Facts

Plaintiff, 50, was a truck driver employee of a national transportation company. The company instituted a program to convince its employee drivers to convert to independent contractors classified as worker owner/operator (owner/operator). When injuries occur, typically workers' compensation applications are filed and employment is an issue.

As part of the conversion, employees are given a policy called Truckers Occupational Accident Insurance, issued by Roe insurance company, which covers medical expenses and disability payments in case of an injury while working. Unknown to employees, Roe as part of the package, also issues to the company a contingent liability insurance policy that states in effect that in the event an owner/operator files a workers' compensation claim and is adjudicated as an employee, Roe will reimburse the company for any benefits paid under workers' compensation law. Roe reserved the right to settle the workers' compensation claim prior to issuance of an order for payment of benefits.

On Sept. 11, 2008, plaintiff became an owner/operator. On April 1, 2009, plaintiff sustained a serious injury on the job when an employee of company assaulted him. Plaintiff received benefits under Roe's occupational accident insurance covering medical expenses and disability payments of $600 per week.

On Nov. 23, 2009, plaintiff received a letter from Roe that stated benefits were suspended because an independent board certified orthopedic surgeon concluded that plaintiff's loss was caused by, contributed to or the results of the pre-existing condition, and that in the absence of this pre-existing conditions, plaintiff would have been able to return to work and the need for medical treatment would have ended eight weeks post injury.

Upon receipt of this letter, plaintiff filed a workers' compensation application.

Roe contacted plaintiff's health providers and refused to pay alleging since a workers' compensation case was filed, the policy benefits cannot be paid until the claim is "approved or denied." On other occasions, Roe state policy benefits are suspended until the claim is resolved and/or finalized.

Roe hired the same attorney to handle the workers' compensation case and the occupational accident insurance case. Despite numerous requests, Roe refused to pay under either the workers' compensation case or the occupational accident insurance policy.

Roe offered to settle the workers' compensation case for $40,000. Plaintiff filed and served this case for breach of the occupational accident policy and bad faith. Then Roe offered to settle the workers' compensation case and the bad faith case for $60,000. Plaintiff refused this offer.

On Oct. 12, 2011, the workers' compensation case alone was settled for $60,000 plus payment of all medical bills. In addition, $6,000 was subsequently paid as a penalty for late payment of the settlement.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended that Roe breached the implied covenant of good faith and fair dealing by refusing unreasonably to make medical and disability payments until the conclusion of plaintiff's claim for workers' compensation benefits when there was serious doubt concerning whether or not plaintiff qualified for workers' compensation coverage. Silberg v. California Life Insurance Company (1974) 11 Cal 3d 452.

DEFENDANT'S CONTENTIONS:
Roe contended that no sums were due under the policy. Plaintiff's pre-existing condition was the cause of his disability after eight weeks. The policy excludes sickness or disease and Roe's independent doctor stated his present condition is caused by pre-existing osteoporosis. The "approval or denial" in the policy means the policy benefits are suspended until there is a judicial determination in the workers' compensation case, and Roe acted reasonably in its claims practices.

Settlement Discussions

Plaintiff demanded $195,000. Defendant offered $25,000.

Result

The case settled for $110,000. Balance of disability payments after credit for workers' compensation net payment to plaintiff - $22,500, plus mental and emotional distress and attorney fees per Brant v. Superior Court (1985) 37 Cal 3d 813, Cassim v. Allstate Insurance Co. (2004) 33 Cal 4th 780.