United States District Court, D. Arizona
Honorable G. Murray Snow United States District Judge.
before the Court is the Motion for Partial Summary
Judgment of Defendant Electric Insurance Company
(Doc. 27). For the following reasons, the Court grants the
November 2014, Plaintiff Gary Nerdig was stopped in his
company's vehicle on the I-17 and was hit from behind by
a vehicle operated by a non-party, Lidia Elisa Martinez. Mr.
Nerdig was injured and required multiple surgeries. Ms.
Martinez's insurance company paid its policy limit to Mr.
Nerdig, for a total of $15, 000. The company vehicle Mr.
Nerdig was driving was insured by Travelers Insurance
Company. It included underinsured motorist coverage
(“UIM”) up to a $1, 000, 000 limit. This policy
was the primary UIM coverage. Defendant, Electric Insurance,
provides Plaintiffs' personal automobile insurance.
Electric's policy has a UIM coverage limit of $250, 000,
and is in excess to the Travelers insurance.
was informed by Plaintiffs' counsel about its possible
exposure in January 2016. Electric did not begin an
investigation at that time, but Electric did monitor the
investigation undertaken by Travelers. Plaintiffs'
counsel sent other letters to Electric in February 2016
asking for Electric to identify documents that would be
needed to review the claim. Electric did not respond to the
letters. On March 20, 2017, Plaintiffs sent a demand letter
to both Travelers and Electric, requesting a payment of the
full policy limit. Travelers issued a payment of $1, 000, 000
to Mr. Nerdig on March 24, 2017. Electric began evaluating
Mr. Nerdig's claim on March 28, 2017, after being
informed that the UIM coverage from Travelers was exhausted.
assigned the claim to defense counsel on April 12, 2017.
Defense counsel requested Mr. Nerdig to undergo an
Examination Under Oath (“EUO”), an Independent
Medical Examination (“IME”), and to authorize
Electric to obtain additional medical records. Electric's
contract with Mr. Nerdig provides that an insured may be
required to submit to the above requests. On April 28, 2017,
Electric offered Mr. Nerdig $50, 000. Plaintiffs, Mr. Nerdig
and his wife, filed suit on May 15, 2017, alleging breach of
contract and bad faith. Electric has now moved for summary
judgment on such claims, Counts I and III of the Complaint.
judgment is appropriate if the evidence, viewed in the light
most favorable to the nonmoving party, demonstrates
“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). Substantive law determines
which facts are material and “[o]nly disputes over
facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary
judgment.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). “A fact issue is genuine
‘if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.'”
Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054,
1061 (9th Cir. 2002) (quoting Anderson, 477 U.S. at
248). When the nonmoving party “bear[s] the burden of
proof at trial as to an element essential to its case, and
that party fails to make a showing sufficient to establish a
genuine dispute of fact with respect to the existence of that
element, then summary judgment is appropriate.”
Cal. Architectural Bldg. Prods., Inc. v. Franciscan
Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987)
(citing Celotex Corp. v. Catrett, 477 U.S. 317,
Breach of the Implied Covenant of Good Faith and Fair
Arizona, “there is a legal duty implied in an insurance
contract that the insurance company must act in good faith in
dealing with its insured on a claim, and a violation of that
duty of good faith is a tort.” Noble v. Nat'l
American Life Ins. Co., 624 P.2d 866, 868 (Ariz. 1981).
Where an insurer “intentionally and unreasonably denies
or delays” payment of a claim, the insurer has breached
the duty of good faith. Rawlings v. Apodaca, 726
P.2d 565, 572 (Ariz. 1986). A plaintiff must show (1)
“the absence of a reasonable basis for denying benefits
of the policy” and (2) “the defendant's
knowledge or reckless disregard of the lack of a reasonable
basis for denying the claim.” Noble, 624 P.2d
at 868. Thus, the “initial inquiry consists of an
objective finding, i.e., whether the insurer acted
unreasonably, [and] the second inquiry focuses on the
insurer's conduct and whether the insurer knew
that its conduct was unreasonable or acted with such reckless
disregard that such knowledge could be imputed to it.”
Deese v. State Farm Mut. Auto. Ins. Co., 838 P.2d
1265, 1268 (Ariz. 1992). A plaintiff “may
simultaneously bring an action for both breach of contract
and for bad faith, and need not prevail on the contract claim
in order to prevail on the bad faith claim.”
Id. at 1270. Plaintiff argues that Electric breached
its duty of good faith by failing to immediately conduct an
investigation when it was informed of its potential exposure
in January 2016 and that Electric's requirements that Mr.
Nerdig submit to EUOs, an IME, and medical authorizations
constituted unnecessary procedural hoops.
parties agree that the “Electric underinsured motorist
coverage was excess to the underinsured motorist coverage
afforded by Travelers.” (Doc. 28, ¶ 7; Doc 30,
¶ 7). Under Arizona law, “[u]ntil a primary
insurer offers its policy limit, the excess insurer does not
have a duty to evaluate a settlement offer, to participate in
the defense, or to act at all.” Twin City Fire Ins.
Co. v. Burke, 63 P.3d 282, 287 (Ariz. 2003); see
also Geurden v. Quantum Transportation LP, 298 F.Supp.3d
1222, 1228 (D. Ariz. 2018) (“An excess insurer has no
duty to defend its insured unless the primary insurer
exhausted its policy limit to defend the insured.”).
Plaintiffs assert that these cases are not relevant because
they do not deal with UIM coverage. While true, Plaintiffs do
not explain why an insurer with UIM coverage that specifies
that it is in excess to other policies should be in a
different position than an insurer with other excess
coverage. Electric was informed that Travelers had tendered
their UIM limit to Mr. Nerdig on March 28, 2017. (Doc. 28,
Ex. B, p. 2). Electric began its evaluation of Mr.
Nerdig's claim on the same day. (Doc. 28, ¶ 13; Doc.
30, ¶ 13). Plaintiffs cannot meet their burden of proof
and cannot show that Electric unreasonably delayed its
evaluation of the claim.
also assert that Electric acted in bad faith by requiring Mr.
Nerdig to submit to EUOs, an IME, and to sign medical
authorizations. Mr. Nerdig's contract with Electric
provided that the insured must “[s]ubmit as often as we
reasonably require [t]o physical exams by physicians we
select [and] [t]o examination under oath.” (Doc. 30,
Ex. D). It also required the insured to “[a]uthorize
[the insurer] to obtain medical reports.” Id.
Electric requested Mr. Nerdig's availability for an EUO,
an IME, and medical record authorizations on April 26, 2017.
Courts have held that insurers may not use EUOs and IMEs to
delay the process and breach the duty of good faith and fair
dealing. But Plaintiffs here have provided no such evidence
of an intent on Electric's part to use the contractual
terms in bad faith. Plaintiffs have noted that the primary
UIM insurer, Travelers, did not request any additional
information. But that is hardly relevant as to whether
Electric acted in bad faith by seeking additional
information, especially when: (1) the Defendant did receive
additional relevant documents pursuant to the signed
authorizations that were relevant to the merits of the
Plaintiff's claims; and (2) the evaluation of
plaintiff's damages may change over time; and (3) the
evaluation of the sufficiency of plaintiff's damage
payments may be in a different posture after he had received
the additional excess payment from Travelers than it was
before that payment. Although it might not have changed the
damages themselves, it might have informed an assessment of
the Plaintiff's ability to meet his ongoing needs in
light of the additional payment. Plaintiffs also note that
two IME reports already existed, but Electric's desire to
have a more up-to-date IME report does not demonstrate bad
faith. In Demetrulias v. Wal-Mart Stores Inc., the
court found that a fact issue for the jury existed where the
insurance adjuster's notes said that the purpose of the
IME was “to limit the extent of the injury.” 917
F.Supp.2d 993, 1007 (D. Ariz. 2013). ...