plaintiff; a neurological evaluation by 21 Dr. Sivakumar; MRIs of the lumbar spine, thoracic spine, sacrum, and coccyx (tailbone); 22 electrodiagnostic studies; and ilioinguinal/iliohypogastric nerve blocks. Dr. Dilla opined 23 he did not believe Plaintiff suffered a lumbar spine injury and he was not optimistic that 24 nerve block treatments would provide lasting benefit. Dr. Dilla indicated he received a 25 correspondence from Lisa LaMont, administrative counsel for Hartford and R&L, on 26 March 26, 2013, presumably regarding the additional medical records. Plaintiff contends 27 that Gallagher waited months to provide Dr. Dilla with the additional records, specifically 28 those regarding Dr. McJunkin. Defendants aver there is no indication that Gallagher had -5- 1 Dr. McJunkin’s records to provide to Dr. Dilla at the time Plaintiff indicates and, as 2 support, note that on April 9, 2013, Ms. LaMont communicated to the Gallagher adjusters 3 that she needed to secure Dr. McJunkin’s medical records. Plaintiff alleges that 4 Ms. Green preemptively decided she would file the Notice of Claim Status and only used 5 Dr. Dilla to “go get an opinion to back up our decision” and for “final closure.” 6 Plaintiff did not appear for several scheduled medical appointments with 7 Dr. Gagnon and Dr. Zacher in July and September of 2012. Plaintiff alleges that he did 8 not seek medical treatment at that time because Defendants denied his treatment pending 9 the IME and he was awaiting Dr. Dilla’s treatment recommendation. Ms. Green sent 10 Plaintiff a letter dated October 2, 2012, requesting an update on his medical care because 11 she had no records since July 9, 2012. Plaintiff states he responded that he was seeking 12 treatment from a pain specialist – presumably APS – at Dr. Dilla’s recommendation. On 13 October 30, 2012, APS called Ms. Green seeking approval for Plaintiff’s treatment, but 14 Ms. Green informed APS that it was not an authorized physician under the Arizona 15 Workers’ Compensation Act. 16 Plaintiff was also scheduled for another IME on August 22, 2013, which did not 17 occur. Defendants allege that the IME doctors refused to conduct the IME due to the 18 perceived threat of litigation by Plaintiff, but Plaintiff contends that the doctor refused to 19 examine him because his wife was present and wanted to record the IME. 20 B. Industrial Commission of Arizona Proceedings 21 On November 7, 2012, Plaintiff petitioned the Industrial Commission of Arizona 22 (“ICA”) to change doctors from Concentra to APS. Defendants allege Plaintiff took this 23 action because his other doctors, Dr. Zacher and Dr. Gagnon, had released and/or stopped 24 treating him, and Plaintiff wanted to continue treatment. Plaintiff contends he filed the 25 petition because Gallagher cancelled his appointments with Dr. Gagnon and Dr. Zacher 26 in response to Plaintiff seeking treatment from APS on October 30, 2012. The ICA 27 approved Plaintiff’s request to change treating doctors and, on November 16, 2012, 28 Gallagher and R&L protested the decision, contending Plaintiff was seeking pain -6- 1 management for issues outside of the scope of the accepted claim. On December 4, 2012, 2 Ms. LaMont advised Ms. Green to issue a Notice of Closing Status based on Dr. Dilla’s 3 report finding Plaintiff was stationary and without a permanent impairment. On 4 December 11, 2012, Plaintiff requested a hearing with the ICA contesting the Notice. 5 On April 9, 2013, Ms. LaMont advised Ms. Green that she would be taking 6 “aggressive steps to move forward on this claim, anticipating that we will soon receive an 7 Award . . . granting continuing benefits.” Ms. LaMont stated that she needed to secure 8 medical records from Dr. McJunkin to determine whether any benefits would be owed, 9 recommended a nurse case manger be assigned to the file, stated she would be meeting 10 11 with Dr. Dilla, and suggested surveillance to document Plaintiff’s level of activity. 1. May 24, 2013 ICA Decision 12 On May 24, 2013, the ICA entered an award for Plaintiff, determining that he was 13 in need of further active medical care and entitled to change doctors. The ICA ordered 14 Plaintiff be awarded: 1) medical, surgical and hospital benefits, as provided by law, from 15 December 9, 2012, until such time Plaintiff’s condition is determined to be medically 16 stationary; 2) temporary total or temporary partial disability compensation benefits, as 17 provided by law, from December 9, 2012, until such time as Plaintiff’s condition is 18 determined to be medically stationary; and 3) a change in doctor from Concentra to APS 19 effective November 14, 2012. 20 Defendants did not pay income benefits following the ICA award. Defendants 21 argue they did not pay benefits because the ICA decision did not specify a payment 22 amount or dates of disability. Gallagher adjuster, Mr. Messner, stated he found the ICA 23 award vague because the ICA “indicated that [Plaintiff] was entitled to some form of 24 benefits, but they did not indicate as to what they were.” (Doc. 145, DSOF, Ex. 3 at 88:4– 25 18.) He also stated that Gallagher was only obligated to follow the ICA award “for the 26 most part” and that he needed to know Plaintiff’s work status for the prior year before he 27 could issue any payment. (Doc. 101, Ex. 25 at 58:16–18.) In Mr. Messner’s notes dated 28 June 11, 2013, he stated “[w]e currently do not have anything that states the [Plaintiff] is -7- 1 completely out of work so it is unknown what TTD/TPD, if any would be owed. It will 2 depend on the outcome of the IME and determining what body parts are related.” (DSOF, 3 Ex. 7-1 at 65.) On June 19, 2013, Mr. Messner hired a field nurse case manager to assist 4 in securing medical records and a treatment plan. 5 Plaintiff contends that the May 24, 2013 ICA award directly provided for benefits, 6 provided specific dates, and found that Plaintiff was not stationary, all of which should 7 have resulted in a payment of income benefits. Plaintiff also argues that Mr. Messner 8 never requested the off-work reports because he already possessed and/or had access to 9 them, but Plaintiff provides no evidence to support this assertion. Plaintiff contends that 10 Mr. Messner scheduled additional IMEs in order to control treatment costs, citing to Mr. 11 Messner’s statement that “I really, really need to find out where he is currently treating 12 and get a current treatment plan prior to 7-9-13 if that is possible.” (DSOF, Ex. 7-1 at 67.) 13 2. April 4, 2013 ICA Hearing and December 5, 2014 ICA Decision 14 On April 4, 2013, the ICA held a hearing at which Dr. Dilla testified that he was 15 changing his November 29, 2012 opinion after reviewing additional records. He stated 16 the relief Plaintiff experienced after Dr. McJunkin’s diagnostic nerve blocks “suggested 17 that perhaps either the ilioinguinal or iliohypogastric nerve was the source of some of 18 [Plaintiff’s] pain, which was, kind of my clinical impression when I first did my IME.” 19 (DSOF, Ex. 8 at 34.) Approximately two weeks after the ICA hearing, Dr. Dilla wrote a 20 report stating that he found there was no objective structural abnormality due to the 21 compensable injury that would require any work restriction, but the ICA did not consider 22 this evidence because it was submitted after the hearing. 23 Gallagher and Ms. LaMont cited several reasons as to why they did not pay 24 income benefits to Plaintiff in 2013 and 2014. In a letter to the ICA Judge dated July 8, 25 2013, Ms. LaMont indicated that payment was being refused based on Dr. Dilla’s notes 26 that there was no basis for work restrictions due to Plaintiff’s nerve condition. 27 Ms. LaMont stated Plaintiff had been seeking treatment for a variety of other orthopedic 28 conditions that were not originally part of the industrial injury, and Defendants had set up -8- 1 an IME to determine whether Plaintiff’s additional conditions were related to the 2 industrial injury. On January 30, 2014, Mr. Messner documented that no income benefits 3 were being paid because “our doctor” felt Plaintiff was capable of working full duty, but 4 that benefits would be reinstated effective the date of the IME. 5 On June 24, 2014, Gallagher issued a Notice of Claim Status reflecting that 6 compensation and medical treatment was terminated on June 5, 2014, because Plaintiff 7 was discharged and there was no permanent disability. 8 On December 5, 2014, the ICA issued a second decision finding that Plaintiff 9 sustained a compensable hernia injury and was entitled to no more than two months of 10 temporary compensation pursuant to Arizona’s hernia statute, A.R.S. § 23-1043, with 11 credit to the carrier for any overpayment. At that time, Plaintiff had already received 12 more than two months of temporary compensation. 3. 13 April 3, 2015 ICA Decision 14 On April 3, 2015, the ICA issued a third decision. The ICA found that Plaintiff’s 15 complications to his iliohypogastric and iloinguinal nerves as a result of his industrial 16 hernia entitled Plaintiff to benefits other than the limited benefits under the Arizona 17 hernia statute. The ICA stated that because damage to the nerves is a compensable 18 consequence of the industrial claim, Plaintiff may be entitled to disability benefits if he 19 was given work restrictions or took time off work for the consequence. In reaching its 20 decision, the ICA adopted Dr. McJunkin’s medical opinion and found that he had placed 21 Plaintiff on light duty status from October 25, 2012 through November 14, 2012, and 22 then placed Plaintiff on a no-work status from November 15, 2012 through November 13, 23 2013. The ICA determined that Plaintiff was entitled to temporary total disability benefits 24 for November 15, 2012 through November 13, 2013, totaling $31,196.22. Upon petition 25 by R&L, Twin City, and Gallagher, the April 3, 2015 ICA decision is being considered 26 on appeal. 27 28 -9- 1 C. Insurance Carrier Coverage 2 The parties contest who insured R&L at the time of Plaintiff’s accident – Twin 3 City or Hartford. Plaintiff contends that the two entities should be liable as Plaintiff’s 4 workers compensation insurers, because they are referred to interchangeably in the 5 relevant insurance documents and the ICA continually sent notifications to both 6 companies. Hartford and Twin City argue that Twin City did not issue a policy of 7 insurance to R&L. 8 Some insurance documents submitted, including ICA decisions and Notice of 9 Claim Status reports, note Twin City as the insurer, and others note Hartford. 10 Mr. Messner and Ms. Green stated that they did not deal with the insurer and/or did not 11 know who the insurer was on Plaintiff’s claim while they worked on the claim. 12 D. Plaintiff’s Financial, Emotional and Physical Damages 13 Plaintiff alleges that, because of Defendants, he suffered financial, psychological, 14 medical and emotional damages. Defendants contend that Plaintiff has not suffered 15 financial damages due to their actions. They note that Plaintiff is under no threat of 16 foreclosure, has never filed for bankruptcy, has not had credit declined or a loan refused, 17 and is not delinquent with credit cards. Plaintiff does not dispute these contentions, but 18 states that because he was unable to work, he was forced to spend his savings and 19 retirement funds, lost his commercial driver’s license, had bills that went into collections, 20 had to incur attorney’s fees, and had to pay for this own medical treatment, costing at 21 least $11,817.78. 22 Plaintiff argues that with timely, proper treatment, he likely would have been able 23 to return to some level of employment, but has been out of work completely for nearly 24 two years. Based on the advice of his doctors, Plaintiff believes he will never be able to 25 return to his line of work or level of compensation. He alleges the delay in medical 26 treatment caused him to suffer unnecessary pain. Plaintiff states that his pain impacts his 27 daily life, and that emotionally, he has suffered from extreme stress, high anxiety, and 28 - 10 - 1 strained relationships with his family. Finally, Plaintiff alleges that Dr. McJunkin testified 2 that the delay in care caused Plaintiff pain, suffering and physical harm 3 Addressing Plaintiff’s psychological and emotional damages claims, Defendants 4 note Plaintiff was discharged from the military because he was found psychologically 5 dangerous, that Plaintiff’s doctor has suggested he seek psychiatric care, and that Plaintiff 6 and his wife have not sought marriage counseling. Plaintiff does not dispute these facts. 7 II. LEGAL STANDARD 8 Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is 9 appropriate when: (1) the movant shows that there is no genuine dispute as to any 10 material fact; and (2) after viewing the evidence most favorably to the non-moving party, 11 the movant is entitled to prevail as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. 12 Catrett, 477 U.S. 317, 322–23 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 13 1288–89 (9th Cir. 1987). Under this standard, “[o]nly disputes over facts that might affect 14 the outcome of the suit under governing [substantive] law will properly preclude the 15 entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 16 A “genuine issue” of material fact arises only “if the evidence is such that a reasonable 17 jury could return a verdict for the non-moving party.” Id. 18 In considering a motion for summary judgment, the court must regard as true the 19 non-moving party’s evidence if it is supported by affidavits or other evidentiary material. 20 Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d at 1289. The non-moving party may not 21 merely rest on its pleadings; it must produce some significant probative evidence tending 22 to contradict the moving party’s allegations, thereby creating a material question of fact. 23 Anderson, 477 U.S. at 256–57 (holding that the plaintiff must present affirmative 24 evidence in order to defeat a properly supported motion for summary judgment); First 25 Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968). 26 “A summary judgment motion cannot be defeated by relying solely on conclusory 27 allegations unsupported by factual data.” Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 28 1989). “Summary judgment must be entered ‘against a party who fails to make a showing - 11 - 1 sufficient to establish the existence of an element essential to that party’s case, and on 2 which that party will bear the burden of proof at trial.’” United States v. Carter, 906 F.2d 3 1375, 1376 (9th Cir. 1990) (quoting Celotex, 477 U.S. at 322). 4 III. ANALYSIS 5 A. Good Faith and Fair Dealing Claims Against Hartford and Twin City 6 Plaintiff claims that Defendants Hartford and Twin City (collectively, “Carrier 7 Defendants”), as Plaintiff’s workers compensation insurers, breached their duty of good 8 faith and fair dealing by refusing to properly investigate and effectively denying 9 Plaintiff’s medical care and other benefits claims without any reasonable basis. (Doc. 49, 10 SAC at 10–11.) Arizona law allows a workers compensation claimant to bring an action 11 against his employer’s workers compensation insurer for breach of the duty of good faith 12 and fair dealing. Demetrulias v. Wal-Mart Stores Inc., 917 F. Supp. 2d 993, 1004 (D. 13 Ariz. 2013) (citing Mendoza v. McDonald’s Corp., 213 P.3d 288, 298 (Ariz. Ct. App. 14 2009)). “The duty of good faith arises because . . . implicit in the contract and the 15 relationship is the insurer’s obligation to play fairly with its insured.” Id. In addition, the 16 Carrier Defendants may be liable for Gallagher’s actions since they cannot delegate their 17 duty of good faith. See Temple v. Hartford Ins. Co. of Midwest, 40 F. Supp. 3d 1156, 18 1166 (D. Ariz. 2014). 19 Arizona employs a two-pronged test to determine whether a claimant has proven a 20 bad faith insurance claim. See id. at 1167–69 (citing Trus Joist Corp. v. Safeco Ins. Co. of 21 Am., 735 P.2d 125, 134 (Ariz. Ct. App. 1986)). First is an objective inquiry: did the 22 insurer act unreasonably toward the insured? Id. at 1168. Second is a subjective inquiry: 23 did the insurer act knowingly or with reckless disregard as to the reasonableness of its 24 actions? Id. at 1169. “Unreasonable actions include failure to ‘immediately conduct an 25 adequate investigation,’ failure to ‘act promptly in paying a legitimate claim,’ ‘forc[ing] 26 an insured to go through needless adversarial hoops to achieve its rights under the 27 policy,’ ‘lowball[ing] claims,’ and similar conduct.” Demetrulias, 917 F. Supp. 2d at 28 1004 (quoting Zilisch v. State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 280 (Ariz. 2000)). - 12 - 1 Arizona law requires insurers to give “equal consideration” to the needs of their insureds, 2 but insurers can challenge claims that are “fairly debatable.” Id. For the second subjective 3 prong, the intent required is the “evil hand” or intent to do the act. Id. at 1005. The 4 insurer need not intend to harm the insured, but only “must intend the act or omission and 5 must form that intent without reasonable or fairly debatable grounds.” Id. The requisite 6 “[i]ntent is established if the insurer lacked a ‘founded belief’ that its conduct was 7 permissible,” and a “founded belief is absent when the insurer either knows that its 8 position is groundless or when it fails to undertake an investigation adequate to determine 9 whether its position is tenable.” Id. 10 The Court now determines whether there is sufficient evidence from which 11 reasonable jurors could conclude that Hartford and Twin City, acting through Gallagher, 12 acted unreasonably in the investigation, evaluation, and processing of Plaintiff’s claim, 13 and either knew or were conscious of the fact that the conduct was unreasonable. See 14 Zilisch, 995 P.2d at 280. In the SAC, Plaintiff alleges that the Carrier Defendants 15 intentionally denied and terminated workers’ compensation benefits without a reasonable 16 basis, failed to perform an adequate and reasonable investigation, unreasonably 17 interpreted their obligations under the Arizona Workers’ Compensation Act, abused the 18 ICA process, needlessly compelled Plaintiff through litigation, forced Plaintiff to accept a 19 lower amount of benefits owed, and placed their financial interests above Plaintiff. (SAC 20 at 10-11.) The Carrier Defendants contend that they are entitled to summary judgment 21 because the evidence shows there was a reasonable basis for their actions. (Carrier Defs.’ 22 Mot. at 7.) They argue that various doctors determined Plaintiff was medically stationary 23 and the ICA decisions did not support providing additional benefits where one decision 24 lacked sufficient detail and a later decision only provided for limited compensation 25 already paid to Plaintiff. (See Carrier Defs.’ Mot. at 7-11.) In response, Plaintiff contends 26 the evidence shows that Gallagher abused the use of IMEs, cited improper reasons to 27 deny and delay payment, and failed to timely share medical reports, especially APS 28 reports, to Plaintiff’s other doctors. (See Resp. to Carrier Defs.’ Mot. at 1–2.) - 13 - 1 Viewing the summary judgment evidence in a light most favorable to Plaintiff, the 2 Court finds Plaintiff has proffered sufficient evidence to create a genuine dispute as to 3 whether the Carrier Defendants acted unreasonably in the investigation and processing of 4 Plaintiff’s claim. Despite the May 2013 ICA decision that awarded Plaintiff medical, 5 surgical and hospital benefits, as well as temporary total or partial disability 6 compensation benefits from December 9, 2012 until such time Plaintiff’s condition was 7 determined to be medically stationary, there is sufficient evidence to create a genuine 8 dispute as to whether Gallagher attempted, in earnest, to pay Plaintiff in accordance with 9 this decision. Gallagher’s adjuster testified that he thought the award was vague and that 10 he did not need to fully comply with it. The adjuster acknowledged he needed more 11 information to carry out the May 2013 decision, but the evidence shows that minimal or 12 no actions were taken to obtain the additional information. 13 The Court acknowledges that there were various medical reports, including IME 14 reports, finding Plaintiff was stationary and ICA decisions at issue in this case that may 15 have caused confusion. The Court, however, finds a genuine dispute arises as to whether 16 the May 2013 ICA decision was sufficiently clear to indicate benefits were owed to 17 Plaintiff and whether Carrier Defendants failed to perform an adequate investigation in 18 response, and rather, effectively ignored the ICA decision. “[W]hile fair debatability is a 19 necessary condition to avoid a claim of bad faith, it is not always a sufficient condition.” 20 Zilisch, 995 P.2d at 280. The inquiry remains “whether there is sufficient evidence from 21 which reasonable jurors could conclude that in the investigation, evaluation, and 22 processing of the claim, the insurer acted unreasonably and either knew or was conscious 23 of the fact that its conduct was unreasonable.” Id. Because the evidence shows Gallagher 24 may not have taken prompt steps to attempt to comply with the May 2013 ICA decision, 25 forcing Plaintiff to go through further adversarial hoops, reasonable jurors could find that 26 the Carrier Defendants, acting through Gallagher, acted unreasonably. See id. 27 The Court must also consider whether the insurer lacked a “founded belief” in the 28 appropriateness of the course of action, in other words, whether the insurer “subjectively - 14 - 1 knew that it was acting unreasonably or acted with such reckless disregard that such 2 knowledge may be imputed to it.” Temple, 40 F. Supp. 3d at 1169. Although the founded 3 belief determination is usually for the jury to determine, if a plaintiff has offered no 4 significantly probative evidence that calls into question the insurer’s subjective founded 5 belief, the Court may rule on the issue as a matter of law. Id. 6 Here, because Plaintiff proceeds on the theory that his claim was delayed due to 7 Gallagher’s failure to adequately investigate his claim, the failure to investigate theory 8 overlaps in the first two elements of the bad faith analysis. The evidence of Gallagher’s 9 failure to investigate and obtain further information to effectuate the May 2013 ICA 10 Award may support both the objective unreasonableness of the insurer’s actions and the 11 existence of the subjective “evil hand.” See Demetrulias, 917 F. Supp. 2d at 1006. 12 Plaintiff also cites statements made by Ms. LaMont, Ms. Green, and Mr. Messner that 13 Plaintiff alleges indicate a subjective knowledge that their actions were unreasonable. 14 The Court finds there is sufficient evidence for a reasonable jury to find the Carrier 15 Defendants, acting through Gallagher, failed to undertake an investigation adequate to 16 determine whether their position to not follow the May 2013 ICA was tenable, and thus 17 the subjective prong of the bad faith claim is also met. 18 19 Accordingly, there is a genuine dispute as to whether the Carrier Defendants acted in bad faith with regard to Plaintiff’s claim. 20 B. Proper Insurance Carrier 21 The Carrier Defendants argue that Twin City did not issue a policy of insurance to 22 Plaintiff’s employer, R&L, and accordingly Twin City cannot be held liable for the 23 alleged failure to act in good faith. (Carrier Defs.’ Mot. at 5.) In support, the Carrier 24 Defendants provide an insurance contract with a policy period of October 1, 2012 to 25 October 1, 2013, which indicates that Trumbull Insurance Company is R&L’s insurer. 26 (DSOF, Ex. 9.) However, Plaintiff’s injury occurred in December 2011 and would not be 27 covered under the policy period in that contract. 28 - 15 - 1 The Carrier Defendants also argue that their Motion should be granted because 2 Plaintiff has only provided documents created by third parties to support Plaintiff’s 3 argument that Hartford and Twin City should both be held liable. (Carrier Defs.’ Mot. 4 At 5.) The ICA sent a Notification of Workers Compensation Claims dated February 2, 5 2012 that indicated Hartford as the insurer. (DSOF, Ex. 7-2 at 11.) Gallagher filed a 6 Notice of Claim Status on May 10, 2012 indicating Hartford as the insurer (DSOF, Ex. 7- 7 2 at 12), but filed another Notice of Claim Status on December 4, 2012 indicating Twin 8 City as the insurer (DSOF, Ex. 7-2 at 14). The May 24, 2013 ICA decision indicates 9 Hartford is the insurer (DSOF, Ex. 7-2 at 41–50), but the December 5, 2014 ICA decision 10 (DSOF, Ex. 7-2 at 53–56) and the April 3, 2015 decision, indicate Twin City is the 11 insurer (DSOF, Ex. 7-2 at 68–73). In addition, R&L and Twin City/Gallagher filed the 12 petition for review of the ICA decisions on May 4, 2015. (DSOF, Ex. 7-2 at 61–62.) The 13 Court finds that these documents showing the ICA’s and Gallagher’s own use of Hartford 14 and Twin City interchangeably as insurers shows there is a genuine dispute as to who was 15 R&L’s insurer at the time of Plaintiff’s injury. Because the above documents are unclear, 16 and because the Carrier Defendants have not provided evidence clearly establishing that 17 Twin City did not have an insurance policy with R&L at the relevant time, the Carrier 18 Defendants have failed to show there is no genuine dispute as to this issue.3 19 C. Punitive Damages Claim Against the Carrier Defendants 20 A plaintiff may receive punitive damages in a bad faith insurance action if there 21 are “circumstances of aggravation or outrage, such as spite or malice, or a fraudulent or 22 evil motive on the part of the defendant, or such a conscious and deliberate disregard of 23 the interests of others that the conduct may be called wilful or wanton.” Demetrulias, 917 24 F. Supp. 2d at 1010. Punitive damages are restricted to those cases in which the 25 3 26 27 28 The Carrier Defendants also argue that the ICA never issued an award against Twin City, and thus Plaintiff has not exhausted his administrative remedies to secure a finding that Twin City is responsible for payment of workers’ compensation benefits. (Carrier Defs.’ Mot. at 5.) The ICA did in fact enter two awards for Plaintiff against Twin City/Gallagher in the December 5, 2014 and April 3, 2015 ICA decisions. (DSOF, Ex. 72 at 53–56, 68–73.) Moreover, given the multiple inconsistencies cited above, the Court finds the issue of who is the actual insurer will be properly placed before a jury. - 16 - 1 defendant’s conduct was guided by evil motive. Temple, 40 F. Supp. 3d at 1171. 2 Summary judgment on the question of punitive damages “must be denied if a reasonable 3 jury could find the requisite evil mind by clear and convincing evidence; summary 4 judgment should be granted if no reasonable jury could find the requisite evil mind by 5 clear and convincing evidence.” Id. at 1166. 6 In order to establish a claim for punitive damages, Plaintiff must provide evidence 7 that supports a showing that the Carrier Defendants either “(1) intended to cause injury; 8 (2) engaged in wrongful conduct motivated by spite or ill will; or (3) acted to serve its 9 own interests, having reason to know and consciously disregarding a substantial risk that 10 its conduct might significantly injure the rights of others, even though defendant had 11 neither desire nor motive to injure.” Id. at 1171. Upon the Court’s threshold review of the 12 evidence, the Court finds that Plaintiff has proffered sufficient evidence to create a 13 genuine dispute as to the third basis. The Carrier Defendants “must show there is a 14 complete failure of proof, Celotex, 477 U.S. at 323, 106 S.Ct. 2548, such that no 15 reasonable jury could find the requisite evil mind required for punitive damages by clear 16 and convincing evidence.” Id. 17 Here, taking inferences in favor of Plaintiff, Plaintiff has proffered evidence that 18 suggests that the Carrier Defendants acted to serve their own interests by not taking 19 prompt or investigatory actions to effectuate the May 2013 ICA decision. Despite the 20 Carrier Defendants’ argument that the decision was too vague, the evidence shows that 21 the decision did state dates and types of benefits awarded to Plaintiff and that the Carrier 22 Defendants could have taken steps to obtain the clarity they claim was required in order 23 to comply with the decision. Plaintiff’s proffered evidence also suggests that the Carrier 24 Defendants knew that their lack of affirmative steps to effectuate the May 2013 ICA 25 decision could injure Plaintiff’s right to obtain benefits because his award would at least 26 be delayed, and possibly disregarded, and yet, the evidence shows the Carrier Defendants 27 may have consciously disregarded this risk by not promptly investigating. The Court 28 acknowledges that Plaintiff’s evidence showing the Carrier Defendants’ “evil mind” is - 17 - 1 quite limited, but it cannot say that no reasonable jury could conclude by clear and 2 convincing evidence that the Carrier Defendants acted to serve their own interests while 3 consciously disregarding the substantial risk that their conduct might significantly injure 4 Plaintiff’s rights. As a result, the Carrier Defendants are not entitled to summary 5 judgment as to Plaintiff’s request for punitive damages. 6 D. Aiding and Abetting Claim Against Gallagher and Ms. Green 7 Under Arizona law, “claims of aiding and abetting tortious conduct require proof 8 of three elements: (1) the primary tortfeasor must commit a tort that causes injury to the 9 plaintiff; (2) the defendant must know that the primary tortfeasor’s conduct constitutes a 10 breach of duty; and (3) the defendant must substantially assist or encourage the primary 11 tortfeasor in the achievement of the breach.” Temple, 40 F. Supp. 3d at 1170 (citing Wells 12 Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust 13 Fund, 38 P.3d 12, 23 (Ariz. 2002), as corrected (Apr. 9, 2002)). The party charged with 14 aiding and abetting must have knowledge of the underlying tortious violation, and 15 knowledge can be inferred from the circumstances. Id. 16 The parties both cite to numerous cases that they argue support either the 17 proposition that Arizona law does or does not permit an aiding and abetting cause of 18 action against a third party administrator, like Gallagher, and/or individual adjuster, like 19 Ms. Green. The Court has reviewed the cases the parties have cited and is guided by a 20 recent decision in this district that also addressed such a cause of action. See Lambert v. 21 Liberty Mut. Fire Ins. Co., No. CV-14-00521-JWS, 2014 WL 5432154, at *3 (D. Ariz. 22 Oct. 24, 2014). As Lambert notes, “[a]lthough federal courts in this district have 23 consistently held that Arizona law would permit a claim against an adjuster [or third party 24 administrator] for aiding and abetting an employer’s bad faith, no conclusive Arizona 25 case law exists.” Id. However, even assuming that a third party administrator or adjuster 26 may be liable for aiding and abetting a violation of the duty of good faith and fair dealing, 27 the plaintiff must still show the elements of a separate tort by the third-party 28 administrator or adjuster against whom the claim of aiding and abetting is being alleged. - 18 - 1 See, e.g., Ortiz v. Zurich Am. Ins. Co., No. CV-13-02097-JAT, 2014 WL 1410433, at *3 2 (D. Ariz. Apr. 11, 2014) (“Because Plaintiff alleges the same actions give rise to both the 3 bad faith claim and the aiding and abetting claim, Plaintiff has failed to state a claim 4 against [the third party administrator] or [the adjuster].”); Haney v. ACE Am. Ins. Co., 5 No. CV-13-02429-DGC, 2014 WL 1230503, at *4 (D. Ariz. Mar. 25, 2014); Jones v. 6 Colo. Cas. Ins. Co., No. CV-12-1968-JAT, 2013 WL 4759260, at *5 (D. Ariz. Sept. 4, 7 2013); Young v. Liberty Mut. Grp., Inc., No. CV-12-2302-JAT, 2013 WL 840618, at *3– 8 4 (D. Ariz. Mar. 6, 2013). 9 While Plaintiff alleges in the SAC that the Carrier Defendants have breached the 10 duty of good faith and fair dealing, committed violations of the Arizona Workers’ 11 Compensation Act, and violated other duties under Arizona law arising from their 12 workers compensation coverage contracts, which could amount to tortious acts, Plaintiff 13 does not allege any claims against Gallagher and Ms. Green other than aiding and 14 abetting and punitive damages. (See SAC at 10-15.) Plaintiff’s separate aiding and 15 abetting claim against Gallagher and Ms. Green requires Plaintiff to provide evidence 16 that these parties took a separate action in concert with the actions giving rise to 17 Plaintiff’s claim against the Carrier Defendants. In other words, if Plaintiff only shows 18 that the alleged actions that constitute the breach of the underlying tortious act are the 19 same as those that constitute the third-party administrator’s and adjuster’s assistance or 20 encouragement, Plaintiff’s claim fails. 21 The Court finds Plaintiff has failed to provide any facts to create a genuine dispute 22 as to whether Gallagher and Ms. Green performed separate actions that substantially 23 assisted or encouraged the Carrier Defendants’ alleged breaches. See Ortiz, 2014 WL 24 1410433, at *3; see also Morrow v. Boston Mut. Life Ins. Co., No. CV-06-2635-SMM, 25 2007 WL 3287585 (D. Ariz. Nov. 5, 2007). In Morrow, the plaintiff made two distinct 26 allegations against two separate defendants – the carrier’s selection of a biased doctor as 27 part of the claims handling, and the doctor’s provision of a biased and unsupported 28 opinion. Morrow, 2007 WL 3287585, at *5. Unlike Morrow, Plaintiff fails to allege, - 19 - 1 much less produce any evidence, that Gallagher and Ms. Green performed any separate 2 action akin to the separate actions in Morrow. The actions that Plaintiff cites in support of 3 the aiding and abetting are the same actions that give rise to the bad faith claim that the 4 Carrier Defendants failed to conduct an adequate investigation and make timely benefit 5 payments. See, Ortiz, 2014 WL 1410433, at *3; Young, 2013 WL 840618, at *3; 6 Lambert, 2014 WL 5432154, at *3. Accordingly, the Court will grant Gallagher and Ms. 7 Green’s Motion for Summary Judgment as to Plaintiff’s aiding and abetting claims 8 against them. D. 9 Punitive Damages Claim Against Gallagher and Ms. Green 10 Plaintiff alleges that Gallagher and Ms. Green are liable for punitive damages. 11 (Resp. to Administrators’ Mot. at 10.) As Plaintiff concedes, the only basis for his 12 punitive damages claim against Gallagher and Ms. Green is his aiding and abetting claim. 13 (Resp. to Administrators’ Mot. at 10.) Because Gallagher and Ms. Green are entitled to 14 summary judgment on Plaintiff’s aiding and abetting claim, they are also entitled to 15 summary judgment on Plaintiff’s punitive damages claim. See Young, 2013 WL 840618, 16 at *4. 17 IV. CONCLUSION 18 The Court finds a genuine dispute exists as to whether the Carrier Defendants 19 breached their duty of good faith and fair dealing by refusing to properly investigate and 20 effectively denying Plaintiff’s medical care and other benefits claims without any 21 reasonable basis. The Court also finds Plaintiff has proffered sufficient evidence from 22 which a reasonable jury could conclude by clear and convincing evidence that the Carrier 23 Defendants acted to serve their own interests, having reason to know and consciously 24 disregarding a substantial risk that their conduct might significantly injure Plaintiff’s 25 rights, and thus the jury could find punitive damages against the Carrier Defendants are 26 appropriate. Accordingly, the Carrier Defendants’ Motion for Summary Judgment with 27 respect to these claims is denied. 28 - 20 - 1 2 No genuine dispute of material fact as to Plaintiff’s claims against Gallagher and Ms. Green exists, and they are thus entitled to summary judgment on those claims. 3 IT IS THEREFORE ORDERED denying Defendants’ Hartford Insurance 4 Company of the Midwest and Twin City Fire Insurance Co.’s First Amended 5 Memorandum of Law in Support of Motion for Summary Judgment (Doc. 144). This 6 matter will proceed to trial on Plaintiff’s claims against these Defendants, and the Court 7 will set a Pretrial Conference by separate order. 8 IT IS FURTHER ORDERED granting Defendants’ Gallagher Bassett Services, 9 Inc. and Jennifer Green’s First Amended Memorandum of Law in Support of Motion for 10 Summary Judgment (Doc. 146). Plaintiff’s claims against these Defendants are 11 dismissed. 12 Dated this 23rd day of February, 2016. 13 14 Honorable John J. Tuchi United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 21 -
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