Issue By: Charles S. Redfield

Carmen Zubillaga v. Allstate Indemnity Company

Court of Appeal, Fourth Appellate District (June 19, 2017)

The “genuine dispute doctrine” provides an insurer a defense against a bad faith claim when there is a genuine dispute with the insured as to the existence of coverage or the amount of the insured’s coverage claim. The insurer must have thoroughly and fairly investigated, processed and evaluated the claim, and the insurer’s position must be maintained in good faith and on reasonable grounds. In Zubillaga, the Court of Appeal determined that there was a triable issue of fact to reverse a summary judgment in favor of an insurer sued for bad faith for refusing to pay the underinsured motorist limits.

Plaintiff Carmen Zubillaga was injured in an automobile accident. The other driver was at fault, and that driver’s insurer paid the $15,000 policy limits to plaintiff. Plaintiff possessed a $50,000 underinsured motorists (“UIM”) policy with Allstate Indemnity Company (“Allstate”). Over the course of two years, plaintiff’s attorney continually demanded the $35,000 UIM remaining coverage from Allstate, while Allstate made incremental increases in settlement offers in response to additional physicians’ reports provided by plaintiff’s attorney. Eventually, plaintiff was awarded $35,000 in a UIM arbitration. Plaintiff sued Allstate for breach of contract and bad faith. Allstate filed a motion for summary judgment on plaintiff’s bad faith cause of action based upon the genuine dispute doctrine. Allstate claimed that it was relying upon a report provided by a physician retained by Allstate who contradicted opinions provided by plaintiff’s treating physicians, particularly concerning the need for epidural steroid injections. The trial court granted Allstate’s motion for summary judgment on plaintiff’s bad faith cause of action based on the genuine dispute doctrine.

The Court of Appeal reversed the trial court’s judgment in favor of Allstate and decided that plaintiff had demonstrated a triable issue of material fact. The Court concentrated on plaintiff’s claimed need for epidural injections and found that Allstate had not performed a good faith investigation of plaintiff’s need for them. Allstate had argued that its decision to not offer the policy limits was based on its retained physician’s determination that plaintiff did not need expensive epidural injections. However, this physician had not reviewed additional physicians’ reports after the date of his report, which may have changed the physician’s opinion as to the reasonableness and need for the injections. Plaintiff had received one lumbar steroid epidural injection after the defense medical examination, and her treating physician had provided an additional report which contained recommendations for further injections with an estimate of at least $18,000. The Court of Appeal held that a reasonable jury could conclude that Allstate may have been obligated to have its retained physician re-examine his prior opinions after reviewing the new physicians’ reports before the UIM arbitration.


Insurers routinely retain physicians to analyze the medical records of UM and UIM claimants to determine the settlement value of the claim. In order to defend itself from a bad faith claim based upon the genuine dispute doctrine, the insurer must continually provide medical records, reports and imaging studies to its retained physician after the retained physician has provided its report. The insurer cannot rely upon the original opinion provided by its retained physician to defend its settlement evaluation if the insurer receives subsequent medical records and reports.

For a copy of the complete decision, see: Zubillaga v. Allstate

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