State Farm initially assigned Ms. Enrique's insurance claim to a Delaware adjuster. Due to a high volume of Delaware claims at the time, in August 2006, State Farm reassigned the claim to J.R. Roach, an adjuster in West Virginia.

Mr. Roach consulted a number of State Farm employees for advice on handling the claim: John Rogin, a Delaware State Farm representative, Paul Gerlitz, the Delaware State Farm team manager, and Mr. Roach's supervisor, Mary Adkins.

After the initial review, in August 2006, Ms. Adkins authorized Mr. Roach to settle the claim in a range between $17,500 and $22,500.

In September 2006, State Farm offered Ms. Enrique $17,500 to settle her claim, which she rejected.

At the time, Mr. Roach valued the claim between $25,000 and $30,000. Mr. Roach had some reservations about this range due to incomplete information about the nature and extent of Ms. Enrique's injuries. The Delaware team manager, Mr. Gerlitz, also expressed concerns about preexisting knee problems, and valued her claim in the range of $19,000 and $25,000.

State Farm then made another settlement offer, this time for $19,000.

In March 2007, Ms. Enrique rejected the $19,000 offer.

Throughout the settlement negotiations and the processing of Ms. Enrique's claim, State Farm personnel expressed concerns about whether Ms. Enrique's knee injuries were caused by pre-existing conditions. These concerns were based on Ms. Enrique's medical records obtained by State Farm sometime before January 2008.

In January 2008, Joan Barker, a State Farm injury claim trainer, questioned whether Ms. Enrique's knee injuries were pre-existing, based on photographs, MRIs, and other records, and made note of the outstanding causation issues.

Mr. Roach also took another look at Ms. Enrique's medical history and condition, and made note of her chondromalacia patellae (a degenerative knee condition), Lyme disease, knock-knees, hypothyroidism, smoking, obesity, and other issues. Mr. Roach also remarked that it was not clear to what extent the accident had caused Ms. Enrique's knee problems, but noted that the claim could be valued between $35,080 and $50,080 after the causation issue was clarified.

In January 2008, Ms. Enrique made her first demand for $165,000.

In March 2008, Mr. Roach contacted Dover attorney Brian McNelis, and sought his opinion on the value of Ms. Enrique's claim. Mr. McNelis believed the claim could be worth up to $50,080 if the accident had caused Ms. Enrique's knee injuries.

State Farm then offered Ms. Enrique $25,000 to settle her claim. She rejected the offer and instead continued to demand $165,000 – $65,000 more than the policy limits.

After Ms. Enrique's demand, in May 2008, the parties agreed to hire a doctor for an independent medical examination (“IME”) to examine Ms. Enrique and to evaluate her medical condition.

Dr. Lawrence Piccioni issued a report on July 23, 2008 and concluded that “[t]he chondromalacic changes would definitely pre-exist the injury of September 26, 2005 and likewise, most likely the meniscus tear would predate the September 26, 2005 injury.” Dr. Piccioni, however, also believed that the accident had aggravated Ms. Enrique's degenerative knee condition. Dr. Piccioni based his conclusions on an examination of Ms. Enrique, “records from Dr. Eric Schwartz, Dr. Glenn Rowe, Dynamic Physical Therapy, Kent General Hospital, vehicle pictures from the accident, and [the] State of Delaware Uniform Traffic Collision report.” Dr. Piccioni could not determine the extent to which Ms. Enrique's condition could be attributed to the accident, however, because certain records pre-dating the accident appeared to be missing.

While the parties were waiting for the IME report, in July 2008, Ms. Enrique filed suit against State Farm. She sought UM benefits up to the $100,000 policy limits, as well as punitive damages against State Farm for bad faith by refusing to pay up to those limits.

In support of the bad faith claim, Ms. Enrique alleged that State Farm had refused to compensate her up to the UM policy limits without any reasonable justification.

State Farm retained Delaware attorney Colin Shalk to defend the UM lawsuit.

In August 2008, Mr. Shalk evaluated the case, including the IME report, and valued Ms. Enrique's claim between $35,000 and $50,000. At about the same time, after seeing the IME report, Mr. Roach increased his value from his earlier range of $35,000 to $50,000 to between $62,080 and $94,960. Mr. Roach seemed to have erroneously concluded from the IME report that Ms. Enrique's injuries were indisputably caused by the accident.

In August 2008, Betsy Hanson, a State Farm claim manager, expressed her disagreement with Mr. Roach's estimate of $62,080 to $94,960 because of the outstanding causation issues. Ms. Hanson was especially concerned because she knew that Ms. Enrique had swelling of the legs and physical therapy before the accident, and believed these facts could be further evidence that the knee injuries were not caused entirely by the accident.

Mr. Roach, Mr. Shalk, and Ms. Hanson all had access to the same IME report and records, all were experienced in valuing insurance claims, and all arrived at different values.

Due to the continuing impasse, in September 2008 State Farm decided to advance Ms. Enrique $25,000, as the parties both agreed the claim was worth at least that much.

As trial approached, State Farm offered Ms. Enrique another $20,000 to settle the case, for a total of $45,000.

Ms. Enrique also revised her demand and, as of January 2010, was willing to settle for an additional $65,000, representing a $90,000 demand.

The parties could not bridge the gap, and the damages case went to trial in February 2010. The jury returned a $260,000 verdict. State Farm did not seek remittitur, but did appeal on an evidentiary issue. The Delaware Supreme Court affirmed and State Farm paid the remaining $75,000 of its policy limits, costs, and interest.

Ms. Enrique then pursued her bad faith claim against State Farm, claiming as damages the unpaid $160,000 portion of the jury verdict, prejudgment interest, and punitive damages.

After discovery, State Farm moved for summary judgment.

The trial court granted State Farm summary judgment, finding that Ms. Enrique had not made a prima facie showing of bad faith. The court based its decision on causation issues arising from Ms. Enrique's pre-existing knee problems (which gave State Farm a reasonable basis for its actions), State Farm's multiple valuations of Ms. Enrique's claim that put it below policy limits, and her failure to offer facts showing that State Farm had exhibited reckless indifference in handling her claim.

Ms. Enrique appealed to the Delaware Supreme Court.

The Delaware Supreme Court's Decision

The court affirmed, finding that the record did not support a bad faith claim against State Farm.

In its decision, the court explained that at the time Ms. Enrique had filed her bad faith claim in July 2008, various State Farm employees with claims-handling experience had valued her claim between $19,000 to $30,000. Moreover, the court observed, State Farm had obtained medical records raising causation issues because of Ms. Enrique's pre-existing degenerative knee condition, Lyme disease, knock-knees, the fact that she had had physical therapy just before the accident, and other issues.

According to the court, after State Farm offered Ms. Enrique $19,000 to settle her claim, she “responded with an unreasonable $165,000 demand well above policy limits.”

In response, the court continued, State Farm sought the advice of a Dover, Delaware, personal injury defense attorney, who valued Ms. Enrique's claim as high as $50,080 if causation could be proven. The court noted that State Farm then offered Ms. Enrique $25,000 to settle her claim but that she rejected the offer and continued to demand $165,000.

The court added that the parties attempted to resolve their impasse through an IME, but that without waiting for the IME results, Ms. Enrique filed suit under the UM policy and for bad faith. The court stated:

That is the sum and substance of the record before [Ms.] Enrique filed her bad faith claim in July 2008. Nothing in the pre-suit record supports a bad faith claim.

The court conceded that Ms. Enrique was not limited to the pre-2008 record to support a bad faith claim, but it found that the post-2008 record also failed to show bad faith conduct by State Farm in handling Ms. Enrique's claim. The court pointed out that a Delaware attorney, Mr. Shalk, had been hired to defend the case, had the benefit of the IME report and other information in the file, and had valued Ms. Enrique's claim between $45,000 and $50,000. The court observed that Mr. Shalk's valuation took into account Dr. Piccioni's uncertainty about causation, but overall treated causation as more or less established.

In addition, the court continued, around the same time Mr. Roach, after seeing the IME report, increased the value from his earlier range of $35,000 to $50,000 to between $62,080 and $94,960 – but other State Farm adjusters questioned Mr. Roach's revised valuation because the causation issues noted in the IME report had not been resolved. State Farm then advanced Ms. Enrique $25,000 and offered an additional $20,000 to settle the case and Ms. Enrique countered with a last offer below policy limits, the court said. It added that the jury's verdict eclipsed all the offers and counteroffers of the parties but ruled that “[n]one of these facts support a finding of bad faith conduct by State Farm in processing [Ms.] Enrique's claim.”

The court rejected Ms. Enrique's contention that it should invoke a “hindsight presumption that the failure to offer policy limits or seek remittitur after a verdict in excess of those limits” constituted bad faith, finding that no such presumption existed.

In the court's view, the record showed that State Farm and Enrique “had different views of the value of the claim; State Farm sought advice from two attorneys, attempted to reach a settlement with [Ms.] Enrique, and failed.” State Farm “had bases for its claim valuations,” and there was “no evidence” that created an inference that those reasons were pretextual. State Farm, the court found, was not “clearly without any reasonable justification” for its valuations.

In its conclusion, the court said that it was not holding that an insured pursuing a bad faith claim against an insurer must come forward with a “smoking gun” to survive summary judgment. In an appropriate case, the court continued, “inferences from facts” could lead to a triable bad faith claim. In this case, the court said, Ms. Enrique “prematurely filed suit claiming bad faith on what could charitably be described as the thinnest of allegations.” Ms. Enrique also had not provided “post-suit evidence of misconduct by State Farm” in handling her claim. Without some evidence of bad faith, the court concluded, the trial court had properly granted summary judgment to State Farm.

The case is Enrique v. State Farm Mutual Automobile Ins. Co., No. 618 (Del. June 14, 2016). Attorneys involved include: William D. Fletcher, Jr., Esquire (argued), Schmittinger & Rodriguez, P.A., Dover, Delaware, for Plaintiff Below, Appellant Joann Enrique; Jeffrey A. Young, Esquire (argued), Young & McNelis, Dover, Delaware, for Defendant Below, Appellee State Farm Mutual Automobile Insurance Company.