Hennepin County District Court File No. 27-CV-15-15328
Katherine S. Barrett Wiik, Best & Flanagan, Minneapolis,
Minnesota; and Teresa Fariss McClain, Robins Kaplan LLP,
Minneapolis, Minnesota (for respondent)
M. Bjorkman, Patrick H. O'Neill III, Larson King, LLP,
St. Paul, Minnesota (for appellant)
Considered and decided by Slieter, Presiding Judge; Worke,
Judge; and Schellhas, Judge.
to Minn. Stat. § 604.18, subd. 2(a) (2018), an insurer
must conduct a reasonable investigation and fairly evaluate
the results to have a reasonable basis for denying an
insured's first-party insurance-benefits claim.
Western National Mutual Insurance Company challenges the
district court's award of taxable costs for bad-faith
denial of a first-party insurance claim pursuant to Minn.
Stat. § 604.18 (2018), arguing the district court
misapplied the statute. We affirm.
and Initial Treatment
Alison Peterson was injured in an automobile collision on
October 21, 2009 and sustained a whiplash injury. Peterson
was not at fault and was covered by an underinsured-motorist
(UIM) policy issued by Western National with a policy limit
of $250, 000. Following the collision, Peterson started
experiencing severe daily headaches.
December 2012, after exhausting other treatments, Peterson
began receiving periodic Botox injections to alleviate her
headaches. After beginning the Botox treatments, Peterson
reported that her headaches were reduced by 50%. Her treating
neurologist believed that Peterson's injuries were
permanent and that Peterson would need Botox injections every
three to four months to manage her chronic headaches.
sought another opinion from a second neurologist. This doctor
also opined that Peterson's injuries were permanent and
that Peterson will likely need to continue Botox treatments
for the rest of her life.
January 13, 2014, Peterson notified Western National that her
past medical expenses totaled $46, 235 and her expected
future medical expenses would likely exceed $300, 000.
Peterson advised Western National that she would likely seek
UIM coverage because the at-fault driver's liability
policy had limits of $50, 000. Ultimately, Peterson settled
the liability claim for $45, 000.
22, 2014, Peterson sent Western National a detailed written
settlement demand that requested payment of her $250, 000 UIM
policy limits. Peterson enclosed extensive copies of her
medical records. Western National assigned a claims adjuster
to Peterson's claim.
National made several requests for medical documentation over
the next 11 months during which time it neither accepted nor
denied the UIM coverage demand. Many of the documents Western
National requested had, as the district court found, been
previously submitted by Peterson. Peterson had also
authorized Western National to obtain her complete medical
18, 2015, Peterson sent Western National a letter seeking an
update on the status of the claim and repeated her request
for the UIM policy limits. Western National did not respond.
August 2015, Peterson sued Western National seeking to
recover UIM benefits. Western National retained counsel to
defend the case. After Peterson sued, Western National
obtained an independent medical examination (IME). Following
an examination of Peterson in March 2016, the IME doctor
opined that Peterson suffered only minor soft tissue injuries
from the collision and found no causal relationship between
the collision and Peterson's headaches. Western
National's counsel concluded that Peterson had been fully
compensated by the liability settlement with the at-fault
driver's insurer and that Western National's UIM
exposure was "slim to none."
parties attended court-ordered mediation on April 4, 2016. To
prepare for the mediation, the Western National claims
adjuster prepared a summary of Peterson's claim for
Western National's claims board. The Western National
claims board assigned zero value to Peterson's claim. At
mediation, Western National offered to settle the claim for
$2, 000. Western National considered this a
"nuisance-value offer." Peterson rejected the
settlement offer. After mediation, Peterson offered to settle
for $200, 000; Western National did not accept the offer.
2016, Western National's counsel tried another
Botox-treatment chronic-headache case to a jury in Hennepin
County. The case involved an automobile collision from which
the plaintiff sustained a whiplash injury and then
experienced daily headaches that were successfully treated
with Botox. The plaintiff prevailed with a damages award
totaling over $1.1 million. Western National's counsel
informed Western National about this verdict, but Western
National's counsel concluded that it had no impact on his
evaluation of Peterson's case because Peterson had a
history of headache problems and the IME doctor had
"made a very bad witness for the defense" at the
1, 2016, Western National offered Peterson a $10, 000
settlement. Peterson did not accept the offer. After the
parties completed depositions of Peterson's medical
experts, Western National increased its settlement offer to
$50, 000. Western National's counsel stated this
increased offer was made because Western National felt
Peterson might be a sympathetic plaintiff.
UIM claim was tried before a jury in August 2016. Both
parties presented expert medical testimony regarding the
cause of Peterson's headaches. The jury returned a
unanimous verdict awarding damages of over $1.4 million,
including more than $900, 000 for past and future medical
expenses. Western National then paid Peterson the policy
limits of $250, 000. The court granted Peterson leave to
amend her complaint to add a bad-faith claim pursuant to
Minn. Stat. § 604.18.
Trial on Bad-Faith Claim
trial on Peterson's bad-faith claim was held in July and
August 2017. Both parties presented expert testimony
regarding insurance claims handling. Peterson's expert
opined that Western National lacked a reasonable basis for
denying Peterson's claim and had acted unreasonably in a
number of ways, including failing to investigate her claim
fairly, "cherry-pick[ing]" her prior medical
records, and unreasonably relying on the dollar value of the
damage to her vehicle in denying her claim. Western
National's expert opined that Western National had
reasonably evaluated Peterson's claim because it obtained
an IME, Peterson had ...