California courts have adopted the Genuine Dispute Doctrine. Chateau Chamberay Homeowners Assn v. Associated Internat. Ins. Co., (2001) 90 Cal. App. 4th 335, 347, 108 Cal. Rptr. 2d 776 (“[A]n insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured’s coverage claim is not liable in bad faith even though it may be liable for breach of contract.”) The Genuine Dispute Doctrine applies not only to disputes over insurance policy interpretation, but also to factual disputes. See, Wilson v. 21st Century Ins. Co., (2007) 42 Cal. 4th 713, 723, 68 Cal. Rptr. 3d 746, 171 P.3d 1082. However, the Genuine Dispute Doctrine will not relieve insurance companies from their obligation to thoroughly and fairly investigate, process, and evaluate the insured’s claim. In determining whether a dispute is genuine and actually exists, the courts do not strive to determine which party is right as to the disputed matter, but only whether a reasonable and legitimate dispute actually exists. Chateau Chamberay, 90 Cal. App. 4th at 348, fn. 7, 108 Cal. Rptr. 2d 776. When a dispute is founded on a basis that is reasonable under all of the circumstances, it is a legitimate, genuine dispute. Wilson, 42 Cal. 4th at 724 fn. 7, 68 Cal. Rptr 3d 746. In determining the reasonableness of the insurance company’s decisions and actions, the court looks to the state of the record at the time that the decision was made.
It is against the foregoing backdrop that the California Court of Appeals, Division 3, in Zubillaga v. Allstate Indemnity Co., 12 Cal. App. 5th, 1071, 219 Cal. Rptr. 3d 620 (2017) considered whether a trial court’s grant of summary judgment was appropriate where the insurance company relied upon an IME to inform its settlement value decisions. The trial court found that Allstate’s utilization of an IME which arguably supported its settlement value was sufficient to grant summary judgment. However, the California Court of Appeals disagreed.
Allstate had an IME done by an independent medical doctor. As additional records were discovered, they were provided to the IME doctor. However, late in the case, prior to an arbitration being convened, plaintiff’s counsel yet again provided additional medical updates which were not provided to the IME doctor. The additional records were directly relevant to the utilization of epidural injections by plaintiff’s treating physicians. Rather than having these additional records reviewed by the IME doctor, Allstate stayed pat on its prior evaluations from the IME doctor. For that reason, the California Court of Appeals in Zubillaga reversed the trial court’s grant of summary judgment.
The court found that the undisputed facts demonstrated that the IME doctor’s opinions were rendered on two prior occasions in October and November 2012 and that Allstate continued to rely upon the IME doctors’ opinions through the arbitration which occurred in September 2013 without ever consulting the IME doctor again or conducting any further investigation. During that intervening time period, the plaintiff had received one lumbar steroidal epidural injection and the insured’s treating doctor had recommended three more. Because Allstate never asked its IME doctor to review these additional records, recommendations and treatment, and Allstate continued to rely upon the IME doctor’s opinions as the basis for disputing the medical necessity and reasonable value of the treatments, as well as the reasonableness of the recommendations being made, the Court found that a question of fact existed whereby a reasonable jury could conclude that Allstate’s assertion that it reasonably continued to rely upon its IME doctor’s opinions, or that it had inadequate time to have him reexamine those opinions or conduct further discovery, had to be decided by a jury. The court made clear, however, that it was not deciding the issue of bad faith, but simply that failure to continue to investigate when presented with additional information in the form of having the additional information reviewed by the IME doctor created a question of fact as to whether Allstate acted unreasonably and in bad faith.