Zubillaga v. Allstate Indemnity Company, 12 Cal.App.5th 1017 (2017)

Carmen Zubillaga sustained a back injury from a car accident. After settling with the other driver’s insurer, Zubillaga made a claim for underinsured motorist benefits to her auto insurer, Allstate Indemnity Company. Zubillaga demanded the remaining $35,000 policy limit to settle her UIM claim. Allstate rejected Zubillaga’s demand, and instead offered $10,000. Zubillaga later claimed that she had radiating back pain requiring epidural injections. Allstate increased its offer to $12,084 and retained an orthopedic surgeon to examine Zubillaga. The surgeon examined Zubillaga and concluded that she did not have radiating back pain and did not need epidural injections. Relying on the surgeon’s opinion, Allstate stood firm on its settlement offer.

Zubillaga then submitted new medical records showing that she had complained of radiating back pain, had received an epidural injection, and would need future injections. Allstate increased its offer to $14,500, but did not send the new medical records to the orthopedic surgeon for review. The claim proceeded to arbitration resulting in an award in Zubillaga’s favor for the remaining $35,000 policy limit. Zubillaga then sued Allstate for breach of the implied covenant of good faith and fair dealing.

In its motion for summary judgment, Allstate argued that a genuine dispute regarding Zubillaga’s need for epidural injections negated Zubillaga’s bad faith claim. The trial court agreed when it concluded that Allstate reasonably relied on the orthopedic surgeon’s opinion that epidural injections were not needed.

The Court of Appeal reversed. As a threshold matter, the Court agreed that Allstate was not obligated to accept Zubillaga’s claim for epidural injections “without scrutiny or investigation.” However, the Court reasoned that a factual dispute precluded summary judgment. According to the Court, a triable issue of fact existed as to whether Allstate adequately investigated the claim when it continued to rely on the orthopedic surgeon’s opinions without asking him to consider Zubillaga’s new medical records.