SEKERA v. ALLSTATE INSURANCE COMPANY (2019)

MEMORANDUM ***

After recovering $15,000 from the insurance company of the at-fault driver in an automobile accident, Appellant Michael Sekera filed a claim with Allstate Insurance Company based on the underinsured motorist provision of the insurance policy covering the vehicle he was driving. A few weeks later, in February 2013, Allstate initiated arbitration pursuant to the policy in order to resolve the matter. In June 2014, more than fifteen months after his initial contact with Allstate, and with Allstate still investigating the claim, Sekera sued Allstate in federal district court alleging bad faith. Allstate filed a motion to compel arbitration which the district court granted and stayed the case. The arbitrator awarded Sekera $30,510 which Allstate paid. The case resumed in district court, and the court granted summary judgment for Allstate on Sekera's bad faith claims. The court found that, pursuant to Guebara v. Allstate Insurance Company, 237 F.3d 987, 992 (9th Cir. 2001), there was a “genuine dispute” as to coverage and the value of Sekera's claim, precluding a finding of bad faith. Sekera appeals that decision as well as the district court's denial of his request to file a supplemental opposition to summary judgment that included an expert report. We have jurisdiction under 28 U.S.C. § 1291. We affirm.

We review a district court's summary judgment order de novo, considering the evidence in the light most favorable to the non-moving party. Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014). We review a district court's decision concerning the management of litigation for abuse of discretion. Preminger v. Peake, 552 F.3d 757, 769 n.11 (9th Cir. 2008) (citing FTC v. Enforma Nat. Prods., Inc., 362 F.3d 1204, 1212 (9th Cir. 2004) ). Similarly, we review a lower court's decision regarding the admission of expert testimony for an abuse of discretion. City of Pomona v. SQM N. Am. Corp., 866 F.3d 1060, 1065 (9th Cir. 2017).

I

Sekera first argues that Allstate's initiating arbitration before completing the claim evaluation creates a fact question of bad faith precluding summary judgment. He also argues that Allstate's delay in evaluating his claim creates a fact issue. “[T]o establish a breach of the implied covenant of good faith and fair dealing under California law, ‘a plaintiff must show: (1) benefits due under the policy were withheld; and (2) the reason for withholding benefits was unreasonable or without proper cause.’ ” Pyramid Techs., Inc. v. Hartford Cas. Ins. Co., 752 F.3d 807, 823 (9th Cir. 2014) (quoting Guebara, 237 F.3d at 992). The reasonableness of an insurer's conduct is ordinarily a question of fact. Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1161 (9th Cir. 2002). However, bad faith claims may be dismissed on summary judgment if the insurer can show both that there was a “genuine dispute” as to liability, Guebara, 237 F.3d at 992, and that the insurer has not acted in bad faith “for advancing its side of that dispute,” Chateau Chamberay Homeowners Ass'n v. Assoc. Int'l. Ins. Co., 90 Cal.App.4th 335, 108 Cal.Rptr.2d 776, 784 (2001). “The genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process, and evaluate the insured's claim. A genuine dispute exists only where the insurer's position is maintained in good faith and on reasonable grounds.” Brehm v. 21st Century Ins. Co., 166 Cal.App.4th 1225, 83 Cal.Rptr.3d 410, 419 (2008) (quoting Wilson v. 21st Century Ins. Co., 42 Cal.4th 713, 68 Cal.Rptr.3d 746, 171 P.3d 1082, 1089 (2007) ).

Sekera argues that there can be no genuine dispute until after Allstate completed its investigation and presented him with a claim valuation. However, Allstate need not have completed the claim investigation or valuation for a genuine dispute to exist. See Guebara, 237 F.3d at 995–96; Chateau Chamberay, 108 Cal.Rptr.2d at 783–84. As with all bad faith claims, the pivotal concern is whether the insurer acted unreasonably or without proper cause in its handling of the claim. See Pyramid Techs., 752 F.3d at 823; Guebara, 237 F.3d at 992; Chateau Chamberay, 108 Cal.Rptr.2d at 784.

Further, Allstate did not wrongly initiate arbitration before there existed a formal disagreement. Certainly, “an insurer cannot shield other dilatory conduct, such as failing to investigate a claim, by the mere act of requesting uninsured motorist arbitration.” Hightower v. Farmers Ins. Exch., 38 Cal.App.4th 853, 45 Cal.Rptr.2d 348, 354 (1995). But, Sekera's allegations of Allstate's bad faith during the investigation of the claim, including the initiation of arbitration, is without support in the record.

Within two weeks of receiving Sekera's claim, Allstate's claims adjuster promptly wrote to Sekera seeking a signed medical authorization to allow Allstate to review Sekera's medical records. Sekera did not sign the medical authorization, and his counsel informed Allstate that Sekera would ignore medical releases along with other forms unless Sekera was asked otherwise. About two weeks later, the adjuster wrote again to Sekera's counsel explaining that further investigation of the claim was needed due to Allstate's specific concerns about missing bills, an unusually low bill for a surgery, and inconsistencies between surgical notes and diagnoses. Allstate explained it would initiate arbitration pursuant to the policy in order to gather the evidence needed to evaluate the claim. Because there was a disagreement as to the value of the claim and as to coverage, arbitration was justified. Moreover, that disagreement constituted a genuine dispute. See Guebara, 237 F.3d at 993–94; Chateau Chamberay, 108 Cal.Rptr.2d at 784.

Further supporting the genuine dispute, Allstate's expert, who conducted the independent medical exam, disagreed that the accident caused Sekera's injuries. See Fraley v. Allstate Ins. Co., 81 Cal.App.4th 1282, 97 Cal.Rptr.2d 386, 391 (2000) (“The ‘genuine dispute’ doctrine may be applied where the insurer denies a claim based on the opinions of experts.”). Sekera challenges the independence of this medical expert because the expert stated that he almost always works for insurance companies in insurance disputes.

In Hangarter v. Provident Life & Accident Insurance Co., 373 F.3d 998, 1010-11 (9th Cir. 2004), we found “substantial evidence” that the insurer engaged in a biased investigation aimed at denying the plaintiff's disability claim, as part of a “comprehensive system for targeting and terminating expensive claims.” Id. Here, there is no evidence calling into question the legitimacy of the expert's assessment or the process by which the independent medical exam was initiated or carried out. Thus, Allstate was entitled to rely in good faith on its expert's report in disputing Sekera's claim. See Fraley, 97 Cal.Rptr.2d at 391.

II

Sekera also challenges the district court's denial of his request to file a summary judgment surreply which included the expert report of David Reilly. The district court did not err in denying Sekera's request because Allstate did not introduce new arguments in its reply to warrant the surreply. See JG v. Douglas Cty. Sch. Dist., 552 F.3d 786, 803 n.14 (9th Cir. 2008) (citing Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996) ) (holding district court did not abuse its discretion in denying leave to file surreply because the court did not consider new evidence included in reply brief). Further, as Sekera acknowledges, the deadline for expert witness designation had passed by the time he sought to file the report, and the report itself added nothing material to Reilly's affidavit which was attached to the summary judgment response. The district court did not abuse its discretion. See City of Pomona, 866 F.3d at 1065.

AFFIRMED.