Mettler v. Government Employees Insurance Company

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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MATTHEW METTLER, Case No. 18-cv-2303-BAS-MSB

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Plaintiff, ORDER GRANTING IN PART

12 DEFENDANT’S MOTION FOR

SUMMARY JUDGMENT

13 v.

[ECF No. 34]

14 GOVERNMENT EMPLOYEES

INSURANCE COMPANY,

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Defendant.

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18 In 2018, Plaintiff Matthew Mettler sued Defendant Government Employees

19 Insurance Company (“GEICO”) for breach of contract and breach of the covenant of

20 good faith and fair dealing. (ECF No. 1-2.) GEICO now moves for summary

21 judgment on some of Plaintiff’s claims. (“Mot.,” ECF No. 34.) Plaintiff filed an

22 opposition to the Motion, (“Opp’n,” ECF No. 36), to which GEICO replied,

23 (“Reply,” ECF No. 38).1 The Court finds this Motion suitable for determination on

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1 Along with its reply brief, GEICO submitted various objections to Plaintiff’s evidence. (ECF No.

26 38-3.) The first piece of contested evidence is John DiMugno’s report, which Plaintiff attached to

his opposition. (ECF No. 36-3.) DiMugno opines on the issue of whether GEICO was obligated

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to provide Matthew with independent counsel. “[A]n expert witness cannot give an opinion as to

1 the papers and without oral argument. Civ. L. R. 7.1(d)(1). For the reasons stated

2 below, the Court GRANTS IN PART and DENIES IN PART GEICO’s Motion.

3 I. BACKGROUND

4 Prior to August 1, 2015, GEICO issued an auto insurance policy to Kellie and

5 Stephen Mettler with body injury liability limits of $100,000 per person. (Joint

6 Statement of Undisputed Material Facts, “JSUMF,” ECF No. 38-4, at ¶ 1.) On

7 August 1, 2015, Kellie’s teenaged son Matthew was driving her car and following

8 another car being driven by his friend Elias. (Id. ¶ 3.) Matthew’s phone was ringing

9 because Kellie was calling him, so he looked down at his phone, negligently failed

10 to stop in time, and rear-ended Elias’ car. (Id. ¶ 3; Mot. at 7.) Elizabeth Cooke was

11 a rear-seat passenger in the car being driven by Elias. (Id. ¶ 2.)

12 On August 19, 2015, Cooke went to a chiropractor. (GEICO’s Exhibit 4, at

13 25.)2 On February 22, 2016, Kellie informed GEICO that she had been served with

14 a lawsuit by Cooke. (JSUMF ¶ 6.) The lawsuit named both Matthew and Kellie.

15 (Id.) The next day, GEICO appointed Beverly Mills to serve as defense counsel. (Id.

16 ¶ 7.) Mills answered Cooke’s complaint and served discovery. On May 16, 2016,

17 GEICO received from Mills a copy of Cooke’s unverified interrogatory answers and

18 document responses, including medical records. (Id. ¶ 8.) On June 23, 2016,

19 Cooke’s attorneys wrote to GEICO making a policy limits settlement demand of

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surrounding the issue and a legal conclusion, and his report is therefore not proper. The Court

22 sustains GEICO’s objection to the report.

GEICO also objects to various portions of the declaration of counsel Ryan Bright. GEICO

23 makes best evidence rule objections to the portions of Bright’s declaration where he summarizes

certain pieces of evidence. See Fed. R. Civ. P. 1002 (“An original writing, recording, or photograph

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is required in order to prove its content unless these rules or a federal statute provides otherwise.”).

25 The Court sustains these objections; the documents speak for themselves. Further, GEICO’s

objection to Bright’s description of what occurred at mediation is moot because the Court did not

26 consider Bright’s statements in analyzing GEICO’s motion.

2 Both parties attach their extensive exhibits to their briefs as one large attachment. Any page

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reference herein to exhibits, including depositions, refers to the CM/ECF pincite page number

1 $100,000 in exchange for the release of Kellie and Matthew and the dismissal of the

2 lawsuit. (GEICO’s Exhibit 9, at 92.) On July 7, 2016, GEICO rejected the settlement

3 demand and provided a counteroffer of $12,900. (JSUMF ¶ 10.)

4 On August 4, 2016, Cooke made a second policy limits demand in the form of

5 a California Code of Civil Procedure section 998 offer, but it was only as to Matthew.

6 (Id. ¶ 11.) GEICO rejected the offer and made a counteroffer of $16,000. (Id. ¶ 12.)

7 On January 19, 2017, Cooke made another settlement demand for $350,000. (Id.

8 ¶ 13.) This demand included a copy of the results of Cooke’s MRI, which had been

9 taken on December 22, 2016, and a report by Dr. Keshavarzi following an evaluation

10 of Cooke on January 10, 2017. (GEICO’s Exhibit 11, at 107–111.) Dr. Keshavarzi’s

11 report detailed Cooke’s description of “migraines, left arm weakness, numbness and

12 tingling in her left arm, and a throbbing pain in her left scapula.” (Id. at 110.) Dr.

13 Keshavarzi informed Cooke of a surgical option as an “aggressive treatment for the

14 pain.” (Id.) In February 2017, GEICO rejected the offer and made a counteroffer

15 for $20,000. (Plaintiff’s Exhibit 25, at 221–22.)

16 On March 6, 2017, Cooke was evaluated in an independent medical

17 examination (“IME”) by Steven Schopler, a doctor chosen by GEICO. (JSUMF

18 ¶ 14.) Dr. Schopler concluded that Cooke has “multilevel cervical spondylosis” and

19 “would be a candidate for cervical spine reconstructive surgery.” (GEICO’s Exhibit

20 13, at 121.) He opined that “physical therapy, epidural injections, facet injections,

21 trigger point injections, and acupuncture are unlikely to prove to be beneficial to

22 her.” (Id.) GEICO learned of Schopler’s opinions on March 14, 2017. (JSUMF

23 ¶ 15.) GEICO then offered a settlement of $100,000, which Cooke rejected. (Id.

24 ¶¶ 16, 17.) GEICO transferred the defense of the Mettlers to the law firm of Tyson

25 & Mendes. (Id. ¶ 18.)

26 Cooke underwent a three-level anterior cervical discectomy and fusion surgery

27 in June 2017. (Id. ¶ 19.) In April 2018, Cooke agreed to a settlement as to Kellie

1 (Id. ¶ 20.) Trial resulted in a jury verdict of $701,493; the judge then granted a

2 motion to award prejudgment interest and costs based on the rejected Section 998

3 offer, leading to a total judgment of approximately $850,000. (Id. ¶¶ 21, 22.)

4 Matthew’s attorney demanded GEICO pay the entire judgment. (Id. ¶ 23.) GEICO,

5 Cooke, and Matthew participated in a private mediation, where GEICO reached a

6 settlement with Cooke for a total of $500,000. (Id. ¶¶ 24, 25.) This settled any

7 liability Matthew had to Cooke. GEICO and Matthew did not reach a settlement, so

8 Matthew filed the present suit. (Id. ¶ 26; “Compl.,” ECF No. 1-2.)

9 II. LEGAL STANDARD

10 Summary judgment is appropriate under Rule 56(c) where the moving party

11 demonstrates the absence of a genuine issue of material fact and entitlement to

12 judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477

13 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law,

14 it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S.

15 242, 248 (1986). A dispute about a material fact is genuine if “the evidence is such

16 that a reasonable jury could return a verdict for the nonmoving party.” Id.

17 A party seeking summary judgment always bears the initial burden of

18 establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323.

19 The moving party can satisfy this burden in two ways: (1) by presenting evidence

20 that negates an essential element of the nonmoving party’s case; or (2) by

21 demonstrating that the nonmoving party failed to make a showing sufficient to

22 establish an element essential to that party’s case on which that party will bear the

23 burden of proof at trial. Id. at 322–23. “Disputes over irrelevant or unnecessary facts

24 will not preclude a grant of summary judgment.” T.W. Elec. Serv., Inc. v. Pac. Elec.

25 Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987).

26 If the moving party fails to discharge this initial burden, summary judgment

27 must be denied, and the court need not consider the nonmoving party’s evidence.

1 meets this initial burden, however, the nonmoving party cannot defeat summary

2 judgment merely by demonstrating “that there is some metaphysical doubt as to the

3 material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

4 586 (1986); Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995)

5 (“The mere existence of a scintilla of evidence in support of the non-moving party’s

6 position is not sufficient.” (citing Anderson, 477 U.S. at 242, 252)). Rather, the

7 nonmoving party must “go beyond the pleadings” and by “the depositions, answers

8 to interrogatories, and admissions on file,” designate “specific facts showing that

9 there is a genuine issue for trial.” Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P.

10 56(e)).

11 When making this determination, the court must view all inferences drawn

12 from the underlying facts in the light most favorable to the nonmoving party. See

13 Matsushita, 475 U.S. at 587. “Credibility determinations, the weighing of the

14 evidence, and the drawing of legitimate inferences from the facts are jury functions,

15 not those of a judge, [when] he [or she] is ruling on a motion for summary judgment.”

16 Anderson, 477 U.S. at 255.

17 III. ANALYSIS

18 The Court first evaluates GEICO’s rejection of Cooke’s offers to settle for

19 policy limits.

20 A. Cooke’s June 23 $100,000 Settlement Offer

21 Plaintiff alleges GEICO acted in bad faith in rejecting Cooke’s June 23

22 settlement offer of $100,000. GEICO argues its decision was reasonable as a matter

23 of law and moves for summary judgment on Plaintiff’s allegation of bad faith.

24 “In each policy of liability insurance, California law implies a covenant of

25 good faith and fair dealing. This implied covenant obligates the insurance company,

26 among other things, to make reasonable efforts to settle a third party’s lawsuit against

27 the insured.” PPG Indus., Inc. v. Transamerica Ins. Co., 20 Cal. 4th 310, 312 (1999).

1 provided that the insured proves the existence of a reasonable offer to settle the

2 claims against the insured for an amount within the policy limits of the insured’s

3 policy. Graciano v. Mercury Gen. Corp., 231 Cal. App. 4th 414, 425 (2014) (citing

4 Merritt v. Reserve Ins. Co., 34 Cal. App. 3d 858, 877 (1973)). The insurer must settle

5 a claim against the insured within policy limits if there is a “substantial likelihood of

6 recovery in excess of those limits.” Johansen v. Cal. State Auto. Ass’n Inter-Ins.

7 Bureau, 15 Cal. 3d 9, 16 (1975). “In determining whether an insurer has given

8 consideration to the interests of the insured, the test is whether a prudent insurer

9 without policy limits would have accepted the settlement offer.” Crisci v. Sec. Ins.

10 Co. of New Haven, Conn., 66 Cal. 2d 425, 429 (1967); see also Judicial Council of

11 California Civil Jury Instruction 2334 (“A settlement demand for an amount within

12 policy limits is reasonable if [name of defendant] knew or should have known at the

13 time the demand was rejected that the potential judgment was likely to exceed the

14 amount of the demand based on [name of plaintiff in underlying case]’s injuries or

15 loss and [name of plaintiff]’s probable liability.”).

16 The determination of whether an insurer’s conduct rises to the level of bad

17 faith must be determined on a case by case basis when considering all of the relevant

18 circumstances. Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co.,

19 90 Cal. App. 4th 335, 346 (2001). The circumstances to consider when evaluating

20 the reasonableness of the insurer’s settlement decision are “wide-ranging” and

21 include “motive, knowledge, experience, and the ability to prophesy.” Camelot by

22 the Bay Condominium Owners’ Ass’n v. Scottsdale Ins. Co., 27 Cal. App. 4th 33, 48

23 (1994). “[O]rdinarily whether the insurer has acted unreasonably, and hence in bad

24 faith, in rejecting a settlement offer is a question of fact to be determined by the jury.”

25 Cain v. State Farm Mut. Auto. Ins. Co., 47 Cal. App. 3d 783, 792 (1975). However,

26 where there are no competing inferences allowing for reasonable minds to differ, the

27 question of whether an insurer acted reasonably and in good faith becomes one of

1 see also Chateau Chamberay, 90 Cal. App. 4th at 346 (holding reasonableness is a

2 question of law if “only one reasonable inference can be drawn” from undisputed

3 evidence).

4 In Cooke’s June 23 letter, she laid out her damages, noting she had incurred

5 $11,079.40 in past medical bills and had past loss of earnings in the amount of

6 $4,275.00. (Plaintiff’s Exhibit 13, at 173.) She also stated she had claims for

7 “general damages related to past pain and suffering,” future medical bills, and future

8 general damages for pain; she provided no monetary amount for these damages. (Id.

9 at 175.) Cooke did not detail how her damages could exceed $100,000. On July 7,

10 GEICO rejected the offer and provided a counteroffer of $12,900. (JSUMF ¶¶ 9,

11 10.) GEICO argues it did so because Cooke did not have a substantial likelihood of

12 a recovery greater than $100,000. (Mot. at 13.) GEICO makes a point to note that

13 only after it rejected the demand, Cooke got a second MRI, a doctor offered spinal

14 fusion as a treatment, and GEICO’s IME doctor opined that surgery was warranted.

15 GEICO argues it was not until these events took place that the case became worth

16 more than $100,000. (Id.)

17 The Court begins its analysis by assuming that on July 7, based on the

18 information known to GEICO, the rejection of the $100,000 settlement was

19 reasonable. Plaintiff does not directly dispute this, but instead focuses his argument

20 on whether GEICO conducted an appropriate investigation before rejecting the offer.

21 (Opp’n at 7–8.) Plaintiff argues that GEICO could have learned relevant facts earlier,

22 and that GEICO did not conduct a reasonable investigation during the claims process

23 to identify the necessary facts for it to determine whether Cooke’s claims would

24 likely exceed the policy limit.

25 An insurer “cannot rely on its breach of the duty to conduct a reasonable

26 investigation to shield itself from liability for breach of the related duty to accept a

27 reasonable settlement demand.” Safeco Ins. Co. of Am. v. Parks, 170 Cal. App. 4th

1 to reject the offer was GEICO’s own doing as a result of an unreasonable

2 investigation, then the decision not to accept Cooke’s offer may ultimately still

3 constitute bad faith. See Spradlin v. GEICO Indemnity Co., No. 2:18-cv-10299-

4 SVW-KES, 2019 WL 5481304, at *22 (C.D. Cal. Aug. 1, 2019).

5 An insurer’s investigation is unreasonable if the insurer “fails to consider, or

6 seek to discover, evidence relevant to the issues of liability and damages.” Shade

7 Foods, Inc. v. Innovative Prods. Sales & Mktg., Inc., 78 Cal. App. 4th 847, 880

8 (2000). Consequently, if the insurer did not undertake an adequate investigation,

9 “the insurer is charged with constructive notice of facts that it might have learned if

10 it had pursued the requisite investigation.” KPFF, Inc. v. Cal. Union Ins. Co., 56

11 Cal. App. 4th 963, 973 (1997) (citations omitted). The determination of whether an

12 insurer’s investigation was reasonable must be made on a case-by-case basis and

13 depends on the totality of the circumstances, but a determination of reasonableness

14 may be made as a matter of law based on undisputed evidence supporting only one

15 reasonable inference. See Chateau Chamberay, 90 Cal. App. 4th at 346.

16 The Court begins by evaluating the reports and opinions of Beverly Mills, who

17 represented GEICO in the beginning of the case. Mills was fully involved in the case

18 early on and prepared thorough reports regarding her impressions and opinions. In

19 a report dated March 2, 2016, Mills referenced the reports of a chiropractor, Dr.

20 Singh. Singh’s “extremely minimal records” showed Cooke was complaining of

21 headaches and pain, and an MRI showed bulges. (Plaintiff’s Exhibit 10, at 160.)

22 Mills noted she did not have any other medical records at the time. (Id.) In her report

23 dated April 13, 2016, Mills noted she had received more medical records, and she

24 detailed reports by a chiropractor, radiologists (who performed x-rays and an MRI),

25 physical therapists, and others. (Plaintiff’s Exhibit 11, at 164.) Mills opined that

26 “the good news is that [Cooke’s neurosurgeon] Dr. Rahimifar did not think that

27 [Cooke] is a surgical candidate.” (Id. at 166.) Mills also opined, “I think that a

1 ascertain the forces exerted on [Cooke] in this accident, if this matter were to proceed

2 to trial.” (Id.) Mills concluded that they could “discuss whether to have [Cooke]

3 examined and/or her medical records reviewed” after Mills deposed Cooke. (Id.) On

4 June 9, 2016, Mills deposed Cooke’s two daughters, who were in the car at the time

5 of the accident, and Elias, the driver of the car. (Plaintiff’s Exhibit 12, at 169.) Mills

6 concluded that “between what we might see on subrosa, an accident

7 reconstruction/biomechanical investigation, and [Cooke’s] own private medical

8 providers’ records, we might be able to establish that this woman was not injured, or

9 at least to the extent claimed.” (Id. at 170.) Later that month, Cooke made the

10 $100,000 settlement offer.

11 On July 7, 2016, Cooke was deposed. In Mills’ summary of Cooke’s

12 deposition, she opined that Cooke “greatly exaggerated” her complaints and Mills

13 “[did] not believe that [Cooke] was hurt in this incident.” (Plaintiff’s Exhibit 16, at

14 184.) Mills concluded, “I want to have her records reviewed, and her examined

15 (probably by a neurosurgeon). I strongly urge as well that we consider retaining a

16 biomechanical engineer, I just don’t see that the forces necessary to injure a woman

17 in prime physical condition . . . were present in this accident.” (Id. at 186.) Mills

18 noted that she believed Cooke had only minimal complaints, “but considering that

19 she is still treating extensively, and getting injections and occipital blocks, I am

20 concerned about our clients’ policy limits.” (Id.)

21 Also on July 7, 2016, GEICO rejected Cooke’s $100,000 settlement demand.

22 (Plaintiff’s Exhibit 15, at 182.) The decision was made by David Fetchina, the

23 regional liability administrator in GEICO’s claims department. (“Fetchina Decl.,”

24 ECF No. 34-3, at ¶ 1.) Fetchina directed GEICO adjuster Adria Shaw to reject the

25 offer. Shaw did so and made a $12,900 counteroffer. (Id. ¶ 57.) It appears that Shaw

26 did not read Cooke’s deposition before making the counteroffer. (“Shaw Depo.,”

27 Plaintiff’s Exhibit 3, at 68.) It is unclear whether Fetchina reviewed Cooke’s

1 Fetchina declares that he “felt confident about GEICO’s ability to settle” for

2 approximately $35,000. (Fetchina Decl. at ¶ 24, 25.) He based this decision on the

3 medical records he had at the time. A “key component” of this determination was

4 neurological surgeon Dr. Imad Abumeri’s medical opinion. (Id. ¶ 46.) On November

5 9, 2015, Dr. Abumeri determined that Cooke is “not a surgical candidate . . . and her

6 injuries most likely are soft tissue injury/muscular injury.” (GEICO’s Exhibit 37, at

7 213.) Prior to seeing Dr. Abumeri, Cooke had participated in physical therapy and

8 chiropractic treatments. Her chiropractor noted her progress over time, recording

9 that her movement had improved at each visit. (GEICO’s Exhibits 25–29, at 174–

10 182.) The physical therapy reports also noted Cooke’s progress. On November 3,

11 2015, Cooke was reported as having a “40% improvement in neck, upper back pain

12 [and a] >90% improvement in headaches with Physical Therapy intervention.”

13 (GEICO’s Exhibit 35, at 200.)

14 But the medical records show that Cooke continued treatments and therapy

15 following her appointment with Abumeri and with physical therapists. Cooke

16 received an MRI in September 2015. (GEICO’s Exhibit 31, at 186.) A pain

17 management specialist opined that Cooke was still complaining of neck pain and

18 headaches in December 2015. (GEICO’s Exhibit 38, at 216.) He scheduled Cooke

19 for trigger point injections in the trapezius muscles. (Id.) Later that month, Cooke

20 received two injections of methylprednisolone and Marcaine. (GEICO’s Exhibit 39,

21 at 218.) In a follow-up visit, Cooke reported that the injections gave her four to five

22 days of relief “but then she overworked herself and now her pain is back” with

23 increased headaches. (GEICO’s Exhibit 40, at 220.) In January 2016, Cooke was

24 put under anesthesia and was given an occipital nerve block. (GEICO’s Exhibit 41,

25 at 222.)

26 On July 7, 2016, GEICO informed Cooke’s counsel that it only had records up

27 to January 2016, so Cooke’s counsel sent GEICO additional medical records,

1 occasional tingling, pain, and limitations; doctor’s notes indicating a positive Spuring

2 test; and evidence that Cooke had received a cervical epidural injection under

3 anesthesia in June 2016. (“Bright Decl.,” ECF No. 36-2, at ¶ 27–34.) Also on July

4 7, 2016, Fetchina authorized Shaw to reject the June 23 policy demands limit.

5 (Fetchina Decl. ¶ 55.)

6 Turning first to the opinions of GEICO’s counsel Mills, the Court notes that a

7 common thread throughout the correspondence between Mills and GEICO was

8 Mills’ opinion that Cooke was not as injured as she claimed to be, but that Mills

9 believed that the issue could be resolved by more investigation. Specifically, Mills

10 mentioned a biomechanical investigation more than once and noted she wanted to

11 see more records. A biomechanical investigation was not done by the time GEICO

12 rejected the settlement offer. Mills has at least “thirty years of litigation experience,

13 including many years with a successful track record of defending GEICO insureds

14 in auto crash cases with skill, care, and expertise.” (Fetchina Decl. ¶ 15.) Mills had

15 personally met Cooke and evaluated her behavior and credibility, and she had clearly

16 delineated her opinions—that Cooke was exaggerating her injuries but that an IME

17 or biomechanical review could confirm this. (See, e.g., GEICO’s Exhibit 43, at 229

18 (on July 7, 2016, Mills opined “I want to have [Cooke’s] records reviewed, and her

19 examined (probably by a neurosurgeon.) I strongly urge as well that we consider

20 retaining a biomechanical engineer . . .”).) Yet without following Mills’

21 recommendations, Shaw and Fetchina formed the opinion that the medical evidence

22 did not establish a case of more than $100,000.

23 And while it is apparent that Fetchina reviewed Cooke’s medical records,3

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25 3 In his declaration, Fetchina summarizes “all of the medical records in GEICO’s claim file as of

July 7, 2016, when [he] authorized” Shaw to reject the June 23 demand. (Fetchina Decl. ¶ 55.)

26 The latest record in this summary is dated January 2016. (Id. at ¶ 53.) But, Cooke’s counsel

declares that on July 7, 2016, he sent additional medical records to GEICO which detailed Cooke’s

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medical appointments from April 2016 to June 2016. (Bright Decl. ¶¶ 26–33.) The timeline of

1 prepared calculations, and used his experience of evaluating “thousands” of bodily

2 injury cases before rejecting the offer, the issue is, were enough steps taken before

3 the conclusion was reached? (See Fetchina Decl. ¶ 56.) It was undisputed that

4 Matthew was liable for the accident and that Cooke had not played a part in the cause

5 of the collision. (JSUMP ¶4.) Fetchina and Shaw had evidence that Cooke had seen

6 quite a few doctors and had sought relief through many different forms of treatment.

7 (Shaw Depo. at 61; see also Bright Decl. ¶ 24 (“At the time of the June 23, 2016

8 demand, Elizabeth Cooke attended approximately 75 medical visits as a result of this

9 crash, including chiropractic care, radiology, physical therapy, primary care

10 physician, pain management, and orthopedic specialists.”).) GEICO knew that

11 Cooke was complaining of stiffness, headaches, and pain; she had not experienced

12 these symptoms prior to the incident. (See Shaw Depo. at 64.) It is apparent from

13 Cooke’s medical records that she was not healed or even on the path to recovery by

14 July 2016; despite trying many different methods and treatments, she was still in

15 pain, stiff, and had limited movement.

16 Despite this information, at the time GEICO rejected the settlement offer, it

17 had not asked for a biomechanical review of the forces. Nor had GEICO submitted

18 Cooke to an IME. To be sure, it was Cooke’s own doctor who had opined that she

19 was not a candidate for surgery, so GEICO may have thought an IME was

20 unnecessary. But still, Cooke’s medical records consistently showed her injury

21 persisted. An IME was conducted later, after July 2016, but Fetchina testified he

22 does not know the cause of the delay. (“Fetchina Depo.,” Plaintiff’s Exhibit 4, at

23 77.) He “would have liked it to have happened earlier” but “it slipped through the

24 cracks, vacations, holidays, schedule of the doctor. There’s a lot of factors that help

25 extend these things unnecessarily.” (Id. at 80.) He testified that GEICO could have

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records, the Court finds this creates a genuine issue of material fact as to whether it was reasonable

1 asked for an extension of time to have an IME conducted before responding to the

2 settlement demand, and that there would have been no harm in doing so, but no

3 extension was requested. (Id. at 77.) He testified that an IME would have “made a

4 difference” and “that’s why it was being considered.” (Id. at 79.)

5 GEICO eventually submitted Cooke to an IME by Dr. Schopler in March

6 2017. (JSUMF ¶ 14.) This was done “[t]o confirm that [Cooke’s] doctor opinion

7 was correct.” (Shaw Depo. at 69.) Shaw testified that getting an IME is “usually the

8 process that happens in litigation. [It’s] standard with every other litigated case.”

9 (Id.) Following the IME, Dr. Schopler opined that Cooke was a candidate for

10 surgery. (GEICO’s Exhibit 13, at 121.) Shaw testified that had the IME been

11 conducted before GEICO rejected Cooke’s policy limits offer, it would have “likely”

12 changed the offer GEICO made. (Id.) Of course, this change of GEICO’s opinion

13 of the case is evident; after receiving the IME results, GEICO offered to settle with

14 Cooke for $100,000. GEICO also eventually consulted with a biomechanical/

15 accident reconstructionist, Isaac Ikram. Although the date of the consultation is

16 unclear, in September 2017, GEICO’s counsel summarized Ikram’s report as “not

17 favorable” because Ikram concluded that “based on 1) [Cooke’s] left sided neck

18 complaints, and 2) her head [was] turned to the right [when the impact occurred],

19 there are good biomechanical explanations for plaintiff’s asymmetric neck

20 complaints and the presence of radicular symptoms that required corrective surgery.”

21 (Plaintiff’s Exhibit 24, at 213–14.)

22 The Court finds that whether or not it was reasonable for GEICO to reject the

23 policy limits offer without performing a biomechanical review or an IME is a

24 disputed issue of fact. GEICO’s decision-makers believed Cooke’s medical records

25 did not show a high-dollar case, but they made this determination before these

26 potentially crucial steps were taken. The Court is not holding that simply because

27 Plaintiff has pointed to a step that GEICO did not take before rejecting the settlement

1 Mut. Auto. Ins. Co., 499 F. Supp. 2d 1154, 1163 n.6 (C.D. Cal. 2007) (noting it is not

2 the case that a plaintiff can “defeat summary judgment simply by pointing to any

3 number of additional expert reports that the insurer could have—but failed to—

4 obtain that would have somehow better informed its evaluation of Plaintiff's claim”).

5 Instead, what raises a disputed issue of fact is whether GEICO should have hired a

6 biomechanical expert or submitted Cooke to IME following Mills’ suggestions and

7 expressed “concern” about GEICO’s policy limits, as well as the medical records

8 showing Cooke’s lack of progress in recovery. Without undisputed evidence of a

9 reasonable investigation, it cannot be said that GEICO’s rejection of the policy limits

10 offer was reasonable as a matter of law. The Court DENIES GEICO’s Motion for

11 Summary Judgment as to this issue.

12 B. Cooke’s CCP Section 998 Offer (August 4, 2016)

13 Cooke’s other settlement demand within policy limits was made in August

14 2016 in the form of a California Code of Civil Procedure section 998 offer. (JSUMF

15 ¶ 11.) GEICO rejected the settlement demand and provided a counteroffer of

16 $16,000. (Id. ¶ 12.) GEICO argues that its refusal of this offer cannot form the basis

17 of Plaintiff’s bad faith claim.

18 Plaintiff argues GEICO’s refusal of the offer was unreasonable. But the first

19 question is whether the offer itself was reasonable. An offer is reasonable if

(1) its terms are clear enough to have created an enforceable contract

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resolving all claims had it been accepted by the insurer, (2) all of the

21 third party claimants have joined in the demand, (3) it provides for a

complete release of all insureds, and (4) the time provided for

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acceptance did not deprive the insurer of an adequate opportunity to

23 investigate and evaluate its insured’s exposure.

24 Graciano, 231 Cal. App. 4th at 425 (citations omitted).

25 The CCP Section 998 offer was a policy limits demand, but it was made only

26 as to Matthew. (JSUMF ¶ 11.) “[A]n insurer may, within the boundaries of good

27 faith, reject a settlement offer that does not include a complete release of all of its

1 Therefore, GEICO is correct that the CCP Section 998 offer was not a reasonable

2 offer. To the extent Plaintiff alleges that GEICO acted in bad faith in rejecting the

3 Section 998 offer, (see Compl. ¶ 11), the Court GRANTS GEICO’s Motion for

4 Summary Judgment on this issue.

5 C. GEICO’s Communication of a Settlement Offer

6 Plaintiff’s complaint vaguely alleges that GEICO acted in bad faith by

7 “unreasonably and/or intentionally refusing to communicate a settlement offer to

8 Plaintiff.” (Compl. ¶ 23.k.) Plaintiff does not provide details as to this unspecified

9 settlement offer. GEICO moves for summary judgment on Plaintiff’s claim that

10 GEICO acted in bad faith by failing to communicate a $250,000 settlement demand.

11 (Mot. at 26.) The settlement demand at issue occurred in an April 2, 2018 text

12 between Poncho Baker (Cooke’s trial counsel) and Kevin Place (one of GEICO’s

13 attorneys). Place was running late to an expert deposition and emailed Baker to tell

14 him so. Baker emailed back, saying, “Pay 250K and call it a day!!” and Place

15 responded, “Lol. If I could, I would.” (Plaintiff’s Exhibit 29, at 244.)4

16 “An insurer’s duty to communicate a settlement offer arises even if the offer

17 is made in excess of policy limits.” Saelee v. Progressive Classic Ins. Co., No. CIV.

18 S05-2648WBSKJM, 2007 WL 120000, at *1 (E.D. Cal. Jan. 11, 2007) (citing

19 Heredia v. Farmers Ins. Exch., 228 Cal. App. 3d 1345, 1360 (1991). Under

20 California law, an insurer acts in “bad faith” when it fails “to inform the insured of a

21 compromise offer.” Id. (quoting Brown v. Guarantee Ins. Co., 155 Cal. App. 2d 679,

22 689 (1957). “[The] duty to communicate may be triggered by something less than a

23 formal offer.” Id.

24

25 4 Plaintiff points out that in March 2018, prior to the relevant text conversation, Baker emailed

Campbell, another one of GEICO’s attorneys, and asked if GEICO “has any interest in resolving

26 this case above the policy limits” and if not, he would request a continuance in another one of his

trials. (Plaintiff’s Exhibit 28, at 242.) Campbell responded that there was no change in GEICO’s

27

position. (Id.) Plaintiff does not appear to be arguing that the March 2018 email was an “offer”

1 Place testified he is “sure” that the text conversation with Baker is something

2 he “would have likely” relayed to Matthew and Kellie, but he did not have “a specific

3 recollection of that conversation.” (“Place Depo.,” Plaintiff’s Exhibit 7, at 147:8–

4 18.) Kellie Mettler testified that she was not informed of any offer to settle the case

5 for $250,000. (Plaintiff’s Exhibit 40, at 282.) Further, Matthew’s father testified

6 that he had never heard that the “case could go away for $250,000” and if he had

7 known of that opportunity, he would have paid the extra $150,000 so the case did not

8 go to trial. (Plaintiff’s Exhibit 9, at 155–56.) This shows that the Mettlers were

9 harmed by the failure to communicate the offer, as they would have taken advantage

10 of it had they known of it.

11 Without any evidence that the Mettlers knew of the offer and without any

12 concrete answer by Place regarding the communication, there is at least a question

13 of material fact as to whether the offer was communicated by GEICO’s counsel. But,

14 GEICO argues that even if the offer was not communicated, GEICO (as opposed to

15 its counsel) did not learn of the offer until it had expired. Campbell informed

16 GEICO’s adjuster Russell Gardner on Saturday, April 7, 2018 that, “Baker stated in

17 passing that trial could be avoided for $250,000.” (GEICO’s Exhibit 20, at 146.)

18 Gardner testified he did not see this email until Monday, April 9, 2018, which was

19 the first day of trial. (“Gardner Depo.,” GEICO’s Exhibit 49, at 261.) GEICO argues

20 that by that time, the offer had expired, and it should not be held liable for its

21 counsel’s failure to communicate the $250,000 offer prior to trial.

22 The Court disagrees that it is undisputed that the offer expired on the first day

23 of trial. From GEICO’s perspective, the only information it had was Campbell’s

24 email, which stated “Baker stated in passing that trial could be avoided for

25 $250,000.” There is no information that Baker stated or implied that the offer must

26 be accepted before April 9, and, in any event, Gardner testified that he received the

27 email “the morning of the trial” so it is possible trial had not yet begun when he

1 GEICO’s adjuster learned of the settlement offer on April 9, 2018, and there is no

2 evidence that anyone at GEICO communicated the offer to the Mettlers. Gardner

3 believed that Place had informed the Mettlers of the offer, (id. at 262), but Place

4 testified that he does not know whether he told Gardner that he had done so. (Place

5 Depo. at 139.) And as noted above, Place cannot definitively say that he told the

6 Mettlers of the offer. There is a disputed issue of material fact as to whether GEICO

7 informed the Mettlers of a settlement offer, as GEICO had a duty to do. For these

8 reasons, the Court DENIES GEICO’s Motion for Summary Judgment on the claim

9 of bad faith for its failure to communicate the $250,000 settlement offer.

10 D. Punitive Damages

11 Finally, GEICO seeks summary adjudication on Plaintiff’s punitive damages

12 claim.

13 “In order to establish that an insurer’s conduct has gone sufficiently beyond

14 mere bad faith to warrant a punitive award, it must be shown by clear and convincing

15 evidence that the insurer has acted maliciously, oppressively or fraudulently.” Mock

16 v. Michigan Millers Mut. Ins. Co., 4 Cal. App. 4th 306, 328 (1992). “This higher

17 clear and convincing evidentiary standard applies at every stage of the litigation

18 process, including summary adjudication.” Adams v. Allstate Ins. Co., 187 F. Supp.

19 2d 1219, 1231 (C.D. Cal. 2002) (citing Basich v. Allstate Ins. Co., 87 Cal. App. 4th

20 1112, 1121 (2001)).

21 Plaintiff bases his punitive damages claim on the conduct of Fetchina and

22 Shaw. Under California law, an employer may be liable for punitive damages based

23 upon acts of an employee if the employer “authorized or ratified the wrongful

24 conduct for which the damages are awarded or was personally guilty of oppression,

25 fraud, or malice.” Cal. Civ. Code § 3294. Further, “[w]ith respect to a corporate

26 employer, the advance knowledge and conscious disregard, authorization,

27 ratification or act of oppression, fraud, or malice must be on the part of an officer,

1 and Shaw were “managing agents” and GEICO does not seem to dispute this. See

2 Egan v. Mut. of Omaha Ins. Co., 24 Cal. 3d 809, 823 (1979) (holding that punitive

3 damages could be awarded against an insurance company based on the tortious acts

4 of its claims representatives).

5 Plaintiff lays out all actions that he believes form the basis for a punitive

6 damage claim: Fetchina authorizing Shaw to reject the first two policy limits

7 demands (without an IME and without reading Cooke’s deposition transcript),

8 Fetchina authorizing Shaw to reject Cooke’s $350,000 demand despite a doctor’s

9 surgical recommendation, and Fetchina and Shaw’s mishandling of the case once a

10 conflict of interest formed between GEICO and Matthew. (Opp’n at 26–27.)

11 The Court addresses the conflict of interest issue first. As background and as

12 noted above, GEICO rejected Cooke’s two policy limit demands, and Cooke made a

13 third demand of $350,000 in January 2017. In the demand letter, Cooke’s counsel

14 stated that GEICO’s rejection of the two earlier demands created a conflict of interest

15 between GEICO and the Mettlers because if GEICO “had agreed to pay the previous

16 policy demand, [the Mettlers] would not be required to contribute $250,000 to

17 resolve this case.” (Plaintiff’s Exhibit 33, at 253.) Cooke’s counsel recommended

18 that GEICO provide the Mettlers with independent counsel. (Id.) GEICO then

19 communicated the $350,000 settlement offer to Matthew and reminded him, “our

20 office is representing you only to defend this lawsuit, and you also may hire another

21 lawyer, at your own expense, to monitor the defense being provided and/or to discuss

22 your rights.” (Plaintiff’s Exhibit 34, at 255.)

23 Although the evidence supporting the claims is unclear to the Court, Plaintiff

24 alleges that GEICO then created a “Chinese Wall” or a “split file” between the

25 Mettlers’ original file and a new file to avoid a conflict of interest. (Opp’n at 21.)

26 Plaintiff alleges GEICO violated the split file by allowing GEICO employees on both

27 sides of the wall to communicate. (Id. at 22.) Plaintiff also alleges GEICO should

1 to independent counsel paid for by an insurer is generally referred to as “Cumis

2 counsel” due to the California Supreme Court’s decision in San Diego Navy Federal

3 Credit Union v. Cumis Ins. Society Inc., 162 Cal. App. 3d 358 (1984). “The Cumis

4 opinion was codified in 1987 by the enactment of Civil Code section 2860, which

5 ‘clarifies and limits’ the rights and responsibilities of insurer and insured as set forth

6 in Cumis.” James 3 Corp. v. Truck Ins. Exch., 91 Cal. App. 4th 1093, 1100 (2001)

7 (citations omitted).

8 The Court first addresses the propriety of this argument. Plaintiff has not

9 previously alleged that GEICO acted improperly by failing to appoint counsel or that

10 it violated the “Chinese wall” after splitting the Mettler file. The only reference to

11 this argument is one sentence in Plaintiff’s complaint where he alleges that GEICO

12 breached its duty of good faith and fair dealing by “unreasonably and/or intentionally

13 compelling Plaintiff to retain counsel during and after the pendency of the underlying

14 lawsuit to protect and promote their [sic] legal interests against GEICO.” (Compl. ¶

15 23.h.) Allowing Plaintiff to use this brief reference now as the basis for his punitive

16 damages claim would be unduly prejudicial. See Coleman v. Quaker Oats Co., 232

17 F.3d 1271, 1292 (9th Cir. 2000) (in evaluating a motion for leave to amend, holding

18 that “adding a new theory of liability at the summary judgment stage would prejudice

19 the defendant”).

20 And in any event, the California code section regarding conflicts of interest

21 specifically provides that “[n]o conflict of interest shall be deemed to exist as to

22 allegations of punitive damages or be deemed to exist solely because an insured is

23 sued for an amount in excess of the insurance policy limits.” Cal. Civ. Code

24 § 2860(b). Plaintiff tries to distinguish this by arguing that the code section does not

25 excuse an insurer from providing Cumis counsel “once a claimant makes a demand

26 within policy limits and there is a ‘likelihood’ of liability in excess of policy limits.”

27 (Opp’n at 23.) Plaintiff cites no authority supporting this proposition, nor can the

1 to support Plaintiff’s punitive damages claim.

2 The Court turns to the other allegations which Plaintiff argues form the basis

3 of his punitive damages claim. Plaintiff argues that Shaw and Fetchina willfully and

4 consciously disregarded the Mettlers’ rights, conducted an inadequate investigation,

5 made “undifferentiated low ball offers[,]” relied on facts supporting GEICO’s

6 position and disregarded those that did not, fired defense counsel for protecting

7 Matthew’s interests instead of GEICO’s, and did not comply with the “Chinese

8 wall.” (Opp’n at 28.) For the most part, these are the same allegations that form

9 Plaintiff’s bad faith claim.

10 “[T]he evidence required to support an award of punitive damages for breach

11 of the implied covenant of good faith and fair dealing is ‘of a different dimension’

12 from that needed to support a finding of bad faith.” Shade Foods, Inc., 78 Cal. App.

13 4th at 909 (2000); see also Mock, 4 Cal. App. 4th at 328 (“Evidence that an insurer

14 has violated its duty of good faith and fair dealing does not thereby establish that it

15 has acted with the requisite malice, oppression or fraud to justify an award of punitive

16 damages.”). Because of this difference, California courts have held punitive

17 damages are generally only available against insurance companies when there are

18 “established policies or practices in claims handling which are harmful to insureds.”

19 Mock, 4 Cal. App. 4th at 329; see also Hangarter, 373 F.3d at 1013–14 (noting

20 punitive damages are available against insurance companies where there is sufficient

21 evidence of a “conscious course of conduct, firmly grounded in established company

22 policy” (quoting Neal v. Farmers Ins. Exch., 21 Cal. 3d 910, 923 (1978))); Amadeo

23 v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1165 (9th Cir. 2002) (same)

24 Plaintiff points to actions that he believes GEICO performed improperly, but

25 he has not provided any evidence that these actions were done with malice,

26 oppression or fraud. See Tomaselli v. Transamerica Ins. Co., 25 Cal. App. 4th 1269,

27 1288 (1994) (holding conduct showing an insurer’s “negligence or slipshod

| || before the Court showing a policy or pattern of GEICO disregarding the rights of its

2 ||insureds. See Mock, 4 Cal. App. 4th at 329. Without this, Plaintiff has no claim of

3 ||punitive damages. The Court GRANTS GEICO’s Motion for Summary Judgment

4 to Plaintiff's punitive damages claim.

5 IV. CONCLUSION

6 For the foregoing reasons, the Court GRANTS IN PART and DENIES IN

7 ||PART GEICO’s Motion for Summary Judgment, as detailed herein. Subject to the

8 ||Order of the Chief Judge No. 18, In re Suspension of Jury Trials and Other

9 || Proceedings During the Covid-19 Public Emergency (S.D. Cal. Mar. 17, 2020), the

10 ||Court orders the parties to contact the Magistrate Judge’s chambers to reset their

11 ||mandatory settlement conference. Upon conclusion of this conference, the parties

12 ||shall coordinate with the Magistrate Judge to set new dates for a pretrial conference

13 |/and trial.

14 IT IS SO ORDERED. /\

15 || DATED: April 15, 2020 asf dg Ainha □□

16 United States District Judge

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