In Sadler v. State Farm Mutual Automobile Insurance Company, No. 08-35859 (9th Cir. Nov. 4, 2009), the insureds sued their insurer for bad faith, among other claims, arising from their insurer’s refusal to pre-authorize surgery under the personal injury protection (“PIP”) provision of the automobile insurance policy. The insured alleged that she sustained harm by awaiting the outcome of the independent medical examination (“IME”) ordered by the insurer before proceeding with treatment, including the loss of her job.
The district court concluded that the insurer did not have a duty to pre-approve the insured’s surgery under the PIP provision of her policy because the PIP provision does not require pre-approval for medical treatment, explicitly allows the insurer to obtain an IME, and indicates that payment is to be made as medical expenses are incurred. In affirming the district court, the Court of Appeals noted that no Washington State law recognizes an implied duty on the part of an insurer to pre-authorize treatment under PIP. Because the Insurer did not have a duty to pre-approve the Insured’s treatment, it would not be responsible for the harm flowing from the Insured’s decision to await the outcome of the IME before proceeding with treatment.
With respect to the Insured’s claim that the Insurer acted in bad faith by requesting and then delaying an IME, the district court and the Court of Appeals found that, in addition to having a contractual right to obtain an IME, the uncontroverted evidence showed that the Insurer requested the IME immediately upon learning of the Insured’s request for surgery. Absent evidence that the Insurer’s handling of the IME was atypical, contrary to law, or otherwise “unreasonable, unfounded or frivolous,” the Insurer could not be liable for bad faith.