A Nevada federal judge has determined that an insurer did not breach its contract or act in bad faith when it terminated payment for chiropractic services for two policyholders injured in an automobile accident. The Court found that the plaintiff policyholders failed to counter medical testimony that they did not require additional chiropractic care because the “maximum medical improvement” had been reached. Gorrell v. State Farm Mutual Auto Ins. Co., Docket No. 08-cv-01757 (D. Nev. June 28, 2010).

Plaintiffs, two Wyoming residents, initially sought chiropractic treatment for neck and back injuries following an automobile accident in Las Vegas. State Farm determined that the accident exacerbated plaintiffs’ preexisting neck and back problems and agreed to pay “reasonable medical expenses” under its insurance agreement. After approximately one year, State Farm sent a letter informing Plaintiffs that it would no longer pay for their medical bills because "maximum medical improvement" had been attained. Therefore, State Farm maintained, additional chiropractic treatment was not reasonable under the insurance policy. Plaintiffs disregarded the letter and continued to receive chiropractic treatment. Plaintiffs subsequently filed suit against State Farm in Nevada state court alleging, inter alia, that State Farm's conduct constituted breach of contract and breach of the implied covenant of good faith and fair dealing.

The Court granted summary judgment to State Farm on Plaintiffs’ claim for breach of contract, and found that State Farm was not obligated to continue making payments for Plaintiffs’ treatment. The Court noted that Plaintiffs’ treating chiropractor and an independent chiropractor both agreed that Plaintiffs had already reached maximum medical improvement, before State Farm decided to stop payment; and that Plaintiffs failed to present any evidence to indicate that the chiropractors’ conclusions were inaccurate or that Plaintiffs had not in fact reached maximum medical improvement.

The Court also granted summary judgment to State Farm on Plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing. Because Plaintiffs were not entitled to additional insurance coverage , the Court held, no factual dispute existed regarding whether State Farm acted in bad faith. Finally, the Court granted summary judgment to State Farm on Plaintiffs' claims for negligent misrepresentation and punitive damages, based on its finding that State Farm had complied with its obligations under the insurance contract.

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