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January 11, 2002 - Letter to a Physician Constitutes Possible Proof of Insurer Bad Faith

A suggestive letter to a doctor who was hired to conduct an independent medical exam is potential evidence of an insurer's bad faith, a federal judge ruled. In Atiyeh v. Liberty Mutual Fire Insurance Co., U.S. District Judge Bruce W. Kauffman found that it made no difference that an outside contractor had authored the allegedly suggestive letter because the insurer received a copy and was aware of it when it cut off the insured's lost wages benefits. The letter was sent by a representative from Concentra Medical Examinations to Dr. M. Barry Lipson and asked that, in conducting his IME, he "address return to work issues" for Huda Atiyeh who was claiming that she was disabled after a car accident.

Atiyeh claims the letter ended with two strongly suggestive sentences that each carried an exclamation point: "Please see enclosed pictures of claimant's car depicting very minimal damage! Claimant has been out on disability for nine months now!" Judge Kauffman agreed that the letter supported Atiyeh's bad faith claim. "Plaintiff has demonstrated that a genuine issue of material fact exists as to whether the IME was a reasonable basis for defendant to discontinue plaintiff's wage loss benefits, because Dr. Lipson may have been unduly influenced by the statements on the Concentra referral letter," Kauffman wrote.

And since a Liberty Mutual claims representative received the letter, Kauffman found that "there is also a genuine issue of material fact as to whether defendant knew or recklessly disregarded the risk that the IME did not constitute a reasonable basis for defendant's decision." Atiyeh's auto policy provided wage loss benefits of up to $50,000. She submitted a claim in March 1999 and was paid more than $23,000 by January 2000.

Her treating doctor diagnosed a herniated disc in her spinal cord and certified her as disabled for nine months. When the certified period ended, Liberty Mutual claims representative Susan Koval decided to request an IME and gave Atiyeh's file to Concentra Medical which in turn mailed the letter to Lipson.

Lipson conducted the IME in December 1999 and later said in a report that Atiyeh "is not in any way impaired or disabled or requires any treatment, as a result of the motor vehicle accident. She is capable of performing the same activities and job requirements that she was able to carry out, as of 3/19/99." Liberty Mutual quickly cut off Atiyeh's benefits.

Atiyeh later submitted to a "functional capacity evaluation" by Don Evans who reported that she could return to work part time if she were provided breaks and accommodations. Her own doctor also said in February 2000 that Atiyeh could return to "light duty sedentary work on a part-time basis." In the suit, Atiyeh's lawyer, Edith C. Rysdyk of Scherline & Associates, argued that Liberty Mutual engaged in bad faith conduct when it refused to pay at least partial wage loss benefits.

Liberty Mutual's lawyers, William C. Foster and Steven Chung of Kelly McLaughlin & Foster, argued that the IME gave the insurer a reasonable basis for discontinuing the wage loss benefits. But Rysdyk argued that the IME wasn't reliable because the Concentra referral letter "suggests to the doctor what the desired opinion should state."

She also argued that it was improper for the doctor to be given photographs of Atiyeh's car without also providing property damage estimates that would better inform him as to the severity of the accident. Judge Kauffman sided entirely with Rysdyk, finding that a jury should decide if Liberty Mutual acted in bad faith.

Looking at the entire picture, Kauffman said, Atiyeh could argue to the jury that the insurer knew she was able to return to work only on a part-time basis, but nonetheless denied all wage loss benefits. "[Claims rep] Koval admitted that if a claimant has coverage for wage loss benefits and a doctor indicates that the claimant can only work part time, [Liberty Mutual] pays partial benefits. ... Koval further admitted that, following the decision to terminate benefits, she never revisited the issue as to whether defendant should have reinstated wage loss benefits - whether full or partial - to plaintiff based on upon medical records," Kauffman wrote. "A reasonable jury could find that defendant knew or recklessly disregarded its lack of a reasonable basis for not paying partial wage loss benefits, particularly if, as defendant argues in its summary judgment motion, [the] decision to discontinue benefits was supported by reports indicating that plaintiff was capable of returning to work on a part-time basis," he wrote.

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