HomeMy WebLinkAbout98-0077 civilNICOLE R. McINTYRE : IN THE COURT OF COMMON PLEAS OF
Plaintiff, : CUMBERLAND COUNTY, PENNSYLVANIA
:
v. : CIVIL ACTION - LAW
STATE FARM MUTUAL AUTOMOBILE : No. 98-0077 CIVIL TERM
INSURANCE COMPANY, :
Defendant. : JURY TRAIL DEMANDED
IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS
BEFORE BAYLEY, J., GUIDO, J.
ORDER
AND NOW, this ~ day of JUNE, 1998,
Defendant ' s
Preliminary Objections are DENIED and Defendant is directed to
file an answer to the complaint within twenty (20) days.
By the
Edward E. Guido, J.
Richard A. Sadlock, Esquire
For the Plaintiff
Rolf E. Kroll, Esquire
For the Defendant
:sld
NICOLE R. McINTYRE : IN THE COURT OF COMMON PLEAS OF
Plaintiff, : CUMBERLAND COUNTY, PENNSYLVANIA
:
v. : CIVIL ACTION - LAW
STATE FARM MUTUAL AUTOMOBILE : No. 98-0077 CIVIL TERM
INSURANCE COMPANY, :
Defendant. : JURY TRAIL DEMANDED
IN RF.: DEFENDANT ' S PRELIMINARY OBJECTIONS.
BEFORE BAYLEY, J., GUIDO, J:.
OPINION AND ORDER OF COURT
On January 7, 1998, Plaintiff filed a complaint against her
insurance company. She alleges that Defendant has failed to pay
her first party benefits for reasonable and necessary medical
expenses incurred for treatment of injuries sustained in an
automobile accident. Count I of her complaint is based upon
various sections of the Pennsylvania Motor Vehicle Financial
Responsibility Law (75 Pa.C.S.A. §1701 et seq.), including
Section 1797(b). [75 Pa.C.S.A. § 1797(b)]. Count II of her
complaint is a bad faith claim based upon Section 8371 of the
Judicial Code. (42 Pa.C.S.A. § 8371). On February 4, 1998,
Defendant filed a Preliminary Objection in the nature of a
Demurrer to Count II of the complaint.~ Briefs were filed by
both parties and argument was held before this Court on March 4,
1998. This matter is now ready for disposition.
FACTUAL BACKGROUND
The complaint avers the following facts:
Defendant also filed a Motion to Strike Count II
pursuant to Pa. Rule of Civil Procedure 1028(a)(3). This issue
has not been briefed and will, therefore, be deemed to have been
abandoned. See Local Rule 210-7.
NO. 98-0077 CIVIL TERM
1. Plaintiff was injured in a motor vehicle accident on
October 1, 1996. (Paragraphs 5 & 7).
2. Defendant is responsible for the payment of Plaintiff's
first party medical benefits pursuant to a contract of insurance
issued in accordance with the Pennsylvania Motor Vehicle
Responsibility Law, 75 Pa.C.S.A. § 1701, et seq. (Paragraph 4).
3. Defendant has in the past paid for some of the medical
treatment of the injuries sustained by Plaintiff in the accident.
(Paragraph 10).
4. Plaintiff continues to suffer from injuries arising
from the accident for which she needs and will continue to need
medical treatment. (Paragraph 9) .
5. Defendant conducted an untimely peer review of
Plaintiff's accident related medical treatment. (Paragraph 15) .
6. The peer review was conducted by a physician who was
not of the "appropriate specialty." (Paragraph 20).
7 Defendant's peer review was a "sham"
· , conducted for the
sole purpose of intimidating Plaintiff to keep her from seeking
further treatment as recommended by her treating physician.
(Paragraph 21).
8. Defendant has refused to pay certain past accident
related medical bills. It is also refusing to pay continuing
accident related medical bills. (Paragraph 11) .
9. Defendant has acted in bad faith by basing its denial
of payment for accident related medical bills on a "sham" peer
NO. 98-0077 CIVIL TERM
review. (Paragraph 33 ) .
10. Defendant's conduct is actionable under 42 Pa.C.S.A.
8371.
DISCUSSION
It is the Defendant's position that Section 1797(b) of the
MVFRL, 75 Pa.C.S.A. § 1797(b), provides the exclusive remedy for
a party aggrieved by the peer review procedure set forth
therein.2 Therefore, the Defendant argues that Plaintiff cannot
2The relevant portions of 75 Pa.C.S.A. § 1797(b) provide as
follows:
(b) Peer review plan for challenges to reasonableness and
necessity of treatment.--
(1) Peer review plan.--Insurers shall contract jointly or
separately with any peer review organization established for the
purpose of evaluating treatment, health care services, products
or accommodations provided to an injured person. Such evaluation
shall be for the purpose of confirming that such treatment,
products, services or accommodations conform to the professional
standards of performance and are medically necessary. An
insurer's challenge must be made to a PRO within 90 days of the
insurer's receipt of the provider's bill for treatment or
services or may be made at any time for continuing treatment or
services.
· · ·
(~) Appeal to court.--A provider of medical treatment or
rehabilitative services or merchandise or an insured may
challenge before a court an insurer's refusal to pay for past or
future medical treatment or rehabilitative services or
merchandise, the reasonableness or necessity of which the insurer
has not challenged before a PRO. Conduct considered to be wanton
shall be subject to a payment of treble damages to the injured
party.
· · ·
(6) Court determination in favor of provider or insured.--
If, pursuant to paragraph (4), a court determines that medical
treatment or rehabilitative services or merchandise were
medically necessary, the insurer must pay to the provider the
outstanding amount plus interest at 12%, as well as the cost of
the challenge and all attorney fees.
NO. 98-0077 CIVIL TERM
maintain a claim under 42 Pa.C.S.A. ~ 8371.3 For the reasons set
forth below, we disagree with Defendant's position.
At the outset, we note that the standard to be applied to
preliminary objections in the nature of a demurrer is whether it
is clear and free from doubt that Plaintiff has pled no facts
sufficient to establish a right to relief. Bower v. Bower, 531
Pa. 54, 611 A.2d 181 (1992). We must accept as true all well
pleaded facts together with any reasonable inferences which may
be drawn therefrom. Mellon Bank v. Fabinyi, 437 Pa. Super. 559,
650 A.2d 895 (1994). Any doubt as to the sufficiency of the
pleading must be resolved in the Plaintiff's favor.
Applying that standard of review to the instant case, we
must accept as true the fact that the Defendant conducted an
untimely peer review before a physician who was not qualified to
review the matter. The whole procedure was a "sham", with
results which were a foregone conclusion, conducted for the sole
purpose of intimidating the Plaintiff and preventing her from
seeking necessary medical treatment which had been recommended by
8371. Actions on insurance policies
In an action arising under an insurance policy, if the court
finds that the insurer has acted in bad faith toward the insured,
the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date
the claim was made by the insured in an amount equal to the
prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the
insurer.
NO. 98-0077 CIVIL TERM
her own treating physician. We have no doubt that such conduct,
if true, is exactly the type of bad faith conduct contemplated
and made actionable by 42 Pa.C.S.A. § 8371.4 Therefore, the only
issue before us is whether the special provisions of 75 Pa.C.S.A.
§ 1797(b) would bar recovery under the more general provisions of
42 Pa.C.S.A. § 8371.
This is the first time our Court has faced the issue of
whether an insurer can avoid a claim for bad faith under 42
Pa.C.S.A. ~ 8371 by using the peer review procedure provided in
75 Pa.C.S.A. ~ 1797(b). However, the identical issue has been
addressed by numerous other Common Pleas Courts throughout this
Commonwealth, with divided results,s In addition, a three Judge
panel of the Superior Court addressed the issue in Barnum v.
State Farm Mut. Auto. Ins. Co., 430 Pa. Super. 488, 635 A.2d 155
(1993). While the Barnum Court held that compliance with the
provisions of 75 Pa.C.S.A. § 1797 would insulate an insurer from
Prior to the passage of 42 Pa.C.S.A. § 8371 there was
no cognizable action for bad faith conduct of an insurer in this
Commonwealth. D'Ambrosio v. Pa. Nat'l Mut. Cas. Ins. Co., 494
Pa. 501, 431 A.2d 966 (1981).
Those cases which have held that Section 1797(b) bars a
claim under Section 8371 when the Peer Review Procedure is
utilized include Conway-West v. State Farm Ins. Co., 19 D & C 4th
84 (C.P. Monroe, 1993), Herd v. Nationwide, 116 Dauph. 141
(1996), and Snyder v. State Farm Ins. Co., 91-56-05676-01, York
County (1997). Those cases which are contra include Bacstrom v.
State Farm Ins. Co., No. A. D. 1997-219, Franklin County (1998),
Hice v. Prudential, 80 Westmoreland L.J. 27 (1997), Pierce v.
State Farm, 27 D & C 4th 464 (C.P. Lackawanna, 1994), Knox v.
Worldwide Ins. Group, 140 P.L.J. 185 (1992), and Milton S.
Hershey Medical Ctr. v. State Farm Ins. Co., 21D & C 4th 62
(C.P. Franklin, 1992).
NO. 98-0077 CIVIL TERM
liability under 42 Pa.C.S.A. ~ 8371, the case has no precedential
value because it was overturned by our Supreme Court, albeit on
other grounds. Barnum v. State Farm Mut. Auto. Ins. Co., 652
A.2d 1319 (Pa. 1994).
Recognizing that there appears to be a conflict between
Section 1797(b) and Section 8371, virtually all of the Courts
addressing the issue have engaged in an exercise of statutory
interpretation and construction. The rule of statutory
construction applicable to the issue at bar is found in 1
Pa.C.S.A. ~ 1933 which provides as follows:
1933. Particular controls general
Whenever a general provision in a statute shall be in
conflict with a special provision in the same or another
statute, the two shall be construed, if possible, so that
effect may be given to both. If the conflict between the
two provisions is irreconcilable, the special provisions
shall prevail and shall be construed as an exception to the
general provision, unless the general provision shall be
enacted later6 and it shall be the manifest intention of the
General Assembly that such general provision shall prevail.
Those courts concluding that Section 1797 bars an action
under Section 8371 have uniformly held that there is an
irreconcilable conflict between the two statutes. Therefore,
under the rules set forth in 1 Pa.C.S.A. § 1933, the special
provisions of Section 1797(b) of the MVFRL would prevail and bar
a claim under the more general provision of Section 8371 of the
Section 1797 of the Motor Vehicle Financial
Responsibility Law and Section 8371 of the Judicial Code were
enacted as part of the Act of February 7, 1990, P.L. 11, No. 6,
effective April 5, 1990.
NO. 98-0077 CIVIL TERM
of the Judicial Code.7
While we agree that Section 1797(b) is more specific than
Section 8371, we do not agree that the two sections cannot be
reconciled. Section 1933 of the Statutory Construction Act
provides that conflicting provisions of statutes "shall be
construed, if possible, so that effect may be given to both." 1
Pa.C.S.A. § 1933 (emphasis added). In the instant case, we feel
that it is certainly possible to construe the provisions so as to
give effect to both.
Section 1797 and Section 8371 address different types of
grievances an insured may have. Therefore, they are
reconcilable. The procedures set forth in 1797(b)(4) deal with
the situation where an insurer refuses to pay medical benefits
wi%hou% challenging the reasonableness or necessity of the
treatment before a PRO. If its conduct is found to be "wanton"
it is subject to treble damages. However, it does no% address
the situation alleged to be present in the instant case, i.e.
where the insurer submits the insured's claim to a "sham" PRO in
As the Barnum Court stated:
The several sections of the statute here being examined
cannot be reconciled. The damages specified by the
legislature in the event of wanton or bad faith conduct by
an insurer are different, and the rate of interest to be
awarded is also different ....
Because the two provisions were enacted at the same
time and cannot be reconciled, the specific provisions of 75
Pa.C.S. § 1797 must be deemed an exception to the general
remedy for bad faith contained in 42 Pa.C.S. § 8371.
635 A.2d at 158-159.
NO. 98-0077 CIVIL TERM
bad faith. Section 8371 can, therefore, be construed to apply to
the situation in the case at bar, thereby giving effect to both
provisions.
If we were to adopt Defendant's position, the mere
submission of a claim to a PRO would insulate an insurer from a
bad faith claim, no matter how corrupt the organization, or how
much collusion might be proven to exist between it and the
insurer. We cannot believe that this was the intention of the
legislature. As Franklin County's Judge Walker so aptly noted,
Courts must be permitted to police the relationship between
the insurers and PROs to ensure the procedures mandated by
[the] legislature are not being used to the disadvantage of
the insured .... Prohibiting a plaintiff from proceeding
under 8371 because the claim has been submitted to a PRO
would thwart [the] legislature's goal of providing fair and
efficient procedures to review insurance claims by
precluding courts from hearing evidence of fraud, deceit,
collaboration, "kickbacks," and other similar conduct that
could constitute bad faith.
Milton S. Hershey Medical Ctr. v. State Farm Ins. Co., 21 D & C
4th 62, 71 (C.P. Franklin 1992).
For the reasons set forth above, we are constrained to deny
Defendant' s Preliminary Objections.
NO. 98-0077 CIVIL TERM
ORDER OF COURT
AND NOW, this 5th day of JUNE, 1998, Defendant's Preliminary
Objections are DENIED and Defendant is directed to file an answer
to the complaint within twenty (20) days.
By the Court,
Richard A. Sadlock, Esquire
For the Plaintiff
Rolf E. Kroll, Esquire
For the Defendant
·
.sld
/s/ Edward E. Guido, J.
Edward E. Guido, Judge