Cavallo v. Phoenix Health Plans, Inc. (D2 2.23.21)

Bad faith claims have recurring themes and evidence on both sides. This appeal is from a jury verdict in favor of a health insurer. The insured suffered from multiple sclerosis and purchased a health care plan in 2015. Before and after he purchased the plan, he received infusion treatments with a “controversial” drug. His medical provider submitted an authorization request and the insurer incorrectly stated that the provider was out-of-network and denied the request. After several weeks of back-and-forth exchanges between the insured, his provider, and the insurer, the infusion treatment was later approved. The insured argued the delay caused a significant relapse, and sued the insurer for bad faith. The defense argued the initial denial was a good-faith mistake; the medical provider cancelled the prior authorization and failed to provide information necessary to initiate and timely process the claim; and, the insured could have accepted a low-cost dose directly from his provider that would have cost approximately $150. Jury agreed and found for the insurer. The insured challenged several jury instructions and evidentiary rulings. The court of appeals held the jury may be instructed on contract defenses including waiver (the waiver defense was focused on the provider cancelling the authorization request). Although there is no “comparative bad faith,” whether the insured breached the contract or there are other contract defenses, such defenses may be considered by the jury when deciding whether the insurer’s conduct was reasonable. A closely related issue follows. The insured challenged a mitigation of damages instruction, but because the jury returned a defense verdict, the court did not consider it. It did, however, consider the insured’s negligent conduct in a footnote stating “UCATA may permit a defendant’s intentional conduct (bad faith) to be compared to a plaintiff’s negligence.” Thus, while there is no “comparative bad faith” because an insured cannot commit bad faith, the court’s footnote suggests comparative fault may still be in play. Less interesting are evidentiary challenges. One involving call logs without foundation, and the second, the inadmissibility of coverage guides from another plan for a different year. All of which were properly excluded.

This entry was posted in Uncategorized. Bookmark the permalink.