Dey v. State Farm Mut. Auto. Ins. Co., No. 14-60300, 2015 WL 3772762 (5th Cir. June 17, 2015).
Fifth Circuit holds that “pocketbook dispute” between insured and insurer over value of the insured’s claim and insurer’s delay in resolving claim while it conducted further investigation did not constitute bad faith.
In October 2009, Daniel Dey’s vehicle was struck by a police officer in Mississippi. Under Mississippi law, police officers are considered uninsured motorists, so Dey tendered his claim to State Farm under his automobile policy, which provided $100,000 in uninsured motorists (“UM”) benefits.
In January 2010, Dey notified State Farm of the potential UM claim and in May 2011, submitted a settlement brochure to State Farm, which included $12,080 in medical bills, $5,777 in lost wages and mileage, and $13,871 in special damages, for a total of $31,728. The brochure also included Dey’s medical records, which indicated that Dey’s injury would likely not require surgery. Dey demanded $125,000, in excess of the policy limit, to settle the claim.
On June 14, 2011, a State Farm adjuster valued Dey’s claim at between $37,000 and $47,000. State Farm initially offered Dey $37,000 to settle the claim and eventually increased the offer to $45,000; Dey rejected both offers and demanded the policy limit of $100,000.
On February 6, 2012, Dey sent State Farm another letter that demanded $100,000 and included a medical report from November 2011 stating that Dey still had medical problems but should not require surgery. State Farm responded by reducing its offer to $37,000. On August 17, 2012, Dey provided State Farm with additional medical records from June 2012, which now recommended surgery. Dey underwent surgery in December 2012, which resulted in $44,841 in additional medical expenses.
On January 24, 2013, State Farm requested medical authorization from Dey to allow State Farm to review Dey’s medical records, and in April 2013, Dey provided the medical authorization. During the period between Allstate’s request and Dey’s authorization, Dey again demanded $100,000, and State Farm refused, stating that it questioned whether the accident was the cause of the injury that required surgery. State Farm deposed Dey in May 2013. In July 2013, a medical expert retained by State Farm to evaluate Dey’s medical records concluded that he was unable to determine, and no shoulder specialist would be able to determine with any degree of medical certainty, that the need for surgery was attributable to the initial accident.
Dey sued State Farm in Mississippi state court for, among other things, bad faith denial of the UM claim; State Farm removed the case to federal court. Dey argued that State Farm acted in bad faith because it delayed requesting medical authorization and delayed informing him that it had questions concerning the cause of his injuries.
State Farm sought and was granted summary judgment on the bad faith claim. The district court analyzed Dey’s claim in two separate periods: before and after State Farm was informed that Dey needed surgery. The court found that, prior to receiving the medical records indicating that Dey needed surgery, State Farm denied Dey’s claim because Dey’s medical bills and expenses totaled $31,728, an amount significantly less than the $100,000 that Dey sought. According to the court, the parties had been engaged in a “pocketbook dispute,” which could not support a claim of bad faith. The court then concluded that State Farm’s delay in investigating the cause of Dey’s injury until after it was notified that Dey needed surgery was appropriate because State Farm had no reason to question the cause of the injury prior to that point. The Court reached this conclusion despite the fact that State Farm: (1) did not seek clarification from Dey’s physician as to the additional medical records; (2) did not request Dey be seen by a State Farm doctor; (3) did not respond to Dey’s offer to depose his physicians for two months; and (4) did not retain an expert until six days before the litigation deadline. The court held that State Farm’s conduct was at worst negligent and thus did not rise to the level of bad faith. Dey appealed the district court ruling.
The issue on appeal was whether there were genuine disputes of material fact as to whether State Farm lacked an arguable basis on which to deny Dey’s claim. The Fifth Circuit held that Dey did not meet his heavy burden in demonstrating that there was no reasonable arguable basis for denying his claim. Rather, the undisputed evidence showed that State Farm had an arguable basis in its delay and denial of Dey’s claims. The Fifth Circuit affirmed the district court’s grant of summary judgment, finding that State Farm performed a prompt and adequate investigation and made reasonable and good faith decisions based on its investigation, while Dey failed to present sufficient evidence to find otherwise.
