Around the Nation: December 2016

ARIZONA: $1 Million in Punitive Damages Reversed for Alleged “Institutional Bad Faith”

In Sobieski v. Am. Standard Ins. Co. of Wisconsin, despite upholding a bad faith judgment against an insurer for conducting an unreasonable investigation and denying a claim, the Arizona Court of Appeals reversed a $1 million award of punitive damages in that bad faith case that arose from the insurer’s denial of an uninsured motorist (UM) claim. The insureds alleged that five broad categories of evidence indicated claims professionals denied their claim because of “undue pressure” from the insurer “to promote company profits at the expense of insureds,” which included “claims department business plans, companywide incentive-pay programs, employee performance reviews and personnel files, claims manager training materials, and a mandate to claims employees to focus on comparative negligence in adjusting claims.” The Arizona Court of Appeals, however, held that a close review of the evidence indicated that these documents, programs, and policies were not “designed or applied with the purpose of arbitrarily reducing or denying claims to further the [insurer’s] bottom line, or that those plans, materials or programs had any inappropriate effect whatsoever on how claims employees handled the [insureds’] claim.” In so holding, the Court of Appeals continued Arizona’s trend of reducing or reversing punitive damages in bad faith cases.—From CLM Member Nathan D. Meyer

CALIFORNIA: Payment Calculation Applied to Future Economic Damages 

In 2011, the California Supreme Court held in Howell v. Hamilton Meats & Provisions Inc. that a plaintiff can recover as damages for her past medical expenses no more than her medical providers accepted as payment in full from the plaintiff and her health insurer. Recently, the Court of Appeal held in Markow v. Rosner that this calculation also applies to the recovery of future medical expenses. Thus, a highly qualified life care planning expert’s testimony regarding the approximate amount the plaintiff would pay based on the amount that would typically be billed and paid for the future care of the plaintiff served as substantial evidence supporting the jury’s award of future economic damages to the plaintiff.—From San Diego Chapter Secretary Karen Holmes

INDIANA: The Application of Reasonable Value of Medical Expenses

In a highly anticipated decision, the Indiana Supreme Court issued its written opinion in Patchett v. Lee regarding the always questionable scope of the collateral source rule. The court held that evidence of write-offs for governmental payments, such as the Healthy Indiana Plan (HIP), Medicare, and Medicaid, are admissible to show the reasonable value of a plaintiff’s medical expenses.—From Southwest Ohio Chapter Director of Education Andrew L. Smith

OHIO: The Application of Independent Corroborative Evidence  

The Ohio Supreme Court recently concluded that, when a motorist is injured in an accident caused by avoiding an unidentified vehicle that fled the scene, evidence derived from the driver’s account, such as statements made to investigating officials and medical professionals, can be considered “independent corroborative evidence” sufficient to support a claim for uninsured motorist insurance (UM) coverage. In Smith v. Erie Ins. Co., the court analyzed a provision in a personal automobile liability policy requiring independent corroborative evidence in so-called “phantom vehicle” cases in which the only witness to the accident is the injured driver. In its holding, the court determined that the requisite corroborative evidence is not limited to third-party testimony or a source completely unrelated to the driver’s statement but can be, in part, based on the driver’s account if additional information is included. “The evidence need only be additional and supportive,” the majority wrote, and can include a police report that references no impairment of the driver and no finding of excessive speed or statements made to a police officer—for which an insured could face criminal liability if they were knowingly false—which could also constitute additional evidence that supports the testimony of the insured. This holding will certainly expand the availability of UM coverage for motorists injured in phantom vehicle accidents.—From CLM Member Holly Marie Wilson, Esq. 

OREGON: Conditions That Pose an Unreasonable Risk of Harm

In Ault v. Del Var Properties, a customer of a storage facility tripped and fell over a raised portion of the sidewalk while dropping her rental payment in a deposit box. The trial court dismissed her complaint on the grounds that she failed to establish an unreasonably dangerous condition. The Oregon Court of Appeals held that a possessor of land’s liability to an invitee is not contingent on the presence of an unreasonably dangerous condition. Even in the absence of an unreasonably dangerous condition, a possessor may be liable for conditions that pose an unreasonable risk of harm. Additionally, the court held that where multiple conditions, such as location, lighting, and nearby distractions combine, a jury should decide whether the circumstances constitute an unreasonable risk of harm and, if so, what action was necessary to warn or otherwise protect invitees from that risk.—From CLM Member Jack Levy

WASHINGTON: No Breach of Duty by Representing Insurance Company in Other Matters

In Arden v. Forsberg & Umlauf, the insurance company defended under a reservation of rights and retained a law firm to serve as defense counsel for the insureds. The lawsuit ultimately settled. The insureds then sued the law firm, alleging that it had breached its fiduciary duty of loyalty by defending them in a reservation of rights context while also representing the insurance company in other unrelated cases. The Washington Court of Appeals rejected the contention, holding that the law firm’s representation of the insureds while also representing the insurance company in other matters did not create a conflict of interest and that the law firm had no obligation to notify the insureds that it represented the insurance company in other cases. The Court of Appeals also held that there was no evidence that the law firm breached its duty of disclosure regarding a potential conflict of interest. The Washington Supreme Court has accepted review of the Court of Appeals’ decision.—From CLM Member Geoffrey Bedell