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In re Schultz

Supreme Court of Colorado, En Banc

November 5, 2018

In Re Charissa Schultz Plaintiff
v.
GEICO Casualty Company. Defendant

          Original Proceeding Pursuant to C.A.R. 21 Weld County District Court Case No. 17CV30881 Honorable Marcelo Kopcow, Judge

          Attorneys for Plaintiff: Speights & Worrich, LLC David Roth Jennifer A. Milne Denver, Colorado

          Attorneys for Defendant: Deisch, Marion & Klaus, P.C. Gregory K. Falls Denver, Colorado

          OPINION

          GABRIEL JUSTICE

         ¶1 In this original proceeding pursuant to C.A.R. 21, we review the district court's order requiring the plaintiff-petitioner, Charissa Schultz, to undergo an independent medical examination ("IME"), pursuant to C.R.C.P. 35, at the request of the defendant-respondent GEICO Casualty Company. We issued a rule to show cause and now make the rule absolute.

         ¶2 In this action, Schultz alleges that GEICO breached its duty of good faith and fair dealing and violated its statutory obligation to evaluate and pay her insurance claim without unreasonable delay. GEICO denies liability, asserting that because the question of medical causation was "fairly debatable" at the time it made its coverage decision, it did not act unreasonably or in bad faith. To establish these defenses, GEICO sought an IME of Schultz, and over Schultz's objection, the district court granted that request.

         ¶3 We now conclude that GEICO's conduct must be evaluated based on the evidence before it when it made its coverage decision and that, therefore, GEICO is not entitled to create new evidence in order to try to support its earlier coverage decision. Accordingly, we further conclude that the district court abused its discretion when it ordered Schultz to undergo an IME over three years after the original accident that precipitated this case and a year and a half after GEICO had made the coverage decision at issue.

         I. Facts and Procedural Background

         ¶4 In February 2015, Schultz and another driver collided when the other driver failed to stop at a stop sign. Thereafter, Schultz underwent multiple knee replacement surgeries.

         ¶5 The other driver's insurance company settled with Schultz for its $25, 000 policy limit, and Schultz then made a demand for uninsured/underinsured motorist ("UM/UIM") benefits under her GEICO policy, which also had a $25, 000 policy limit. In connection with this demand, Schultz provided GEICO with medical authorizations to allow it to obtain the medical records associated with her claim.

         ¶6 In April 2017, after months of correspondence and apparent review of an MRI performed on Schultz in April 2015, GEICO offered Schultz its full policy limit, and it did so without requesting that she undergo an IME. Indeed, GEICO's claim logs reveal that at the time GEICO decided to offer Schultz its policy limits, it "concede[d] peer review wouldn't be necessary," indicating an affirmative decision not to request an IME.

         ¶7 A few months later, Schultz filed the present lawsuit asserting claims for bad faith breach of an insurance contract and, pursuant to sections 10-3-1115 and 10-3-1116, C.R.S. (2018), unreasonable delay in the payment of covered benefits. GEICO denied liability, disputing the extent and cause of Schultz's claimed injuries and asserting that causation surrounding the knee replacement surgeries was "fairly debatable" because Schultz had preexisting arthritis, which GEICO claimed may independently have necessitated her surgeries.

         ¶8 As part of its effort to support these defenses, GEICO requested that Schultz undergo a medical examination pursuant to C.R.C.P. 35. Schultz objected, arguing that C.R.C.P. 35 was inapplicable because her physical condition was no longer in controversy. The parties attended a hearing before the district court to resolve this question.

         ¶9 At the hearing, GEICO contended that it had decided to pay Schultz's UM/UIM claim even though it had recognized that the question of causation was unresolved. In light of Schultz's current claims, however, GEICO argued that causation was again a live issue because "[y]ou can't delay a benefit that was never owed." GEICO thus asserted that it was entitled to explore the causation issue through, among other means, an IME of Schultz. Schultz disagreed, asserting that the reasonableness of GEICO's conduct had to be evaluated based on the information that ...


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