Summary
discussing claim for bad faith delay in processing claim
Summary of this case from Villarreal v. United Fire & Cas. Co.Opinion
No. 5-828 / 04-1074
Filed January 19, 2006
Appeal from the Iowa District Court for Scott County, Mark D. Cleve, Judge.
Cara Calvert appeals from the summary judgment ruling entered in favor of American Family Insurance Group on her claim for bad faith failure to pay medical benefits. AFFIRMED.
Daniel D. Bernstein and William J. Bribiesco of William J. Bribiesco Associates, Bettendorf, for appellant.
Ted Wallace, Davenport, for appellee.
Heard by Zimmer, P.J., and Miller and Vaitheswaran, JJ.
Cara Calvert appeals from the district court's summary judgment ruling entered in favor of American Family Insurance Group (American Family), dismissing Calvert's first-party bad faith claim for failure to pay medical expense benefits. We affirm the district court.
I. Background Facts and Proceedings.
On January 15, 2003, Calvert was injured when her car collided with another vehicle. Neither the owner nor the operator of the other vehicle maintained automobile insurance at the time of the accident. As a result, Calvert filed a claim under the policy she held with American Family.
In relevant part, Calvert's policy provided medical expense coverage with a $5,000 limit. The policy required Calvert to "[a]ssist [American Family] with any claims or suits" and to provide American Family "with medical . . . and other records and documents [American Family] request[s], as often as [American Family] reasonably ask[s]. . . ." It also reserved to American Family the right "to determine . . . whether any treatment is medically appropriate and necessary, and whether any charge incurred is fair, usual and customary," and "to determine the medical necessity of proposed or incurred treatment plans."
The policy also contained uninsured motorist coverage. Payment has been made under that provision and is not at issue in this appeal.
The day following the accident American Family casualty claim analyst Gary Umble took Calvert's recorded statement. Calvert reported a loss of consciousness upon being struck by the driver's side air bag, hyperventilation, pain in her abdomen, neck, and back, and a split lip. Umble then wrote to Calvert informing her of the $5,000 limit on her medical pay coverage and requesting that she sign an authorization for release of medical information and return the authorization along with any medical bills. The letter advised Calvert that coverage was limited to reasonable fees and necessary medical care for injuries resulting from the accident, and that American Family determined whether treatment and fees were necessary and reasonable.
Calvert began submitting bills for chiropractic care. Although it had not yet received the medical release, American Family made partial payment of the charges. On January 30 Umble wrote Calvert's attorney, William Bribriesco, again requesting the medical release authorization form. Umble stated that "[w]e will secure necessary records from the medical providers in order to make payment."
Bribriesco provided the authorization form on February 10. On April 14 the authorization was rendered invalid by the Security Rule of the Health Insurance Portability and Accountability Act (HIPAA). See 45 C.F.R. § 164.534. American Family did not request a new authorization form from Calvert, or inform Calvert the February 10 authorization was no longer valid.
On April 4 Calvert called Umble and informed him she had suffered a tooth injury. On May 20 Bribriesco sent a letter to Umble, demanding payment of four bills for dental treatment: one from the University of Iowa, one from Dr. John Strief, one from Oral Surgery Associates, and one from Radiological Medical Services. Bribriesco enclosed the dental bills and demanded American Family pay the bills and authorize further work, or explain denial of payment, by June 3.
Bribriesco also enclosed an undated, unsigned letter from Dr. Strief, which was addressed to "American Family Insurance c/o Gary." In the letter Dr. Strief gave the history of a tooth injury that "[a]ccording to [Calvert] . . . was the result of an airbag." The letter also stated a pre-treatment radiograph was enclosed "for your dental consultant to review," as well as the bill for the work performed by Dr. Strief.
While Calvert asserts Dr. Strief sent this letter directly to Umble on May 1, she does not cite to any part of the appendix in support of her assertion. Our review of the file reveals this fact was not made a part of the summary judgment record.
According to the letter Dr. Ann Romanski, a periodontist, diagnosed Calvert with a "traumatic injury to the tooth and alveolar bone, with secondary infection and loss of periodontal attachment." Dr. Romanski recommended extraction of the tooth, which was performed by Dr. Ed Lorson. Dr. Strief, who first examined Calvert on April 3, 2003, installed a temporary bridge and recommended Calvert receive permanent bridgework.
On May 21 Umble left Bribriesco a phone message indicating that Calvert's file had been "misplaced" or "missing" for "sometime," perhaps up to a month, and that the file would be "needed in order to pay additional bills." Bribriesco responded via letter, demanding payment of the dental bills by June 3.
On June 3 Umble sent Bribriesco a letter "apologiz[ing] for any inconvenience," and stating that Umble was now in possession of the file and that American Family was in the process of making additional medical expense payments. Umble asked Bribriesco to forward any and all records from Dr. Romanski, the University of Iowa, and Oral Surgery Associates. Umble stated the records would be forwarded to the medical services department for review, and would be processed for payment if they were found to be accident related. Umble also informed Bribriesco that any additional bills should be accompanied by supporting records, which would expedite the claim payment. No medical records were provided by Calvert.
On June 20, 2003, Calvert filed suit against American Family, seeking payment for her injuries under her insurance policy, and alleging a first party bad faith claim against American Family for unreasonable delay and/or denial of medical expense payments under the policy. After filing an answer denying Calvert's claims, American Family filed a motion for partial summary judgment that requested dismissal of Calvert's bad faith claim or, in the alternative, that the damages and bad faith claims be bifurcated for trial.
The suit also made negligence claims against the vehicle owner and vehicle operator. Those individuals have been dismissed without prejudice and the claims against them are not at issue on appeal.
The district court granted American Family's request for partial summary judgment and dismissed Calvert's bad faith claim. The court concluded that
an objectively reasonable basis did exist for delaying payment on the claim, in that [American Family] had not yet investigated the claim because the medical records had not been provided [by Calvert]. Moreover, less than two months passed between [American Family] receiving notice of the dental claim and [Calvert] filing this law suit.
The court also determined there were no disputed issues of material fact to support Calvert's assertion that a bad faith delay of payment occurred because American Family's automated system resulted in a temporary loss of her file.
Calvert filed an appeal. Our supreme court determined Calvert's appeal was from a final judgment, and transferred the matter to this court for resolution. On appeal Calvert contends the district court erred in determining, as a matter of law, that American Family had a reasonable basis for the delay in payment and thus that she could not sustain a first-party bad faith claim.
Although Calvert repeatedly states her claim as one for either the denial of benefits or a delay in payment, there is no evidence in the record that American Family denied any claim for payment of dental-related expenses.
II. Scope and Standard of Review.
Our review of the district court's summary judgment ruling is for the correction of errors at law. Iowa R. App. P. 6.4; Keokuk Junction Ry. Co. v. IES Indus., Inc., 618 N.W.2d 352, 355 (Iowa 2000). Summary judgment was appropriately entered if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3); City of West Branch v. Miller, 546 N.W.2d 598, 600 (Iowa 1996). We view the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, in the light most favorable to the nonmoving party. Id.; Bearshield v. John Morrell Co., 570 N.W.2d 915, 917 (Iowa 1997). However, when a motion for summary judgment is made and properly supported, a party resisting a summary judgment may not simply rely upon the pleadings, but must "set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered." Iowa R. Civ. P. 1.981(5).
III. Discussion.
To establish her first-party bad faith claim, Calvert was required to show that (1) American Family had no reasonable basis for delaying payment of her medical expense benefits, and (2) American Family knew or had reason to know that its delay in payment was without a reasonable basis. See Sampson v. American Standard Ins. Co., 582 N.W.2d 146, 149 (Iowa 1998). The first element of this test is objective; the second element is subjective. Reuter v. State Farm Mut. Auto. Ins. Co., 469 N.W.2d 250, 251 (Iowa 1991).
Our supreme court has recently summarized the court's role in assessing the existence of an objectively reasonable basis:
A reasonable basis exists for denial of policy benefits if the insured's claim is fairly debatable either on a matter of fact or law. A claim is "fairly debatable" when it is open to dispute on any logical basis. Stated another way, if reasonable minds can differ on the coverage-determining facts or law, then the claim is fairly debatable.
. . . .
Whether a claim is fairly debatable can generally be decided as a matter of law by the court. That is because "`[w]here an objectively reasonable basis for denial of a claim actually exists, the insurer cannot be held liable for bad faith as a matter of law.'" As one court has explained, "[c]ourts and juries do not weigh the conflicting evidence that was before the insurer; they decide whether evidence existed to justify denial of the claim." Thus, if it is undisputed that evidence existed creating a genuine dispute as to . . . the nature and extent of the insured's injuries, . . . a court can almost always decide that the claim was fairly debatable as a matter of law.
Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473-74 (Iowa 2005) (citations omitted). Applying these principles we agree that, under the undisputed facts in this case, American Family had an objectively reasonable basis for delaying payment of Calvert's dental-related medical expenses.
American Family was not informed of a possible accident-related tooth injury until approximately two and one-half months after the accident, and did not receive a claim for dental-related medical expenses until approximately four months after the accident. Within two weeks of being presented with the dental bills, American Family requested medical records so it could determine whether the injuries were, as Calvert reported to Dr. Strief, the result of the accident.
American Family had a right to investigate Calvert's claim prior to payment. See Sampson, 582 N.W.2d at 151. Under the policy terms it also had a right — without regard to the medical release or any statements that American Family would obtain medical records — to request medical records directly from Calvert. Calvert had an equally clear obligation to comply with the request. However, no records were ever provided. Such a failure can give rise to an objectively reasonable basis for a delay in payment. Cf. AMCO Mut. Ins. Co. v. Lamphere, 541 N.W.2d 910, 914 (Iowa Ct.App. 1995) (concluding insured's lack of cooperation in providing documents requested by insurer established an objectively reasonable basis for denial).
Calvert asserts the delay occasioned by her "lost" file, in and of itself, supports her bad faith claim. However, the record does not reveal when her file was recovered by Umble, much less support a conclusion that its misplacement added to or was the cause of any delay in payment. Moreover,
an insurer's intentional, reckless, or negligent failure to investigate or evaluate a claim is only an element by which the insured may prove that no lawful basis for refusal existed. The insurer's "subpar" investigation cannot in and of itself sustain a tort action for bad faith. . . . Although subjective bad faith may be inferred from an insurer's flawed investigation, an improper investigation, standing alone, is not sufficient cause for recovery if the insurer in fact has an objectively reasonable basis for denying the claim.
Reuter, 469 N.W.2d at 254-55.
Calvert concedes American Family had a right to investigate her claim, and even appears to concede that if her claim had been for uninsured motorist benefits the delay occurring in this case would have been reasonable. She contends, however, that the necessity and extent of an investigation should be severely narrowed when a claim is for medical expenses. She asserts that, unlike uninsured motorist benefits, there is an "immediate necessity" for medical expense benefits, and thus insurers should be obligated to pay medical expense benefits so long as the insurer has received "any credible information . . . that an injury is related to a covered accident." She argues Dr. Strief's letter, when viewed in light of her January report of a mouth injury and her April report of a tooth injury, is "credible information" sufficient to casually connect the injury to the accident and trigger American Family's payment obligation.
Calvert's argument has some appeal; however, it is contrary to the express language of her policy, which does not limit or distinguish the parties' rights and obligations in the investigation or payment of a medical expense claim. It is also contrary to the controlling definition of a fairly debatable claim as one "open to dispute on any logical basis." Bellville, 702 N.W.2d at 473. Under prevailing supreme court precedent, there is simply no support for Calvert's position that a lesser standard should be applied in cases involving medical expense claims.
In light of the limited information American Family had received regarding Calvert's tooth injury, it was objectively reasonable for American Family to question whether the injury was accident related, and thus whether Calvert was entitled to payment for any associated care. Until it had an opportunity to review the medical records, American Family had a reasonable basis for delaying payment of the dental expenses. Thus, Calvert's claim for policy benefits was fairly debatable as a matter of law. We accordingly affirm the district court's dismissal of Calvert's bad faith claim.