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Cedillo v. Farmers Insurance Company of Idaho

Supreme Court of Idaho

November 29, 2017

PEGGY CEDILLO, Plaintiff-Appellant,

         2017 Opinion No. 118

         Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Hon. Lynn G. Norton, District Judge.

         The judgment of the district court is affirmed.

          Runft & Steele Law Offices, Boise, for appellant. Jon M. Steele argued.

          Gjording Fouser, PLLC, Boise, for respondent. Bobbi K. Dominick argued.

          BRODY, JUSTICE.

         This is 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.


         In May 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.

         In July 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.

         Ms. 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.

         Shortly 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 only)."

         On 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 payments:

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 accident.

         Farmers 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.

         There 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.

         Farmers 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.

         On May 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 providers.

         On 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 information.

         Farmers 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.

         In 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 to arbitration.

         While 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.

         The 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

$121, 700.12

• Lost Income

$135, 000.00

Total Economic Loss

$256, 700.12

• Noneconomic Damages

$150, 000.00

Total Value of Claim

$406, 700.12

         Following 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.

         Ms. 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. ...

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