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Arizona District Court Holds “Reasonable” Medical Expenses Are Amounts Accepted by Providers as Payment in Full Rather Than Billed Amounts

Arizona District Court Holds “Reasonable” Medical Expenses Are Amounts Accepted by Providers as Payment in Full Rather Than Billed Amounts

The Holding

In Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113 (D. Ariz. Apr. 28, 2020), a putative breach of contract and insurance bad faith class action arising from a MedPay claim, the Arizona District Court held the phrase “reasonable expenses incurred for necessary medical services’ are those expenses which the healthcare provider accepts as payment in full.”

The Takeaways

  • If an insurer’s policy limits MedPay benefits, or perhaps UM or UIM benefits, to “reasonable medical expenses,” then the insurer should determine whether an insured’s medical providers contracted to accept less than the amount billed as payment in full to determine the benefits owed.
  • Because Arizona’s model personal injury damages instruction, RAJI Personal Injury Damages 1 (Measure of Damages), limits Arizona personal injury plaintiffs’ recovery of medical expenses to “reasonable expenses of necessary medical care,” some Arizona insurers and personal injury defendants may begin to cite Jimenez and argue the recovery of medical expenses by Arizona personal injury plaintiffs and insureds should be limited to the amounts accepted by medical providers as payment in full rather than billed amounts.

The Facts

In Jimenez, the Policy stated the Insurer would pay MedPay benefits for “reasonable expenses incurred for medical services” and the Insurer would “determine whether the expenses for medical services are reasonable.” The Insurer had contracted with an entity that entered “Provider Agreements” with medical providers that agreed to deliver medical services at specific contract rates. The Insurer had also contracted with another entity that made the Insurer part of a Virtual Provider Network in which a network of medical providers similarly agreed to deliver medical services for the entity’s clients, such as the Insurer, at reduced rates.

The Insured was in a car accident, incurred $6,719 of medical expenses, had no health insurance, and made a MedPay claim for his $5,000 MedPay limits. The Insurer determined the Insured’s medical providers had contracted with the above two entities and agreed to accept reduced rates, specifically $3,455, as payment in full, and paid that amount of MedPay benefits.

The Insured filed a putative class action against the Insurer for himself and other insureds whom the Insurer paid less than policy limits because of similar contracts/Voluntary Provider Networks and asserted claims, among others, for breach of contract and bad faith. The Insured and Insurer filed dueling motions for summary judgment, and the Court granted the Insurer’s motion.

The Rationale

First, the Court noted the Insured violated the conditions precedent for suing the Insurer. The Insured had not paid money of his pocket to his medical providers before suit, and the Insured’s medical providers had initiated no collection activity against the Insured.

Second, the Court noted the Arizona District Court had previously “noted the unique payment practices of the health care industry, wherein health care providers routinely accept an amount less than the amount billed as payment in full.” But, it and the Arizona Supreme Court had “considered simply what charges were ‘incurred’” rather than “addressed the proper interpretation of the word ‘reasonable’ when applied to such charges.” Indeed, the Arizona District Court limited its analysis to the phrase “actual charges” in Pierce v. Cent. United Life Ins. Co., 2009 WL 2132690 *5 (D. Ariz. July 15, 2009), and the Arizona Supreme Court limited its analysis to the phrase “actually incurred by the insured” in Samsel v. Allstate Ins. Co., 59 P.3d 281, 286, 291 (Ariz. 2002).

Third, the Court noted a “few courts have addressed the question of whether, in the medical expenses context, ‘reasonable’ expenses are those billed or those accepted as payment in full,” “the Court finds persuasive those that have interpreted reasonable expenses as those expenses accepted as payment in full,” and cited these cases:

  • West v. Shelby Cty. Healthcare Corp., 459 S.W.3d 33, 44-46 (Tenn. 2014) (In Tennessee, “with regard to an insurance company’s customers, ‘reasonable charges’ are the charges agreed to by the insurance company and the hospital”—in other words, the amount accepted as payment in full. Using the amount billed is unreasonable because “virtually no public or private insurer actually pays full charges,” and a “more realistic standard,” which “reflect[s] what is [actually] being paid in the market place,” is “what insurers actually pay and what the hospitals [are] willing to accept”—i.e. the amount accepted as payment in full.)
  • Allstate Ins. Co. v. Holy Cross Hosp., Inc., 961 So. 2d 328, 335 (Fla. 2007) (If a healthcare provider “has agreed in a valid and enforceable contract to accept payment for services at a particular rate, that rate would necessarily be a ‘reasonable amount for the services … rendered.’”) (quoting Nationwide Mut. Ins. Co. v. Jewell, 862 So. 2d 79, 86 (Fla. Dist. Ct. App. 2003)).
  • Howell v. Hamilton Meats & Provisions, Inc., 257 P.3d 1130, 1142 (Cal. 2011) (“We do not suggest hospital bills always exceed the reasonable value of the services provided … If we seek … the exchange value of medical services the injured plaintiff has been required to obtain, looking to the negotiated prices providers accept from insurers makes at least as much sense, and arguably more, than relying on [the amount billed]…. For this reason as well, it is not possible to say generally that providers’ full bills represent the real value of their services …”).
  • Kenney v. Liston, 760 S.E.2d 434, 451 (W. Va. 2014) (Loughry, J., dissenting) (“Given the current complexities of health care pricing structures, it is simply absurd to conclude that the amount billed for a certain procedure reflects the ‘reasonable value’ of that medical service…. ‘[b]ecause so many patients, insured, uninsured, and recipients under government health care programs, pay discounted rates, hospital bills have been called ‘insincere,’ in the sense that they would yield truly enormous profits if those prices were actually paid.”) (quoting Howell, 257 P.3d at 1142).

Accordingly, the Court held:

  • “the ‘reasonable expenses incurred for necessary medical services’ are those expenses which the healthcare provider accepts as payment in full”;
  • the Insurer “did not breach the [Policy] by paying the amount the healthcare providers agreed to accept as payment in full”; and
  • the Insurer did not act in bad faith because “it was reasonable for [the Insurer] to promptly send full payments of the amount the healthcare providers were contractually obligated to accept.”

If you would like additional information regarding Arizona insurance coverage and bad faith cases, please contact Nate Meyer at 602.248.1032 or ndm@jaburgwilk.comMicalann Pepe at or 602.248.1043, K. Michelle Ronan at or 602.248.1083, or Echo Reynolds at or 602.248.1076.

Jaburg Wilk Wins Unanimous Defense Verdict for USAA

Jaburg Wilk Wins Unanimous Defense Verdict for USAA

In November 2019, Jaburg Wilk Partners Nate Meyer, Tom Moring, and Micalann Pepe tried a two-week, breach of contract and insurance bad faith case to a jury in Graham County, Arizona, and won a unanimous defense verdict for USAA. The case arose from a homeowner’s claim that Plaintiffs made to USAA after wind and rain storms in Thatcher, Arizona, in June and July 2013.

Breach of Contract

Plaintiffs argued that wind-driven rain caused $147,000 of covered exterior and interior damages, necessitated the complete replacement of Plaintiffs’ roof, and the repair of significant interior water damage.

Jaburg Wilk argued that Plaintiffs’ house had numerous construction defects, so:

  • USAA properly paid Plaintiffs about $3,750 (after a $500 deductible) for the covered “sudden and accidental” exterior damages and covered interior ensuing damages; and
  • USAA correctly denied coverage for the additional claimed damages because the additional damages were:
    • not “sudden and accidental,” as required by the Insuring Clause of the Policy;
    • excluded by the Construction Defect Exclusion and Insured Neglect Exclusions, among other exclusions; and
    • precluded by Plaintiffs’ breaches of the Duty to Protect the Property after a loss and the Duty to Make Reasonable & Necessary Repairs after a loss.

Bad Faith

Plaintiffs argued USAA breached the duty of good faith and fair dealing by:

  • not issuing a reservation of rights letter at the beginning of the claim;
  • allegedly not disclosing all coverages to Plaintiffs;
  • allegedly using an unqualified Independent Adjuster;
  • allegedly conducting inadequate inspections;
  • allegedly issuing “low-ball” estimates;
  • allegedly issuing a “low-ball” payment;
  • not sending a partial denial letter;
  • allegedly retaining an unqualified expert; and
  • refusing to appraise the entire loss (regardless of coverage).

Jaburg Wilk argued USAA did not breach the duty of good faith and fair dealing because:

  • It was unnecessary to issue a reservation of rights letter because Plaintiffs were aware of the coverage issues and could not have mistaken USAA’s continued investigation as a promise of a significant, future payment.
  • USAA reasonably relied upon two thorough inspections conducted by a licensed Independent Adjuster with over 25 years’ experience.
  • USAA’s coverage determination was correct and reasonable, in part, because every person (including Plaintiffs) who visited the Property observed or reported construction defects.
  • USAA’s estimates and payment were reasonable.
  • It was unnecessary to send a partial denial letter because USAA orally advised Plaintiffs (and Plaintiffs understood) that USAA denied most of the claim based on the Construction Defect Exclusion.
  • After USAA re-opened its investigation, USAA reasonably relied upon the thorough inspection and opinion of a forensic structural engineer that construction defects rather than the 2013 Storms caused the extensive interior damage.
  • USAA reasonably refused to appraise the entire loss because only a small portion of the loss was covered and appraisal is not appropriate for coverage or scope of damage issues.
  • Plaintiffs caused most of the damages because, in the six years since the 2013 Storms, Plaintiffs performed almost no repairs.


During trial, USAA called Ricard Sicuranza as a claim handling expert, Marcor Platt as an expert Forensic Engineer, and Jim Speros as an expert General Contractor. Plaintiffs called David Frangiamore via video as a claims handling expert and Michael Peterson as an expert General Contractor.

Settlement Negotiations

Other than an early Offer of Judgment served with the Complaint, until two weeks before trial, Plaintiffs did not demand less than $800,000. Then, over the two weeks before trial, Plaintiffs’ demand dropped to $127,000.

Plaintiff’s Prayer for Relief

During closing arguments, Plaintiffs asked the jury to award $441,000 to $807,000 for the remediation and repair of the property, as well as emotional distress.


The jury returned a unanimous defense verdict in favor of USAA after only 90 minutes of deliberation.

The Jaburg Wilk Trial Team

Nate Meyer has been recognized as a “Super Lawyer” in Insurance Coverage since 2014 by Southwest Super Lawyers; a “Top-Rated” lawyer in insurance and commercial litigation by American Lawyer Media and Martindale-Hubbell since 2014; one of “Arizona’s Finest Lawyers” by Arizona’s Finest Lawyers since 2014; and has an “AV Preeminent” peer review rating—the highest rating a lawyer can attain—by Martindale Hubbell since 2012. Nate is the Vice President of the Arizona Chapter of CLM and a member of CLM’s Extra-Contractual Subcommittee.

Tom Moring is a seasoned trial attorney and is one of the top litigators in Arizona. He has been lead counsel in over 30 commercial trials in which the amount in controversy has exceeded $1M. Tom believes strongly in pro bono work and twice has been named Attorney of the Month by Volunteer Lawyers Program and pro bono attorney of the year by Intel.

Micalann Pepe was recently elected as a Member of the Federation of Defense & Corporate Counsel; has been recognized as a “Rising Star” in Insurance Coverage since 2015 by Southwest Super Lawyers; is Vice Chair of the American Bar Association’s Insurance Coverage Litigation Committee, Property Insurance Law Committee, and Self-Insurers and Risk Managers General Committee; was named an Associate Fellow by the Litigation Council of America; has also earned an “AV Preeminent” rating from Martindale Hubbell; and serves on the Arizona Association of Defense Counsel Board.

If you would like additional information regarding Arizona insurance coverage and bad faith cases or Nate and Micalann’s insurance coverage and bad faith practice, please contact Nate at 602.248.1032 or or Micalann at 602.248.1043 of

If you would like additional information regarding Tom’s commercial litigation and trial practice, please contact Tom at 602.248.1049 or

Ninth Circuit Holds Removal Deadline Runs from Receipt of Complaint by Insurer Rather Than Insurer’s “Statutorily Designated” Agent

Ninth Circuit Holds Removal Deadline Runs from Receipt of Complaint by Insurer Rather Than Insurer’s “Statutorily Designated” Agent

The Holding

In Anderson v. State Farm Mutual Automobile Insurance Co., 917 F.3d 1126 (9th Cir. 2019) (Wash.), the Ninth Circuit Court of Appeals held that the thirty-day removal deadline under 28 U.S.C. § 1446(b)(1) does not commence upon service of a complaint on an insurer’s “statutorily designated agent”; rather, it commences when an insurer receives a complaint.

The Takeaway

In Arizona, if a plaintiff serves an insurer through the Arizona Department of Insurance, then an insurer has thirty days from the date it receives a complaint from the ADOI to remove to federal court.

The Facts

The Ninth Circuit provided few facts.  Instead, Anderson simply stated the appeal arose from Plaintiffs’ single-car accident in 1998.  Similar to Arizona law, Washington law designates the Washington Insurance Commissioner as insurers’ statutory agent and Washington plaintiffs “must” serve foreign insurers via the Commissioner. See A.R.S. § 20-221.  Plaintiffs served the Insurer via the Commissioner on February 9, 2015, the Insurer received the Complaint on February 13, and the Insurer filed a Notice of Removal on March 16.  Plaintiffs asserted the removal was untimely, but the Washington District Court denied Plaintiffs’ Motion to Remand.

The Rationale

The Ninth Circuit held that the thirty-day removal deadline commenced upon receipt of the Complaint by the Insurer rather than the Insurer’s statutorily designated agent for four primary reasons:

  • First, the text of 28 U.S.C. 1446(b)(1) (the “Removal Statute”) does not advance the analysis very far, but does indicate that the “actual defendant” must receive the complaint.  The Removal Statute states a notice of removal must be filed “within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading.” (emphasis added).
  • Second, an “agent designated by the state legislature to receive service fundamentally differs from a defendant’s agent-in-fact, because the defendant has no meaningful say in or control over the former.”
  • Third, the legislative history of the Removal Statute “clearly demonstrates” “the key point was to peg the time calculation to receipt by the defendant” and “Congress’ intent to avoid disparate application of the removal statute due to differences in state law.”  “If delivery to a statutorily designated agent began the removal clock, the effective time a defendant had to remove would depend not only on differences in state law, but also on the efficiency of state agencies in each instance.”  This “cannot be reconciled with Congress’ unambiguous intent to provide each defendant with a fixed and adequate amount of time, after obtaining access to [receipt of] the complaint, to decide whether to remove.”
  • Fourth, a “bedrock principle”—“an individual or entity named as a defendant is not obliged to engage in litigation unless notified of the action, and brought under a court’s authority, by formal process”—“confirms that serving the Commissioner did not provide the necessary notice to [the Insurer] of the suit—that occurred only when [the Insurer’s] designated recipient received the complaint.”
Arizona District Court Dismisses Bad Faith and Aiding & Abetting Claims Against TPA and Adjuster

Arizona District Court Dismisses Bad Faith and Aiding & Abetting Claims Against TPA and Adjuster

The Holding

In Centeno v. American Liberty Ins. Co., 2019 WL 568926 (D. Ariz. Feb. 12, 2019) (Order), an insurance bad faith case arising from a workers’ compensation claim, the Arizona District Court granted a motion to dismiss bad faith and aiding and abetting claims against a Third-Party Administrator (“TPA”) and its Adjuster.

The Takeaways

  • The Arizona District Court confirmed insureds may not assert bad faith claims against a TPA or a TPA’s adjusters because the duty of good faith and fair dealing arises from a contract—the insurance policy—but neither a TPA nor an adjuster has a contractual relationship with an insured.
  • A viable aiding and abetting bad faith claim against a TPA or an adjuster must allege bad faith acts committed by a TPA and an adjuster “separate and apart” from the alleged bad faith acts of an insurer.

The Facts

The Insured reported that she tripped and injured her back while in the course and scope of her employment.  The Insurer initially accepted the claim, the Insurer subsequently denied the claim, and the Industrial Commission of Arizona ruled in the Insured’s favor.

The Insured subsequently filed a Complaint against the Insurer, the Insurer’s TPA, and the TPA’s Adjuster.  The Insured asserted bad faith claims against the Insurer and the TPA, aiding and abetting bad faith claims against the TPA and the Adjuster, and punitive damages claims against all three defendants.

The TPA and the Adjuster filed a Motion to Dismiss.

The Rationale

In granting the Motion to Dismiss, the Arizona District Court reasoned as follows:

  • A bad faith claim “requires a contractual relationship.  Without a contract, there is no duty of good faith and fair dealing.” (citing Walter v. F.J. Simmons & Others, 169 Ariz. 229, 237, 818 P.2d 214, 222 (Ariz.App. 1991)).
  • In Centeno, no contractual relationship existed between the Insured and either the TPA or the Adjuster, so the bad faith claims against both failed as a matter of law.
  • Many judges in the Arizona District Court have held that an agent can be liable for aiding and abetting a principal’s breach of the duty of good faith and fair dealing. (citing Morrow v. Boston Mut. Life Ins. Co., 2007 WL 3287585, at *6 (D. Ariz. Nov. 5, 2007) (rejecting argument that aiding and abetting bad faith claims against an insurance administrator could be dismissed because it was same entity as the insurer); Inman v. Wesco Ins. Co. , 2013 WL 2635603, at *4 (D. Ariz. June 12, 2013) (noting that “an aiding and abetting claim is not barred simply because a person worked for the alleged primary tortfeasor and was acting within the scope of her employment”)).
  • A viable aiding and abetting bad faith claim against a TPA or an adjuster, however, requires an allegation of “some action taken by [a TPA and/or an adjuster] separate and apart from the facts giving rise to the [bad faith] claim against” an insurer.
  • In Centeno, the Complaint did not allege bad faith acts by either the TPA or the Adjuster “separate and apart from” the alleged bad faith acts of the Insurer, so the Arizona District Court dismissed the aiding and abetting faith claims against the TPA and the Adjuster.
Arizona Court of Appeals Enforces Workers’ Comp Exclusion to MedPay Coverage

Arizona Court of Appeals Enforces Workers’ Comp Exclusion to MedPay Coverage

The Holding

In Doneson v. Farmers Ins. Exch., 2018 WL 4781382 (Ariz.App. Oct. 3, 2018), an insurance bad faith case, the Arizona Court of Appeals upheld an exclusion precluding MedPay benefits “if workers’ compensation benefits are required,” despite the Insured’s reimbursement of the workers’ compensationinsurer.

The Takeaways

  • Arizona is more likely to enforce a MedPay exclusion regarding workers’ compensation benefits, if the exclusion applies when workers’ compensation benefits are “required” rather than “payable.”
  • A proponent of parole evidence must first persuade a court that a contract is reasonably susceptible to the interpretation asserted by the proponent before a court will consider the proffered parole evidence.

The Facts

The Insured was injured in an accident and incurred $22,000 in medical expenses. A workers’ compensation insurer paid some of those medical expenses. The Insured recovered $15,000 from the tortfeasor’s liability insurer. Pursuant to ARS 23-1023(D), the Insured reimbursed the workers compensation insurer $8,750.

The Insured’s policy included $5,000 of MedPay coverage for injuries sustained in an auto accident. The MedPay coverage, however, included an exclusion for “bodily injury” that “[o]ccurred…if workers’ compensation benefits are required.” The Insured submitted a claim for the $5,000 MedPay limits. The Insurer denied the claim pursuant to the exclusion.

The Insured filed suit against the Insurer and asserted claims for breach of contract, declaratory relief, bad faith, and tortious interference with contract. The Insurer filed a motion to dismiss, and the trial court granted the motion to dismiss.

The Rationale

In upholding the Workers’ Compensation Exclusion, the Court of Appeals reasoned as follows:

  • It rejected the Insured’s argument that workers’ compensation benefits are not “required” when an insured reimburses a workers’ compensation insurer.
  • The cases relied upon by the Insured were not persuasive because they considered workers compensation exclusions that applied if workers’ compensation benefits were “payable”—a term other courts found ambiguous.
  • The Workers’ Compensation Exclusion’s use of the word “required” creates an exclusion susceptible to only one reasonable and logical interpretation.
  • The trial court correctly refused to consider the Insured’s parole evidence.
  • “In determining whether to consider parole evidence to interpret a contract, a judge first considers the offered evidence and, if he or she finds that the contract language is reasonably susceptible to the interpretation asserted by its proponent, the evidence is admissible to determine the meaning intended by the parties.” Taylor v. State Farm Mt. Auto. Ins. Co., 175 Ariz. 148, 154 (1993).
  • In Doneson, “the Insured did not prove the Workers Compensation Exclusion was “reasonably susceptible” to the Insured’s interpretation—that worker’s compensation benefits are not “required” when an insurer recovers from a tortfeasor and reimburses a workers compensation insurer.

Read the entire Doneson opinion here.