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When Do an Insurance Company’s Responses Move from Negotiation to Unreasonable to Bad Faith?

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The United States District Court D in Colorado addressed that question in Rivera v. State Farm Mutual Insurance Co., Civil Action No. 16-cv-00227-MSK-MJW, (D. Colo., Sept. 11, 2017).

Joyce Rivera (“Rivera”) was involved in a rear-end automobile accident in El Paso County, Colorado on June 15, 2012. At the time, she was covered by a general liability insurance policy issued by State Farm Mutual Insurance Company (“State Farm”). That policy had a $100,000 underinsured motorist’s (“UIM”) endorsement. On January 20, 2015, Rivera tendered (through counsel) a demand for State Farm to pay its UIM limits, claiming that she had medical expenses of $14,000 plus, and future anticipated medical expenses of $132,000.

In September of 2015, State Farm paid an Independent Medical Examiner (“IME”) to examine Rivera. The IME said Rivera’s issues were a combination of results from the car accident of 2012 and to an earlier automobile accident that Rivera was in in 1984 or 1985. Based, at least in part, on this opinion, State Farm extended a first settlement offer of $29,000 in December of 2015. In January of 2016, Rivera counteroffered $90,000. State Farm’s representative rejected that and tendered a new offer of $35,000. On that same day, Rivera’s counsel sent a letter to State Farm saying Rivera’s IME had rejected the claims of State Farm’s IME.

The State Farm claims representative told Rivera’s counsel there was no way that State Farm would pay more than $50,000. Negotiations stopped, and Rivera filed the instant lawsuit on January 29, 2016. In addition to her statutory bad faith count, Rivera also brings a breach of contract claim, and she requests declaratory judgment that she is entitled to the full UIM limits, as well as costs and attorneys’ fees. Rivera determined her actual and anticipated medical expenses and noneconomic damages were $213,700. She also produced her own IME report indicating that all her injuries from 2012 were from the 2012 accident, and not the 1984/1985 accident. Rivera consulted an expert on insurance, who said that State Farm had acted unreasonably (according to industry standards) by offering $29,000 and $35,000 without explanation for the basis of those offers. Rivera says this unreasonableness is the basis for her bad faith claim.

When the Court is considering a Motion for Summary Judgment or a Motion for Partial Summary Judgment, the question is: is a trial required? A trial is required if there are material factual disputes to resolve. Rivera’s bad faith claim alleges State Farm acted unreasonably during the settlement discussions between the parties by offering at most $35,000 without an explanation of the basis of its calculation of that amount, and disregarding her professed medical costs of $72,789.63 and her unspecified noneconomic damages that would cause her total claim to exceed the UIM policy limits. In other words, her theory is that State Farm unreasonably “lowballed” her UIM claim without any legitimate, which led to the improper denial and/or delay of payment of that claim. The appropriate Colorado statute governing this says: an insurer’s delay or denial iss unreasonable if the insurer delayed or denied payment of a covered benefit without a reasonable basis for that action.

Accepting State Farm’s contention that there is a genuine, reasonable dispute as to whether Rivera’s injuries should be attributed in part to an automobile accident that she experienced in the 1980s (as opposed to being solely attributed to her 2012 accident),  that would be relevant as to whether State Farm has unreasonably denied or delayed payment of her claim. In other words, State Farm may have a legitimate objection to the amount of Rivera’s claim yet still be acting unreasonably in processing it. The Court therefore must review the remaining evidence put forward. Because there are questions of material fact to be resolved, the Court denies State Farm’s Motion for Summary Judgment.

The Metier Law Firm is committed to assisting people with personal injury claims throughout Colorado, Wyoming and Nebraska, and we frequently serve as co-counsel to law firms nationwide. Tom Metier recently secured the largest personal injury verdict in Colorado