A recently published federal decision underscores the risks to insurers of failing to promptly investigate and pay valid personal injury protection (PIP) claims. McGee-Grant v. Am. Family Mut. Ins., ___ F. Supp. 3d ___, 2016 WL 126429, at *1 (W.D. Wash. Jan. 12, 2016). In McGee-Grant, Federal District Court Judge Ricardo Martinez ruled as a matter of law that American Family acted in bad faith by taking months to investigate a PIP claim and disregarding a treating medical provider’s opinion on the cause of the insured’s injury.
In July 2012, Penny McGee-Grant suffered a shoulder injury when her car was rear-ended. The next month, she applied for PIP benefits under her AmFam policy, which covered reasonable and necessary medical expenses incurred as a result of an accident. An October MRI revealed a rotator cuff tear. In December, McGee-Grant notified AmFam that she would undergo shoulder surgery in January 2013. AmFam requested an independent medical examination (IME) because it questioned whether the tear was related to the accident. The IME was delayed for various reasons, including AmFam’s inability to obtain the MRI film. In January, McGee-Grant’s surgeon told AmFam that the tear and the surgery were related to the accident, but AmFam still declined to pay the claim and ordered a records review. In March 2013, a physician retained by AmFam concluded that the shoulder disorder was caused by normal wear and tear. Although it was not mentioned in the opinion, there is some controversy over whether rotator-cuff tears are caused by auto accidents at all. AmFam closed the claim.
McGee-Grant sued AmFam for bad faith, alleging that it denied payment before completing its investigation. Under Washington law, an insurer may be in bad faith if it its investigation violates the claim-handling regulations found at WAC 284-30 or if it relies on conjecture or speculation. Coventry Assocs. v. Am. States Ins. Co., 136 Wn. 2d 269, 279, 961 P.2d 933 (1998); Indus. Indem. Co. v. Kallevig, 114 Wn.2d 907, 917, 792 P.2d 520 (1990).
Granting the claimant’s partial summary judgment motion on the issue of bad faith, Judge Martinez held that AmFam violated the claim-handling regulations by:
- not completing its investigation within 30 days;
- concluding that the injury may not have been related to the accident without a medical basis; and
- refusing payment before an IME or records review.
AmFam cited several bases for its good-faith belief that the injury and the accident were unrelated:
- the delayed onset of symptoms;
- pre-existing degenerative changes; and
- McGee-Grant’s continued work as a hairdresser.
But the court noted that there was no evidence that these were medically significant or that AmFam knew about them before denying the claim. The court also found unconvincing AmFam’s arguments that its inability to obtain MRI records caused the delay and that few other insurers could have completed an investigation within 30 days. In the court’s view, AmFam simply lacked any basis for denying McGee-Grant’s claim for such a long period. Judge Martinez reserved ruling on bad-faith damages for trial.
This case serves as a cautionary tale for insurers handling PIP claims. PIP benefits are designed to provide auto-accident victims quick and adequate compensation for economic losses regardless of fault. Ainsworth v. Progressive Cas. Ins. Co., 180 Wn. App. 52, 74, 322 P.3d 6 (2014). A drawn-out, overly adversarial claims-handling process may thwart that objective—and lead to a finding of bad faith.
