Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-00276/USCOURTS-caed-2_06-cv-00276-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

ROBERT COSMERO, 

 Plaintiff, 

v. 

STATE FARM MUTUAL AUTOMOBILE 

INSURANCE COMPANY and DOES 1 

through 50, inclusive, 

 Defendants. 

No. Civ. S-06-cv-276 DFL KJM 

Memorandum of Opinion

and Order

Plaintiff Robert Cosmero is suing his insurer, defendant 

State Farm Mutual Automobile Insurance Co., for denying his 

claim, thereby requiring him to pursue the claim through an 

arbitration proceeding. The arbitrator resolved the claim in 

his favor. Cosmero alleges that State Farm breached the 

covenant of good faith and fair dealing by denying the claim in 

the first instance. Cosmero seeks punitive damages. State Farm 

now moves for summary judgment. For the reasons below, the 

court DENIES State Farm’s motion. 

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I. 

In 2002, Cosmero was involved in two car accidents within a 

span of three months. 

On April 16, 2002, Cosmero was rear-ended by Roland 

Granados. (Def.’s SUF 3.) Cosmero settled his claim against 

Granados for Granados’s policy limit of $15,000. (Def.’s SUF 

4.) At the time, Cosmero had automobile liability insurance 

through State Farm. (Def.’s SUF 1.) His policy provided for 

per-person medical payments coverage of $5,000 and underinsured 

motorist coverage of $100,000.1 (Def.’s SUF 1.) On July 18, 

2002, Cosmero was in another car accident. Cosmero settled that 

claim for the driver’s $100,000 policy limit. (Ex. 21.) 

After the accidents, Cosmero began experiencing severe neck 

pain. On January 21, 2003, Cosmero underwent a cervical 

discectomy procedure to help alleviate the pain. (Def.’s SUF 

8.) Cosmero incurred over $140,000 in medical fees. (Ex. J2 

2.) In March 2003, State Farm paid Cosmero the maximum $5,000 

of medical coverage as partial reimbursement for his neck 

surgery. (Bell Dec. 51:2-22.) 

On August 25, 2003, Cosmero sent a demand letter to State 

Farm. (Def.’s SUF 6.) Cosmero claimed that the April 16 

accident caused his neck injury and that the settlement with 

Granados did not fully compensate him for his losses. (Def.’s 

SUF 6.) Cosmero sought underinsured motorist coverage for neck 

injuries and a broken morphine pump, a device he previously had 

 

1

 Underinsured motorist coverage protects insureds when they are 

involved in an accident where the at-fault party does not have 

adequate insurance. 

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implanted in his body to help him manage pain that lingered from 

prior injuries. (Ex. 2.) 

Upon receiving his demand letter, State Farm informed 

Cosmero that it needed more time to evaluate the claim. (Ex. 

4.) For the next six months, Cosmero waited for a decision. 

(Ex. 18 MAYAL0080.) State Farm referred Cosmero’s claim to 

counsel, Mark Berry. (Def.’s SUF 13.) State Farm also hired 

its own doctor, Kavian Shahi. (Def.’s SUF 26.) Against Berry’s 

advice, State Farm had Dr. Shahi conduct a medical examination 

(“IME”) of Cosmero. (Def.’s SUF 28.) Berry counseled against 

conducting an IME because he felt that “[a]n IME will not be 

beneficial as [Cosmero’s] surgery has already been performed and 

there is no current condition to evaluate.” (Ex. 12 1CF0186.) 

During its investigation, State Farm deposed the doctors 

who treated Cosmero’s neck injuries. Dr. Willis testified at 

his deposition that he first noticed Cosmero might have suffered 

a neck injury on June 25, 2002, before Cosmero’s second 

accident. (Willis Dep. 28: 16-19.) Dr. Pasquale Mantesano, who 

performed Cosmero’s neck surgery, observed that Cosmero “had a 

long history of back problems.” (Mantesano Dep. 11:14-15.) Dr. 

Mantesano reasoned that the April 16 accident “likely” worsened 

existing neck problems that Cosmero had and that, “as a result 

of both accidents, [Cosmero] ended up getting surgery.” 

(Mantesano Dep. 11:14-12: 3.) 

Various State Farm employees and representatives were aware 

of Dr. Willis and Dr. Mantesano’s opinions. The claim adjuster 

assigned to the case indicated in her activity log that she 

reviewed Dr. Willis’s deposition and noted that “Dr. Willis 

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feels both [accidents] contributed to the patient[‘]s neck pain 

and increased low back pain.” (Ex. A. 1CF1117.) In a summary 

of Cosmero’s medical records that he sent to State Farm, one of 

Berry’s associates concluded that “[t]he April 2002 accident 

does appear to have caused him neck injury.” (Ex A. 1CF0199.) 

In the same letter, the associate reiterated that “it appears 

that the April 2002 accident may have contributed to Mr. 

Cosmero’s neck injuries addressed by his cervical fusion in 

January 2003.” (Ex. A. 1CF0199.) In his summary of Comsero’s 

deposition, Berry noted that “Cosmero contends that the April 

2002 accident was more significant than the July 2002 accident.” 

(Ex. 12 1CF0184.) In his pre-arbitration report, Berry, 

however, stated that “the underlying $15,000 that was recovered 

from the adverse driver is sufficient to compensate Mr. Cosmero 

for injuries associated with [the April 16] accident.” (Ex. A 

1CF104.) 

On August 27, 2004, Dr. Shahi sent State Farm a report in 

which he concluded that the April 16 accident did not cause 

Cosmero any “temporary or permanent impairment.” (Ex. 17 

1CF0095.) Dr. Shahi arrived at this conclusion from 

interviewing Cosmero and independently evaluating his medical 

records. (Ex. 17 1CF0073.) In his report, Dr. Shahi contended 

that “[t]here is no evidence of cervical complaints in the 

reviewed records until August 6, 2003.” (Ex. 17 1CF0095.) Dr. 

Shahi took the position that Cosmero would have felt pain in his 

neck immediately if he had suffered a neck injury in April 2005, 

but Cosmero did not complain about any neck pain in his visit to 

the emergency room. (Ex. 17 1CF0095.) Dr. Shahi observed that 

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Cosmero also stated in his deposition that the second impact 

“was actually harder” than the first. (Ex. 17 1CF0095.) 

Finally, Dr. Shahi noted that Dr. Mantesano discovered during 

surgery that Cosmero had a disc that “had calcified and 

partially ossified.” (Ex. 17 1CF0095.) Because “[t]his process 

of calcification/ossification takes years to occur,” Dr. Shahi 

reasoned that “the disc problem predates the accident of 

4/16/02.” (Ex. 17 1CF0095.) In his report, Dr. Shahi claimed 

that he reviewed Dr. Willis’s and Dr. Mantesano’s depositions in 

which they stated that they believed both accidents contributed 

to Cosmero’s neck injuries. (Ex. 17 1CF0091, 1CF0093.) 

Based on its investigation, State Farm determined that 

Cosmero was not entitled to underinsured motorist coverage. 

Under Cosmero’s policy, Cosmero and State Farm must settle 

disagreements as to coverage through binding arbitration. 

(Def.’s SUF 2.) The case went to arbitration in September 2004. 

(Def.’s SUF 33.) On November 4, 2004, Judge Gilbert, the 

arbitrator, found in favor of Cosmero, and State Farm paid 

Cosmero $275,629.78. (Ex. L. 1.) 

II. 

State Farm contends that it did not act in bad faith by 

refusing to settle Cosmero’s claim as a matter of law because it 

relied on the conclusions of its expert and its attorney that 

the April 2002 accident played no part in Cosmero’s neck 

injuries. 

State Farm is correct that a court may find, as a matter of 

law, that there was no bad faith when an insurer relies on the 

advice and opinions of experts to deny or delay payment of a 

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claim. Chateau Chamberay Homeowners Ass’n v. Associated Int’l 

Ins. Co., 90 Cal. App. 4th 335, 348 (2001). But reliance on an 

expert “will not automatically insulate an insurer from a bad 

faith claim based on a biased investigation.” Id. Even when 

insurers rely on experts, courts must deny summary judgment on 

bad faith claims when: “(1) the insurer was guilty of 

misrepresenting the nature of the investigatory proceedings; (2) 

the insurer’s employees lied during the depositions or to the 

insured; (3) the insurer dishonestly selected its experts; (4) 

the insurer’s experts were unreasonable; and (5) the insurer 

failed to conduct a thorough investigation.” Id. at 348-49 

(citations omitted). 

In this case, a jury could find that Dr. Shahi’s 

conclusions were unreasonable. Dr. Shahi reached his 

conclusions based almost entirely on his review of Cosmero’s 

medical records and on inferences drawn from purported omissions 

in those records. For example, Dr. Shahi noted that Cosmero’s 

medical records did not reflect that Cosmero showed any symptoms 

associated with neck injuries during his visit to the emergency 

room, the day after the April 2002 accident, “when the patient 

should have had maximal symptoms.” Cosmero testified in his 

deposition, however, that he was fairly certain that he 

complained about neck pain during that visit. (Ex. C 63:22-23.) 

And Dr. Willis, who attended to Cosmero, stated in his 

deposition that he was uncertain whether Cosmero complained of 

neck pain because they were so focused on whether the accident 

had damaged Cosmero’s morphine pump. (Ex. D. 19:5-23.) 

Finally, in his review of Cosmero’s medical records, Berry’s 

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associate noted that, during Cosmero’s visit to the emergency 

room prior to the second accident, Cosmero reported a mild ache 

in his neck. (Ex. 13 1CF0195.) In these circumstances, a jury 

could find unreasonable Dr. Shahi’s inference that Cosmero had 

no neck injury because the medical records purportedly did not 

make note of neck pain. The inference is contrary to Cosmero’s 

best recollection and does not take account of Dr. Willis’s 

explanation that the morphine pump was the focus of everyone’s 

concern. 

Moreover, some of Dr. Shahi’s observations in his report 

are sufficiently puzzling that a jury could find that State Farm 

should have realized that reliance on his opinion was not 

justified. First, in his IME report, Dr. Shahi claimed that 

“[t]here is no evidence of cervical complaints in the reviewed 

records until August 6, 2002.” But in the same report, Dr. 

Shahi earlier noted that he had reviewed Dr. Willis’s deposition 

and acknowledged that Dr. Willis testified that Cosmero showed 

signs of having suffered a neck injury on June 25, 2002, before 

his second accident. 

Second, Dr. Shahi also claimed that Cosmero testified in 

his deposition that the second impact “was actually harder” than 

the first. But Berry wrote in his summary of Cosmero’s 

deposition that “Cosmero contends that the April 2002 accident 

was more significant than the July 2002 accident.” 

Third, Dr. Shahi relied on Dr. Manteseno’s discovery during 

Cosmero’s surgery of a problem disc that “had calcified and 

partially ossified.” Dr. Shahi contended that “[t]his process 

of calcification/ossification takes years to occur and suggests 

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the disc problem predates the accident of 4/16/92.” But even if 

Cosmero had neck problems before, the April 2002 accident still 

could have aggravated the injury. Therefore, it does not 

necessarily follow that Cosmero did not suffer any “temporary or 

permanent impairment” from the April 2002 accident. 

State Farm also contends that there was a genuine dispute 

as to coverage because it relied on its attorney’s advice. 

Reliance on counsel is one factor courts may consider to 

determine whether an insurer acted in bad faith. State Farm 

Mut. Auto Ins. Co. v. Superior Court, 228 Cal. App. 3d 721, 725 

(1991). But reliance is proper only if the attorney’s belief 

was “reasonably held.” 16 Am. Jur. 3d Proof of Facts § 419 

(2006). 

As with Dr. Shahi’s conclusions, a jury could find that 

Berry’s recommendations to State Farm were unreasonable. 

Although he concluded in his pre-arbitration report that Cosmero 

had little chance of prevailing in arbitration, Berry relied on 

supporting statements that contradicted ones he or his associate 

made in previous letters to State Farm. First, Berry wrote in 

his pre-arbitration report that “[t]here is nothing in the 

medical records that would indicate that Mr. Cosmero complained 

of neck pain prior to the July 18, 2002 accident.” In his 

summary of Dr. Willis’s deposition, however, Berry’s associate 

observed that Dr. Willis found on June 25, 2002 that Cosmero may 

have sustained a neck injury in the April 16 accident. He also 

concluded in the same summary that “[t]he April 2002 accident 

does appear to have caused him neck injury, but this was 

exacerbated by the July 2002 accident.” 

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Second, in his pre-arbitration report, Berry indicated that 

Cosmero felt that “the second accident was more pronounced than 

the first.” But in his summary of Cosmero’s deposition, Berry 

noted that, “Mr. Cosmero contends that the April 2002 accident 

was more significant than the July 2002 accident.” 

Third, Berry claimed in his pre-arbitration report that he 

relied on Dr. Shahi’s IME to determine that there was no 

evidence that Cosmero complained of neck pain before the second 

accident. But because a jury could find that Dr. Shahi’s own 

conclusions were unreasonable, Berry’s reliance on them arguably 

was also unreasonable. 

IV. 

Finally, State Farm moves for summary judgment on Cosmero’s 

claim for punitive damages. For the same reasons that a jury 

could find that State Farm was unreasonable to conclude that the 

first accident had no effect at all in causing plaintiff’s neck 

injury, a jury could also conclude by clear and convincing 

evidence that State Farm was guilty of “oppression, fraud, or 

malice” in denying the claim. Cal. Civ. Code §3294 (2007). 

Therefore, the court denies summary judgment on Cosmero’s 

punitive damages claim. 

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V. 

For the reasons above, the court denies State Farm’s motion 

for summary judgment. 

 

IT IS SO ORDERED. 

Dated: May 8, 2007 

 /s/ David F. Levi___________

 DAVID F. LEVI 

United States District Judge

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