Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_18-cv-02659/USCOURTS-azd-2_18-cv-02659-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Raymond Gastelo,

Plaintiff,

v. 

Wesco Insurance Company, et al.,

Defendants.

No. CV-18-02659-PHX-MTL

ORDER 

In this case the Plaintiff, Raymond Gastelo, claims that the Defendants wrongfully 

withheld worker’s compensation benefits after he was injured on the job. Presently before 

the Court are the following Motions: (1) Motion to Dismiss Plaintiffs’ Complaint as to 

Defendant Pam Greer (Doc. 40); (2) Plaintiffs’ Motion for Partial Summary Judgment on 

Liability for Bad Faith Against Wesco Insurance Company (Doc. 51); and (3) Defendants’ 

Motion for Summary Judgment (Doc. 49).1 The motions are denied.

I. FACTUAL BACKGROUND

On November 14, 2015, Mr. Gastelo sustained injuries after he fell approximately 

22 feet from a ladder while working at a jobsite. He was hospitalized for about a week, 

during which he was treated for injuries to his head, back, left side, and left leg. At this 

time he experienced, but was not treated for, pain in his left shoulder.

Within days of his fall, Mr. Gastelo filed a worker’s compensation claim with his 

1 The Court believes that oral argument would not significantly aid the decisional process. 

See Fed. R. Civ. P. 78(b) (court may decide motions without oral hearing); LRCiv 7.2(f) 

(same).

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employer’s worker’s compensation insurer, Defendant Wesco Insurance Company.

Amtrust North America, also a defendant in this case, served as the administrator for 

Wesco on this claim. Defendant Pam Greer was employed by Amtrust as the adjuster. 

Wesco also assigned a nurse case manager to the claim.

On January 26, 2016, Mr. Gastelo sent an email to Ms. Greer reporting that:

While I was in the hospital, my left shoulder was in pain. But 

nobody looked at it, I thought it was just sor[e]ness. But the

pain still ex[]ists, . . . [the] last week of December I brought [it] 

to the attention of Michelle[, the nurse care manager]. And 

today Michelle told me to contact you. Michelle is 

recommend[ing] a doctor Baile.

(Doc. 52-1 at 80.)

Ms. Greer did not respond to this email, so Mr. Gastelo sent another unanswered 

one later in January. He sent a third in February. Ms. Greer responded to that email by 

instructing him to go see a doctor. Mr. Gastelo saw Dr. David Baillie on September 6, 2016 

and was diagnosed with a left rotator cuff tear. Dr. Baillie noted in the record that, “I think 

this is part of his industrial injury. I am unclear as to why it took this long for him to be 

evaluated. This is a very unfortunate situation as this could have lead to a[] non-repairable 

tear.” (Doc. 52-1 at 88.)

Mr. Gastelo sent two emails to Ms. Greer in late September, 2016 to discuss Dr. 

Baillie’s assessment. Ms. Greer did not respond to either one. On October 1, 2016, Mr. 

Gastelo filed a request for a hearing with the Industrial Commission of Arizona wherein 

he sought to submit a claim for his shoulder injury. In his filing, Mr. Gastelo stated that, 

“my case manager will not answer E-mail and phone calls from myself or Dr. Bailie’s [sic] 

office. I have brought my injury to my case manager back in January.” (Doc. 52-2 at 8.)

On October 4, 2016, Ms. Greer responded to the last email from Mr. Gastelo in the 

chain – the one dated September 23, 2016 –and instructed Mr. Gastelo to “[m]ake an 

appointment and go see the doctor.” (Doc. 52-1 at 82.) Within a few hours, Mr. Gastello 

responded, “I have already seen a doctor[,] Dr. Bailey [sic] . . . . They took X-Rays which 

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I paid out of my pocket. Dr Bailey [sic] wants to proceed with MRI but needs you to call 

their office to get an ok. [T]hank you very much.” (Id.) The next day, October 5, Ms. Greer 

and Mr. Gastelo exchanged emails in which Mr. Gastelo reported that he had not yet 

received a call approving his MRI. Not yet having an answer, on October 14, 2016, Mr. 

Gastelo again emailed Ms. Greer requesting that she call his doctor and confirm that Wesco 

“will cover doctors visits,” including the MRI that was scheduled for that day. (Id.) Ms. 

Greer did not respond.

Nearly two months later, in early December, the nurse care manager asked Ms. 

Greer to approve Mr. Gastelo’s shoulder surgery. The claim notes show the following entry 

by Ms. Greer:

Received call from Michelle . . . seeking approval for shoulder 

surgery. Review of file found claimant reported injury to his 

left leg, thigh, broken hip and gash over left eye. There is no 

mention of shoulder. I explained that all treatment has been to 

the leg, thigh, hip and gash over left eye. Claimant never 

received treatment for his shoulder. According to Michelle, the 

claimant stated he mentioned it a couple of times and no one 

treated his shoulder. No authorization given as claim is over a

year old and he is now complaining of shoulder pain?

(Doc 52-1 at 57.)

Ms. Greer denied the shoulder injury claim on December 6, 2016. (Doc. 52-1 at 56.) 

The claim notes indicate that, on January 3, 2017, Ms. Greer was put on notice that Mr. 

Gastelo’s claim may have been denied in error. (Doc. 52-2 at 55.) A few days later, Ms. 

Greer requested that Mr. Gastelo submit to an independent medical examination in order 

to determine if the injury was related to the workplace accident. (Id.) In May 2017, Ms. 

Greer logged a claims notation that she “discovered in medical records that shoulder was 

mentioned although he never received treatment.” (Doc. 52-1 at 3.) Ms. Greer re-opened 

the file. Mr. Gastelo attended an independent medical examination in August 2017 which 

resulted in a recommendation that he receive physical therapy and injections. 

Mr. Gastelo underwent shoulder surgery on April 5, 2018. Following that, his 

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surgeon placed him on a work restriction that entitled him to an income benefit under the 

worker’s compensation policy. Not having received a payment by the 25th of April, Mr. 

Gastelo’s attorney contacted Wesco. There was no response. The attorney then filed an 

administrative bad faith and unfair processing claim with the Industrial Commission of 

Arizona. The claim noted that, “42 days after surgery, the carrier has yet to pay any

temporary total compensation.” (Doc. 52-2 at 21.) Wesco’s response opposing the 

administrative claim contended that, “[i]t was not until September 2016, ten months after 

the date of injury, that [he] made reference to complaints regarding his left shoulder.” (Doc. 

52-2 at 25.) The response also claimed that “the delay resulted from [Mr. Gastelo’s] failure 

to report the shoulder, and his failure to report the shoulder is evidence that the alleged 

traumatic tear to the shoulder is not causally related to the subject fall.”2(Id.) Wesco finally 

issued Mr. Gastelo’s income benefit check on July 9, 2018, representing a 95-day time 

lapse between his surgery and payment. (Doc. 52-1 at 197.)

Mr. Gastelo initiated this lawsuit claiming that the Defendants here “individually 

and/or collectively, have engaged in conduct that wrongfully denied and/or unreasonably 

delayed payment of workers’ compensation benefits for workplace injuries . . . .” (Doc. 1 

at ¶ 8.) The Complaint alleges the following four claims for relief: (1) breach of the duty 

of good faith and fair dealing against Defendants Wesco and Amtrust North America; (2) 

aiding and abetting Wesco’s breach of the duty of good faith and fair dealing against 

Defendant Amtrust North America; (3) aiding and abetting Wesco’s and Amtrust North 

America’s duty of good faith and fair dealing against Ms. Greer; and (4) punitive damages 

against all defendants.

III. ANALYSIS

A. Motion to Dismiss

The Court may dismiss a complaint for failure to state a claim under Rule 12(b)(6), 

Fed. R. Civ. P., if it fails to assert a cognizable legal theory or if it fails to allege sufficient 

2 On September 19, 2018, the Industrial Commission issued an award in Mr. Gastelo’s 

favor, concluding that Wesco had acted in bad faith. Wesco had “demonstrated delays in 

authorizing medical treatment, in spite of having evidence relating the shoulder to the 

industrial injury as early as September 6, 2016.” (Doc. 52-1 at 74-75.)

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facts to support a recognized claim for relief. Balistreri v. Pacifica Police Dept., 901 F.2d 

696, 699 (9th Cir. 1990). In deciding a motion to dismiss under Rule 12(b)(6), the Court 

must construe the well-pled facts alleged in the complaint as true. Shwarz v. United States, 

234 F.3d 428, 436 (9th Cir. 2000).

The Complaint alleges aiding and abetting tort liability against Ms. Greer and a 

punitive damage claim against all three defendants. The Motion to Dismiss (Doc. 40) asks 

that the Court dismiss the aiding and abetting and punitive damages claims against Ms. 

Greer. The Motion argues that the Complaint defectively incorporates the same alleged 

misconduct as a basis for liability against Greer and the Wesco/Amtrust defendants. 

“[F]ederal courts sitting in diversity jurisdiction apply state substantive law and 

federal procedural law.” Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003). 

Under Arizona law, the elements of an aiding and abetting claim are:

(1) the primary tortfeasor must commit a tort that causes injury 

to the plaintiff;

(2) the defendant must know that the primary tortfeasor’s 

conduct constitutes a breach of duty; and

(3) the defendant must substantially assist or encourage the 

primary tortfeasor in the achievement of the breach.

Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension 

Trust Fund, 201 Ariz. 474, 485 (2002); see also Restatement (Second) Torts § 876(b)

(adopted by the Arizona Supreme Court in Wells Fargo Bank, supra).

More specifically, “[t]he party charged with the tort must have knowledge of the 

primary violation, and knowledge may be inferred from the circumstances.” Temple v. 

Hartford Ins. Co. of Midwest, 40 F. Supp. 3d. 1156, 1170 (D. Ariz. 2014). Where an insurer 

delegates its claim handling responsibilities to an administrator and its adjuster, the 

“agent”, i.e., the adjuster, “can be held liable for aiding and abetting an insurer’s violation 

of the duty of good faith and fair dealing.” Id. 

Ms. Greer seeks dismissal because the Complaint rests Wesco’s alleged misconduct 

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solely on Ms. Greer’s conduct in handling Mr. Galesco’s claim. While much of that is true, 

the Complaint does allege independent liability against Wesco for breach of the duty of 

good faith and fair dealing and punitive damages. In that regard, the Complaint alleges that 

Wesco, which was Mr. Galesco’s employer’s insurer and had a duty to pay legitimate 

claims, failed to do so when it did not timely approve upon his shoulder injury claim and 

pay his income benefits. (E.g., Doc. 1 at ¶¶ 17-22.) The Complaint also sets forth 

allegations consistent with the aiding and abetting cause of action adopted by the Arizona 

Supreme Court. That is, Wesco was the insurer with the duty to make payments, its agent 

Ms. Greer had the requisite scienter, and that through her actions and inaction she provided 

substantial assistance or encouragement for Wesco’s alleged breach. (Doc. 1 at ¶¶ 29-33.) 

To summarize, the Complaint’s theory of liability against Wesco is that it had the 

duty to pay Mr. Galesco’s well-taken insurance claims. It did not satisfy this duty. The 

Complaint further alleges that Ms. Greer, as the third-party adjuster, took steps and failed 

to take steps in furtherance of Wesco’s failure to pay. The Complaint, therefore, states 

distinct claims against Ms. Greer. The Motion to Dismiss (Doc. 40) is denied.

B. Cross-Motions for Summary Judgment

Plaintiff moves for summary judgment against Wesco for breach of the duty of good 

faith and fair dealing. (Doc. 53.) Defendants move for complete summary judgment. (Doc. 

49.) Summary judgment is appropriate if the evidence, viewed in the light most favorable 

to the nonmoving party, demonstrates “that there is no genuine dispute as to any material 

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A 

genuine issue exists if “the evidence is such that a reasonable jury could return a verdict 

for the nonmoving party,” and material facts are those “that might affect the outcome of 

the suit under the governing law . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 

(1986). At the summary judgment stage, “[t]he evidence of the non-movant is to be 

believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255 (internal 

citations omitted); see also Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1131 (9th 

Cir. 1994) (court determines whether there is a genuine issue for trial but does not weigh 

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the evidence or determine the truth of matters asserted). 

1. Breach of Good Faith and Fair Dealing

Arizona law imposes on insurers a duty of good faith and fair dealing that applies 

to their insureds and to third party claimants. Rawlings v. Apodaca, 151 Ariz. 149, 154-55

(1986). This duty, and the potential liability exposure, exists in the domain of workers’ 

compensation insurance contracts. Merkens v. Federal Ins. Co., 237 Ariz. 274, 276 (App. 

2015). Workers who are injured on the job also have separate administrative remedies 

available from the Industrial Commission of Arizona.

Bad faith insurance practices cover situations where an insurer intentionally and 

unreasonably denies a claim or where it intentionally and unreasonably fails to process, 

handle, or pay a claim. Demetrulias v. Wal-Mart Stores, Inc., 917 F. Supp. 2d 993, 1004 

(D. Ariz. 2013). The test for bad faith requires that a court conduct a two-part analysis. 

“First is the objective inquiry: did the insurer act unreasonably toward the insured? Second 

is the subjective: did the insurer act knowingly or with reckless disregard as to the 

reasonableness of its actions?” Id. (citation and internal quotation marks omitted).

The objective inquiry is satisfied based on insurer’s “failure to immediately conduct 

an adequate investigation, failure to act promptly in paying a legitimate claim, forc[ing] an 

insured to go through needless adversarial hoops to achieve its rights under the policy, 

lowball[ing] claims, and similar conduct.” Id. (quoting Zilisch v. State Farm Mut. Auto. 

Ins. Co., 196 Ariz. 234, 238 (2000)) (internal quotation marks omitted). Here, Mr. Gastelo 

has presented material facts of Defendants’ objectively unreasonable behavior. For 

example, he has pointed to Ms. Greer’s multiple failures to promptly respond to his 

requests to authorize his shoulder treatment; despite his multiple communications, Ms. 

Greer questioned the veracity of the claim (“No authorization given as claim is over a year 

old and he is now complaining of shoulder pain?”); Mr. Gastelo was required to file a claim 

with the Industrial Commission to prompt Defendants into action; and Wesco delayed 

paying Mr. Gastelo’s income benefits by 95 days after his shoulder surgery. Mr. Gastelo 

therefore satisfies the objective inquiry.

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The second inquiry requires an examination of the insurer’s subjective intent. In 

order to survive summary judgment, a plaintiff must show that the defendants’ conduct 

exceeds mere negligence. “The ‘intent’ required here is an ‘evil hand’ to do the 

act. . . . [T]he insurer must intend the act or omission and must form that intent without 

reasonable or fairly debatable grounds.” Id. at 1005 (quoting Rawlings, 151 Ariz. at 160.) 

The facts of this case present a close call between what can be described as Ms. Greer’s 

negligence in handling this claim and the “evil hand” standard articulated in Rawlings. 

Defendants’ explanation that Ms. Greer’s failure to process the shoulder injury claim was 

the result of a serious personal medical condition is a strong one. After all, Rawlings

recognizes that, “[i]nsurance companies, like other enterprises and all human beings, are 

far from perfect. Papers get lost, telephone messages misplaced and claims ignored because 

paperwork was misfiled or improperly processed.” 151 Ariz. at 157. Such misconduct may 

constitute a breach of contract; however, it does not necessarily expose the insurer to bad 

faith liability. Id. Defendants have, in this regard, presented enough facts to preclude 

summary judgment in favor of Mr. Gastelo. A reasonable jury can identify Defendants’ 

non-actionable negligence as the source of the claims processing misunderstandings and 

delays.

But a satisfactory end-result did take a very long time and a great deal of effort on 

Mr. Gatelo’s part. “Intent is established when an insurer lacked a founded belief that its 

conduct was permissible. The founded belief is absent when the insurer either knows that 

its position is groundless or when it fails to undertake an investigation adequate to 

determine whether its position is tenable.” Demetrulias, 917 F. Supp. 2d at 1005 (quoting 

Rawlings, 151 Ariz. at 160) (internal quotation marks and citation omitted). Based on the 

timeline of facts, a reasonable jury could reach a conclusion that Ms. Greer acted with 

deliberate indifference to the shoulder injury claim. A jury can also conclude, regardless 

of her personal medical situation, that she intentionally failed to engage in an adequate 

investigation each of the many times that Mr. Gastelo contacted her. For example, Mr. 

Gastelo was forced to engage in a vigorous email campaign simply to get Ms. Greer to give 

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his claim attention. Mr. Gastelo was diligent in reporting his shoulder pain to the nurse care 

manager. He followed through with her request to contact Ms. Greer. Medical professionals 

and the Industrial Commission all concluded that his injury was related to the fall. Also, 

relevant here is that, even after Defendants had realized that Ms. Greer overlooked Mr. 

Gastelo’s initial January 2016 email notice of his injury, they continued to press the 

argument with the Industrial Commission that he was solely at fault for the delay.

Concerning the delay in paying the post-shoulder-surgery income benefits, lost 

income, even for a short amount of time, can be of significant consequence to someone in 

Mr. Gastelo’s position. Here, Mr. Gastelo was without his income benefit for 95 days. 

Based on a two-week pay cycle, this amounts to almost 7 pay periods. A reasonable jury 

can find bad faith because attorney communications an administrative complaint were 

necessary to prompt Defendants to pay benefits. For these reasons, Mr. Gastelo has 

satisfied his burden to defeat summary judgment in favor of Defendants.

2. Punitive Damages

Defendants seek summary judgment in their favor on Plaintiff’s punitive damages 

claim. They argue that Mr. Gastelo has not adduced any facts to satisfy his burden to take 

this issue to the jury. It was recognized in Temple v. Hartford Insurance Company, that an 

award of punitive damages requires satisfying one of the following three factors by clear 

and convincing evidence: 

that [the] [d]efendant either (1) intended to cause injury; 

(2) engaged in wrongful conduct motivated by spite or ill will; 

or (3) acted to serve its own interests, having reason to know 

and consciously disregarding a substantial risk that its conduct 

might significantly injure the rights of others, even though 

defendant had neither desire nor motive to injure. 

40F. Supp. 3d at 1171.

At the summary judgment stage, the evidence, and all reasonable inferences drawn 

from the evidence, must be viewed in a light most favorable to the non-moving party. 

Temple, 40 F. Supp. 3d at 1171; accord Anderson, 477 U.S. at 248. While this is another

close call, the Court ultimately finds that a reasonable jury can arrive at more than one

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basis for awarding punitive damages. A reasonable jury can conclude that the evidence of 

Defendants’ failure to properly handle Mr. Gastelo’s shoulder injury claim satisfies the 

third punitive damages factor. That same jury can conclude that the evidence of 

Defendants’ delays in responding to and paying Mr. Gastelo’s income benefits satisfies the 

second and third factors. For these reasons, Defendants’ Motion for Summary Judgment 

on the punitive damages claim is denied.

V. CONCLUSION

Accordingly,

IT IS ORDERED denying the Motion to Dismiss (Doc. 40);

IT IS FURTHER ORDERED denying the Cross-Motions for Summary Judgment 

(Docs. 49 and 51).

IT IS FINALLY ORDERED setting a telephonic trial-setting conference for 

Tuesday, April 21, 2020, at 9:30 a.m. The parties are directed to jointly call the Court at 

(602) 322-7655 at the time set for the hearing. 

Dated this 18th day of March, 2020.

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