Opinion No. 118
from the District Court of the Fourth Judicial District of
the State of Idaho, Ada County. Hon. Lynn G. Norton, District
judgment of the district court is affirmed.
& Steele Law Offices, Boise, for appellant. Jon M. Steele
Gjording Fouser, PLLC, Boise, for respondent. Bobbi K.
an insurance bad faith case arising out of a claim for
underinsured motorist coverage. Ms. Cedillo claims the
district court erred when it (1) granted summary judgment in
favor of Farmers on her bad faith claim, (2) denied discovery
of the entirety of Farmers' claims file and certain
electronic information, and (3) denied a motion to amend her
complaint to include a claim for punitive damages. We affirm
the judgment of the district court on the bad faith claim and
do not reach the merits of Ms. Cedillo's other claims. We
deny Farmers' request for attorney's fees, but award
costs on appeal.
FACTUAL AND PROCEDURAL BACKGROUND
2008, Peggy Cedillo was injured in a collision while riding
as a passenger on the back of a motorcycle. About a year
after the collision, she settled her claim against the
motorcycle driver for $105, 000, the total amount available
under his insurance policy. Ms. Cedillo married the
motorcycle driver about eight months after the collision, and
he is her lawyer in this lawsuit and has been designated as
one of her experts.
2009, about two months after settling her tort claim, Ms.
Cedillo sent Farmers a letter seeking payment under the
underinsured motorist portion (UIM) of her own auto policy.
The UIM insuring clause stated:
We will pay all sums which an insured person is legally
entitled to recover as damages from the owner or operator of
an UNDERinsured motor vehicle because of bodily injury
sustained by the insured person.
Cedillo told Farmers that her medical bills totaled $53,
048.62, and she demanded payment of policy limits of $500,
000 and resolution of the claim within thirty days.
after receiving Ms. Cedillo's letter, Farmers requested
that she sign a medical release authorizing the company to
obtain her medical records. She signed the release, but
limited it to medical information related to the motorcycle
collision by adding the notation "(information
pertaining to the accident/injury occurring 5-25-08
August 25, 2009, a few days before the thirty-day demand
period was up, Farmers sent Ms. Cedillo a $25, 000 check with
a letter stating that the check represented their valuation
of her UIM claim and took into account the $105, 000 she
received from the motorcycle driver's insurance company.
The policy also contained a provision allowing a reduction in
the amount of UIM coverage based on third party liability
The amount of UNDERinsured Motorist Coverage we will pay
shall be reduced by the amount of any other bodily injury
coverage available to any party held to be liable for the
stated that its valuation did not include lost wages because
her letter did not support a wage claim and she had not
requested lost wages. The letter stated she could submit any
additional information she had to support her claim.
was no further contact between the parties for a period of
about six months. On March 30, 2010, Ms. Cedillo sent Farmers
another letter informing it that she needed surgery to remove
or block the occipital nerves because of ongoing headaches
and neck pain. She estimated the procedure to cost $25, 000.
She also stated that she may need another surgical procedure
to cover numbness and tingling in her hands. She stated she
did not have a cost estimate for that procedure. She again
made a demand for policy limits of $500, 000.
responded to Ms. Cedillo's March 2010 demand
approximately two weeks later by sending her a letter stating
that it was not in a position to accept or deny the demand.
Farmers stated that it needed to obtain the records
pertaining to recent medical treatment and that it needed
records for five years prior to the collision. Farmers noted
in the letter that there may be relevant pre-accident
records. Farmers also stated that it had not received any
additional documentation regarding a wage claim.
7, 2010, Farmers sent Ms. Cedillo a letter advising her that
it had obtained her medical records from the physician she
said had recommended the nerve block/removal surgery. Farmers
obtained the records using the limited release Ms. Cedillo
had previously provided. Farmers stated that the doctor's
records did not document the need for surgery and asked her
to provide any additional documentation that she might have.
Farmers also stated that the records it had obtained did not
support changing its evaluation of her claim and again
requested that she sign a medical release so that it could
request pre- and post-accident records. It also requested
that she provide a list of her treatment providers. Ms.
Cedillo provided the release on July 2, 2010, approximately
two months later. On July 16, 2010, Farmers sent Ms. Cedillo
another letter again requesting a list of treatment
September 3, 2010, Ms. Cedillo sent Farmers another demand
for policy limits. In her letter, she outlined her injuries,
the impact those injuries had on her daily life, including
her inability to work, and her medical bills to date (a
little over $56, 000) and the difficulties she was having
paying those bills. She included adjusted gross wage
information from past years (selected information from past
tax returns) and provided a list of past treatment providers
as well as new treatment providers. She stated that she had
not received Farmers' August 25, 2009, request for wage
responded to Ms. Cedillo's demand on September 24, 2010.
It requested Ms. Cedillo's complete tax returns so that
it could evaluate her claim for lost wages. It also stated
that it needed the medical records for new medical bills she
had provided (it said it would request the records) and
records documenting the need for surgery since the records
they had obtained did not support her claim. Farmers also
pointed out that the August 24, 2009 request for wage
information was included with the $25, 000 check which she
had cashed. Farmers stated that it was not in a position to
accept or deny the claim and told her that she would need to
undergo an independent medical examination to determine the
cause and extent of her injuries pre- and post accident. Ms.
Cedillo responded to Farmers about a month later, giving it
updated information on a bill and telling it to let her know
the date and location of the medical examination.
December 2010, Farmer's attorney contacted Ms. Cedillo to
set up the independent medical examination. Dr. Richard
Wilson did the exam on April 19, 2011, and issued a report
outlining his findings. He attributed her ongoing pain
symptoms to stress rather than a nerve issue requiring
surgery and apportioned the necessity of the neck fusion
surgery she had undergone in 2008 after the collision equally
between pre-existing conditions (she had been involved in two
prior collisions) and the motorcycle accident at issue.
Farmers advised Ms. Cedillo on May 5, 2011 that it was not
changing its evaluation of her claim. The parties proceeded
the arbitration was pending, Ms. Cedillo underwent a second
neck fusion surgery (a level above the original fusion) in
February 2012. In May 2012, she had surgery on her right
shoulder to debride the rotator cuff and labral tears and
bursal adhesions. In October 2012, Farmers had Dr. Wilson
perform another independent medical examination to evaluate
Ms. Cedillo's condition following these surgeries. Dr.
Wilson did not attribute the need for the surgeries to the
collision. Nonetheless, on October 18, 2012, Farmers paid Ms.
Cedillo an additional $155, 000 under the UIM policy. Farmers
made the payment approximately one month before the
arbitration hearing took place.
arbitration hearing took place on November 21-22, 2012. The
parties stipulated prior to the arbitration that the
arbitrator would not address setoff issues in his initial
determination. The arbitrator issued a written decision
detailing his findings and valuation of damages. He
apportioned 100% of the cost of the first neck surgery and
the shoulder surgery to the motorcycle collision, contrary to
Dr. Wilson's testimony. With respect to the second neck
surgery, he apportioned 25% of the cost to preexisting
conditions and 75% of the cost to the motorcycle collision.
His valuation shows that he also disallowed 25% of general
damages for the preexisting neck condition which necessitated
the second fusion. With respect to the lost income claim, he
found that Ms. Cedillo had carried her burden of proving lost
income through Nancy Collins, a vocational rehabilitation
counselor. Although Farmers presented an expert who testified
that Ms. Collins' methodology failed to take into account
the economic recession that hit the real estate market during
the time period at issue (Ms. Cedillo was a realtor) and that
she believed economic loss should be limited to periods of
time where Ms. Cedillo was recovering from surgery, the
arbitrator found that Farmers' expert failed to quantify
the amount of the loss. The arbitrator valued Ms.
Cedillo's claim as follows:
• Medical Expenses
• Lost Income
Total Economic Loss
• Noneconomic Damages
Total Value of Claim
his initial determination, the arbitrator re-evaluated the
award to take into account setoffs for the settlement with
the motorcycle driver (deducted $105, 000), payments made by
Farmers (deducted $25, 000 and $155, 000), the apportionment
of costs for the second neck surgery, deductions for
collateral source payments (contractual discounts taken by
the medical providers) and other minor deductions. The
arbitrator also found that Ms. Cedillo provided Farmers with
enough information to trigger an obligation to investigate
her claim and determine their rights and obligations as of
July 28, 2009. The arbitrator found that prejudgment interest
started to run on August 25, 2009, the date Farmers provided
Ms. Cedillo with its initial valuation of her claim. After
all of the deductions and calculations of prejudgment
interest, the arbitrator determined that the principal amount
still owed by Farmers was $100, 332.95 and the prejudgment
interest owed was $103, 135.46.
Cedillo subsequently filed a petition in district court to
confirm the arbitration award. Farmers filed a motion with
the arbitrator to reconsider the prejudgment interest award,
because it had paid $100, 333 to Ms. Cedillo before the
arbitration award was made final. The arbitrator issued an
amended final order of $101, 948, concluding that
Farmers' $100, 333 payment was applied to the prejudgment
interest and that $2, 803 interest had accrued on the damage
award. When Farmers issued the final check to Ms. ...