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Wiebers v. Farmers Mutual Hail Insurance Co.

United States District Court, D. South Dakota, Southern Division

December 12, 2019




         Plaintiffs Robin Wiebers (Robin) and Darin Wiebers (Darin) (collectively the Wiebers) sued their insurance carrier Farmers Mutual Hail Insurance Company of Iowa (FMH) after FMH declined to pay its remaining underinsured motorist (UIM) coverage limit of $50, 000 to the Wiebers. The Wiebers' complaint makes claims for breach of contract, first-party bad faith, intentional infliction of emotional distress, breach of fiduciary duty, and unfair or deceptive trade practices, and the Wiebers seek compensatory and punitive damages and attorney's fees. FMH filed a motion for partial summary judgment, Doc. 16, seeking summary judgment on all claims except the breach of contract claim, and a motion to bifurcate, Doc. 21, in the alternative to the extent this Court opts not to grant summary judgment on all non-contractual claims. For the reasons explained, this Court grants in part FMH's motion for partial summary judgment and bifurcates the contract claim for a separate trial preceding any other claim this Court might allow.

         I. Facts

         Robin was driving home from work on June 15, 2016, lawfully traveling between 45 and 55 miles per hour, when another car, driven by Kerri Ann Latendresse, ran a stop sign and collided with Robin's vehicle. Doc. 17 at ¶¶ 1-2; Doc. 26 at ¶¶ 1-2; Doc. 27-2 at 20. Robin was badly injured in the accident and taken by ambulance to a hospital in Sioux Falls. Doc. 17 at ¶ 3; Doc. 26 at ¶ 3; Doc. 27-2 at 6.

         An emergency room doctor diagnosed Robin with a fractured right ankle and a broken rib. Doc. 32-1 at 1; Doc. 17 at ¶ 3; Doc. 26 at ¶ 3; Doc. 27-2 at 5. The ankle had punctured Robin's skin and she would later testify that the injury was "extremely, extremely painful." Doc. 27-2 at 7; see also Doc. 32-1 at 1. Robin underwent surgery on her ankle, with metal hardware being. inserted to repair the fracture. Doc. 26 at ¶ 3; Doc. 27-2 at 6-7, 11. Robin took prescription pain medication for two weeks after the accident and ibuprofen thereafter to control her pain. Doc. 26 at ¶ 3; Doc. 27-2 at 8-10. Robin missed a full month from her job as an assistant dean at the University of South Dakota's School of Education and had to use a wheelchair, scooter, and crutches to get about during her recovery. Doc. 26 at ¶ 3; Doc. 27-2 at 3, 7-8, 27. Robin's family doctor eventually prescribed medication for what she suspected was arthritis in Robin's right ankle. Doc. 26 at ¶ 3; Doc. 27-2 at 10. Robin testified that in the summer of 2017, approximately one year after the accident, she still had "chronic" and "constant" ankle pain as well as difficulty going up and down steps and walking on uneven ground. Doc. 26 at ¶ 3; Doc. 27-2 at 11. In short, Robin testified to life-altering injuries from the car accident.

         Robin also testified that the accident injured her neck, causing her pain in the neck and shoulder area and numbness in her fingers. Doc. 26 at ¶ 3; Doc. 27-2 at 5, 17-18. She had some injections for neck pain in October 2016, but at least through August 2018 appears not to have received any treatment for her neck since October 2016. Doc. 26 at ¶ 3; Doc. 27-2 at 18-19.

         At the time of the accident, Progressive Northern Insurance Company (Progressive) insured Latendresse, with liability limits of $250, 000. Doc. 17 at ¶ 3; Doc. 26 at ¶ 3. The Wiebers had $300, 000 in UIM coverage with FMH. Doc. 17 at ¶ 3; Doc. 26 at ¶ 3. Under South Dakota law, "[u]nderinsured motorist coverage allows the insured to collect the amount of that insured's own coverage less the amount of the tortfeasor's liability coverage." Kirchoff v. Am. Cas. Co. of Reading. 997 F.2d 401, 402 n.2 (8th Cir. 1993) (cleaned up and citation omitted); SDCL § 58-11-9.5. Accordingly, FMH's UIM exposure was $50, 000-the $300, 000 UIM coverage limit minus the $250, 000 liability limit of Progressive.

         Kevin Templeton, an FMH claims adjuster, called Robin on June 21, 2016. Doc. 17 at ¶ 6; Doc. 26 at ¶ 6. He notified her of the $10, 000 medical payment benefit under the FMH policy and began adjusting the property damage claim. Doc. 17 at ¶ 6; Doc. 26 at ¶ 6. FMH received medical bills for Robin on July 13, 2016, and paid the $ 10, 000 medical payment benefit to Sanford Hospital the next day. Doc. 17 at ¶ 7; Doc. 26 at ¶ 7. FMH's file reflects that it had over one hundred pages of Robin's medical records by July 14, 2016. Doc. 26 at ¶ 7; Doc. 27-7.

         Deborah Beeler, another FMH claims adjuster, contacted Robin on July 18, 2016, to discuss the loan on her damaged vehicle. Doc. 17 at ¶ 8; Doc. 26 at ¶ 8. Beeler investigated the matter and contacted Wells Fargo that day to obtain a pay-off amount. Doc. 17 at ¶ 8; Doc. 26 at ¶ 8. On July 20, 2016, FMH issued a check to Wells Fargo to pay off the vehicle loan and sent another check to Robin for her equity in the vehicle. Doc. 17 at ¶ 8; Doc. 26 at ¶ 8.

         Robin called Beeler on August 16, 2016, to discuss the claims process. Doc. 17 at ¶9; Doc. 26 at ¶ 9. She was concerned that her own health insurance carrier was paying her medical bills, but Beeler assured her that this was normal, and that the health insurance carrier would be reimbursed through subrogation. Doc. 17 at ¶ 10; Doc. 26 at ¶¶ 9-10; Doc. 20-1 at 8. Robin said she was confused by the claims process and not sure whether she needed an attorney, and Beeler explained that hiring an attorney was Robin's choice. Doc. 17 at ¶ 11; Doc. 26 at ¶ 11; Doc. 20-1 at 8. FMH's claims notes from this discussion show that Robin had signed a HIPP A authorization[1](presumably not for FMH) by August 16, 2016. Doc. 26 at ¶ 9; Doc. 20-1 at 8. The notes from August 2016 also show that FMH knew Progressive's limits were $250, 000 and that Robin's medical bills were at least $72, 558.26, but might be as much as $140, 000. Doc. 26 at ¶ 9; Doc. 20-1 at 7-8.

         After the Wiebers retained counsel, the Wiebers' attorney on November 14, 2016, sent a letter to FMH that began:

I am representing Robin and Darin Wiebers concerning Robin's motor vehicle accident on June 15, 2016. Although I am seeking confirmation, it is my understanding that the responsible driver, Kerri Latendresse, had insurance with Progressive Northern Insurance Company with limits of $250, 000. Perhaps you have already confirmed those limits.
It is also my understanding that there is available from your company an additional $50, 000[2] in underinsured motorist coverage. Please confirm that UEVI coverage.

         Doc. 20-2 at 1. The letter then detailed the Wiebers' damages, including roughly $87, 000 in past medical expenses, $6, 254.06 in lost income, and prejudgment interest on those amounts. Doc. 20- 2 at 2-3; Doc. 17 at ¶ 12; Doc. 26 at ¶ 12. Describing Robin's injuries as "life changing," the Wiebers' attorney predicted that a jury would award her "several hundred thousand dollars" for pain and suffering and loss of enjoyment of life. Doc. 20-2 at 3. As for future damages, the attorney wrote that Robin had suffered a disk injury in her neck and had been told that there "is the likelihood of future surgery." Doc. 20-2 at 4. He also claimed that Robin would need ankle surgery, either to remove the hardware or replace her ankle. Doc. 20-2 at 4. Although the attorney had yet to obtain estimates for Robin's future medical expenses, he opined that the cost of neck surgery, hardware removal, and a potential ankle replacement could range anywhere from $100, 000 to $225, 000. Doc. 20-2 at 4. The attorney included records from Robin's health insurer with the letter, but did not provide any medical or lost income records. Doc. 17 at ¶ 12; Doc. 26 at ¶ 12. The letter concluded with the following paragraph:

I am attempting to confirm payment of the policy limits by Progressive National Insurance Company. Please confirm, that I am willing to accept those policy limits on behalf of your insured and that you will also pay your underinsured motorist limits. Again, I don't think there is any question under good faith and fair dealing that those UIM limits are due and owing. I would hope to hear back from you regarding payment of those limits within the next 20 days.

         Doc. 20-2 at 4. FMH did not respond to the November 2016 letter despite the attorney's request that it do so within twenty days. Doc. 26 at ¶ 12; Doc. 20-2 at 4.

         Beeler wrote a claims note in December 2016 recognizing that Robin's attorney had requested $50, 000 in UIM coverage. Doc. 20-1 at 5. The note also stated: "Adjust Collision reserve from $90.48 to $0.00. Increase the sub reserve for collision to $12, 000 and sub medpay for $10, 000.00. Increase BIUI to $50, 000 based on the medical bills, lost wages, out of packet [sic] expenses and general damages." Doc. 20-1 at 5. In Robin's view, this note shows that FMH realized that her damages would exceed Progressive's liability coverage. Doc. 25 at 6. FMH disagrees, asserting that the note reflects "an adjustment of the reserves because of how South Dakota allocates UIM coverage with a credit for the underlying policy limits." Doc. 30 at 4. FMH filed an affidavit from Beeler saying that she had simply increased the reserves and that the reserves "are not an indication of what a case is worth or valued at." Doc. 31 at ¶ 2.

         The Wiebers' attorney sent FMH a letter on January 31, 2017, explaining that Progressive would pay Robin the $250, 000 policy limits if FMH approved this settlement and waived its subrogation claim under the Schmidt/Clothier procedure.[3] Doc. 17 at ¶ 13; Doc. 26 at ¶ 13; Doc. 20-3 at 1. He wrote that FMH had thirty days to either pay its UIM limit or substitute its draft for the payment from Progressive. Doc. 20-3 at 1. If FMH did neither, the Wiebers' attorney explained, "we will proceed as though you have waived your right of subrogation, and we will have our clients execute a full Release with the tortfeasor, Kerri Latendresse." Doc. 20-3 at 1-2.

         Beeler wrote the Wiebers' attorney on February 8, 2017, requesting copies of all medical bills and records concerning the accident and documentation supporting the lost wages claim. Doc. 17 at ¶ 14; Doc. 26 at ¶ 14; Doc. 20-4. She explained that FMH needed this information before it could decide whether to waive its subrogation rights. Doc. 20-4.

         The Wiebers' attorney did not respond to Beeler until a March 10, 2017 letter. Doc. 17 at ¶ 15; Doc. 26 at ¶ 15; Doc. 20-5. He wrote that Robin would sign a medical authorization if FHM sent one, even though he had already provided FMH with information about Robin's bills and damages in his November 2016 letter. Doc. 17 at ¶ 15; Doc. 26 at ¶ 15; Doc. 20-5. He also asked FMH to decide whether to waive subrogation or substitute its draft. Doc. 17 at ¶ 15; Doc. 26 at ¶ 15; Doc. 20-5.

         Beeler emailed the Wiebers' attorney on March 16, 2017, writing that she was considering the March 10 letter but that she had not been able to gather the necessary decision makers because it was the week of spring break. Doc. 17 at ¶ 16; Doc. 26 at ¶ 16; Doc. 20-6. On March 23, 2017, Beeler forwarded a medical authorization and a letter stating that FMH would waive its "medpay subrogation right" and that the Wiebers could accept the settlement with Progressive. Doc. 17 at ¶ 16; Doc. 26 at ¶ 16; Doc. 20-7.

         The Wiebers' attorney emailed Beeler on April 3, 2017, asking her to confirm that FMH agreed to waive all of its subrogation rights, not just the medpay subrogation right Beeler mentioned in her March 23 letter. Doc. 27-3; Doc. 26 at ¶ 16. He also noted that he was attaching Robin's medical records and bills that Progressive had gathered. Doc. 27-3; Doc. 26 at ¶ 16. Beeler confirmed the following day that FMH waived all of its subrogation rights. Doc. 20-15. Doc. 17 at ¶ 17; Doc. 26 at ¶ 17. Thus, the waiver of FMH's subrogation rights and right to substitute its draft occurred about 65 days after the January 31, 2017 notice of Progressive having tendered liability limits, and that time included a 30-day delay in the Wiebers' attorney responding to FMH's February 8, 2017 letter.

         FMH received Robin's medical authorization on April 17, 2017, along with a letter from the Wiebers' attorney opining that the medical records he had forwarded should be enough for FHM to resolve Robin's UTJVI claim. Doc. 17 at ¶ 18; Doc. 26 at ¶ 18; 20-8. Beeler replied by email, explaining that FMH was reviewing Robin's records and would get back to her attorney once this was done. Doc. 17 at ¶ 18; Doc. 26 at ¶ 18; 20-8 at 4.

         On April 20, 2017, FMH sent Robin's medical records to ReMed Casualty Consultants (ReMed) for a nurse to review. Doc. 17 at ¶ 19; Doc. 26 at ¶ 19. The ReMed nurse replied the next day, saying that she needed some additional records to complete the review but that the records she did have showed a "high probability" of arthritis in the ankle and that future surgery could be necessary.[4] Doc. 17 at ¶ 20; Doc. 26 at ¶¶ 19-20; Doc. 20-1 at 3.

         Beeler wrote the Wiebers' attorney on May 11, 2017, explaining that FMH was still gathering Robin's medical records for the review. Doc. 17 at ¶ 21; Doc. 26 at ¶ 21; Doc. 20-9. The Wiebers' attorney emailed Beeler that same day, saying that the Wiebers had given FMH ample opportunity to review the claim and asking whether litigation would be necessary. Doc. 26 at¶16;Doc. 27-3 at 3.

         On June 1, 2017, ReMed informed FMH that it had now gathered the necessary medical records and that its review should be complete by June 23, 2017. Doc. 17 at ¶¶ 22-23; Doc. 26 at ¶¶ 22-23; Doc. 20-1 at 2. Beeler updated the Wiebers' attorney on the status of Robin's ...

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