Court Opinion

ID: 2671332
Source: CourtListenerOpinion
Date Created: 2014-04-26 00:00:52.856249+00
Date Added: 2024-06-11T09:19:31.860697
License: Public Domain

FILED
                           NOT FOR PUBLICATION                             APR 25 2014

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

PETER FAULKNER,                                  No. 12-15922

              Plaintiff - Appellant,             D.C. No. 2:10-cv-01064-ROS

  v.
                                                 MEMORANDUM*
WAUSAU BUSINESS INSURANCE
COMPANY,

              Defendant - Appellee.

                   Appeal from the United States District Court
                            for the District of Arizona
                 Roslyn O. Silver, Senior District Judge, Presiding

                        Argued and Submitted April 8, 2014
                            San Francisco, California

Before: BENAVIDES,** TALLMAN, and CLIFTON, Circuit Judges.

       Plaintiff Peter Faulkner appeals from a grant of summary judgment in favor

of Defendant Wausau Business Insurance Company on his claims under Arizona

law for insurance bad faith and punitive damages. We reverse and remand.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
            The Honorable Fortunato P. Benavides, Senior Circuit Judge for the
U.S. Court of Appeals for the Fifth Circuit, sitting by designation.
      Under Arizona law, the tort of insurance bad faith arises when an insurer

(1) denies a claim without a reasonable basis to do so and (2) either knows it or is

conscious of the fact that it does not have a reasonable basis for denying the claim.

Noble v. National Am. Life Ins. Co., 624 P.2d 866, 868 (Ariz. 1981); Lennar Corp.

v. Transamerica Ins. Co., 256 P.3d 635, 641 (Ariz. Ct. App. 2011). “The carrier

has an obligation to immediately conduct an adequate investigation, act reasonably

in evaluating the claim, and act promptly in paying a legitimate claim.” Zilisch v.

State Farm Mut. Auto. Ins. Co., 995 P.2d 276, 280 (Ariz. 2000). At summary

judgment, the inquiry is whether “reasonable jurors could conclude that in the

investigation, evaluation, and processing of the claim, the insurer acted

unreasonably and either knew or was conscious of the fact that its conduct was

unreasonable.” Id. at 280 (discussing standard for judgment notwithstanding the

verdict).

      Genuine disputes of material fact preclude summary judgment in this case. A

reasonable jury could find that Wausau knowingly failed to undertake an

investigation adequate to determine whether denying Faulkner’s claim was tenable.

See Rawlings v. Apodaca, 726 P.2d 565, 577 (Ariz. 1986). In particular, a jury

could find that Wausau ignored crucial evidence confirming the work injury:

eyewitnesses who saw Faulkner hurt his back on the job on February 14, 2008. A

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phone call transcript indicates that in April 2008, Faulkner notified Wausau’s

claims adjuster, Matt Smith, about one eyewitness, but Wausau did no

investigation into him. Wausau also did not inform the Independent Medical

Examiner about the potential eyewitness even though the IME made clear in May

2008 that he needed additional verification that the injury occurred as Faulkner

reported it. The IME stated, for instance, that if Faulkner had reported the injury

promptly, that could have provided “adequate verification.” A jury could therefore

find that Wausau knew that an eyewitness could provide similarly “adequate”

verification but unreasonably failed to investigate. Moreover, after Wausau denied

Faulkner’s claim in June, he filed three witness statements before the Industrial

Commission of Arizona. Wausau still did not investigate any witnesses and waited

more than five months before discussing them with the IME. This evidence creates

genuine disputes of material fact on the bad faith claim. We reverse the district

court’s grant of summary judgment.

      A jury need not accept Wausau’s argument that the IME was supposed to

take the injury for granted and merely determine whether the injury caused the

observed symptoms. The IME himself implicitly rejected this characterization of

his assignment when he testified at his deposition that he would have accepted

witness statements as adequate verification of the injury, had they been provided to

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him. Although Wausau draws different inferences from the record, we cannot

affirm summary judgment by viewing the facts in the moving party’s favor.

Blankenhorn v. City of Orange, 485 F.3d 463, 470 (9th Cir. 2007) (“[W]hen

reviewing a grant of summary judgment, [t]he evidence of the non-movant is to be

believed, and all justifiable inferences are to be drawn in his favor.”) (quotation

omitted) (second alteration original).

      As for the evidentiary issues over which the parties spill much ink in their

papers, the district court abused its discretion in excluding (1) the April 2008

transcript of the phone call in which Faulkner notified Smith about an eyewitness

and (2) the witness statements filed before the Industrial Commission. First, the

district court—quite understandably given the poor quality of the briefing and the

unnecessarily voluminous record—overlooked the deposition testimony that

authenticated the phone call transcript. Second, the witness statements are not

hearsay to show that Wausau knew about them. See Orr v. Bank of Am., 285 F.3d
764, 778 (9th Cir. 2002) (discussing hearsay rule); see also United States v.

Tamura, 694 F.2d 591, 598 (9th Cir.1982) (admitting telexes describing a bribery

scheme not for the truth of their contents but for the nonhearsay purpose of

showing defendant’s knowledge of the scheme).

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      The district court also abused its discretion in excluding as irrelevant

portions of the IME’s deposition testimony. The district court sustained a relevance

objection to Plaintiff’s Statement of Fact 129, which recited the IME’s deposition

testimony about the effect witness statements might have had on his medical

opinion. But this testimony was plainly relevant, at a minimum, to show that

Wausau’s failure to share eyewitness information with the IME was unreasonable.

      The district court did not abuse its discretion in excluding the Houle

documents and Faulkner’s expert evidence on claims handling. The Houle

litigation documents are evidence concerning Liberty Mutual’s claims handling

practices in the 1990s, not Wausau’s practices in 2008, and therefore were not

relevant. Plaintiff’s expert evidence likewise was not relevant because the expert

did not review Wausau’s documents. To the extent Faulkner had other evidence of

Wausau’s claims handling practices, he failed to specifically cite that evidence

below. The district court did not abuse its discretion by declining to consider such

evidence, and Faulkner cannot circumvent this rule by citing evidence for the first

time on appeal. “Judges are not like pigs, hunting for truffles buried in briefs,”

much less buried in disorganized, scattershot evidentiary submissions—the

situation facing the district judge here. Christian Legal Soc. v. Wu, 626 F.3d 483,

488 (9th Cir. 2010) (emphasis added) (quotation omitted); see also Carmen v. San

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Francisco Unified Sch. Dist., 237 F.3d 1026, 1029-31 (9th Cir. 2001) (affirming

summary judgment where the plaintiff failed to cite in opposition brief below the

declaration establishing a genuine dispute of material fact). The various other

evidentiary issues the parties raise appear to be immaterial, and we decline to

address them. See Orr, 285 F.3d at 773 (explaining that evidentiary error requires

reversal only if it could “alter[ ] the outcome of the summary judgment motion”).

      The district court granted summary judgment on punitive damages because

the bad faith claim failed. That premise is no longer true. We reverse the grant of

summary judgment as to punitive damages. See Schmidt v. Am. Leasco, 679 P.2d
532, 535 (Ariz. Ct. App. 1983) (“Whether to award punitive damages . . . is within

the discretion of the jury.”); cf. Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d
1152, 1165 (9th Cir. 2002) (citing California law for proposition that

“[d]eterminations related to assessment of punitive damages have traditionally

been left to the discretion of the jury”) (internal quotation marks omitted).

      REVERSED AND REMANDED.

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