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Larson v. Hartford Insurance Company of The Midwest

United States District Court, D. Arizona

July 3, 2014

Christy Larson, Plaintiff,
Hartford Insurance Company of the Midwest, et al., Defendants.


NEIL V. WAKE, District Judge.

Before the Court are the parties' respective motions for summary judgment (Docs. 108, 116), responses (Docs. 120, 122), and replies (Docs. 125, 127). The parties also presented oral argument on June 19, 2014. For the following reasons, Plaintiff's Amended Motion for Partial Summary Judgment (Doc. 108) will be denied, and Defendants' Motion for Summary Judgment (Doc. 116) will be granted in part and denied in part.


The following facts are undisputed except as noted. In July 2010, Plaintiff Christy Larson managed a Denny's Restaurant in Sierra Vista, Arizona. Doc. 124 at 2. On July 28, she hurt her back while painting the Denny's break room as directed by her supervisor, Kelly Sturm. She went home and felt pain in her legs. Doc. 109 at 3. Larson informed Sturm of the injury the next day. Id. at 13. She worked July 29, 30, and 31 in pain. Id. at 3.

Larson sought treatment. On August 1, she went to the Sierra Vista Regional Medical Center Emergency Room "because [she] couldn't take the pain anymore" and "wasn't getting any better." Id. The clinician diagnosed back pain and sciatica and prescribed pain medication. Doc. 109-7 at 3; Doc. 124-2 at 25, 31. The parties dispute whether Larson reported the injury as work related. Each has submitted a "Triage Information" sheet, one indicating the injury occurred at work and one not so indicating. Compare Doc. 109 at 17 and Doc. 109-7 at 2 with Doc. 124 at 7 and Doc. 124-2 at 32. On August 5, Larson went to a second medical provider, High Desert Clinic. Doc. 109 at 4. The High Desert Clinic records indicate the cause of injury was "working long hours, 1½ weeks ago was unloading truck then last week was painting[.]" Doc. 109-10 at 3. Larson was referred to an orthopedic surgeon. Doc. 109-3 at 3. She returned to the Sierra Vista facility on August 12 and reported back pain from stepping off a chair while painting the break room. The attending physician signed a "Worker's & Physician's Report of Injury" for the Industrial Commission of Arizona. Doc. 109-9 at 2. The parties dispute whether the facilities filed a workers' compensation claim with the Industrial Commission on Larson's behalf, compare Doc. 109 at 4 with Doc. 124 at 8, but Defendants do not dispute that the Industrial Commission subsequently sent a formal Notice of Injury to Defendant Gallagher Bassett. Doc. 124 at 8.

As a Denny's employee, Larson benefited from an insurance policy issued by Defendant Hartford Insurance Company of the Midwest. Defendant Gallagher Bassett served as claims handler. Doc. 109 at 1. Gallagher Bassett received Larson's workers' compensation insurance claim on August 2, 2010. Doc. 109-3 at 2. On August 9, Gallagher Bassett supervisor Heather Bilodeau entered the following notes in Larson's electronic claim file:

This claim needs to be transferred to the indemnity office. The F/U notes total temporary disability 8/5/2010 until seen by ortho. The GM, Kelly [Sturm, ] questions this as [Larson] said she was on a ladder painting in the break room and had pain in her back and legs when she went home. [Larson] is a manager, worked the next couple of days and did not report the incident until 2 days later.

Id. at 3. The same day, Bilodeau assigned the claim to adjuster Tina Gustafson. Doc. 109 at 5.

Within a few hours, Gustafson began investigating the claim. She first contacted Sturm. Gustafson's notes from this conversation reflect that Sturm "doubt[ed] the claim. [Larson] told him she was just standing on a step stool in their break area painting and felt pain in her back. She did not fall or twist her back. She did not report this right away." Doc. 109-3 at 4. Based on this initial conversation, Gustafson concluded she "needed to complete an investigation to find out what was going on." Doc. 124-5 at 16. She "needed to do an investigation" because "there were not consistent stories as to what happened. [Larson] was just standing there and felt pain in her back." Id. at 17. Gustafson "wanted a second opinion" because Larson "didn't really do anything according to them. She was- she just started having pain." Id.

Gustafson then contacted Larson, who

state[d] she was standing on a general chair (not a ladder as the FROI states) in the break room area painting a wall.... She stepped off the the [sic] chair onto her right foot and began experiencing pain. When she got home she had to lay down the pain was so bad. She went into work the next day and reported this to the GM Kelly [Sturm]. She explained the issues w/Kelly and Kelly was very upset about this and did not want to deal with it nor did he send her to a clinic. She went to the ER on her own. She denies any prior back injuries or problems[.] She only had one prior claim for a minor knee injury w/minimal txt, no time loss and no settlement or impairment. She has been out of work since seen at ER on 8-1-10.

Doc. 109-3 at 4. After a subsequent conversation with Larson, still on August 9, Gustafson noted Larson had been seen at the Sierra Vista and High Desert facilities for severe pain in her lower back. Gustafson informed Larson she could not authorize medical treatment at that point and instead needed to schedule an independent medical review (IME) and obtain her medical records. Doc. 109-2 at 6; 109-3 at 4. Gustafson's notes from that conversation conclude, "She was not happy and advised she is getting an atty." Doc. 109-3 at 5.

That same day, Gustafson informally decided to deny Larson's claim pending further investigation. She entered the following in the claim file: "Claim being investigated. Mechanism of inj[ury] questionable at this time, need an MD opinion. [Larson] did not report this immediately[. Received Denny's] approval to deny and set up IME[.]" Id. Gustafson subsequently testified she did not need Denny's approval.

Between August 9 and August 11, Gustafson added to Larson's file emails between Gustafson and two of Denny's risk managers. Therein, Gustafson relays that Larson "did indicate she was painting their break room wall just as Kelly told me. She was on a general chair though and not on a step ladder." Id. at 6. The three women agree on denying the claim. Gustafson stated, "The back problems/symptoms do not seem consistent to me w/ the mechanism of injury, " and one of the risk managers reported that she learned from Sturm that Larson had taken unprescribed oxycodone at some point. This risk manager noted that "since there was an actual incident it will be hard to follow thru [sic] with denial of claim, " but wondered whether they could "stand on the fact that she should not have been taking these non-prescribed scripts while at work." Id. at 8-9.

At her deposition, Gustafson testified she decided to deny Larson's claim on August 9 "to complete the investigation." She "needed to obtain all her prior medical records, the current medical records, and also set up an independent medical evaluation." Doc. 109-2 at 7. Gustafson was also motivated by an Arizona statute, A.R.S. § 23-1061(M), which deems claims accepted within 21 days of notification from the Industrial Commission unless they are denied. Doc. 109-2 at 9, 11. Nonetheless, Gustafson testified she could not recall why she informally decided to deny the claim before receiving the triggering Industrial Commission notice. Id. at 7. She also testified the allegations regarding oxycodone were unimportant in evaluating the claim. Doc. 121-3 at 29. Indeed, despite perceiving inconsistencies regarding the injury, Gustafson testified she did not initially view the claim with suspicion. Doc. 124-5 at 16-17. Similarly, Gustafson testified the "Form 101" from Larson's file, completed by or on information provided by Denny's, did not indicate the validity of Larson's claim was in doubt. Doc. 109-2 at 7.

Subsequently, Gustafson ordered medical records and set an IME for September 14. Doc. 109 at 5-6. Gustafson's notes reflect that she set the IME because the injury appeared inconsistent with stepping down from a chair. Doc. 109-3 at 8. Gustafson similarly testified she wanted an IME "[t]o see what was going on with her, to get an opinion on causation, the diagnoses being consistent with the mechanism of injury." Doc. 109-2 at 6.

On September 7, Gallagher Bassett issued a formal denial of Larson's claim, one week prior to the IME and nine days before the claim would be statutorily deemed accepted. Id. at 9, 11. Gustafson testified she denied the claim before both "[b]ecause we were still investigating the claim, and our IME wasn't until the 14th. There was no way our investigation was going to be complete by [the statutory deadline]." Id. at 11; see also Doc. 124-5 at 22-23 (Gustafson testifying, "[M]ore often than not we can't get our investigation complete because sometimes it takes three to four weeks just to even get an independent medical evaluation in. Obtaining prior medical records and the current medical records, sometimes that takes a very long time"). In addition to the IME report, Gustafson "had a very difficult time getting the medical records." Doc. 109-2 at 11. According to her, Gallagher Bassett "sent [Larson] a medical authorization and would have sent her a request for prior doctors and clinics that she has treated with, and I don't believe we got that, so we were still completing. It's a part of our investigation." Id. The dispute over medical records authorization is elaborated below.

On September 9, Gustafson documented that she received medical records from Larson's trips to the Sierra Vista and High Desert facilities. Doc. 117 at 3. Gustafson recorded Larson's report to the High Desert Clinic that she "injured herself working long hours and unloading a truck and painting." Doc. 117-2 at 11. That same day, Gustafson engaged an investigator to "attempt to secure a signed authorization and list of prior health care providers as well as pursue video surveillance" to ensure Larson acted consistently with her reported injury. Doc. 117 at 3; Doc. 121-3 at 37. The investigator surveilled Larson for three days beginning September 17. Doc. 121-3 at 37; 109-3 at 11. Gustafson did not recall whether the surveillance ever discovered behavior inconsistent with Larson's reported injury. Doc. 121-3 at 37.

On September 19, Gustafson sought treatment again, this time at John C. Lincoln Hospital. The examiner noted a "history of chronic back problems." Doc. 117-2 at 22. The examiner also noted that Larson "was at work painting her restaurant and noted the flare up of the pain" and that the injury was work related. Id. Larson disputes both that she reported any prior lower back injury at John C. Lincoln and that Gallagher Bassett obtained this information prior to mid-December 2010. Doc. 121 at 13-14; Doc. 121-9 at 130.

By letter dated September 20, the IME doctor reported that Larson's "history and diagnosis [were] causally related to the injury of 7/28/10." Doc. 109-14 at 9. She continued: "There is no evidence in the medical records available for review or the information provided by the examinee that suggests any underlying or preexisting condition that would have caused these symptoms anyway." Id. at 10. Based on Larson's account, the doctor also ruled out that unloading a truck caused the injury. Id. at 9. The doctor noted Larson was "extremely motivated to return to work. There are no findings that suggest other issues might play a role in this examinee's condition." Id. at 10-11. She concluded, however, that Larson was "not capable of returning to work at this time, or until her pain is better controlled. She is unable to tolerate sitting, standing or walking secondary to pain." Id. at 10. The IME doctor referred to and relied on the medical records from the Sierra Vista and High Desert facilities. Id. at 8-9.

On September 22, Gustafson wrote to Denny's risk managers, "I'm waiting on the IME but I have heard this MD may have related [the injury] to this alleged incident. As I indicated, I'm not accepting the claim due to the conflicting information in the medical reports... specifically the part where she tells the MD she injured herself unloading her truck." Doc. 109-3 at 12. Gustafson also noted Larson had recently moved, but it appears she was referring to Larson's move into her parents' home in September after the injury occurred. Id. at 11-12.

Meanwhile, Larson had hired a lawyer, Sarkisov, to challenge the claim denial before the Industrial Commission. Doc. 109 at 8; Doc. 121 at 10. The parties dispute whether Gallagher Bassett's administrative counsel, Baker, conceded the compensability of the claim during the Industrial Commission litigation. Compare Doc. 109 at 8 with Doc. 124 at 17. Pursuant to that litigation, Larson served interrogatories regarding the claim denial. Gallagher Bassett disputes that Gustafson ever saw the interrogatory responses. But the responses themselves indicate the claim was formally denied because "Applicant's low back complaints are not related to her alleged industrial injury...." ...

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