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Haney v. ACE American Insurance Co.

United States District Court, D. Arizona

January 5, 2015

Jane Haney, Plaintiff,
ACE American Insurance Company, et al., Defendants.


DAVID G. CAMPBELL, District Judge.

Plaintiff Jane Haney has moved for summary judgment on her claim that Defendant ACE American Insurance Company breached its duty of good faith and fair dealing. Doc. 65. The motion is fully briefed. Docs. 65, 80, 96.[1] The Court will grant Plaintiff's motion.

I. Background.

On March 13, 2012, Plaintiff Jane Haney fell on a cement surface and injured her head and knee. Doc. 66-1. At the time, she worked for the Boeing Company. Id. Boeing had contracted with Defendant ACE American Insurance Company ("ACE") to insure Boeing's employees for workers' compensation. Doc. 66, ¶ 6; Doc. 81, ¶ 6. Boeing had also contracted with Defendant Sedgwick Claims Management Services ("Sedgwick") to adjust the claims of employees who suffered injuries while working for Boeing. Doc. 66, ¶ 7; Doc. 81, ¶ 7.

Due to her injuries, Haney did not return to work for the next two years. Doc. 66-1, ¶ 2. Haney's worker compensation coverage, administered by ACE and Sedgwick, covered her medical expenses and provided wage replacement benefits. Doc. 97, ¶¶ 10-12. Sedgwick assigned Defendant Lori Hasty to manage Haney's worker compensation claims. Doc. 66, ¶ 8; Doc. 81, ¶ 8. When calculating Haney's wage replacement benefits, Hasty erred in two ways. First, she based Haney's wage benefits on Haney's annual salary, as opposed to the income Haney received in the thirty days preceding her injury. Doc. 66, ¶ 15; Doc. 81, ¶ 15; see Doc. 66-6 at 7.[2] Second, Hasty miscalculated Haney's annual salary as $14, 925.57. Doc. 66, ¶ 14; Doc. 81, ¶ 14. This was the amount Haney earned in the first few months of 2012, not the amount she earned over the previous twelve months. See Doc. 66-6.

Because of Hasty's miscalculations, Haney received $1, 247.19 in monthly wage replacement benefits instead of the statutory maximum of $4, 062.29. Doc. 97, ¶ 13. This resulted in a deficiency of over $20, 000 in benefits until the miscalculation was corrected. Id., ¶¶ 60-61. Hasty later described her miscalculation as an "honest mistake." Doc. 66-16 at 28.

In July of 2012, Haney hired Fendon Law Firm because she believed that she was not receiving her full workers' compensation benefits. Doc. 81-1 at 18. On September 5, 2012, Haney filed a notice of her injury with the Industrial Commission of Arizona ("ICA"). Doc. 81-3 at 27. On September 14, Defendant Hasty responded by filing a notice of Haney's claim status with ICA. Doc. 66-7.[3] Hasty's notice included the miscalculated amount of Haney's monthly wage benefits and incorrectly stated that Haney's income for the thirty days preceding her injury was $1, 185.18. Id. On September 28, ICA "independently determined" Haney's average monthly wage to be $1, 247, the same amount Hasty had calculated. Doc. 81-3 at 37. ICA's findings were mailed to Haney, but she claims she never received them. Doc. 66-1, ¶ 3; Doc. 66-5, ¶ 2.

Although Haney had been receiving improperly calculated wage benefits for months, the Fendon Law Firm did not raise this issue with Defendants until February of 2013. See Doc. 66-19. On February 14, 2013, a bookkeeper for Fendon sent Hasty an e-mail stating that Haney's average monthly wage should be raised to the limit of $4, 062.29 and requesting "a retro check... to get her caught up." Doc. 66-20 at 6. On March 13, 2013, Haney's compensation benefits were corrected and Haney began to receive $4, 062.29 a month. Doc. 66-1, ¶ 6; Doc. 66-5 at 4. Defendants still did not issue a check for the previous underpayments.

On March 20, 2013, Fendon requested a hearing with ICA regarding Haney's underpaid benefits. Doc. 66-5. Defendants were notified about the hearing, but did not attend. Id. On July 31, 2013, ICA found that Haney's average monthly wage should be set to the statutory maximum of $4, 062.29 and ordered Defendants "to pay applicant the difference between what applicant should have been receiving based on that maximum wage amount and what the carrier incorrectly paid based on lower wage figures from the date of injury through March 13, 2013." Doc. 66-5 at 5. Defendants received a copy of ICA's order. Doc. 66, ¶ 57; Doc. 81, ¶ 57.

In September of 2013, Fendon sent Hasty two separate e-mails requesting payment of $23, 549.31, the amount Fendon believed was owed to Haney due to previous mispayments. Doc. 66, ¶¶ 57-62; Doc. 81, ¶¶ 57-62. Hasty received and read these e-mails, but did not respond. Id. On October 22, ICA ordered Defendants to "address why you have not paid the benefits which were ordered to be paid." Doc. 66-14. On November 20, Defendants sent Haney checks totaling $23, 549.31 (Doc. 97, ¶¶ 60-61), [4] a day before ICA sent Defendants a "Notice of Alleged Bad Faith and/or Unfair Claim Processing Practices" (Doc. 66-26). ICA subsequently withdrew its notice of alleged bad faith. Doc. 66-26.

On November 26, 2013, Haney filed this lawsuit. Doc. 1. Haney claims that Defendant ACE breached its duty of good faith and fair dealing, and that Defendants Sedgwick and Hasty aided and abetted ACE in this breach. Id. Haney also claims that Defendants intentionally inflicted emotional distress. Id. The Court granted Defendants' motion to dismiss Haney's claim for intentional infliction of emotional distress. Doc. 27. Haney has now moved for partial summary judgment on its claim that ACE breached its duty of good faith and fair dealing. Doc. 65.

II. Legal Standards.

A. Summary Judgment.

A party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Summary judgment is also appropriate against a party who "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. Only disputes over facts that might affect the outcome of the ...

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