Ellis v. West Bend Mutual Insurance Company

Background

Ellis was injured in a March 2017 car accident. He was insured by West Bend, and the other driver’s insurer paid its liability limit to settle Ellis’s claim against the driver and the driver’s employer. Ellis then sought underinsured-motorist benefits from West Bend, claiming that his damages included at least $2 million in medical expenses, replacement-services damages, and lost earnings, as well as lifelong pain and disability.

West Bend requested information about the claim in November 2019. Ellis provided a demand letter and supporting reports, medical records, bills, and a deposition transcript. On November 18, 2019, West Bend said it would not replace the $1 million settlement payment with its own check. Ellis demanded $1 million in benefits on December 16, 2019. West Bend did not respond until after Ellis filed suit and West Bend answered; it then offered $100,000.

The parties filed two motions. Ellis moved to amend his complaint to add a claim under Minnesota Statutes section 604.18, which allows recovery of taxable costs and attorney’s fees for certain insurer bad-faith conduct. West Bend moved to compel Ellis to attend a medical examination under Federal Rule of Civil Procedure 35. Ellis agreed that his medical condition was at issue but refused to attend unless the examination was recorded.

Motion to Amend

Because more than 21 days had passed after service of a responsive pleading, Ellis needed West Bend’s consent or the court’s permission to amend. The court explained that amendment should generally be allowed unless there are compelling reasons such as undue delay, bad faith, prejudice, or futility. An amendment is futile if the proposed complaint would not survive a motion to dismiss for failure to state a claim.

Under Minnesota law, a bad-faith claim requires allegations showing both that the insurer had no reasonable basis for denying benefits and that the insurer knew, or recklessly disregarded, that it lacked a reasonable basis. The court found that Ellis plausibly alleged the first requirement by asserting that he gave West Bend substantial information about his damages, that West Bend delayed responding for several months, and that West Bend offered only $100,000 without explaining its calculation.

The court also found the second requirement plausibly alleged. It relied on Ellis’s allegations that West Bend was indifferent to his claim because of the delay and its failure to provide a basis for denying most of the benefits Ellis sought. The court declined to assume that West Bend would later establish a reasonable basis through anticipated motions concerning the damages Ellis could recover. Those issues could be addressed after discovery and further briefing.

The court therefore granted Ellis’s Motion to Amend Complaint. Ellis was ordered to file the amended complaint within 14 days of the order.

Motion to Compel

The court treated a Rule 35 medical examination as a form of discovery. Because the court had already determined that Ellis’s medical condition was relevant and that good cause supported an examination, Ellis—the party resisting the examination—had the burden to show why it should not occur as noticed.

The court found that Ellis offered no persuasive, case-specific reason to record the examination. His argument that Rule 35 examinations are inherently adversarial was not enough. The court reasoned that recording would give Ellis an advantage that West Bend did not have regarding the examinations conducted by Ellis’s treating physicians. The court also noted that Ellis could challenge the examiner’s credibility or bias through deposition or cross-examination, and could seek to exclude the examiner’s testimony if appropriate.

The court further ruled that Minnesota law generally allowing a person to record a conversation involving that person did not override the Federal Rules of Civil Procedure in this discovery dispute. The court therefore granted West Bend’s Motion to Compel and required Ellis to attend an unrecorded medical examination with Dr. Sherman.

Disposition

The court granted both motions. It left prior consistent orders in effect and warned that violations could result in remedies or sanctions, including costs, fines, attorney’s fees, evidentiary restrictions, striking pleadings, dismissal with prejudice, or default judgment. The order was signed by United States Magistrate Judge Tony N. Leung.