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.
Hennepin County District Court, File No. 27-CV-15-15328
S. Barrett Wiik, Best & Flanagan, Minneapolis, Minnesota; and
Teresa Fariss McClain, Robins Kaplan LLP, Minneapolis,
Minnesota (for respondent)
Bjorkman, Patrick H. O’Neill III, Larson King, LLP, St. Paul,
Minnesota (for appellant)
and decided by Slieter, Presiding Judge; Worke, Judge; and
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.
Collision 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.
July 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.
Western 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
June 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
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
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 other trial.
June 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
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.
Court Trial on ...