Filed 6/19/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

CARMEN ZUBILLAGA,

Plaintiff and Appellant ,

v. ALLSTATE INDEMNITY COMPANY,

Defendant and Respondent

. G052603
(Super. Ct. No. 30

- 2013

- 00695292)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, John C. Gastelum, Judge. Reversed

.

Law Office of Kyle J. Scott and Kyle J. Scott for Plaintiff and Appellant. Sheppard, Mullin, Richter & Hampton, Peter H. Klee, Karin Dougan Vogel and Joseph E. Foss , for Defendant and Respondent.

* * *2 In this first party insurance bad faith action, the question is whether the

court properly granted summary judgment for the insurer , based on the “ genuine dispute ”
doctrine

. (See Wilson v. 21st Century Ins. Co. (200 7 ) 42 Cal.4th 713, 723 ( Wilson ) .)

Pl aintiff Carmen Zubillaga was injured in an automobile accident . The
other driver was at fault. Her i nsurer, defendant Allstate Indemnity Company ( Allstate ), rejected her demand for $ 35, 000 , the full amount o f her remaining underinsured motorist (UIM) coverage , although it made her a series of offers increasing to $15,584 instead.

After an arbitrator a warded plaintiff $ 35, 000 , the amount of her demand,
she sued Allstate for breach of the implied covenant of good faith and fair dealing.

We conclude plaintiff demonstrated triable issues of material fact regarding
whether Allstate ‟s decision she did not need expensive epidural steroid injections, was made without a good faith investigation and without a reasonable basis for a genuine dispute. Th erefore , summary judgment was improper and we reverse

.

FACTUAL AND PROCEDURAL BACKGROUND “Because thi s case comes before us after the tria l court granted a motion for summary judgment, we take the facts from the record that was before the trial court when
it ruled on that motion. [Citation.] „“We review the trial court ‟ s decision de novo, considering al l the evidence set forth in the moving and opposing papers except that to which objections were made and sustained.”‟ [Citation.] W e liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evide nce in favor of that party. [Citation.]” ( Yanowitz v. L’Oreal USA,
Inc. (2005) 36 Cal.4th 1028, 1037.)

The summary judgment record reflects the following undisputed facts: Plaintiff had an automobile policy with Allstate that included UIM coverage with a $50,000 per person limit, and with th at limit to be reduced by a ny amounts paid by the owner or operator of the underinsured car. The policy also provided
for voluntary binding arbitration of claim dispute s

.3 Plaintiff was in a serious car accident on March 25, 2011. The other driver

ran a red light and struck her car

. The police determined the other driver was at fault. Plaintiff reported the accident to Allstate the next day and she retained an attorney two days later. According to the poli ce report , plaintiff reported pain to her chest and left

arm immediately after the accident. She walked from her car to a gurney, and was then transported by ambulance to the hospital.

The hospital records state plaintiff complained of pain to her face and arm,
and said the pain “d oes not radiate.” She reported no back injury or back pain, exhibited no spinal tenderness, and had a full range of motion in her back. S he was instructed to follow up with her own medical doct or.

P laintiff did not follow up with her own medical doctor . Instead she saw Leonard Valentine, D.C. , a chiropractor. Over the next four months she saw Valentine
39 times. Plaintiff first told Valentine she had lower back pain on May 3

. She stopped seeing Dr. Valentine in July 2011. At that time she reported lower back pain at a level of
three on a scale of zero to 10.

On July 22, p laintiff saw Arlen Green, D.O. , an osteopath. Green
recommend ed plaintiff get magnetic resonance imaging ( MR I ) of her spine, continue her chiropractic treatment, and take over

- the

- counter pain medications as necessary.

A month later, Green noted, “ An MRI of the cervical spine report was reviewed indicating multiple disc protrusions. An MRI of the lumbar spi ne was reviewed indicating a disc protrusion at the L5

- S1 level measuring 3 mm with neuroforaminal narrowing .” Green further noted , “ Due to the fact that there is significant disc protrusion
seen in both the cervical and lumbar spine s , this patient will m ost probably require

. . . future medical treatment . This could include more therapy, medications for pain, and cervical/lumbar epidural steroid injections.”4 On November 10, plaintiff ‟s attorney sent Allstate a demand for $35,000,
based on medical bill s totaling $17,645.44 and his claim that plaintiff would have lower back pain for the remaining 52 years of her life expectancy. P laintiff had settled with the
other driver for $15,000 , so the $35,000 demand represented the full amount of her remaining UIM policy coverage

.

Shortly after receiving the November 10 demand letter, Allstate responded in writing, introduc ed the claims representative assigned to handle plaintiff ‟s claim , and
describ ed the process Allstate would follow.

On Novemb er 29, Allstate wrote to plaintiff ‟s attorney again and stated “although the claim‟s value is in dispute, we are willing to set tle the matter for $9,367.00.” Allstate arrived at that figure by determining what it felt was the reasonable and customary amou nt of plaintiff ‟s medical bills ($14,367) , then adding $10,000 in general damages , and finally s ubtracting the $15,000 settlement from the other driver.

On November 30, plaintiff served a formal offer to compromise (Code Civ. Proc., § 998) for $35,000. However, p laintiff ‟ s counsel did not otherwise respond to Allstate‟s $9,367 settlement offer for more than four months , even though Allstate wrote
five follow

- up letters r equesting such a response

.

O n April 4 , 2012, plaintiff ‟ s counsel formally reject ed Allstate‟s $9 , 367 offer and again demand ed $ 35,000

. He provided January and March 2012 e valuatio n s of plaintiff by Afshin Mashoof , M.D. , a board certified orthopedic surgeon.

Mashoof‟s January evaluation stated : “At this point, recommendation is
Me drol Dosepak and I will see her back in 4 weeks. The patient can benefit from therapy and I told her to lose weight. She does weigh about 340 pounds.” His March e valuation
noted : “At this point, the patient was discharged from my care. She can benefit from p.r.n. anti

- inflammatory medication, physi cal therapy, and weight loss.”

Mashoof‟s evaluation s increased plaintiff‟s medical expenses by $1,200 , and made no mention of any need for epidural steroid injections

.5 At that juncture , Allstate increased its ev aluation of plaintiff ‟s claim to $25,000 since she still had complaints of back pain. Consequently, on May 2 Allstate
increased its settlement offer to $10,000 ($25,000

- $15,000).

A month later, plaintiff ‟s counsel rejected All state‟s $10,000 settlement offer, renewed her $35,000 demand, demanded arbitration, and requested that Allstate assign counsel to handle the claim. Allstate promptly assigned counsel and served written discovery.

Plaintiff‟s responses to written discov ery reference d Michael Lowenstein, M.D., a board certified pain management specialist and anesthesiologist who had seen
her for a consultation on July 9. Plaintiff‟s discovery responses s aid both Lowenstein and Green “have opined [ she ] will require epidur al injections, anti

- inflammatory and pain medications, and physical therapy.”

On October 4, plaintiff ‟s attorney sent Allstate medical records from
Lowenstein , which revealed she had complained of radiating back pain

. Lowenstein diagnosed plaintiff with, among other things, “Lumbar disc herniation at L5

- S1 3mm , per MRI o n J uly 28, 2011 .”

Lowenstein‟s report stated : “The patient‟s subjective complaints are consistent with the clinical course, records, history of injury, and objective fi ndings. It is therefore my opinion that the patient has correctly stated information with the current complaint of the low back with radiation to the lower right extremity is due to the automobile accident occurring on March 25, 2011.

Lowenstein recomm ended, “lumbar epidural steroid injection

. . . at L4

- L5
and L5

- S1.” P laintiff ‟ s counsel advised Allstate , “ the cost of such injections

. . . may range from an additional $15,000 to $20,000 if she has only one to $45,000 to $60,000 if she has three epidur als.”

In response, Allstate increased its valuation of plaintiff ‟s claim to $27,084
, and offered her $12,084 ($27,084

- 15,000 )

.6 Later that month , Allstate retained Milton Legome, M.D., a board certified orthopedic surgeon, to conduct a defense medical examination (D ME) of plaintiff , review her medical records, and determine whether epidural injections were appropriate. Legome saw plaintiff on October 30, 2012, and prepared a report the same day , before he
reviewed any of her medical records

. The next day h e prepared an other report , after he
reviewed some of her medical record s

.

Legome ‟s reports offered the following o pinion s and conclusions:

• Lowenstein ‟s findings were questionable because : (i) plaintiff ‟s

c omplaints to him were at odds with what she told all of her previous doctors; (ii) she did not report radiating pain during the DME ; (iii) in a written questionnaire plaintiff noted pain radiating up her spine, not to any lower extremities; and (iv) there was no evidence
Lowenstein performed any straight leg rais e tests.

• Plaintiff had only a left

- sided lumbar “ disc protrusion, and not a herniat ion

. While some people use the terms synonymously, I do not, and the radiologist who interpreted her scan referred to a protrusion and n ot a herniation.”

• “ While Dr. Lowenstein recommended epidural steroid injections

at

. . . L4/5 and L5/S1, there is no indication for such injections. She does not have
radicu lar symptoms , nor is there any ev idence that she ever had radicu lar symptoms in the past. Furthermore, there are no abnormal i ties at L4/5.”

• “From the records, I conclude that her present neck and back symptoms are the result of her accident. However, I feel her neck symptoms represent only postural strain symptoms, and much of her back complaints represent mechanical or postural strain symptoms. There is no way of determining wheth er the disc protrusion at L5/S1 is the cause of any of her a xial back pain, but there is no indication that she has left

- sided radicular symptoms based on her history or examination.”

• “She is markedly overweight. This may be contributing to her chronic back symptoms.

. . . She has no indication for any type of injections.”7 O n November 30, Legome provided a third report , based on his review of
p laintiff‟s hospital record s, which stated he had “no reason to change any opinions expressed in previous reports after reviewing these additional records.”

O n June 17, 2013, plaintiff ‟s counsel s ent Allstate a letter asking that the
arbitration be set for September or October, because plaintiff “is being scheduled for an epidural inj ection in the next few weeks.”

Allstate‟s counsel responded promptly and asked plaintiff ‟s counsel to “Please send me any new records and bills ASAP (particularly p ertaining to the epidural injection mentioned in your letter) so that I may forward it to the adjuster for review and

re

- evaluation well in advance of the arbitration date.”

On July 12, Allstate received a letter from plaintiff ‟s counsel enclosing
medica l records to support an additional claim of $6,850 in medical expenses for “a lumbar epidural steroid injection” plaintiff had received from Dr. Neil Soni, on June 20.
The records consisted of an “Operative Report” and a $1,050 bill from Soni representing his charges for the treatment. With t his additional charge, the medical bills incurred by plaintiff totaled $26,455.44.

O n July 29, Allstate offer ed plaintiff $14,500.
O n September 13, plaintiff‟s counsel sent Allstate a September 4 report from Soni which stated: “I consider [plaintiff‟s] medical condition, as a result of the incident of 3/25/2011 to remain guarded. I recommend that provisions are made to mitigate [plaintiff‟s] pain sym ptoms to include (but may not be lim ited to) future medical

car e i n continuing of [medications]; and should drug therapy not prove effective, repeating the lumbar epidural steroid injections in series of three injections over a six month period and in conjunction with her p hysical therapy. [¶] I estimate the cost of each of the epidural steroid injection s would be $12,000 (combined physician and surgery center)

. In addition, medications as described above would cost approximately $6,000 per year, likely cost of physical therapy would be $6 ,000 per year

. . . . ”8 Allstate never had Legome review Soni‟s lumbar epidural steroid injection
treatments and recommendations . But Allstate increased its valuation of plaintiff‟s claim to $30,584, and offered her $15,584 ($30,584

- $15,000).

The a rbi tration occurred in September, 2013. During the arbitration, plaintiff introduced a r eport from Soni dated July 15, 2013 , that plaintiff had never provided to Allstate before . This report showed leg rais e tests reflect ed downward

radiating back pain to p laintiff ‟s legs. Plaintiff argued it proved future epidural injections

were necessary and appropriate.

T he arbitrator found for plaintiff and awarded her $35,000 ($21,205 in economic damages and $13,795 in noneconomic damages) , the full amount of her remaining UIM policy limits demand

. Allstate paid the arbitration award

. P laintiff then
sued Allstate for breach of contract and bad faith, claiming it did not fairly investigate her
claim and should have paid her the UIM policy limits soon er.

T he court granted Allstate‟s motion for summary judgment on plaintiff‟s
bad faith c ause of action , “ based on the genuine dispute doctrine. ” 1 I t explained:

“The [ DME ] report indicates Plaintiff saw Dr. Green (a chiropractor) who
ordered MRIs of the cervical and lumbar spines and mentioned a possible epidural steroid injection. The report notes that Plaintiff saw Dr. Mashoof who told her, her obesity was causing her pain. The repo r t then notes that Plaintiff was seen by Dr. Lowenstein who

recomm ended an epidural steroid injection. Although Dr. Legome admits to not having yet reviewed her medical records, he opines that „she describes treatment far in excess of any that might reasonably have been necessary to lessen or resolve any symptoms
result ing from her accident.‟ In addition he states, „While by history an epidural steroid injection has been recommende d , neither from her history or examination, does she show any problem for which an epidural steroid injection would be appropriate. ‟

1 The court had previously granted j udgm ent on the pleadings in favor of Allstate on p laintiff‟s breach of contract cause of action

.9 “ Acco rdingly, Defendant Allstate was permitted to rely on its expert‟s opinion , who had a history of all of Plaintiff‟s treating doctors (Green, Lowenstein, Mashoof) to determine that her treatment was excessive and she did not need the expensive steroid inject ions.

“ After reviewing Lowenstein‟s report suggesting Plaintiff get the epidural injection .

. ., Allstate offered $27 , 084 (including the $15,000 Plaintiff had already
received )

. However, then, after reviewing the [DME] report, A l lstate concluded it di d not have any basis to increase its valuation of Plaintiff‟s claim.

. . .

“ The decision to not offer any more money was based on the [D ME ‟s ] determination that Plaintiff did not need expensive epidural injections. Defendant is entitled to rely on this expert report. Allstate had legitimate bases for disputing Plaintiff‟s claim in regards to the need for future epidural shots. This was not a case where Allstate was simply unwilling to pay off on a policy ; rather, on the table was an offer for $12, 084

. . . . It does not appear unreasonable that Defendant did not offer up the entire $35,000 at this point since D efendant‟s [D ME ] concluded Plaintiff‟s treatment
thus far had been excessive and epidural injections were unnecessary.”
DISCUSSION
The legal principles which govern this dispute are well established. Applying these principles leads us to conclude the court err ed

. As we will explain,
p laintiff demonstrate d triable issue s of material fact as to Allstate‟s alleged bad faith

. 1. The Legal Principles Which Govern This Dispute Are Well Established.

A trial court properly grants a motion for summary judgment only if no issues of triable fact appear and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) “The moving party bears the burden of showing the court that the plaintiff „has not established, and cannot re asonably expect to establish,‟ ” the elements of his or her cause of action. ( Miller v. Department of
Corrections (2005) 36 Cal.4th 4 46, 460.)10 “ The law implies in every contract, including insurance policies, a covenant
of good faith and fair dealing. „ The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the agr eement‟s benefits. To fulfill its implied obligation, an insurer must give at least as much consideration to the interests of the insured as it gives to its own interests. When the insurer unreasonably and in bad faith withholds payment of the claim of i ts insured, it is subject to liability in tort. ‟ [Citation.] ” ( Wilson , supra , 42 Cal.4th at p. 720 .)

“ While an insurance company has no obligation under the implied covenant of good faith to pay every claim its insured makes, the insurer cannot deny the claim

„ without fully investigating the grounds for its denial. ‟ [Citation.] T o protect its insured‟s contractual interest in security and peace of mind, „ it is essential that an insurer fully inquire into possible bases that might support the insured‟ s claim ‟ before denying it. [Citation

. ] By the same token, denial of a claim on a basis unfounded in the facts known to the insurer, or contradicted by those facts, may be deemed unreasonable. „ A trier of fact may find that an insurer acted unreasonably i f the insurer ignores evidence available to it which supports the claim. The insurer may not just focus on those facts whic h justify denial of the claim. ‟ [Citations.] ” ( Wilson , supra , 42 Cal.4th at p. 721.)

As noted, an insurer‟s denial of or dela y in paying benefits gives rise to tort damages only if the insured shows the denial or delay was unreasonable. “[A] n insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured‟s coverage claim is not liable in bad faith even though it might be liable for breach of contract.” ( Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins.
Co. (2001) 90 Cal.App.4th 335, 347 ( Ch ateau Chamberay ).) “This „ genuine dispute ‟ or

„ g enuine issue ‟ rule was originally invoked in cases involving disputes over policy interpretation, but in recent years courts have applied it to factual disputes as well

. [Citations.]” ( Wilson , supra , 42 Cal .4th at p. 723.)11 “ The genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate, process and evaluate the insured ‟ s claim. A genuine dispute exists only where the insurer ‟ s position is maintained in good faith and on reasonable grounds. [Citations.] Nor does the rule alter the standards for deciding and reviewing motions for summary judgment. „ The genuine issue rule in the context of bad faith claims allows a [trial] cou rt to grant summary judgment when it is undisputed or indisputable that the basis for the insurer‟ s denial of benefits was reasonable

— for example, where even under the plaintiff‟ s version of the facts there is a genuine issue as to the insurer‟ s liability under California law. [Citation.] .

. . On the other hand, an insurer is not entitled to judgment as a matter of law where, viewing the facts in the light most favorable to the plaintiff, a jury could conclude that the insurer acted unreasonably

. ‟ [Cita tion.]” ( Wilson , supra , 42 Cal.4th at pp. 723

- 724, fn. omitted.)

“ Thus, an insurer is entitled to summary judgment based on a genuine dispute over cover age or the value of the insured‟ s claim only where the summary judgment record demonstrates the absenc e of triable issues (Code Civ. Proc., § 437c, subd. (c)) as to whether the disputed position upon which the insurer denied the claim was reached reasonably and in good faith. ” ( Wilson , supra , 42 Cal.4th at p. 724

. )

When determining if a dispute is genui ne, we do “not decide which party is „right‟ as to the disputed matter, but only that a reasonable and legitimate dispute actually
existed. ” ( Chateau Chamberay , supra , 90 Cal.App.4th at p. 348, fn.7.) A dispute is legitimate , if “ it is founded on a basis that is reasonable under all the circumstances.” ( Wilson , supra , 42 Cal.4th at p. 724, fn. 7.) “ This is an objective standard. ” ( Bosetti v.
U nited S tates Life Ins. Co. in City of New York (2009) 175 Cal.App.4th 1208, 123 7 .)

“ Moreover , the reasonableness of the insurer‟s decisions and actions must be evaluated as of the time that they were made ; the evaluation cannot fairly be made in the light of subsequent events which may provide evidence of the insurer ‟ s errors. [Citation.]” ( Cha teau Chamberay , at p. 347.)12 What is more , “ [t] he „genuine dispute‟ doctrine may be applied where the insurer denies a claim based on the opinion of experts. [Citations.]” ( Fraley v. Allstate
Ins. Co. (200 0) 81 Cal.App.4th 1282, 1292 .) “ As the Fraley court emphasized, where an insurer, for example, is relying on the advice and opinions of independent experts, then a
basis may exist for invoking the doctrine and summarily adjudicating a bad faith claim in the insurer‟ s favor. [Citations.]” ( Chateau C hamberay , supra , 90 Cal.App.4th at p. 348.)
Still , under the genuine dispute doctrine, an expert ‟ s testimony will not automatically
insulate an insurer from a bad faith claim. ( Ibid .) Case

- by

- case analysis is required.
2. Plaintiff Demonstrated T riabl e I ssue s of Material F

act. Applying the foregoing principles to the facts in this case show s plaintiff
demonstrate d triable issue s of material fact regarding whether Allstate‟s repeated denial s of plaintiff‟s claim w as un reasonabl e and in bad faith. A jury could reasonably find
Allstate ‟s continued insistence plaintiff did not need epidural steroid injections, was without a good faith investigation and without a reasonable basis for genuine dispute.

When Alls tate moved for summary judgment , it presented evidence

c onsist ing primarily of declarations , medical records and correspondence , which spelled out in considerable detail the entire adjustment process as it unfolded. Allstate argued, and the court agreed, the evidence reveal ed a reasona ble and good faith dispute about the
value of plaintiff ‟s claim, particularly as it relate d to her claimed need for epidural injections , based upon the opinion s of Allstate‟s medical expert, Legome

.

The problem is the undisputed facts show Legome‟s opinions were
rendered in Octobe r and November 2012, but Allstate continued to rely on them through the arbitration in September 2013, without ever consulting with Legome again or conducting any further investigation. In th e meantime , plaintiff had receiv ed one lumbar steroidal epidural injection that cost $6,850 , and Soni had recommended three more, if drug therapy prove d in effective

. Soni estimated the se in jections would each cost $12,000 , and the medications and physical therapy would each cost $6,000 per year.13 Because it never asked Legome to review Soni‟s epidural treatment s and recommendations, Allstate ‟s continued reliance upon Legome‟s opinions as the basis for disputing the medical necessity or reasonable value of th ose treatment s and
recommenda tions may have been un reasonable. And, leaving aside Legome‟s reports and opinions, Allstate has not directed us to any other medical reports or opinions that could reasonably support its ongoing denial of plaintiff‟s claim.

Of course, Allstate was not o bliged to accept Soni‟s treatment s and
recommendations “ without scrutiny or investigation. ” ( Wilson , supra , 42 Cal.4th at
p. 72 2

. ) To the extent it had good faith doubts, Allstate had the right to further investigate the basis for plaintiff‟s claim by having Legome reexamine his 2012 opinions, having another physician review all of plaintiff‟s medical records and offer opinions, or, if necessary, having plaintiff further examined by Legome or another defense doctor.

What Allstate could not do, consi stent with the implied covenant of good faith and fair dealing, was to ignore Soni‟s treatment s and recommendations , without adequate ly investigati ng them

. ( Wilson , supra , 42 Cal.4th at p. 722. ) To be clear, we are

not saying Allstate breached the implie d covenant. W e are saying a reasonable jury
could conclude it did so. Allstate‟s assertion it reasonably continued to rely on Legome‟s opinions, or that it had inadequate time to have him reexamine those opinions or conduct further investigation, merely inform our conclusion plaintiff has demonstrated triable issues of material fact that cannot be resolved by summary judgment.

For these same reasons, the court erred by granting summary judgment based upon the genuine dispute doctrine. Again, t he genuine dispute rule does not relieve an insurer from its obligation to thoroughly and fairly investigate the insured‟s claim , and

a genuine dispute exists only where the insurer‟s position is maintained in good faith and on reasonable grounds. Once more , a n insurer is not entitled to judgment as a matter of law where, viewing the facts in the light most favorable to the plaintiff, a jury could conclude that the insurer acted unreasonably

. ( Wilson , supra , 42 Cal.4th at pp. 723

- 724.)14 Considering the objecti ve facts known to Allstate at the time its final decision to deny plaintiff‟s $35,000 demand was made, and viewing the evidence i n the light most favorable to plaintiff as required , we are convinced “ „ a jury could conclude
that the insurer acted unreasonab ly

. ‟ ” ( Wilson , supra , 42 Cal.4th at p. 724 .) Specifically,
there is sufficient evidence for a jury to find Allstate‟s continued insistence she did not
need expensive epidural injections was, “ „ “ prompted not by an honest mistake, bad judgment or negligenc e but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement. ” ‟ ” ( Id

. at
p. 726 .)
DISPOSITION

The judgment is reversed

. Plaintiff is entitled to costs on appeal.

THOMPSON, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

MOORE, J.