The court denied the insurer’s motion for partial summary judgment seeking to dismiss the insured’s claim for bad faith in handling his claim. Davis v. Allstate Indem. Co., 2022 U.S. Dist. LEXIS 93475 (C.D. Cal. April 15, 2022).
On February 5, 2012, Terry Davis had an auto policy with Allstate providing $30,000 in uninsured motorist (UM) bodily injury coverage and $100,000 in medical payments coverage. Mr. Davis was involved in an auto accident with an uninsured motorist. The next day, he reported the accident to Allstate. Allstate confirmed that the at-fault driver was uninsured and opened a UM bodily injury claim file.
On January 15, 2014, counsel for Mr. Davis sent Allstate a letter demanding UM coverage. An Allstate claim handler reviewed Mr. Davis’ medical records and noted they were related to prostate, urinary tract, and constipation issues which pre-dated the accident. In March 2014, Allstate asked Mr. Davis to provide there years of historical medical records. Starting in October 2014, Allstate sent Mr. Davis monthly letters that claimed it still did not have the information needed to evaluate the claim. On February 25, 2015, an Allstate representative told Mr. Davis’s counsel that the medial records revealed many illnesses that were not acute and appeared to be unrelated to the accident. Counsel did not return subsequent calls from Allstate. Allstate closed Mr. Davis’s claim on June 16, 2015. The parties never commenced UM arbitration.
Davis filed suit alleging Allstate breached the covenant of good faith and fair dealing. Allstate moved for summary judgment arguing (1) Mr. Davis’s claim was time barred or (2) there was a genuine fact dispute as to when his injuries originated which precluded a finding of bad faith.
The court first found that the claim was not time-barred. At no point within five years did Allstate commence, or offer to commence, arbitration proceedings after Mr. Davis’s request. Under California law, a cause of action to compel arbitration of an uninsured motorist claim did to accuse, and the statute of limitations did not begin to run, until one party refused to submit to arbitration. Mr. Davis’s cause of action accrued on January 15, 2019 and he filed his complaint on June 3, 2020. Therefore, he filed within the two year statute of limitations.
Next the court found that the investigation could be found to have been conducted in bad faith. Therefore, Allstate was not entitled to a genuine dispute defense. Based upon the medical records, Allstate believed the injuries were due to a pre-existing condition. Allstate ignored that a severe car accident, in which Mr. Davis’s car was t-boned and suffered major damage, may have caused new issues that related to his prior condition but were in fact novel. A reasonable jury could find that Allstate acted unreasonably in determining that Mr. Davis’s injuries were not caused by the accident but instead were pre-existing conditions. Therefore, Allstate’s motion on the bad faith claim was denied.