When in Doubt – Consider an IME

Independent Medical Examinations (IMEs) are a necessary adjunctive procedure that is recognized in most states through the judicial rules of civil procedure, and can be required by insurance companies according to the terms of their insurance policies. An IME presents the opportunity to have a second opinion from an independent doctor, which can be of significant assistance in evaluating the insured’s medical condition for purposes of medical payments coverage, uninsured and underinsured motorist coverage and can also be used to support the insurer’s claims decisions. A case in point is the Alaska Supreme Court’s decision in Lockwood v. GEICO General Ins. Co., 323 P.3d 691 (2014).

In Lockwood, a drunk driver rear-ended the insured while she was stopped at a red light. The accident was entirely the responsibility of the drunk driver. The insured went to the emergency room complaining of tenderness in her neck the night of the accident. The emergency room doctor diagnosed the insured with a cervical spine injury and strain of the muscles near the neck. However, x-rays of the insured’s neck showed no spinal or “soft tissue” abnormalities. The injury form the insured filled out at the hospital reported that she was experiencing a headache, dizziness, and pain in her left wrist, neck and back.

There were two categories of coverage available under the insured’s policy: (1) medical payments coverage, and (2) uninsured motorist coverage. The UM coverage set forth several conditions for receipt of payment, including notice to the insurer, written proof of the claim (under oath, if required), and the willingness of the insured to submit to an IME if required.

The day after the accident, the insured went to a local chiropractor (who had treated her before) who diagnosed that the insured suffered neck and shoulder muscle strains as a result of the accident. Although the chiropractor ordered an MRI and took x-rays, both the MRI and the x-rays were normal. The motor vehicle accident occurred on May 21, 2007. The insurance company sent a letter to the insured’s chiropractor in July 2007 requesting a complete billing history and all previous treatment records for the insured. This request for information was fulfilled by the chiropractor within a month. The chiropractic records that were received indicated that the insured had chiropractic treatment before the accident for a prior back injury, but that the last time the insured had been seen by the chiropractor was five months before the accident. Those records also contained a chart note from an orthopedic surgeon, who determined that the insured was medically stable in December 2006. Although the chiropractor released the insured to work on July 25, 2007, she continued to treat with the chiropractor for over a year after the accident.

By August 2007, approximately 12 weeks post-accident, the insured exhausted her medical payments coverage of $10,000. At that point, the insured made a UM claim. The insured was seeking payment of her medical costs above the medical payments coverage through the portal of the UM coverage. However, GEICO did not pay any additional medical bills through the UM coverage. Instead, the insured paid for approximately $1,000 of additional medical expenses and then took out a loan for another $5,000 to cover the rest of the treatment. Eventually the insured stopped treatment because of the cost.

The insured brought a lawsuit against GEICO, alleging breach of contract and bad faith. The lawsuit was settled three years after the accident during the litigation. Initially, GEICO offered $750 of UM benefits. Apparently, this offer was to pay the cost of the insured’s son’s daycare while the insured was receiving medical treatment. The offer was declined. Next, GEICO refused to make partial payments of medical bills outside of a global settlement of the UM claim in its totality. In response, the insured counteroffered for the policy limit of $50,000. One month later the insurer responded with a $12,000 counteroffer.

Because of the lawsuit filing, the insurer requested, for the first time, an IME, nearly three years after the accident. The IME doctor concluded that the insured had experienced “mild discomfort” in her lower back, and diagnosed neck muscle and ligament strain or sprain, as well as lower back muscle or ligament strain. The doctor could not find any objective evidence to support the insured’s contention that she hurt her back in the accident. The IME doctor also concluded that the soft tissue injuries sustained by the insured in the accident had resolved within six to eight weeks following the date of the accident. Two months following the IME, the insurer increased its settlement offer to $25,000. The settlement offer was accepted with the settlement agreement reserving to the insured the right to bring a bad faith lawsuit.

The trial court granted summary judgment in favor of GEICO on the bad faith claim, finding that the facts did not support a conclusion that the insurer lacked a reasonable basis in failing to pay the demanded settlement amounts. The Alaska Supreme Court disagreed and reversed.

Turning to GEICO’s decision not to pay any of the insured’s medical bills after exhaustion of the medical payments coverage without a total UM settlement, the Supreme Court found that a material issue of fact existed as to whether the insurer’s decision was unconnected to the insured’s actual medical condition. The Court found: “If [the insurer] had legitimate concerns about the extent of [the insured’s] injuries, an inference can be drawn that a reasonable insurer would advise [the insured] of those concerns with specificity and either ask [the insured] for more medical information or ask for an Independent Medical Examination. [The insurer] took no such actions at the time it demanded a global settlement. This could raise the question whether [the insurer’s] decision to condition additional medical payments on a global settlement actually was connected to Lockwood’s medical situation in the accident.” 323 P.3d at 698.

Next, the Alaska Supreme Court noted that the insurer had declined to make any further attempts to reach a settlement “based solely on its unsubstantiated doubts about the necessity of medical care for injuries sustained in the accident.” Although the insured had presented evidence in her deposition, affidavit and medical records, and submitted medical records that she had experienced ongoing pain as a result of the accident, the insurer responded by noting that the insured had a prior back injury. The insurer also expressed concern that the insured’s medical bills were “high” in the context of the accident. “But other than asserting these doubts, GEICO did nothing to reduce the alleged medical uncertainty about the cause of [the insured’s] pain which would clarify the necessity of further treatment from the chiropractor.”

As an example, the Court noted that GEICO did not request a second medical opinion, or an IME until 2010, approximately three years after it stopped paying the insured’s medical bills under the medical payments coverage. The Court also noted that the insurer’s claims staff did not cite a medical basis of any kind to call into question the chiropractor’s treatment for the insured’s injuries in 2007. The insurer did not seek to use the policy’s voluntary arbitration clause to resolve the issue of medical uncertainty. The insurer did not inform the insured what the insured would have to do to resolve the medical uncertainties to the insurer’s satisfaction. Given these apparent failures to investigate the medical issues, the Court reversed summary judgment that had been entered in favor of the insurer.

In many cases involving a prior back injury with associated chiropractic care, a question can arise as to whether the current complaints of the insured are related to the prior injury. The fact of prior injury with associated medical care raises a legitimate concern about the extent of medical causation for the injuries. According to the Alaska Supreme Court, a reasonable insurer would advise the insured of those concerns with specificity, and either request more medication information or ask for an IME. Where an IME is requested, it can provide substantial assistance to the adjuster in resolving the adjuster’s concerns regarding medical causation. There is no requirement that an IME be utilized in all cases where there is a question regarding the extent of injury. Nevertheless, an IME can solidify the adjuster’s concerns about the excessiveness regarding the utilization of medical care and its cost. The IME can also resolve the question of whether the prior injury had resolved before the subject motor vehicle accident occurred.

The takeaway from the Alaska Supreme Court’s decision in Lockwood, is that an IME can obviate a multitude of questions regarding the insurer’s evaluation and claim value. In the context of bad faith claims, the focus of the inquiry is on the state of mind of the insurer and its claim adjuster. Where an adjuster has doubt about medical causation, or the current medical condition of the insured, an IME can resolve those doubts and form the basis upon which the adjuster pays the claim, or increases the last offer from the insurer. On the other hand, where the IME supports the adjuster’s belief that medical causation is questionable, or what the value of reasonable medical care is for the injury, an IME can inoculate the adjuster concerns, provided that the adjuster reasonably relies upon the information contained in the IME.