HomeMy WebLinkAbout92-0099 CivilERMINIA LEONE and LUIGI : IN THE COURT OF COMMON PLEAS OF
LEONE, Her Husband, : CUMBERLAND COUNT~ PENNSYLVANIA
Plaintiffs :
:
v. : CIVIL ACTION - LAW
:
STATE FARM INSURANCE :
COMPANIES, :
Defendant : NO. 99 CIVIL 1992
IN RE: DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT
BEFORE SHEELY, P.J., HESS and OLER, JJ.
AND NOW, this ~ day of December, 1995, after careful
consideration of Defendant's motion for partial summary judgment,
and for the reasons stated in the accompanying opinion, the motion
is DENIED.
BY THE COURT,
Timothy A. Shollenberger, Esq.
1820 Linglestown Road
P.O. Box 60545
Harrisburg, PA 17106-0545
Attorney for Plaintiffs
Rolf E. Kroll, Esq.
101 Pine Street
P.O. Box 932
Harrisburg, PA 17108-0932
Attorney for Defendant
: re
ERMINIA LEONE and LUIGI : IN THE COURT OF COMMON PLEAS OF
LEONE, Her Husband, : CUMBERLAND COUNTY, PENNSYLVANIA
Plaintiffs :
:
v. : CIVIL ACTION - LAW
:
STATE FARM INSURANCE :
COMPANIES, :
Defendant : NO. 99 CIVIL 1992
IN RE: DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT
BEFORE SHEELY, P.J., HESS and OLER, JJ.
OPINION and ORDER OF COURT
Oler, J.
For disposition in this action against an automobile insurance
company by its insureds is a motion for partial summary judgment
filed by Defendant. The action arises out of Defendant's alleged
refusal to pay certain medical charges for treatment of one of the
insureds following an automobile accident.
Defendant's motion for partial summary judgment is premised
upon the res judicata effect of a certain federal class action upon
Plaintiffs' claims for (1) bad faith under Section 8371 of the
Judicial Code, (2) violation of Pennsylvania's Unfair Trade
Practices and Consumer Protection Law, and (3) deceit. For the
reasons stated in this opinion, Defendant's motion will be denied.
STATEMENT OF FACTS
The complaint in this matter was filed on January 8, 1992, by
Plaintiffs Erminia Leone and Luigi Leone against Defendant State
Farm Insurance Companies. It contained counts alleging breach of
an insurance contract within the scope of 42 Pa. C.S. §8371,~
~ Act of February 7, 1990, P.L. 11, §3, 42 Pa. C.S. §8371
(1995 Supp.); see Plaintiffs' Complaint, Count II.
NO. 99 CIVIL 1992
relating to bad faith by an insurer,2 breach of contract,3
commission of the "common law tort of bad faith,"4 violation of
Pennsylvania's Unfair Trade Practices and Consumer Protection Law,5
and deceit.6
Preliminary objections, which did not include an objection
based upon pendency of a prior action, were filed by Defendant on
January 31, 1992. These resulted in a court-ordered dismissal of
the count based upon the "common law tort of bad faith."?
The underlying facts alleged in Plaintiffs' complaint may be
2 The statutory provision reads as follows:
In an action 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.
Act of February 7, 1990, P.L. 11, S3, 42 Pa. C.S. §8371 (1995
Supp.).
See Plaintiffs' Complaint, Count III.
See Plaintiffs' Complaint, Count IV.
Act of December 17, 1968, P.L. 1166, as amended, 73 P.S.
§§201-1 et seq. (1995 Supp.); see Plaintiffs' Complaint, Count V.
~ See Plaintiffs' Complaint, Count VI.
7 Order of Court, October 15, 1992.
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NO. 99 CIVIL 1992
summarized as follows:8 On September 20, 1989, Plaintiff Erminia
Leone suffered personal injuries when the automobile she was
operating was involved in an accident.9 Ms. Leone was subsequently
treated for her injuries and continues to receive medical treatment
for injuries incurred as a result of the accident.~°
At the time of the accident, the Plaintiffs were covered under
an automobile insurance policy (Policy) issued by the Defendant,
providing for first party medical coverage in the amount of
$100,000.00.~ Pursuant to the terms of the Policy, the Plaintiffs
submitted claim documentation requesting that the Defendant pay
named health care providers for treatment rendered to Ms. Leone.~2
The Defendant, which paid Ms. Leone's medical bills through
September 10, 1990, informed the Plaintiffs by way of
correspondence dated April 1, 1991, that it was denying payment of
various medical bills because the treatment regimen was deemed to
be excessive by a Peer Review Organization (PRO).~3 Use of a PRO
8 The recitation of facts as set forth in Plaintiffs'
complaint is not intended by the court to indicate an opinion as to
the accuracy of the allegations.
9 See Plaintiffs' Complaint, paragraph 6.
See Plaintiffs' Complaint, paragraph 8.
See Plaintiffs' Complaint, paragraphs 4, 5.
See Plaintiffs' Complaint, paragraphs 10, 11.
Plaintiffs' Complaint, paragraphs 12, 18-19.
3
NO. 99 CIVIL 1992
is authorized by 75 Pa. C.S. §1797 (Act 6).TM
Subsequent to the denial of payment by the Defendant,
Plaintiffs requested a reconsideration of the PRO's decision, which
is provided for under 75 Pa. C.S. S1797(b)(2) and, again, the PRO
determined that the treatment regimen was excessive; consequently,
payment was denied by the insurer.~s
Plaintiffs' claim of bad faith under Section 8371 of the
Judicial Code is premised upon the insurer's alleged submission of
incomplete records to the PRO, failure to provide prompt
notification of its decision to deny coverage, and failure to
reasonably investigate Ms. Leone's claim, inter alia.~6 Plaintiffs'
claim of violation of the Unfair Trade Practices and Consumer
Protection Law is premised upon the insurer's alleged failure "to
objectively and fairly evaluate the ... claim and ... concocti[on
of] a frivolous defense," inter alia.~? Plaintiffs' claim of deceit
is premised upon the insurer's alleged "representations that
~4 Act of February 12, 1984, P.L. 53, §3, as amended, Act of
February 7, 1990, P.L. 11, §18, 75 Pa. C.S. ~1797 (1995 Supp.).
The PRO legislation provides that an insurer may submit
the records of medical treatment relating to a claim made by an
insured to a PRO, which then reviews the records and determines
whether the "treatment, products, services or accommodations
conform to the professional standards of performance and are
medically necessary." Id., §1797(b)(1).
See Plaintiffs' Complaint, paragraphs 20-24.
See Plaintiffs' Complaint, paragraphs 37-43.
See Plaintiffs' Complaint, paragraph 52.
4
NO. 99 CIVIL 1992
all claims would be fairly and promptly paid, which representations
were false when made," inter alia.~8
On November 23, 1992, Defendant filed an answer with new
matter. The new matter did not, however, include a res judicata
defense. Plaintiffs' reply to Defendant's new matter was filed on
December 11, 1992.
No amended pleadings, depositions, answers to interrogatories,
admissions or affidavits appear in the record. On November 23,
1994, Defendant filed the motion for partial summary judgment
presently at issue.
The motion is based upon the doctrine of res judicata, and
maintains that a settlement in the apparently unreported federal
class action of Brownell v. State Farm Mut. Automobile Ins. Co.,
No. 90-2224 (D.C.E.D. Pa. 1993), approved May 4, 1993, bars
Plaintiffs' "extra-contractual" claims against Defendant. Appended
to the motion are copies of a July 31,. 1992, order in Brownell
certifying a "settlement class," a document entitled "Class Action
Settlement Agreement," and the May 4, 1993, order approving
settlement.
Under the July 31, 1992, order, the following settlement class
was certified:
From February 24, 1984 to the date of final
order, all persons and entities (other than
defendants, their subsidiaries, parents and
~8 See Plaintiffs' Complaint, paragraph 55.
5
NO. 99 CIVIL 1992
affiliated companies) insured by a State Farm
motor vehicle insurance policy issued for a
motor vehicle registered in Pennsylvania,
and/or including those who submitted a Medical
Payment Coverage claim ("MPC claim") to State
Farm for injuries arising out of the use,
operation or maintenance of a motor vehicle in
Pennsylvania.
The settlement agreement provided for adherence by Defendant
State Farm and Co-Defendant Worldwide Auditing Services, Inc.
(apparently a company used in some capacity by State Farm), to
certain claims practices and procedures. Specifically, State Farm
was not to "utilize written criteria with respect to duration of
treatment, frequency of treatment, amount of physician or hospital
bills, or type of treatment to ... refer [medical payment coverage]
claims to PROs, or ... to evaluate [such] claims after review by a
PRO," without disclosing the criteria to its insured (unless the
criteria were officially authorized); State Farm and Worldwide were
not to compensate PRO's on the basis of claims recommended for
rejection; and Worldwide was not to use as a "screen, red flag,
criteria or guideline for the review, investigation, peer review or
audit of a medical payment coverage claim ... representation by an
attorney [,] union membership[, or] age or retirement status[.]"
The settlement agreement also provided for issuance of a
release:
Effective as of the date of entry of the
final order provided for under paragraph 13
hereof, the Settlement Class individually and
collectively, do hereby release, remise,
quitclaim and forever discharge State Farm,
6
NO. 99 CIVIL 1992
Worldwide, and all other PRO's used by State
Farm for their evaluations of MPC claims for
or on behalf of State Farm, their subsidiaries
and affiliates, parents, officers, directors,
employees, agents, attorneys, divisions,
predecessors, successors and assigns, from any
and all claims, demands, causes of action,
suits, liabilities, orders or decrees, and any
execution thereon, that he, she, it or they
had, have or may have, which were or could
have been at issue or asserted in this Action,
arising out of, related to, or based in whole
or in part on any of the facts, matters or
claims alleged or which could have been
alleged in the Action, or which otherwise are
or were at issue in the Action, including
without limitation, any statutory or common
law claim for fraud, misrepresentation,
violation of the MVFRL, Act 6, 42 Pa. C.S.A.
S8371, Consumer Protection Law, Unfair
Insurance Practices Act and Racketeer
Influenced And Corrupt Organization Act,
including any claims for treble damages,
attorneys fees or any other special,
compensatory, exemplary or punitive damages,
relating to any of the matters complained of
in the Action or which could have been
complained of in the Action.
This Settlement shall not constitute a
classwide settlement or release or waiver of
any individual liquidated contract claim of
Settlement Class members for medical expense
benefits under §1712(1) of the MVFRL which has
or may be brought or which may be pending.
The order dated May 4, 1993, approving the settlement,
provided, inter alia, as follows:
6. In accordance with ~ 13(f) and 15 of
the Settlement Agreement, the Court DISMISSES
WITH PREJUDICE all claims by any members of
the class which were or could have been at
issue and/or asserted, including, without
limitation, any statutory or common law claim
for fraud, misrepresentation, violation of the
Motor Vehicle Financial Responsibility Law
7
NO. 99 CIVIL 1992
("MVFRL"), Act 6, 42 Pa. Cons. Stat. S 8371,
the Pennsylvania Consumer Protection Law, the
Pennsylvania Unfair Insurance Practices Act
and the federal Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. § 1961 et
seq., relating to any of the matters
complained of in this action or which could
have been complained of in this action;
7. This settlement shall not constitute
a classwide settlement or release or waiver of
any individual liquidated contract claim of
settlement class members for medical expense
benefits under §1712(1) of the MVFRL which has
or may be brought or which may be pending;
On the basis of the federal class action settlement,
Defendant's motion for partial summary judgment maintains that
Plaintiffs' claims for bad faith under Section 8371 of the Judicial
Code, violation of the Unfair Trade Practices and Consumer
Protection Law and deceit have been barred. The record contains no
admissions on the part of Plaintiffs regarding the federal suit.
Plaintiffs' brief in this matter suggests that Plaintiffs did not
receive proper notice with regard to the federal action and that
the causes of action in the federal case and this case are not the
same. In the latter regard, Plaintiffs make the following
representation in their brief:
In the present action, the Plaintiffs'
have not alleged that State Farm used improper
criteria to reject MPC claims nor have the
Plaintiffs' alleged that State Farm had
improperly compensated PROs for their claim
review services. The allegations of
misconduct versus State Farm in the present
claim are very fact specific to the handling
of this claim. Plaintiffs have alleged very
specific violations of the regulations
8
NO. 99 CIVIL 1992
governing the peer review process, 31'Pa. Code
69.1 et seq. These allegations are based on
the specific manner in which State Farm
handled the Leones' claim.~9
DISCUSSION
Pennsylvania Rule of Civil Procedure 1035(a) provides as
follows:
After the pleadings are closed, but
within such time as not to delay trial, any
party may move for summary judgment on the
pleadings and any depositions, answers to
interrogatories, admissions on file and
supporting affidavits.
A federal class action can have res judicata effect as to a
class member in a state action. Bardo v. Commonwealth, Department
of Public Welfare, 40 Pa. Commw. 585, 397 A.2d 1305 (1979).
However, a determination that an action is barred under the
doctrine of res judicata depends upon a finding that
the previous proceeding and the current matter
share (1) identity of things sued for; (2)
identity of causes of action; .(3) identity of
parties; and (4) identity of the quality or
capacity of the parties suing or being sued.
In re Jones, Pa. Super. , , 660 A.2d 76, 82 (1995).
The defense of res judicata is one of the affirmative defenses
that are to be pleaded in new matter. Pa. R.C.P. 1030(a). In this
regard, it has been said that
[i]t is well settled in this Commonwealth that
unless the complaint sets forth in detail the
~9 Memorandum of Plaintiff in Objection to Defendant's Motion
for Partial Summary Judgment, at 8-9.
9
NO. 99 CIVIL 1992
essential facts and issues pleaded by the
prior suit, the affirmative defense of res
judicata must be raised in a responsive
pleading under the heading of new matter ....
MacNeal v. I.C.O.A., Inc., 382 Pa. SuPer. 430, 437-38, 555 A.2d
916, 919-20 (1989).20
A salutary aspect of this rule is that it tends to foster
development of a factual record upon which a court can properly
consider the merits of the defense. In the present case,
Plaintiffs' complaint makes no reference to the federal class
action relied upon by Defendant as a basis for its res judicata
defense; no other pleading, amended or otherwise, suggests the
defense; and the record contains no "depositions, answers to
interrogatories, admissions on file [or] supporting affidavits."
Judicial notice is not generally a proper means of supplementing
such a record.2~
Under these circumstances, the court does not find itself in
a position to determine as a factual matter that the criteria for
res judicata in the areas of identity of parties, identity of
things sued for and identity of causes of action are met in this
20 The court is aware that in compelling circumstances a court
may choose to determine a res judicata issue by way of a vehicle
other than new matter. See 3 Goodrich-Amram 2d §10:36 (1991)
(preliminary objection).
2~ "[A] court may not ordinarily take judicial notice in one
case of the records of another case .... " Naffah v. City Deposit
Bank, 339 Pa. 157, 160, 13 A.2d 63, 64 (1940) (consideration of res
judicata defense on preliminary objection on basis of judicial
notice held improper).
10
NO. 99 CIVIL 1992
case, so as to bar Plaintiffs' claims for bad faith under Section
8371 of the Judicial Code, violation of the Unfair Trade Practices
and Consumer Protection Law and deceit. In this regard, the
identity of causes of action appears particularly questionable,
given the terms of the settlement apparently reached in the federal
case.
For these reasons, the following order will be entered:
ORDER OF COURT
AND NOW, this 7th day of December, 1995, after careful
consideration of Defendant's motion for partial summary judgment,
and for the reasons stated in the accompanying opinion, the motion
is DENIED.
BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
Timothy A. Shollenberger, Esq.
1820 Linglestown Road
P.O. Box 60545
Harrisburg, PA 17106-0545
Attorney for Plaintiffs
Rolf E. Kroll, Esq.
101 Pine Street
P.O. Box 932
Harrisburg, PA 17108-0932
Attorney for Defendant
:rc
11