Gloria

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8 UNITED STATES DISTRICT COURT

9 EASTERN DISTRICT OF CALIFORNIA

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12 JAMES GLORIA, No. 2:22-cv-1126-WBS-CDK

13 Plaintiff,

14 v. MEMORANDUM AND ORDER RE:

PARTIES’ CROSS MOTIONS FOR

15 ALLSTATE INDEMNITY COMPANY and SUMMARY JUDGMENT

DOES 1 through 50, inclusive,

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17 Defendants.

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Plaintiff James Gloria brought this action against

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defendants Allstate Indemnity Company and Does 1-50 alleging that

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Allstate breached the implied covenant of good faith and fair

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dealing with its handling of a 2014 uninsured motorist (“UIM”)

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insurance claim that Gloria filed under his Allstate automobile

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policy. (Docket No. 1 at 2.) Plaintiff has now moved for

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summary judgment on the issue of liability (Docket No. 26), and

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Allstate has filed a counter motion for summary judgment. In the

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event that the court denies Allstate’s motion, it alternately

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1 moves for partial summary judgment dismissing Gloria’s claim for

2 punitive damages. (Docket No. 27.)

3 I. BACKGROUND

4 On May 2, 2014, Gloria was rear ended in an automobile

5 collision. (Docket No. 26 at 2.) Although he declined medical

6 treatment from first responders at the scene, Gloria was admitted

7 to Dameron Hospital later that same day due to back pain.

8 (Docket Nos. 27 at 10, 27-15 at 28—35.) Following his discharge

9 from the hospital, Gloria followed up with his primary care

10 doctor on May 5, 2014. (Docket No. 27-15 at 46.) Then, on May

11 12, 2014, Gloria started treatment at Soto Chiropractic under the

12 care of Dr. Edmund Zeiter, D.C., who placed him on disability

13 leave. (Docket No. 30-15 at 118—22.) Dr. Zeiter cleared Gloria

14 to return to work on July 28, 2014. (Id.) Between May 12, 2014,

15 and August 4, 2014, Gloria received 25 chiropractic treatments.

16 (Docket No. 30-17 at 3.)

17 At the time of the accident, Gloria had an Allstate

18 automobile insurance policy, which included a medical payment

19 coverage limit of $5,000.00 and a UIM policy with a $100,000.00

20 coverage limit for bodily injury. (Docket No. 27-1 at 9.)

21 Following the accident, Gloria submitted medical bills to

22 Allstate under his medical payment coverage. (Docket No. 27-1 at

23 6.) But on August 18, 2014, Allstate sent a letter to Gloria

24 notifying him that he had exhausted the medical pay coverage

25 limit of his policy, which was $5,000.00, and advised him that

26 any further medical treatment would need to be filed under his

27 health insurance policy. (Docket No. 30-2 at 6.)

28 Gloria also filed a third-party claim against Hartford

1 Underwriters Ins. Co., the third-party driver’s automobile

2 insurance provider, which was ultimately settled for the policy’s

3 full liability limit of $25,000.00. (Docket No. 27-1 at 6.)

4 Upon the conclusion of his suit against Hartford, Gloria provided

5 proof of the settlement to Allstate, and on August 18, 2015, he

6 served Allstate with a demand for UIM arbitration, which was

7 accepted. (Docket No. 26-1 at 2.)

8 In June of 2016, Gail Dillard, an Allstate adjuster,

9 evaluated his claim. (Docket No. 27-17 at 3.) She determined

10 that treatment after July 29, 2014, was unrelated to Gloria’s

11 automobile accident and calculated the total value of his claim

12 to be $31,371.47 before offsets to account for the $25,000.00

13 settlement paid by Hartford. (Id. at 4.)

14 Allstate then retained Dr. Gary Alegre, M.D., a board-

15 certified orthopedic surgeon, to serve as its independent medical

16 expert (“IME”). Dr. Alegre examined Gloria on September 20,

17 2016, reviewed the available records in the case, and issued his

18 IME report on October 21, 2016. (Docket No. 27-18 at 2—11.) Dr.

19 Alegre’s IME report affirmed Allstate’s June 2016 evaluation in

20 concluding that Gloria’s injuries were fully resolved after July

21 29, 2014. (Id.)

22 Then, on December 6, 2016, Allstate offered to settle

23 Gloria’s claim for $500.00. (Docket No. 27-22 at 2.)

24 Throughout 2017, Gloria continued to receive

25 chiropractic treatments as well as acupuncture. (Docket No. 27-

26 21 at 2—3.) In 2018, he sought more intensive diagnostics and

27 treatment. (Id.) On July 17, 2018, Gloria received an MRI of

28 his lumbar spine. (Id. at 3.) Then, that October, Dr. Zeiter

1 referred him for an orthopedic consult. (Id.) On December 7,

2 2018, Gloria underwent a second MRI under the care of Dr. Ardavan

3 Aslie, an orthopedic spine surgeon. (Docket No. 29 at 4.) Dr.

4 Aslie recommended “spinal fusion surgery” as the only viable form

5 of treatment for Gloria, a procedure expected to cost well over

6 $250,000.00. (Docket Nos. 26-1 at 4, 30 at 17.)

7 On September 1, 2020, the parties attended binding

8 arbitration, and on October 2, 2020, the arbitrator found for

9 Gloria, valuing his claim at $50,000.00. (Docket No. 27-38 at 2—

10 4.)

11 Gloria initiated the present action against Allstate on

12 January 25, 2022, in the San Joaquin County Superior Court

13 (Docket Nos. 26, 27, 29, 30.). (See Docket No. 1-1.) Allstate

14 filed its answer on March 3, 2022. (Docket No. 1 at 2.) In his

15 statement of damages filed on June 1, 2022, Gloria seeks an

16 undetermined amount in special damages, $2,500,000.00 in general

17 damages, $7,500,000.00 in punitive damages, and $75,000.00 in

18 attorney’s fees. (Docket No. 1-2 at 2.) On June 29, 2022,

19 Allstate timely removed the suit to this court on diversity of

20 citizenship grounds. (Docket No. 1 at 2.)

21 II. LEGAL STANDARD

22 Under Federal Rule of Civil Procedure 56, a party may

23 move for total or partial summary judgment by “identifying each

24 claim or defense -- or the part of each claim or defense -- on

25 which summary judgment is sought.” Fed. R. Civ. P. 56(a).

26 Summary judgment empowers a court to “pierce the pleadings and to

27 assess the proof in order to see whether there is a genuine need

28 for trial.” Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio

1 Corp., 475 U.S. 574, 586 (1986) (citing Advisory Committee Note

2 to 1963 Amendment of Fed. R. Civ. P. 56(e)). Summary judgment is

3 designed to “isolate and dispose” of factually unsupported claims

4 which “no reasonable jury” would resolve in the claimant’s favor.

5 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

6 To prevail, then, the moving party must show -- based

7 on the pleadings, discovery, and any other competent evidence

8 submitted with the motion -- that there is no genuine dispute as

9 to any material fact. See Fed. R. Civ. P. 56(a). A fact is

10 material if it has the potential to affect the outcome of the

11 suit pursuant to the applicable governing law. Anderson v.

12 Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A dispute about

13 a material fact is ‘genuine’ if the evidence is such that a

14 reasonable jury could return a verdict for the non-moving party.”

15 Id. Importantly, “the mere existence of some alleged factual

16 dispute between the parties will not defeat an otherwise properly

17 supported motion for summary judgment; the requirement is that

18 there be no genuine issue of material fact.” California v.

19 Campbell, 138 F.3d 772, 780 (9th Cir. 1998) (citing Anderson, 477

20 U.S. at 247—48). Finally, when evaluating a motion for summary

21 judgment, all facts and inferences must be construed in the light

22 most favorable to the non-moving party. See Matsushita, 475 U.S.

23 at 587.

24 III. ALLSTATE’S EVIDENTIARY OBJECTIONS

25 Allstate raises various evidentiary objections against

26 Gloria’s supporting evidence. (See Docket Nos. 30-6, 33-1.)

27 As a preliminary matter, the court will disregard any

28 objections that are duplicative of the summary judgment standard.

1 Under Federal Rule of Evidence 401, evidence is relevant if it

2 “has any tendency to make a fact more or less probable” and that

3 fact “is of consequence in determining the action.” Fed. R.

4 Evid. 401. Here, all of Allstate’s objections are directed at

5 the sworn declaration of Noah Schwinghamer. (See Docket No. 26-3

6 at 4—10.) However, the court does not rely on any part of

7 Schwinghamer’s declaration in reaching the conclusions below.

8 Accordingly, the court Allstate’s objections to Gloria’s evidence

9 are overruled. (See Docket Nos. 30-6, 33-1.)

10 IV. DISUSSION

11 A. Bad Faith

12 California law recognizes that every contract contains

13 an implied covenant of good faith and fair dealing. See Marsu,

14 B.V. v. Walt Disney, Co., 185 F.3d 932, 937 (9th Cir. 1999)

15 (“Every contract imposes upon each party a duty of good faith and

16 fair dealing in its performance and its enforcement.”); see also

17 Wilson v. 21st Century Insurance Company, 42 Cal.4th 713, 720

18 (2007). This covenant is understood to have “particular

19 application” to contracts between insurers and the insured

20 because they are “invested with a discretionary power affecting

21 the rights of another.” Amadeo v. Principal Mut. Life Ins. Co.,

22 290 F.3d 1152, 1161 (9th Cir. 2002) (citation omitted).

23 To prevail on a claim of bad faith against an insurer,

24 a plaintiff needs to show that “benefits due under the policy

25 were withheld” -- whether denied or delayed -- and that “the

26 reason for withholding benefits was unreasonable or without

27 proper cause.” Pyramid Techs., Inc. v. Hartford Cas. Ins. Co.,

28 752 F.3d 807, 823 (9th Cir. 2014) (quoting Guebara v. Allstate

1 Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001) (citation omitted)).

2 The “key to a bad faith claim is whether or not the insurer’s

3 denial of coverage was reasonable” and “[t]he reasonableness of

4 an insurer’s claim-handling conduct is ordinarily a question of

5 fact.” Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d

6 998, 1009–10 (9th Cir. 2004) (citing Amadeo, 290 F.3d at 1161);

7 see also Bosetti v. U.S. Life Ins. Co. in the City of New York,

8 175 Cal. App. 4th 1208, 1236 (2009) (“[A]n insured plaintiff need

9 only show . . . that the insurer unreasonably refused to pay

10 benefits.”). Crucially, to determine whether an insurer’s

11 “conduct in denying [a] claim was reasonable,” that conduct in

12 question must be evaluated in the context of what the insurer

13 knew “at the time that the allegedly ‘bad faith’ decision was

14 made.” Aceves v. Allstate Ins. Co., 827 F. Supp. 1473, 1484

15 (S.D. Cal. 1993), rev’d in part, 68 F.3d 1160 (9th Cir. 1995).

16 An insurer acts unreasonably when it fails to properly

17 investigate the policyholder’s claim. See, e.g., Century Sur.

18 Co. v. Saidian, No. 12-cv-7428 SS, 2016 WL 6440140, at *18 (C.D.

19 Cal. Mar. 16, 2016). “[W]hether an insurer breached its duty to

20 investigate [is] a question of fact to be determined by the

21 particular circumstances of each case.” Paulfrey v. Blue Chip

22 Stamps, 150 Cal.App.3d 187, 196 (1983). Additionally, an insurer

23 acts unreasonably when its investigation of the insured’s claim

24 is biased. Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 381

25 (C.D. Cal. 1995) (“[A]n insurer breaches the implied covenant of

26 good faith by conducting a biased investigation.”) (citation

27 omitted).

28 An insurer also acts unreasonably when it ignores

1 evidence that supports the policyholder’s claim. Allstate Ins.

2 Co. v. Madan, 889 F. Supp. 374, 381 (C.D. Cal. 1995) (“An insurer

3 is liable for bad faith if it disregards evidence supporting

4 coverage.”); see also Tetravue Inc. v. St. Paul Fire & Marine

5 Ins. Co., No. 14-cv-2021 W BLM, 2018 WL 1172852, at *5 (S.D. Cal.

6 Mar. 6, 2018) (“[B]ad faith may lie where a claim is denied on a

7 basis unfounded in the facts known to the insurer, or

8 contradicted by those facts or where the insurer ignores evidence

9 that supports the insured's claim, and just focuses on facts that

10 justify denial.” (citation and internal quotation marks

11 omitted)).

12 Here, Gloria advances four lines of argument in support

13 of its bad faith claim against Allstate.

14 First, Gloria argues that Allstate “failed to perform

15 even a basic investigation . . . and it certainly did not perform

16 a thorough, fair, or objective investigation.” (Docket No. 26-1

17 at 8.) Specifically, Gloria contends that because Allstate

18 “neither interviewed nor deposed any of [his] friends, family

19 members, or treating physicians regarding [his] injuries,” it

20 failed to seek and learn “information that corroborated” his

21 claims. (Id.) Gloria argues that this failure on the part of

22 Allstate amounts to a violation of its duty to “fully inquire

23 into possible bases that might support the insured’s claim.” See

24 Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d 809, 819 (1979).

25 In response, Allstate argues that its investigation

26 included (a) “obtaining and carefully reviewing Gloria’s

27 voluminous medical records”; (b) “retaining arbitration counsel,

28 who conducted written discovery, took Gloria’s deposition, and

1 assisted in Allstate’s investigation”; (c) “retaining an

2 independent Board-certified orthopedic surgeon to examine Gloria,

3 review his medical records, and testify at arbitration”; (d)

4 “evaluating Gloria’s claim, making settlement offers, and

5 attempting to consummate a settlement”; and (e) preparing for

6 arbitration to resolve the parties’ dispute regarding the value

7 of the claim.” (Docket No. 30 at 24—25.)

8 Allstate is correct that no authority exists for

9 Gloria’s proposition that an insurer is required to interview an

10 insured’s friends, family, or treating doctors to fulfill its

11 obligation to properly investigate. (See Docket No. 26.) What

12 may be required, rather, is that an insurer investigate that

13 which needs to be investigated, particularly the possible bases

14 for supporting the insured’s claim, not ignoring such evidence,

15 and not searching for or relying on only the evidence that weighs

16 against the insured’s claim. See, e.g., Saidian, 2016 WL 6440140

17 at *18; Madan, 889 F. Supp. at 381; Tetravue Inc., 2018 WL

18 1172852 at *5.

19 In determining whether Allstate acted unreasonably,

20 therefore, the question then becomes whether Allstate had reason

21 to expand its investigation pursuant to its investigatory duties

22 under Egan. “The reasonableness of an insurer's conduct is

23 usually a question of fact, although it becomes a question of law

24 where the evidence is undisputed and only one reasonable

25 inference can be drawn from the evidence.” Saidian, 2016 WL

26 6440140 at *18 (citation omitted). Because more than one

27 inference can be drawn from the record here, this is a question

28 of ultimate fact and must be answered by a jury. Id.; see also

1 Bafford v. Travelers Cas. Ins. Co. of Am., No. 2:11-cv-2474 LKK,

2 2012 WL 5465851, at *7 (E.D. Cal. Nov. 8, 2012) (“An insurer’s

3 efforts to seek more information from several sources and

4 reconsider plaintiff’s claims at various times has been held to

5 demonstrate good faith; conversely, an insurer’s early closure of

6 investigation and unwillingness to reconsider a denial when

7 presented with evidence of factual errors will fortify a finding

8 of bad faith.” (citation and internal quotation marks omitted)).

9 Second, Gloria argues that Allstate ignored evidence

10 that would support his claim by failing to revise the valuation

11 of his claim in response to Gloria providing additional medical

12 evidence, including the results of his 2018 MRI under the care of

13 Dr. Aslie -- Gloria's then-treating physician -- and the

14 subsequent surgical recommendation. (Docket No. 26-1 at 9—10.);

15 see also Madan, 889 F. Supp. at 381 (“An insurer is liable for

16 bad faith if it disregards evidence supporting coverage.”). In

17 response, Allstate maintains that “during the claim, [it] gave

18 full and careful consideration to all available information,

19 including Gloria’s medical records and deposition testimony.”

20 (Docket No. 30 at 25.) Allstate continues, arguing that just

21 because it “analyzed or gathered that information differently

22 than Gloria would prefer does not mean that [it] somehow

23 ‘ignored’ evidence.” (Id.)

24 Third, Gloria contends that Allstate acted in bad faith

25 by failing to make a reasonable settlement offer when Adjuster

26 Dillard offered “only $500,” but Allstate argues that its offer

27 was a negotiating starting point in an attempt at settling

28 Gloria’s claim. (Compare Docket No. 26-1 at 11, with Docket No.

1 30 at 27—28.) Once again, these contradictory characterizations

2 of the same, undisputed evidentiary facts signal that they are

3 questions of ultimate fact that can only be answered by a jury.

4 See McClatchy Newspapers, Inc. v. Cont'l Cas. Co., No. 1:14-cv-

5 00230-LJO, 2015 WL 2340246, at *10 (E.D. Cal. May 13, 2015)

6 (“California courts have determined, like all other issues, that

7 when there are genuine factual disputes, bad faith claims cannot

8 be decided in summary judgement proceedings.”).

9 Fourth, Gloria argues that Allstate’s selection of and

10 reliance on Dr. Alegre as its IME resulted in a biased

11 investigation. (Docket No. 26-1 at 11—12.) Gloria contends that

12 Dr. Alegre was unqualified because there are six “prior

13 malpractice cases against him,” and he is biased because he

14 testifies as an IME exclusively on behalf of insurers. (Id. at

15 11.) Gloria asserts that Dr. Alegre’s medical opinion was

16 effectively “purchased” by Allstate for $10,250.00. (Id.)

17 Allstate, on the other hand, argues that, as a matter of law, Dr.

18 Alegre -- who is a board-certified orthopedic surgeon -- is not

19 biased merely because he has previously worked for Allstate.

20 (Docket No. 30 at 29.)

21 As the court in Fadeeff v. State Farm Gen. Ins. Co.

22 observed, there are “several circumstances where a biased

23 investigation claim should go to jury.” 50 Cal. App. 5th 94, 102

24 (2020), as modified on denial of reh'g (July 1, 2020) (citing

25 Guebara, 237 F.3d at 994). These include: (1) “the insurer was

26 guilty of misrepresenting the nature of the investigatory

27 proceedings”; (2) “the insurer's employee's lied during the

28 depositions or to the insured”; (3) “the insurer dishonestly

1 selected its experts”; (4) “the insurer's experts were

2 unreasonable”; and (5) “the insurer failed to conduct a thorough

3 investigation.” Pyramid Techs., 752 F.3d at 823. Here, Gloria

4 alleges precisely that Allstate was dishonest in its selection of

5 Dr. Alegre. (See Docket No. 26-1 at 11-12.) Accordingly, this,

6 too, presents the court with a question of ultimate fact that

7 must be answered by a jury. Therefore, Gloria’s motion will be

8 denied.

9 1. Inapplicability of the Genuine Dispute and Active

Investigations Doctrines

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The genuine dispute doctrine and the active

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investigation doctrine are both insufficient to take plaintiff’s

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bad faith claim away from the jury.

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Ordinarily, the genuine dispute doctrine provides that

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an insurer cannot be found liable for bad faith for a coverage

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determination so long as it can show that its denial of coverage

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or delay in payment was the result of there being a genuine

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dispute between the insurer and insured as to coverage or the

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amount of loss. In other words, “[w]here there is a genuine

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issue as to the insurer’s liability under the policy for the

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claim asserted by the insured, there can be no bad faith

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liability imposed on the insurer for advancing its side of that

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dispute.” Chateau Chamberay Homeowners Ass’n v. Associated Int’l

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Ins. Co., 90 Cal. App. 4th 335, 347 (2001).

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However, the genuine dispute doctrine does not

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constitute a blanket liability shield against claims of bad

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faith: “An insurer cannot claim the benefit of the genuine

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dispute doctrine based on an investigation or evaluation of the

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1 insured’s claim that is not full, fair and thorough.” Bosetti v.

2 U.S. Life Ins. Co. in the City of New York, 175 Cal. App. 4th

3 1208, 1237 (2009).

4 Contrary to Allstate’s suggestion, however, the

5 doctrine does not provide -- without restrictions -- that an

6 insurer “cannot be held liable for bad faith so long as a genuine

7 dispute existed about coverage or the amount covered.” (Docket

8 No. 27-1 at 15.) The doctrine is a defense against a claim of

9 bad faith alleging that the insurer unreasonably delayed payment

10 or denied coverage. But it does not shield an insurer from bad

11 faith liability arising out of failing to investigate, ignoring

12 evidence that supports the insured’s claim, or conducting a

13 biased investigation. See Pyramid Techs., Inc. v. Hartford Cas.

14 Ins. Co., 752 F.3d 807, 823 (9th Cir. 2014) (“[The] genuine

15 dispute doctrine should be applied on a case-by-case basis and

16 does not protect allegedly biased investigations.” (citations

17 omitted)).

18 Similarly, although delays resulting from an insurer’s

19 need to conduct a thorough investigation of a policyholder’s

20 claim generally cannot be used to support a finding of bad faith,

21 the fact that the insurer is actively investigating does not

22 automatically preclude a finding of bad faith on other grounds.

23 See generally Guebara v. Allstate Ins. Co., 237 F.3d 987 (9th

24 Cir. 2001).

25 Neither of these doctrines foreclose a finding of bad

26 faith based on the record in this case. At the same time, the

27 facts in the record do not compel a finding of bad faith as a

28 matter of law. While the evidentiary facts here are undisputed,

1 what remains is the question how those facts bear on the

2 determination of whether Allstate’s behavior was reasonable and

3 whether it acted in bad faith when handling Gloria’s claim.

4 Here, the court must conclude that a reasonable jury could find

5 either for Gloria or for Allstate on the issue of bad faith.

6 Therefore, Allstate’s motion for summary judgment must also be

7 denied.

8 B. Punitive Damages

9 To prevail on a claim for punitive damages, a plaintiff

10 must prove by clear and convincing evidence that the defendant’s

11 conduct amounted to “oppression, fraud, or malice.” Cal. Civ.

12 Code § 3294(a); see also Tibbs v. Great Am. Ins. Co., 755 F.2d

13 1370, 1375 (9th Cir. 1985) (citing San Jose Production Credit

14 Ass'n v. Old Republic Life Insurance Co., 723 F.2d 700, 705 (9th

15 Cir.1984)) ("Punitive damages are recoverable, however, when the

16 defendant breaches the implied covenant of good faith and fair

17 dealing and is guilty of oppression, fraud or malice." (emphasis

18 in original)).

19 California Civil Code 3294(c) defines those terms as

20 follows:

21 (1) “Malice” means conduct which is intended by the

defendant to cause injury to the plaintiff or

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despicable conduct which is carried on by the

23 defendant with a willful and conscious disregard

of the rights or safety of others.

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(2) “Oppression” means despicable conduct that

25 subjects a person to cruel and unjust hardship in

conscious disregard of that person's rights.

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27 (3) “Fraud” means an intentional misrepresentation,

deceit, or concealment of a material fact known

28 to the defendant with the intention on the part

1 of the defendant of thereby depriving a person of

property or legal rights or otherwise causing

2 injury.

3 Cal. Civ. Code § 3294(c)(1—3) (emphasis added); see also Bajwa v.

4 United States Life Ins. Co., No. 1:19-cv-00938-JLT-SAB, 2024 WL

5 1344675, at *18 (E.D. Cal. Mar. 29, 2024).

6 Gloria persists in relying on fraud as a basis for his

7 punitive damage claim, although it is unclear what material fact

8 he claims Allstate misrepresented. In his brief in opposition to

9 Allstate’s motion he states that:

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Allstate engaged in fraud when it purchased the

11 medical opinions it wanted from Dr. Alegre. Alstate

paid him over $10,000 for his opinions, while never

12 budging from their %500 offer to Plaintiff. Allstate

knows it could have gotten a legitimate doctor, but

13 they chose a hack. This was deceitful, and Allstate

has done this thirty times.

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It is unnecessary for the court to make a finding at this stage

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as to whether that amounted to misrepresentation of a material

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fact because the court finds for the following reasons that the

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evidence is sufficient to permit plaintiff’s punitive damage

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claim to go to the jury on his theory of malice or oppression.

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As a threshold question, conduct is “despicable” only

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when it is “so vile, base, contemptible, miserable, wretched or

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loathsome that it would be looked down upon and despised by

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ordinary decent people.... such conduct has been described as

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[having] the character of outrage frequently associated with

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crime.” CACI No. 3945, JUDICIAL COUNCIL OF CALIFORNIA CIVIL JURY

25

INSTRUCTIONS (2025 edition); American Airlines Inc. v. Sheppard,

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Mullin, Richter & Hampton, 96 Cal.App.4th 1017, 1049-50 (2002).

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The despicable standard thus “represents a serious limitation on

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1 punitive damages awards." Okerman v. Life Ins. Co. of N. Am.,

2 No. 00-cv-0186-GEB-PAN, 2001 WL 36203082, at *7 (E.D. Cal. Dec.

3 24, 2001) (citing Shade Foods, Inc. v. Innovative Prods. Sales &

4 Mktg., Inc., 78 Cal. App. 4th 847, 891 (2000), as modified on

5 denial of reh'g (Mar. 29, 2000)).

6 That said, usually “the question of whether the

7 defendant's conduct will support an award of punitive damages is

8 for the trier of fact, since the degree of punishment depends on

9 the peculiar circumstances of each case.” Johnson & Johnson v.

10 Superior Ct., 192 Cal.App.4th 757, 762, (2011) (internal

11 citations and quotation marks omitted).

12 While a court may rule on the question of punitive

13 damages at the summary judgment stage, it may not “impose on a

14 plaintiff the obligation to ‘prove’ its case” at the summary

15 judgment stage. Barrous v. BP P.L.C., No. 10-cv-02944-LHK, 2011

16 WL 4595205, at *15 (N.D. Cal. Oct. 3, 2011). Rather, a court

17 properly adjudicates the issue of punitive damages at summary

18 judgment “only when no reasonable jury could find the plaintiff's

19 evidence to be clear and convincing proof of malice, fraud or

20 oppression.” Johnson & Johnson, 192 Cal.App.4th at 762 (emphasis

21 added).

22 Where a reasonable jury could find for the plaintiff,

23 there exists a triable question of ultimate fact that must be

24 answered by a jury. See Morcom v. Newport Aquatic Ctr., No. 20-

25 cv-2444-DOC-ADS, 2021 WL 5927907, at *8 (C.D. Cal. Aug. 31, 2021)

26 (holding that because "[a] jury could find this to be ‘despicable

27 conduct’ . . . Plaintiff's request for punitive damages is not

28 suitable for summary adjudication."). Accordingly, although it

1 may seem unlikely to the court that a jury would find on this

2 evidence that Allstate’s conduct was so vile, base, contemptible,

3 miserable, wretched or loathsome that it would be looked down

4 upon and despised by ordinary decent people, that is a question

5 for the jury, not the court, to answer.

6 Finally, where, as here, defendant is a corporate

7 entity, a plaintiff must also prove that the offending conduct

8 was carried out or ratified by “an officer, director, or managing

9 agent of the corporation.” Cal. Civ. Code § 3294(b); see

10 Glovatorium, Inc. v. NCR Corp., 684 F.2d 658 (9th Cir. 1982);

11 Kelsey v. Allstate Ins. Co., No. 04-cv-01224-RMW, 2005 WL

12 1773302, at *11 (N.D. Cal. July 26, 2005).

13 Under California law, the controlling case on what

14 constitutes a managing agent is Egan v. Mutual of Omaha Ins. Co.,

15 24 Cal.3d 809 (1979). Ginda v. Exel Logistics, Inc., 42 F. Supp.

16 2d 1019, 1022 (E.D. Cal. 1999) (“Egan is the seminal case on what

17 constitutes a “managing agent[.]’”). In Egan, the California

18 Supreme Court held that “[w]hen employees dispose of insureds’

19 claims with little, if any, supervision, they possess sufficient

20 discretion for the law to impute their actions concerning those

21 claims to the corporation.” 24 Cal.3d at 823. Instead, the

22 court explained, “the critical inquiry is the degree of

23 discretion the employees possess in making decisions that will

24 ultimately determine corporate policy.” Id.

25 The standard established by Egan further provides that

26 the exercise of sufficient discretion -- even on the part of an

27 employee who is relatively low in the corporate hierarchy --

28 “necessarily results in the ad hoc formulation of policy.” Id.;

1 see also Rangel v. Am. Med. Response W., No. 1:09-cv-01467-AWI,

2 2013 WL 1785907, at *31 (E.D. Cal. Apr. 25, 2013) (citing Siva v.

3 General Tire & Rubber Co., 146 Cal.App.3d 152 (1983)). In Mosley

4 v. Ashley Furniture Indus., Inc., the court held that:

5 [T]he formulation of ad hoc policy is also established

in the context of insurance agents, who, despite not

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being high in the corporate hierarchy in their setting

7 of policy, dispose of insureds’ claims with little to

no supervision and thus are involved in the ad hoc

8 formation of corporate policy.

9 No. 1:18-cv-00557-SAB, 2019 WL 2325557, at *28 (E.D. Cal. May 31,

10 2019).

11 Similarly, this court has held previously that “[a]

12 manager’s ability to decide whether or not a particular policy is

13 applied in particular circumstances is tantamount to making

14 decisions that affect both the store and company policy.”

15 Almanza v. Wal–Mart Stores, Inc., No. 2:06–0553–WBS–GGH, 2007 WL

16 2274927, *5 (E.D. Cal. Aug. 7, 2007) (citing White v. Ultramar,

17 21 Cal.4th 563, 577 (1999)); cf. LMA N. Am., Inc. v. Nat’l Union

18 Fire Ins. Co. of Pittsburgh, Pa, 924 F. Supp. 2d 1188, 1207–08

19 (S.D. Cal. 2013) (“Viewing the evidence in the light most

20 favorable to LMA, a reasonable jury could find that Manger, who

21 was the only National Union agent ‘proactively involved’ in

22 ‘assess[ing]’ the claim and ‘read[ing] any of the underlying

23 documentation’ . . ., was a ‘managing agent’ of National Union

24 pursuant to California Civil Code § 3294(b).”) (citation

25 modified).

26 Considering the evidence under this standard, Gloria

27 has made a sufficient showing to create a triable issue of fact

28 on the ultimate question of whether Adjuster Dillard was a

1 managing agent of Allstate. Without reference to the entire

2 record in this case, Gloria presents evidence upon which a

3 reasonable jury could find that Dillard exercised such

4 discretionary authority in her role as a claims adjuster as to

5 impute her actions concerning those claims to the corporation.

6 See Garcia v. New Albertson’s, Inc., No. 2:13-cv-05941-CAS, 2014

7 WL 4978434, at *8 (C.D. Cal. Oct. 3, 2014) (“[T]he question of

8 whether an employee is a managing agent “is a question of fact

9 for decision on a case-by-case basis,” and that in light of

10 California precedent, judgment as a matter of law is

11 inappropriate at this stage of litigation.”).

12 Accordingly, Allstate’s alternative motion with regard

13 to plaintiff’s claim for punitive damages, whether it be

14 considered as a motion partial summary judgment, a motion to

15 strike, or a motion to dismiss, must be denied.

16 V. CONCLUSION

17 For the reasons discussed above, Gloria is not entitled

18 to summary judgment on the issue of liability on his claim that

19 Allstate breached the implied covenant of good faith and fair

20 dealing in its handling of his 2014 claim. Nor is Allstate

21 entitled to summary judgment on either the question of whether it

22 acted in bad faith or the question of whether it may be found

23 liable for punitive damages.

24 IT IS THEREFORE ORDERED that plaintiff’s motion for

25 summary judgment on the issue of liability for breach of the

26 implied covenant of good faith and fair dealing (Docket No. 26),

27 ///

28 ///

nen ene IO I OE OS OSE! INE ee

1 and defendants’ motion for summary judgment or in the alternative

2 partial summary judgment (Docket No. 27) be, and the same hereby

3 are, DENIED.

4 .

5 Dated: November 13, 2025 crhittiom th. Ad. be—~

WILLIAM B. SHUBB

6 UNITED STATES DISTRICT JUDGE

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