Date: 12-19-2018

Case Style: Melissa case v. State Farm Mutual Automobile Insurance Co., Inc.

Case Number: B281732

Judge: Manella, P.J.

Court: California Court of Appeals Second Appellate District, Division Four on appeal from the Superior Court, County of Los Angeles

Plaintiff's Attorney: John W. Phillips, and Patrick Phillips

Defendant's Attorney: Michael J. O’Neill

Description: The following facts are not in dispute: In March 2013, Case
was employed by Lawry’s Restaurant, and insured under a
personal automobile policy issued by State Farm. The policy’s
uninsured-underinsured motorist (UM) coverage for bodily injury
was $100,000 per person and $300,000 per accident. On March
29, 2013, while returning to Lawry’s Restaurant from an off-site
catering location, Case was injured in a car accident involving an
uninsured driver. The next day, she sought workers’
compensation benefits through her employer’s policy and
submitted a claim to State Farm under her personal automobile
policy. In 2014, after Case submitted a demand for UM policy
benefits, State Farm sought verification of a “final lien” relating
to medical expenses incurred as workers’ compensation benefits.
When State Farm failed to pay UM benefits, Case requested
arbitration.
On May 28, 2015, Case initiated the underlying action
against State Farm for breach of an insurance contract and bad
faith. The complaint asserted that State Farm acted improperly
in delaying arbitration and settlement of Case’s claim for UM
benefits, alleging that although she verified a final workers’
compensation lien relating to medical expenses no later than
November 2014, State Farm neither paid her claim for UM
3
benefits nor undertook arbitration. The complaint requested
compensatory and punitive damages.
In September 2015, Case submitted information to State
Farm showing that she had exhausted the possibility of receiving
additional payments through the workers’ compensation system.
In November 2015, State Farm and Case settled her claim for UM
benefits for $35,000.
In December 2016, State Farm sought summary judgment
or adjudication on Case’s claims. State Farm requested summary
adjudication on the claim for breach of the insurance contract,
contending it had provided all policy benefits due Case.
Furthermore, relying on Rangel v. Interinsurance Exchange
(1992) 4 Cal.4th 1 (Rangel), State Farm contended the bad faith
claim failed, arguing that it breached neither the policy nor the
implied covenant of good faith by declining to pay or arbitrate
Case’s UM claim before her claim for workers’ compensation
benefits had been resolved. In view of the purported defects in
the claims for breach of an insurance contract and bad faith,
State Farm maintained that summary adjudication was proper
with respect to Case’s request for punitive damages.
The trial court granted summary judgment, concluding that
summary adjudication was proper with respect to Case’s claims
and her request for punitive damages. On March 6, 2017, the
court entered a judgment in favor of State Farm and against
Case. This appeal followed.
DISCUSSION
Case contends the trial court erred in granting summary
judgment. For the reasons explained below, we disagree.
4
A. Standard of Review
“A summary adjudication motion is subject to the same
rules and procedures as a summary judgment motion. Both are
reviewed de novo. [Citations.]” (Lunardi v. Great-West Life
Assurance Co. (1995) 37 Cal.App.4th 807, 819.) “A defendant is
entitled to summary judgment if the record establishes as a
matter of law that none of the plaintiff’s asserted causes of action
can prevail. [Citation.]” (Molko v. Holy Spirit Assn. (1988) 46
Cal.3d 1092, 1107.) Generally, “the party moving for summary
judgment bears an initial burden of production to make a prima
facie showing of the nonexistence of any triable issue of material
fact; if he carries his burden of production, he causes a shift, and
the opposing party is then subjected to a burden of production of
his own to make a prima facie showing of the existence of a
triable issue of material fact.” (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 850.) In moving for summary judgment,
“all that the defendant need do is to show that the plaintiff
cannot establish at least one element of the cause of action -- for
example, that the plaintiff cannot prove element X.” (Id. at p.
853, fn. omitted.)
Although we independently assess the grant of summary
judgment, our review is governed by a fundamental principle of
appellate procedure, namely, that “‘[a] judgment or order of the
lower court is presumed correct,’” and thus, “‘error must be
affirmatively shown.’” (Denham v. Superior Court (1970) 2 Cal.3d
557, 564, quoting 3 Witkin, Cal. Procedure (1954) Appeal, § 79,
pp. 2238-2239, italics omitted.) Under this principle, Case bears
the burden of establishing error on appeal, even though State
Farm had the burden of proving its right to summary judgment
before the trial court. (Frank and Freedus v. Allstate Ins. Co.
(1996) 45 Cal.App.4th 461, 474.) For this reason, our review is
5
limited to contentions adequately raised in Case’s briefs.
(Christoff v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th
118, 125-126.)
B. Governing Principles
Generally, “[a]n insured can pursue a breach of contract
theory against its insurer by alleging the insurance contract, the
insured’s performance or excuse for nonperformance, the insurer’s
breach, and resulting damages.” (San Diego Housing Com. v.
Industrial Indemnity Co. (1998) 68 Cal.App.4th 526, 536.) In
view of the requirement for contract-related damages, an insurer
may secure summary adjudication on the claim when there are no
unpaid policy benefits. (Behnke v. State Farm General Ins. Co.
(2011) 196 Cal.App.4th 1443, 1468.)
To establish bad faith, a policy holder must demonstrate
misconduct by the insurer more egregious than an incorrect
denial of policy benefits. “The law implies in every contract,
including insurance policies, a covenant of good faith and fair
dealing.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713,
720 (Wilson).) The obligation imposed on the insurer under the
covenant “‘is not the requirement mandated by the terms of the
policy itself . . . . It is the obligation . . . under which the insurer
must act fairly and in good faith in discharging its contractual
responsibilities.’” (California Shoppers, Inc. v. Royal Globe Ins.
Co. (1985) 175 Cal.App.3d 1, 54, quoting Gruenberg v. Aetna Ins.
Co. (1973) 9 Cal.3d 566, 573-574, italics omitted.) In the context
of a bad faith claim, “an insurer’s denial of or delay in paying
benefits gives rise to tort damages only if the insured shows the
denial or delay was unreasonable.” (Wilson, supra, 42 Cal.4th at
p. 723.)
Under this standard, “an insurer denying or delaying the
payment of policy benefits due to the existence of a genuine
6
dispute with its insured as to the existence of coverage liability or
the amount of the insured’s coverage claim is not liable in bad
faith[,] even though it might be liable for breach of contract.”
(Chateau Chamberay Homeowners Assn. v. Associated Internat.
Ins. Co. (2001) 90 Cal.App.4th 335, 347.) That is because “whe[n]
there is a genuine issue as to the insurer’s liability under the
policy for the claim asserted by the insured, there can be no bad
faith liability imposed on the insurer for advancing its side of that
dispute.” (Ibid., italics deleted.)
Here, the key issues concern State Farm’s conduct
regarding Case’s claim for UM benefits, which she pursued while
seeking workers’ compensation benefits. Under Insurance Code
section 11580.2 (section 11580.2), automobile insurance policies
must offer UM coverage and provide for binding arbitration of
certain disputes relating to UM benefits. (Ins. Code, § 11580.2,
subds. (a), (f), (p); Rangel, supra, 4 Cal.4th at pp. 7-8.) The scope
of the mandated arbitration is limited: absent an agreement
between the insured and the insurer, only the uninsured driver’s
liability and the amount of damages caused by the uninsured
driver are subject to arbitration; other issues -- including
coverage issues relating to the claim for UM benefits -- are not
arbitrable. (Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th
1190, 1200.)
As discussed further below, section 11580.2 contains
provisions intended to prevent a “double recovery” of UM benefits
and workers’ compensation benefits for the same injury. (Rangel,
supra, 4 Cal.4th at p. 9.) Among the principal benefits available
through the workers’ compensation system are temporary
disability indemnity and permanent disability indemnity.
(Department of Rehabilitation v. Workers’ Comp. Appeals Bd.
(2003) 30 Cal.4th 1281, 1291.) The former replaces a fixed
7
percentage of the wages lost by the worker during the healing
period (County of Alameda v. Workers’ Comp. Appeals Bd. (2013)
213 Cal.App.4th 278, 282-283; see Lab. Code, § 4653); the latter
provides compensation for the residual loss of function after
maximum recovery from the injury, based on a “rating” of that
loss (Genlyte Group, LLC v. Workers’ Comp. Appeals Bd. (2008)
158 Cal.App.4th 705, 715-716; see Lab. Code, § 4660).
Additionally, the injured worker is entitled to recover the
costs of medical treatments “reasonably required to cure or
relieve . . . the effects of his or her injury.” (Lab. Code, § 4600,
subd. (a).) That right is subject to certain limitations, as
“[e]mployers and their insurers may establish or contract with a
medical provider network to treat injured employees. [Citation.]
An injured employee may visit medical providers outside such
networks only if the employer has not established a network or if
the employee notified the employer in writing prior to the date of
injury that he or she has a personal physician. [Citation.]”
(Chorn v. Workers’ Comp. Appeals Bd. (2016) 245 Cal.App.4th
1370, 1377.) Generally, medical providers are permitted to assert
liens on workers’ compensation benefits for the costs of medical
services that are unpaid or contested. (Ibid.)
Section 11580.2 includes two provisions designed to prevent
a double recovery of UM benefits and workers’ compensation
benefits for the same injury. (Rangel, supra, 4 Cal.4th at pp. 7-9.)
In 1961, the Legislature amended the statute to permit the
reduction of UM benefits in the event of workers’ compensation
benefits. (Stats. 1961, ch. 1189, § 2, p. 2931; Rangel, supra, 4
Cal.4th at p. 7.) Subdivision (h) of section 11580.2 states: “Any
loss payable under the terms of the uninsured
motorist . . . coverage to or for any person may be reduced:
[¶] . . . By the amount paid and the present value of all amounts
8
payable to him or her . . . under any workers’ compensation law,
exclusive of nonoccupational disability benefits.” As explained in
Waggaman v. Northwestern Security Ins. Co. (1971) 16
Cal.App.3d 571, 575 (Waggaman), this provision authorizes
insurers to include in automobile policies clauses mandating the
reduction of UM benefits to reflect workers’ compensation
benefits. However, the Legislature has enacted no statute
permitting automobile insurers to impose liens on workers’
compensation benefits in order to recover excessive UM benefit
payments. (Rangel, supra, 4 Cal.4th at pp. 9-11, 15.)
Section 11580.2 also imposes a stay of arbitration regarding
UM benefit disputes until specified circumstances occur relating
to a workers’ compensation claim. (Rangel, supra, 4 Cal.4th at p.
8.) Subdivision (f) of the statute provides: “If the insured has or
may have rights to benefits, other than nonoccupational disability
benefits, under any workers’ compensation law, the arbitrator
shall not proceed with the arbitration until the insured’s physical
condition is stationary and ratable. In those cases in which the
insured claims a permanent disability, the claims shall, unless
good cause be shown, be adjudicated by award or settled by
compromise and release before the arbitration may proceed.”1
(§
11580.2, subd. (f).) Our Supreme Court has explained that in
1973, the Legislature enacted the arbitration stay provision to
1
Subdivision (f) of section 11580.2 further provides: “Any
demand or petition for arbitration shall contain a declaration,
under penalty of perjury, stating whether (i) the insured has a
workers’ compensation claim; (ii) the claim has proceeded to
findings and award or settlement on all issues reasonably
contemplated to be determined in that claim; and (iii) if not, what
reasons amounting to good cause are grounds for the arbitration
to proceed immediately.”
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prevent a type of arbitration-facilitated double recovery identified
in Waggaman.
2
(Rangel, supra, 4 Cal.4th at p. 9.)
The application of the two provisions described above was
examined in Rangel. There, the automobile policy’s UM
provisions reduced the loss payable under the policy by the
workers’ compensation benefits paid or payable to the insured --
in terms closely tracking subdivision (h)(1) of section 11580.2 --
but permitted arbitration of disputes regarding the loss payable --
thus authorizing an arbitration broader than required under
subdivision (f) of section 11580.2. (Rangel, supra, 4 Cal.4th at pp.
11, 17.) After the insured suffered injuries in an accident
involving an uninsured motorist, she filed a claim for UM benefits
and sought workers’ compensation benefits, including permanent
2
In Waggaman, the plaintiff sought UM policy benefits and
workers’ compensation benefits, including permanent disability
indemnity. (Waggaman, supra, 16 Cal.App.3d at pp. 573, 575-
576.) The UM provisions contained a term mandating that UM
benefits be reduced by the workers’ compensation benefits paid or
payable, as permitted under section (h)(1) of section 11580.2.
(Waggaman, supra, at pp. 574-575.) Prior to the permanent
disability award, pursuant to the UM policy provisions, the
plaintiff and his insurer submitted to arbitration the amount of
UM benefits due under the policy. (Id. at pp. 575-576.) The
arbitrator declined to reduce the UM benefits to reflect the
plaintiff’s prospective permanent disability award because it
could not be valued. (Id. at pp. 573-574.) After the arbitrator’s
award was confirmed, the appellate court affirmed. While
recognizing that section (h)(1) of section 11580.2 was intended to
bar a double recovery of UM benefits and workers’ compensation
benefits, the court found nothing in section 11580.2 or the
workers’ compensation statutes foreclosing a possible double
recovery under the circumstances presented. (Waggaman, supra,
at pp. 579-580.)
10
disability indemnity. (Id. at pp. 5-6.) The automobile insurer
initially refused to pay UM benefits until her workers’
compensation claim was resolved. (Id. at p. 5.) Almost two years
after the accident, the insured requested arbitration of her claim
for UM benefits, but the arbitrator ordered the proceeding stayed
while the workers’ compensation proceeding was pending. (Ibid.)
More than six years after the accident, while the workers’
compensation proceeding was still pending, the automobile
insurer paid the maximum amount of the UM coverage. (Id. at p.
6.) When the workers’ compensation proceeding terminated, the
insured sued the automobile insurer for bad faith. (Ibid.)
After the trial court granted judgment on the pleadings in
favor of the insurer, our Supreme Court affirmed, concluding that
under the specific circumstances presented, the arbitration stay
provision in section 11580.2, subdivision (f), operated to exonerate
the insurer of bad faith. (Rangel, supra, 4 Cal.4th at pp. 10-13.)
The court determined that because the insured claimed a
permanent disability, the arbitration stay provision expressly
required that arbitration be stayed absent a showing of good
cause, which the insured never offered. (Id. at pp. 8, fn. 6, 13-14.)
The court further determined that under the policy’s terms, the
reduction of UM benefits to reflect workers’ compensation
benefits was an arbitrable issue: “The policy’s arbitration clause
is broader than that required [under section 11580.2, subdivision
(f)]. The statute requires only that the damages due from the
uninsured motorist be subject to arbitration. In contrast, the
policy’s arbitration clause encompasses disputes concerning the
amount owing under the insurance policy as well as the damages
due from the uninsured motorist.” (Id. at p. 11.) The court
concluded: “Because the policy . . . provides for arbitration in the
event of a dispute over the loss payable, and because [the
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insured’s] workers’ compensation claim was not resolved [for over
eight years], there was an arbitrable issue which could be delayed
under section 11580.2 unless good cause was shown.” (Id. at p.
13.)
In so concluding, the court found that the UM policy term
reducing the loss payable in the event of workers’ compensation
benefits was “clear and unambiguous,” that is, free of any
ambiguity relevant to the specific issues presented. (Rangel,
supra, 4 Cal.4th at p. 14.) Relying on that determination, the
court rejected the contention that the insurer was required to pay
some UM benefits regardless of the outcome of the workers’
compensation proceeding because the UM policy provisions
mandated payment of some items of damages -- such as
foreseeable economic loss -- not offset by workers’ compensation
benefits. (Id. at p. 17.) The court explained that because the
insured had “bargained for a policy in which workers’
compensation benefits would be deducted from the uninsured
motorist policy limit, . . . the insurer is only liable for the excess,
if any, of the policy limit over the workers’ compensation benefits.
If there is no excess, the uninsured motorist insurer has no duty
to pay general damages that are not compensable by workers’
compensation.” (Ibid.)
C. Underlying Proceedings
We next examine the parties’ showings, with special
attention to the evidence bearing on the issues raised on appeal.
1. State Farm’s Evidence
State Farm submitted evidence supporting the following
version of the underlying events: The UM provisions of Case’s
policy stated: “Any amount payable . . . shall be reduced by any
amount paid or payable to . . . the insured[] [¶] . . . [¶] . . . under
any workers’ compensation, disability benefits, or similar law.”
12
(Italics omitted.) Additionally, the policy stated that there was no
coverage for bodily injury “to the extent [such coverage would]
benefit[] [¶] . . . any worker’s compensation or disability benefits
insurance company.” (Capitalization omitted.) The policy further
provided for arbitration of disputes limited to the issues set forth
in subdivision (f) of section 11580.2.3

In a letter dated July 17, 2014, Case’s counsel, John W.
Phillips, submitted a demand for UM benefits totaling $66,712,
including $14,212 in past medical expenses, $25,500 in future
medical expenses, and $27,000 for noneconomic “pain and
suffering” damages. Noting that Case was 27 weeks pregnant
when the accident occurred, Phillips stated: “Fortunately, [Case]
had a successful birth and has now concluded her physical
therapy and other medical treatment.” According to Phillips,
Case expected to incur future medical expenses because she had
been diagnosed with “significant disc bulges” and required
epidural injections to treat on-going pain. The demand stated
that a particular doctor -- who had already billed Case for
services totaling $1,525 -- had recommended that she undergo
three or more epidural injections at a cost of $8,500 per injection.
Phillips made no reference to benefits paid to Case through her
workers’ compensation claim.
3 The policy stated: “Two questions must be decided by
agreement between the insured and us:
1. Is the insured legally entitled to collect damages from
the owner or driver of the uninsured motor vehicle; and
2. If so, in what amount?
If there is no agreement, upon written request of the insured or
us, these questions shall be decided by arbitration as provided in
section 11580.2.” (Italics omitted.)
13
On August 7, 2014, a State Farm claim specialist contacted
Phillips and acknowledged receipt of the demand. According to
the claim file, the specialist told Phillips that she needed
“additional docs to proceed with [the] evaluation,” as well as “WC
information.”
On September 22, 2014, Phillips submitted to State Farm
medical records relating to the cause of Case’s back injuries.
Phillips also presented documentation from Case’s workers’
compensation insurer reflecting an existing lien for $1,873.72.
The documentation did not refer to certain claimed items of past
medical costs -- totaling $9,794 -- detailed in the July 2014
demand, including the services rendered by the doctor who
recommended a course of epidural injections.
In a letter to Phillips dated October 30, 2014, State Farm
stated: “[A]dditional information is required to . . . extend an
offer. [¶] Please provide a copy of the workers’ compensation
final lien and breakdown for our review . . . .” On the same date,
State Farm also asked Gallagher Bassett Services, Inc.
(Gallagher Bassett), the third party administrator responsible for
processing Case’s workers’ compensation claim, to provide the
“status of [the] claim and notice of final lien.” Case provided no
information establishing that the past medical expenses itemized
in the July 2014 demand but not reflected in the September 2014
documentation had been addressed through Case’s workers’
compensation claim. State Farm also received no information
establishing that Case’s future medical expenses had been
addressed through Case’s workers’ compensation claim.
In November 2014, Case demanded arbitration. In a letter
to Case dated December 4, 2014, a State Farm claims manager
stated: “You allege State Farm has not made a fair offer of
settlement of your [UM benefits] claim. . . . Your workers’
14
compensation carrier paid $2,164.99 on your behalf and closed
your claim. The demand received from . . . Phillips on July 21,
2014, lists past special damages of $14,212 and estimated future
medical costs of $25,000. [¶] It appears you withdrew your
workers’ compensation claim after your initial treatment in favor
of presenting your claim exclusively to State Farm.” After noting
that the policy reduced UM benefits in the event of workers’
compensation payments and quoting section 11580.2, subdivision
(h)(1), the letter further stated: “[A] determination must be made
to what extent workers’ compensation benefits continue to be
owed to you prior to State Farm’s ability to determine what is
owed from your . . . [p]olicy. [¶] Your attorney
requested . . . arbitration. State Farm is in the process of
preparing your case for referral to legal counsel to begin the
discovery process.”
In late February 2015, during prearbitration discovery,
Case testified in a deposition that she was still experiencing pain
from the injuries she incurred in the accident. Case’s responses
to State Farm’s interrogatories also stated that she continued to
suffer pain from those injuries.
On March 30, 2015, after Phillips requested a “final” lien
balance relating to the workers compensation claim, a Gallagher
Bassett manager responded: “Unfortunately, the only items I can
provide you is . . . [a] benefit printout showing a total of $2,164.99
has been paid to date. Since [Case] was never discharged from
care under the workers’ compensation system she may return at a
later date and seek additional medical treatment under this
claim . . . .”
In a letter dated July 6, 2015, Phillips informed State
Farm’s counsel that Case’s medical condition was stationary and
that she had received no medical treatments since October 2013.
15
Phillips stated: “There is no better evidence of [Case]’s lack of
need for further medical treatment than her lack of further
medical treatment. By any reasonable measure, [Case]’s physical
condition is ‘stationary and ratable.’ Therefore, the status of her
workers[‘] compensation claim does not excuse State Farm’s
refusal to schedule an arbitration date in this matter.”
(Emphasis omitted.)
In an e-mail to Phillips dated September 18, 2015, a
Gallagher Bassett manager stated: “I have reviewed your request
for reimbursement of medical expenses[,] and since [Case] was
not treated under the workers[’] compensation system, all medical
treatment obtained is considered self-procured and is not
reimbursable. As you are aware, all bills or treatment
obtained . . . is not payable under the workers’ compensation
system. Furthermore, there was no authorization, and treatment
was not referred by the designated treating physician . . . .” The
following day, Phillips forwarded the e-mail to State Farm.
On November 19, 2015, Case and State Farm agreed to
settle her UM benefits claim for $35,000. Five days later, State
Farm issued the settlement funds to Case.
2. Case’s Evidence
In opposing the motion for summary adjudication or
judgment, Case challenged little of State Farm’s showing. Her
principal contention was that there were triable issues because
that showing was incomplete.4

4
In an effort to establish triable issues, Case also asserted
evidentiary objections to State Farm’s showing in her separate
statement of undisputed facts. Because the trial court did not
expressly rule on the objections, it presumptively overruled them.
(Archer v. United Rentals, Inc. (2011) 195 Cal.App.4th 807, 813,
16
According to Case’s showing, Phillips responded promptly
to State Farm’s October 30, 2014 request for verification of a final
workers’ compensation lien by submitting by e-mail evidence that
he described as “the workers’ comp lien for my client.” A State
Farm claim specialist then asked, “[C]an you send me something
in writing that confirms this is a final lien. [¶] . . . Just need
something that confirms final lien.” Later, in an e-mail to
Phillips dated November 6, 2014, the claim specialist stated: “I
revd call from . . . Gallagher and confirmed final lien. I am
waiting for authority on it.”
On November 12, 2014, Case demanded arbitration.
Accompanying the demand was Phillips’s declaration, which
stated: “[Case’s] workers[’] compensation claim has settled on all
issues reasonably contemplated to be determined in that claim.
[Case] has no expectation that she will receive further benefits
through that claim.”
State Farm’s claim file reflects the following note dated
December 1, 2014: “There is a question as to whether [Case] can
‘opt out’ of [workers’ compensation] benefits in order to pursue
UM [benefits] solely through [State Farm]. . . . We have a ‘final’
[workers’ compensation] lien amount; however, [Case] withdrew
her [workers’ compensation] claim after she retained counsel so
the [workers’ compensation] carrier paid only for initial
treatment.” On December 11, 2014, Phillips provided State Farm
with another copy of the lien he had given to State Farm.
In a letter to Phillips dated March 11, 2015, after
discussing Case’s deposition, State Farm’s counsel stated:

fn. 4.) As Case has not reasserted her objections on appeal, she
has forfeited any claim of error regarding the implied rulings.
(Ibid.)
17
“[Case’s] worker[s’] compensation claim must be completely
resolved before State Farm can complete its evaluation of her
claim. [¶] . . . [¶] If her claim is still pending, we will have to
wait for it to be concluded before State Farm can evaluate the
claim. If the claim has been completely resolved, State Farm
should be provided with documentation that states what
worker[s’] compensation benefits she received as a result of that
claim, so that the evaluation can take place.”
On March 13, 2015, Phillips responded that four months
earlier, State Farm obtained satisfactory proof that the workers’
compensation claim was completely resolved, pointing to the
State Farm claim specialist’s November 6, 2014 e-mail. Phillips
stated: “The fact that [Case]’s workers[’] comp claim has resolved
is beyond dispute. Any delay in resolving this [UM] claim on the
basis of an ‘open’ workers[’] comp claim is therefore completely
without merit.”
On April 9, 2015, Phillips provided State Farm with
another copy of Case’s workers’ compensation lien itemization
and asked: “Please confirm that this satisfies your need to verify
the ‘final’ status of [Case’s] workers’ compensation claim.”
Phillips received no response.
From March through mid-July 2015, State Farm made no
requests for documentation establishing the medical expenses she
had incurred or the status of her workers’ compensation claim.
On July 23, 2015, at State Farm’s request, Case submitted her
bills for previous medical services to “workers[’] compensation” in
order to determine whether they were payable through the
workers’ compensation system.
D. Analysis
We conclude that the trial court did not err in granting
summary judgment. At the outset, we observe that our inquiry
18
has a narrow scope. Because Case neither discusses her claim for
breach of the insurance contract nor suggests that there are
unpaid policy benefits, she has forfeited any contention of error
that summary adjudication was improperly granted with respect
to that claim. (Wall Street Network, Ltd. v. New York Times Co.
(2008) 164 Cal.App.4th 1171, 1177; Yu v. Signet Bank/Virginia
(1999) 69 Cal.App.4th 1377, 1398; Reyes v. Kosha (1998) 65
Cal.App.4th 451, 466, fn. 6.) In connection with the bad faith
claim, Case contends only that State Farm improperly declined to
pay UM benefits -- including noneconomic damages -- prior to a
determination regarding the extent to which her medical
expenses were payable through the workers’ compensation
system; she raises no contention that State Farm improperly
delayed arbitration under subdivision (f) of section 11580.2. Our
inquiry thus focuses primarily on whether State Farm acted
unreasonably in applying the key loss-payable-reduction policy
provision authorized by subdivision (h)(1) of section 11580.2. As
explained below, Case has established no triable issues regarding
bad faith.5

5
In seeking summary adjudication on the bad faith claim,
State Farm relied primarily on Rangel, which placed special
emphasis on the arbitration stay provisions in section 11580.2,
subdivision (f). However, we may affirm the summary
adjudication on a theory not relied upon by the trial court,
provided that the parties have had an adequate opportunity to
address that theory. (Byars v. SCME Mortgage Bankers, Inc.
(2003) 109 Cal.App.4th 1134, 1147; Bains v. Moores (2009) 172
Cal.App.4th 445, 471, fn. 39; Code Civ. Proc., 437c, subd. (m)(2).)
That requirement is satisfied here. Before the trial court
and on appeal, State Farm asserted that the loss-payablereduction
policy provision and subdivision (h)(1) of section
19
1. Loss-Payable-Reduction Policy Provision
We begin by examining the policy to determine the extent
to which it permitted State Farm to reduce UM benefits to reflect
medical expenses included in her July 2014 demand for which she
had not asserted a workers’ compensation claim. We find
guidance from Bailey v. Interinsurance Exchange (1975) 49
Cal.App.3d 399 (Bailey).
In Bailey, supra, 49 Cal.App.3d at pages 401-402, the
plaintiff’s automobile policy provided coverage for medical
expenses, subject to an exclusion stating: “This policy does not
apply to bodily injury . . . if benefits therefor are in whole or in
part either payable or required to be provided under any
Work[ers’] Compensation Law.” After the plaintiff was injured in
a car accident in the course of his employment, he did not apply
for workers’ compensation benefits. (Id. at p. 402.) When the
insurer declined to pay policy benefits for medical expenses, the
plaintiff asserted a claim for breach of insurance contract. (See
id. at p. 404.) Relying on the policy exclusion, the trial court
found that the claim failed. (Id. at p. 402.) Affirming, the
appellate court concluded that although the term “‘payable’” in
the exclusion was potentially ambiguous in isolation, the
exclusion’s meaning was clear: “[T]he additional language ‘or
required to be provided under any work[ers’] compensation law’
. . . is susceptible to only one reasonable and logical

11580.2 support summary adjudication on the bad faith claim,
and Case presented her views regarding that theory in her reply
brief. (Bains v. Moores, supra, 172 Cal.App.4th at p. 471, fn. 39.)
We therefore conclude that the alternative theory is properly
available to us as a ground for affirming summary judgment.
(See Byars v. SCME Mortgage Bankers, Inc., supra, 109
Cal.App.4th at p. 1147; Bains v. Moores, supra, at p. 471, fn. 39.)
20
interpretation. That interpretation is that the policy excludes
coverage for an injury for which the insured is eligible for
work[ers’] compensation benefits.” (Id. at p. 404.)
We conclude that the loss-payable-reduction provision in
Case’s policy authorized State Farm to reduce UM benefits to
reflect certain medical expenses potentially included in her July
2014 demand, namely, past and future expenses for injuryrelated
treatments payable through -- but not submitted to -- the
workers’ compensation system. That provision states that the
UM benefit “shall be reduced by any amount paid or payable
to . . . the insured [¶] . . . [¶] . . . under any workers’ compensation,
disability benefits, or similar law.” (Italics omitted and added.)
Here, the term “payable” necessarily encompasses medical
expenses eligible for payment through the workers’ compensation
system, regardless of whether the insured has submitted a claim
for them. That conclusion flows from the italicized language,
viewed in conjunction with the related policy provision expressly
denying coverage for bodily injury “to the extent [such coverage
would] benefit[] [¶] . . . any workers’ compensation . . . insurance
company.” (Capitalization omitted.) The italicized language and
accompanying policy provision -- like the additional language in
Bailey -- supports only one reasonable interpretation, namely,
that the provision applied to medical expenses eligible for
payment as workers’ compensation benefits. That interpretation
comports with the legislative intent underlying subdivision (h)(1)
of section 11580.2, which authorizes the provision. (Rangel,
supra, 4 Cal.4th at p. 14; Waggaman, supra, 16 Cal.App.3d at p.
579.)
Our conclusion receives additional support from that
statute, as it provides that the loss payable may be reduced by
“the present value of all amounts payable” under the workers’
21
compensation law. (§ 11580.2, subd. (h)(1).) Although the losspayable-reduction
provision in Case’s policy does not qualify the
term “payable” by the phrase “the present value of all amounts,”
that statutory restriction is necessarily implied. (Mid-Century
Inc. Co. v. Gardner (1992) 9 Cal.App.4th 1205, 1219-1220 [UM
coverage provisions less favorable to insured than set forth in
section 11580.2 are not enforceable].) The phrase “the present
value of all amounts payable,” by its plain meaning, encompasses
all determinable workers’ compensation benefits for which the
insured is eligible, including benefits that will or can be paid in
the future.6
6 We recognize that under exceptional circumstances not
presented here, the application of the term “payable” in a losspayable-reduction
policy provision may be subject to uncertainty,
in view of the statutory requirement that the “payable” amounts
of workers’ compensation benefits must be reduced to present
value. In Waggaman, the pertinent provision expressly included
that requirement. (Waggaman, supra, 16 Cal.App.3d at pp. 574-
575.) After the plaintiff sought UM benefits and workers’
compensation benefits, including permanent disability indemnity,
the plaintiff and his automobile insured submitted the UM claim
to an arbitrator, who declined to value the then-unresolved
permanent disability award for purposes of reducing the UM
benefits. (Id. at pp. 573-574.) The appellate court concluded that
the arbitrator did not err, reasoning that under the
circumstances, the meaning of the phrase “‘the present value of
all amounts payable’” was ambiguous, and thus properly
construed unfavorably to the insurer. (Id. at pp. 576-578.) The
court explained: “It is virtually impossible to arrive at an
accurate amount which will be paid under permanent disability
awards of work[ers’] compensation when the insured is not yet
ratable for permanent disability.” (Id. at p. 576.)
22
The provision in Case’s policy thus required that the loss
payable be reduced by the determinable medical expenses eligible
for payment through the workers’ compensation system,
regardless of whether Case submitted a claim for them. For that
reason, State Farm could not ascertain the loss payable until the
amount of such expenses was known to State Farm. Accordingly,
the provision authorized State Farm to request a determination
regarding the extent to which her past and future medical
expenses could be paid through that system.
2. No Triable Issues Regarding Bad Faith
The remaining question is whether State Farm acted
reasonably in delaying payment of UM benefits, including
benefits for noneconomic damages. In view of our conclusion
regarding the meaning of the loss-payable-reduction provision,
the resolution of that question hinges on whether State Farm
acted reasonably in connection with its request for a
determination of the extent to which Case’s medical expenses
were eligible for payment through the workers’ compensation
system. That is because State Farm’s maximum liability for all
UM benefits was determined by the amount of the eligible
expenses. As explained in Rangel, under the loss-payable-

The potential ambiguity identified in Waggaman is not
pertinent here. Waggaman establishes only that a loss-payablereduction
provision is ambiguous when the “payable” amounts of
future workers’ compensation benefits must be determined at a
time when it is impossible to value them. As we discuss further
(see pt. D.2., post), those circumstances are not presented here.
Case claimed medical treatment expenses -- rather than a
permanent disability -- and the evidence otherwise showed that
her eligibility for workers’ compensation benefits was
determinable through inquiries to Gallagher Bassett.
23
reduction policy provision, the insurer is liable only for the
“excess, if any, of the policy limit over the workers’ compensation
benefits,” that is, the difference between the policy limits and the
applicable workers’ compensation benefits. (Rangel, supra, 4
Cal.4th at p. 17.) Accordingly, as the amount of the medical
expenses eligible for payment through the workers’ compensation
system increased, State Farm’s liability for UM benefits
diminished.
In our view, no triable issues exist regarding whether State
Farm acted reasonably in seeking an eligibility determination.
Generally, the reasonableness of an insurer’s conduct “must be
evaluated in light of the totality of the circumstances surrounding
its actions.” (Wilson, supra, 42 Cal.4th at p. 723.) Thus, the
adequacy of the insurer’s claims handling is properly assessed in
light of conduct by the insured delaying resolution of a claim.
(Blake v. Aetna Life Ins. Co. (1979) 99 Cal.App.3d 901, 905-906.)
The record establishes that Case’s July 2014 demand
sought approximately $40,000 in medical expenses, but did not
mention her workers’ compensation claim. The demand included
$25,000 for future epidural injections to treat Case’s pain. In
August 2014, State Farm informed attorney Phillips that it
needed “WC information.” The next month, Phillips submitted
documentation showing the existence of a workers’ compensation
lien for $1,873.72.
In October 2014, State Farm asked Phillips to provide a
workers’ compensation “final” lien and breakdown, and also asked
Gallagher Bassett to verify “the status of [the] claim and notice of
final lien.” After Phillips submitted to State Farm what he
described as “the workers’ comp lien,” State Farm requested
confirmation that it was a final lien.
24
In early November 2014, a State Farm claim specialist
informed Phillips that Gallagher Bassett had “confirmed final
lien” and that she was “waiting for authority on it.” Shortly
afterward, Case submitted her demand for arbitration, supported
by Phillips’s declaration stating that Case expected no additional
workers’ compensation benefits.
In a letter dated December 4, 2014, in response to the
demand for arbitration, State Farm observed that Case appeared
to have withdrawn her workers’ compensation claim after having
received only $2,164.99 in benefits, even though she asserted the
existence of approximately $40,000 in past and future medical
expenses. After pointing to the statutory and contractual
provisions authorizing the reduction of UM benefits to reflect
paid and payable workers’ compensation benefits, State Farm
stated: “[A] determination must be made to what extent
worker[s’] compensation benefits continue to be owed to you prior
to State Farm’s ability to determine what is owed from
your . . . policy.”
During prearbitration discovery in February 2015, Case
testified that she continued to suffer pain from her injuries. At
that time, State Farm again informed Case that her workers’
compensation claim “must be completely resolved before State
Farm can complete its evaluation of her claim.” The following
month, when Phillips requested a final lien balance, Gallagher
Bassett responded that it could provide only a printout showing
that $2,164.99 had been paid to date. Gallagher Bassett
explained: “Since [Case] was never discharged from care under
the workers’ compensation system she may return at a later date
and seek additional medical treatment under this claim . . . .”
In July 2015, Phillips informed State Farm that Case’s
medical condition was stationary, that she had received no
25
medical treatment since October 2013, and that she needed no
further treatment. At State Farm’s request, Case also submitted
her bills for past medical services to Gallagher Bassett in order to
determine whether they were payable through the workers’
compensation system. In September 2015, Gallagher Bassett
determined that Case’s past medical expenses were not
recoverable through that system. In November 2015, State Farm
settled Case’s claim.
On this record, there are no triable issues regarding the
reasonableness of State Farm’s resolution of Case’s claim for UM
benefits. When Case submitted her July 2014 demand, State
Farm promptly requested information regarding her workers’
compensation claim. Although a dispute arose in November 2014
when Case provided evidence of a purported final lien and denied
the likelihood of receiving additional workers’ compensation
benefits, the dispute was “genuine,” as State Farm had reason to
believe that Case’s medical expenses were eligible for payment
through her workers’ compensation claim, which she had
withdrawn. (Wilson, supra, 42 Cal.4th at p. 723 [dispute is
genuine when insurer advances position “in good faith and on
reasonable grounds”].) In early December 2014, State Farm
requested a determination regarding the extent to which she was
“owed” workers’ compensation benefits for her past and future
medical expenses. However, Phillips first asked Bassett
Gallagher whether Case’s past medical expenses were payable
through the workers’ compensation system in July 2015, when he
also disclosed to State Farm that Case had completed her medical
treatment. The facts crucial to establishing the loss payable --
namely, the extent to which Case was entitled to worker’s
compensation benefits -- were fully known by State Farm only in
September 2015, when Bassett Gallagher made the requested
26
determination. Because State Farm resolved Case’s claim shortly
after that determination, no triable issues exist regarding bad
faith.
3. Case’s Contentions
Case’s principal contentions rely on regulations requiring
insurers to provide explanations of delays in accepting claims,
and pay accepted claims promptly. (Cal. Code Regs., tit. 10, §
2695.7, subds. (e), (h).) Case maintains that under those
regulations, State Farm was not permitted to delay payment of
UM benefits pending a determination of her medical expenses
eligible for payment through the workers’ compensation system.
We disagree. The regulations in question state: “No insurer shall
delay or deny settlement of a first party claim on the basis that
responsibility for payment should be assumed by others, except as
may otherwise be provided by policy provisions, statutes or
regulations, including those pertaining to coordination of
benefits.” (Cal. Code Regs., tit. 10, § 2695.7, subd.(e), italics
added.) In view of the italicized language, State Farm did not
contravene the regulations, as the loss-payable-reduction policy
provision and Insurance Code section 11580.2, subdivision (h)(1)
expressly authorized the reduction of UM benefits to reflect
“payable” workers’ compensation benefits.
Case further contends that as early as November 2014,
when she submitted her request for arbitration, State Farm was
obliged to settle her claim, or at minimum, pay the noneconomic
damages she demanded. (Cal. Code Regs., tit. 10, § 2695.7, subd.
(h.)7 She argues that because the declaration from Phillips
7
California Code of Regulations, title 10, section 2695.7
provides in pertinent part: “(h) Upon acceptance of the claim in
whole or in part . . . , every insurer . . . shall immediately, but in
27
accompanying her request informed State Farm that she had
concluded her medical treatments, State Farm then knew that
the maximum potential reduction of the UM benefits was
determined solely by Case’s “previously incurred medical bills.”
Case thus maintains that State Farm was in a position to
calculate the maximum potential reduction and pay all
undisputed claimed benefits within the adjusted coverage limit.
Case’s contention fails, as Phillips’s declaration is not
plausibly viewed as stating that Case had concluded her medical
treatment. Case’s request for arbitration expressly referred to
her July 2014 demand for UM benefits, which included a claim
for $25,500 in future medical expenses. Phillips’s declaration
stated: “[Case’s] workers[’] compensation claim has settled on all
issues reasonably contemplated to be determined in that claim.
[Case] has no expectation that she will receive further benefits
through that claim.” As reflected in State Farm’s December 4,
2014 response to the arbitration request, State Farm reasonably
understood Phillips to be affirming nothing more than that Case
had withdrawn her workers’ compensation claim. The record
otherwise discloses that not until July 2015 did Phillips expressly
inform State Farm that Case had concluded her medical
treatment.8

no event more than thirty (30) calendar days later, tender
payment or otherwise take action to perform its claim obligation.”
8
The decisions upon which Case relies are distinguishable,
as they involved insurers who engaged in bad faith by declining
to pay policy benefits for wholly meritless reasons. (Neal v.
Farmers Ins. Exchange (1978) 21 Cal.3d 910, 921 [insurer
engaged in bad faith by failing to pay portion of UM benefits not
subject to any dispute]; Beck v. State Farm Mut. Auto. Ins. Co.
28
In a related contention, Case maintains that State Farm
failed to explain why it was delaying payment of her UM benefits
and how she could secure the benefits. However, State Farm’s
December 4, 2014 response stated (1) that Case was claiming past
and future medical expenses not paid through her workers’
compensation claim, (2) that she appeared to have withdrawn
that claim in order to submit those expenses solely to State Farm
for payment, (3) that the policy and section 11580.2 authorized
the reduction of UM benefits to reflect “payable” workers’
compensation benefits, and (4) that there must be a
determination of the workers’ compensation benefits “owed” to
Case. The response thus provided an adequate explanation for

(1976) 54 Cal.App.3d 347, 355 [insurer engaged in bad faith by
withholding UM benefits on basis of “patently untenable”
defense].) In contrast, the record here discloses a reasonable
basis for State Farm’s delay in paying the UM benefits. Case’s
July 2014 demand for approximately $40,000 in past and future
medical expenses, coupled with her deposition testimony in early
2015 that she continued to suffer pain from her injuries,
precluded an estimate of the reduction in the loss payable under
the UM provision of the policy.
Case’s reply brief offers an alternative basis for her
contention that Phillip’s declaration triggered State Farm’s
obligation to pay UM benefits. She argues (1) that under
subdivision (f) of section 11580.2, State Farm was required to pay
UM benefits as soon as Case’s condition was “stationary and
ratable,” and (2) that Phillips’s declaration established that
Case’s condition was then “stationary and ratable.” We reject the
argument, as the statute identifies the existence of a stationary
and ratable condition as the threshold requirement for
arbitration -- not the obligation to pay UM benefits -- and
Phillips’s declaration is not reasonably viewed as referring to that
requirement.
29
State Farm’s conduct. Furthermore, although the response did
not expressly ask Case to submit a workers’ compensation claim
for her medical expenses, the response’s reference to her
withdrawn workers’ compensation claim unmistakably suggested
that course of action.
Case also contends that Gallagher Bassett’s September
2015 determination that Case’s past medical expenses were not
eligible for payment through the workers’ compensation system
conclusively established that State Farm engaged in bad faith.
According to Gallagher Bassett, because Case had not been
treated within that system, her treatment was “considered selfprocured
and [was] not reimbursable.” Case argues: “Since the
bills [Case] incurred outside the WC system were never payable
to begin with, [State Farm’s] insistence that [Case] submit these
bills to her [workers’ compensation] carrier for payment
consideration before it would pay UM benefits is a position that
has no legal basis whatsoever. [State Farm] asserted this
position unreasonably, and consequently engaged in bad faith.”
Gallagher Bassett’s determination does not establish State
Farm’s bad faith. As explained above (see pt. D.2., ante), the
existence of bad faith hinges on when State Farm knew the
determination of Case’s eligibility for workers’ compensation
benefits, not on the determination itself. The record discloses
only that State Farm resolved Case’s promptly after learning of
her ineligibility for future Workers’ Compensation benefits. In
sum, Case has demonstrated no triable issues precluding
summary judgment on her complaint.
In view of our conclusion regarding summary adjudication
on the bad faith claim, summary adjudication was also proper

Outcome: The judgment is affirmed. State Farm is awarded its costs
on appeal.

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