Facts

On March 17, 2014, plaintiff Juan Martinez, a tow truck driver, was driving his four children home from school in his personal vehicle, when he collided with a semi-tractor driven by Jesus Morfin. Plaintiff tried to contact Morfin with no success. Plaintiff was insured by Mercury Insurance Co. policy for 10 years prior to the accident.

Plaintiff reported the property damage but no injury to himself or his passengers. The day after the accident, a Mercury adjuster, Cynthia Bouzos, inquired into the accident facts, and plaintiff stated he was not injured, nor were his passengers. Bouzos stated to plaintiff's policy had "liability coverage only" and that he would have to look to the responsible driver carrier for any recovery regarding the accident.

Several days after the accident, plaintiff felt lower back pain and his 12-year-old daughter, who had been a passenger during the accident, felt pain in her arm. Mercury informed plaintiff that he had medical payments coverage in the amount of $5,000 that was "excess with reimbursement," meaning subject to repayment back to Mercury if recovery was made as against Morfin.

Plaintiff was referred to a clinic by his legal counsel, as he had no medical insurance except for the Mercury medical payments benefit. The clinic treated him and released him in August 2011. The clinic also requested authorization from plaintiff's counsel to refer plaintiff to a facility for an MRI, for which counsel consented. A demand letter with medical reports and bills was sent to Bouzos in September 2011, and requested that Mercury pay the medical payments pursuant to the policy provisions. Bouzos sent the claims to Mercury's medical review unit to determine if the bills and treatment were reasonable and necessary. The review unit reduced plaintiff's daughter's bills from $3,450 to $1,714 and sent a check to plaintiff. The same unit calculated a reduction in plaintiff's bills from $8,512 to $5,500, but did not send a check. Instead, Mercury transferred plaintiff's claim from Bouzos to Mercury's special investigations unit.

PLAINTIFF'S CONTENTIONS:
The special investigations adjuster, Anna Belk, then requested that plaintiff send another copy of the bills and records, stating they were illegible. One of the provider's records, that of the MRI facility, showed evidence that the liens had been paid by plaintiff's counsel on behalf of his client. Plaintiff claimed that Mercury's special investigations department received these in March 2012, and was unaware that Mercury did not know that the medical liens were paid in October 2011 out of plaintiff's third-party recovery. He claimed he was never asked if the liens were paid, and never thought there was a need to inform Mercury the liens had been paid.

Belk then instituted a fraud investigation by reporting plaintiff, his family, his doctors, and his attorney to two national Fraud Bureaus. Plaintiff claimed this was prior to any investigation confirming any suspicion of fraud whatsoever. Belk's investigation also involved appearing at plaintiff's medical facility without notice, identifying herself as a "special investigator" and seeking to inspect the medical facility and conduct interviews with providers and staff. Her request was refused by the facility.

Belk then sent several requests to the clinic's administrator, seeking a meeting for her investigation without stating why the claim was being investigated. In discovery, it was learned that Mercury was investigating the claim in it's special investigations unit as the medical clinic was half-owned by a businessman who was not a medical practitioner, and Mercury believed that the clinic was "illegally owned" under California Law. The court granted a Motion in Limine to preclude this contention by Mercury at trial. According to plaintiff, Mercury also claimed fraud in the request for medical benefits in that the owner of the MRI facility was arrested and indicted on numerous counts of fraud. Belk then demanded a statement under oath of plaintiff, which was provided in May 2012.

In December 2012, Belk closed the file on the claim because she could not obtain the cooperation of the medical providers with respect to the fraud investigation. Plaintiff then filed suit for bad faith. During deposition taken by Mercury, plaintiff's orthopedic doctor furnished copies of checks paid by plaintiff's lawyer to the medical providers in settlement of the liens.

Plaintiff contended that a formal claim denial was never made until one month before trial in May 2014, when the special investigation department sent a letter stating the claim was denied due to concealment by plaintiff's attorney of the fact that he had settled and paid plaintiff's medical bills for $4,300, which was less than the medical bills sent of $8,512, and less than the policy limits of $5,000, alleging that his was fraud perpetrated by plaintiff's counsel to improperly profit $700. Plaintiff claimed that he had to settle the medical bills when the third party claim was resolved pursuant to the signed medical liens. Plaintiff claimed that these were settled in October 2011 after making the medical payments claims, and that since he did not request a specific figure in the medical payments demand, just that the bills he properly paid under the coverage, that he did not attempt to claim monies in excess of what was later paid for the liens.

Plaintiff claimed that Mercury's special investigation unit at no time had any intention to properly pay the medical payments coverage that plaintiff was entitled to receive. He claimed that he did not report his injury on the day after the accident because he was incorrectly informed that his coverage was for liability only. He claimed that this misstatement by Mercury, and another a month later in writing, were in Mercury's favor, as both would cause plaintiff to forgo making a medical payments claim. Plaintiff contended that the special investigations adjuster's claim that the records were illegible was false, given that the medical record review department had already prior analyzed and approved the bills for payment.

Plaintiff argued that Mercury's special investigations department's practice of reporting 100 percent of their insured's claims as fraudulent on two insurance bureaus was unreasonable, as this is done at the very onset of every investigation and before Mercury has any supporting evidence that a claim is fraudulent. Plaintiff alleged that plaintiff's counsel never demanded the $5,000 policy limit for bills, which were later settled for $4,300, but simply sent the bills asking that they be properly paid pursuant to the Mercury policy.

Plaintiff's claims handling expert stated that under the Fair Claims Settlement Practices Act, Mercury had 40 days to accept or deny the claim, which could be extended to 80 days if fraud was suspected, but that a two-year delay was in bad faith. Also, that Mercury was not entitled to "close the file" on the claim for non-cooperation of the medical providers as the policyholder had cooperated fully, and has no control over whether others cooperate with Mercury.

DEFENDANT'S CONTENTIONS:
Defendant contended that plaintiff claimed he felt lower back pain the same day that Bouzos initially called him. Defendant claimed that the MRI facility's records showed evidence that the bills had been paid, but there was no indication as to who had paid that bill. Based on the indictment of plaintiff's radiologist on several hundred counts of fraud relating to his practice, Belk then instituted a fraud investigation. She was denied access and told to coordinate her inspection through the facility administrator. Belk sought a meeting for her investigation due to questions concerning the legality of the operation of the clinic.

Mercury claimed that plaintiff and his lawyer concealed that the medical liens had been settled for less than the medical payments policy limit, and that had it known at any time that the medical bills had been paid, a check would have been issued for the medical payments benefits to plaintiff immediately. Mercury contended it did not know the liens had been paid until the deposition of plaintiff's orthopedist, who produced copies of the checks from plaintiff's attorney at his deposition in December 2013. Mercury contended that it was reasonable to investigate plaintiff's treatment for possible fraud because plaintiff's radiologist had recently been indicted on several hundred counts of fraud relating to his radiology practice. Defendant contended that plaintiff's counsel improperly referred plaintiff for the MRI.

Settlement Discussions

Plaintiff made a CCP 998 demand for $24,999. Mercury made a CCP 998 offer for $2,500.

Result

Plaintiff's verdict for $660,683 as follows: $4,323 for contractual damages, $600,000 emotional distress, and $56,360 for attorney fees.

Other Information

Defendant has filed a motion for new trial and a motion for judgment notwithstanding the verdict.

Deliberation

4.5 hours

Length

six days