Maslo v. Ameriprise Auto & Home Insurance

(Insurer’s Failure to Investigate and Extend a Settlement Offer in Connection with UM Claim Supports Complaint for Bad Faith)

In Maslo v. Ameriprise Auto & Home Ins., ___ Cal.App.4th ___ (June 27, 2014), the California Second District Court of Appeal reversed the trial court’s judgment of dismissal following an order sustaining a demurrer filed by Ameriprise Auto & Home Insurance (“Ameriprise”) in response to a complaint for bad faith filed by its insured, Ted Maslo (“Maslo”). The parties’ dispute arose out of an uninsured motorist claim made by Maslo under an Ameriprise automobile liability policy affording UM limits of $250,000. Maslo provided Ameriprise with medical records, a statement, and police report in support of his claim. Notwithstanding information provided by Maslo, Ameriprise failed to investigate the claim and refused to extend an offer to settle Maslo’s UM claim. Rather, Ameriprise demanded arbitration of the claim. Thereafter, the arbitrator awarded Maslo $164,120.91. It took approximately 3 years from the date of Maslo’s tender of the UM claim until the arbitration for the matter to be resolved.

As a result of Ameriprise’s failure to investigate and settle Maslo’s claim, he filed a complaint for bad faith against Ameriprise. In response, Ameriprise filed a demurrer arguing that since the amount awarded in the arbitration was within the policy UM limits, it could not have acted in bad faith as of law. The trial court agreed and entered a judgment requiring the dismissal of Maslo’s complaint.

In reversing the trial court’s decision, the Court of Appeal held as follows:

Applying these principles, we conclude the SAC stated an insurance bad faith cause of action. Appellant alleged (1) that the insurer was apprised that appellant, its insured, had suffered bodily injuries resulting from the negligence of an uninsured motorist; (2) that the insurer knew the LAPD traffic collision report had concluded the uninsured motorist was solely at fault; (3) that appellant made a demand for payment of the $250,000 policy limit on his uninsured motorist coverage; (4) that appellant submitted his medical records and billing statements; (5) that the insurer rejected the demand without an adequate investigation, as the insurer failed, among other things, to conduct a defense medical examination or interview appellant’s treating physicians; (6) that despite clear evidence of liability, the insurer made no offer of settlement; (7) that the insurer agreed to pay the claim only after the arbitration, which was more than three years after the accident and more than two years after the insurer had all appropriate medical documentation in its possession; and (8) that as a result of the insurer’s refusal to investigate and evaluate his claim, appellant was compelled to incur the costs of an arbitration necessitated solely by the insurer’s intransigence. Under this factual scenario, a reasonable jury could find the insurer liable for breach of the covenant of good faith and fair dealing.

. . .

There can be no serious dispute that an insurer is required to thoroughly and fairly investigate, process, and evaluate its insured’s claim. The SAC alleged facts sufficient to state a tort claim for the insurer’s breach of the duty of good faith and fair dealing under common law and for failure to attempt to effectuate a prompt and fair settlement under the Insurance Code. It further adequately alleged that the insurer’s breach of its duty of good faith and its failure to attempt to effectuate a prompt and fair settlement directly and proximately caused appellant to suffer damages, including incurring unnecessary costs and fees of arbitration. Accordingly, the court erred in sustaining the demurrer and dismissing the SAC with prejudice.