HomeMy WebLinkAbout94-6456 CivilHEALTHSOUTH OF : IN THE COURT OF COMMON PLEAS OF
MECHANICSBURG, INC., : CUMBERLAND COUNTY, PENNSYLVANIA
Plaintiff :
:
v. : CIVIL ACTION - LAW
:
STATE FARM INSURANCE :
COMPANY, :
Defendant : NO. 94-6456 CIVIL TERM
IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS TO
PLAINTIFF'S AMENDED COMPLAINT
BEFORE SHEELY, P.J., HESS and OLER, JJ.
ORDER OF COURT
AND NOW, this ~ day of December, 1995, after careful
consideration of Defendant's preliminary objections to Plaintiff's
amended complaint, and for the reasons stated in the accompanying
Opinion, the preliminary objections are DENIED.
BY THE COURT,
John D. Briggs, Esq.
Richard Oare, Esq.
1776 South Queen Street
York, PA 17403-4628
Attorneys for Plaintiff
Rolf E. Kroll, Esq.
Reynolds & Havas
101 Pine Street
P.O. Box 932
Harrisburg, PA 17108-0932
Attorneys for Defendant
HEALTHSOUTH OF : IN THE COURT OF COMMON PLEAS OF
MECHANICSBURG, INC., : CUMBERLAND COUNTY, PENNSYLVANIA
Plaintiff :
:
v. : CIVIL ACTION - LAW
:
STATE FARM INSURANCE :
COMPANY, :
Defendant : NO. 94-6456 CIVIL TERM
IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS TO
PLAINTIFF'S AMENDED COMPLAINT
BEFORE SHEELY, P.J., HESS and OLMR, JJ.
OPINION and ORDER OF COURT
Oler, J.
This case presents the issues of whether a claim for
attorney's fees under Sections 1716 and 1798 of the Pennsylvania
Motor Vehicle Financial Responsibility Law against an insurer
should be dismissed upon preliminary objections because of (1) the
res judicata effect of a settlement of a certain federal class
action involving Defendant and (2) a statutory preclusion on
recovery of such fees where an insurer has utilized the peer review
process under Section 1797 of the MVFRL..
For the reasons stated in this Opinion, Defendant's
preliminary objections will be denied.
STATEMENT OF FACTS
The facts as alleged in Plaintiff's amended complaint may be
summarized as follows: On May 17, 1990, Plaintiff's assignor was
injured in an automobile accident while insured under an automobile
insurance policy issued by Defendant. Plaintiff provided treatment
to the insured as a result of the accident, but Defendant chose not
to cover all of Plaintiff's fair and reasonable charges.
NO. 94-6456 CIVIL TERM
In declining to cover the charges, Defendant utilized a peer
review organization evaluation; a reconsideration by the PRO was
also requested, and a reconsideration report was provided. In each
case, a denial of benefits was supported on the ground that the
treatment was not causally related to the insured's accident. The
matter of causation, in Plaintiff's view, was not within the
legislatively-intended scope of a PRO's responsibility.~
Plaintiff seeks damages in the amount of the unpaid charges·
as a matter of contract law. In addition, Plaintiff alleges that
Defendant's conduct was sufficiently unreasonable to warrant an
award of attorney's fees under Sections 1716 and 1798 of the MVFRL.
These sections provide in pertinent part as follows:
Benefits are overdue if not paid within
30 days after the insurer receives reasonable
proof of the amount of the benefits. If
reasonable proof is not supplied as to all
benefits, the portion supported by reasonable
proof is overdue if not paid within 30 days
after the proof is received by the insurer.
Overdue benefits shall bear interest at the
rate of 12% per annum from the date the
benefits become due. In the event the insurer
is found to have acted in an unreasonable
manner in refusing to pay the benefits when
due, the insurer shall pay, in addition to the
benefits owed and the interest thereon, a
reasonable attorney fee based upon actual time
~ This issue appears to remain unresolved on the appellate
level. See Bodtke v. State Farm Mut. Automobile Ins. Co., Pa.
· 659 A.2d 541 (1995), rev'g Bodtke v. State Farm Mut. Automobile
Ins. Co., 432 Pa. Super. 31, 637 A.2d 648 (1994).
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NO. 94-6456 CIVIL TERM
expended.2
In the event an insurer is found to have
acted with no reasonable foundation in
refusing to pay the benefits enumerated
when due, the insurer shall pay, in additi~
to the benefits owed and the interest thereon,
a reasonable attorney fee based upon actual
time expended.3
Defendant has filed preliminary objections to the amended
complaint. These objections request dismissal of Plaintiff's claim
for attorney's fees (1) on the ground that a settlement in the
apparently unreported case of Brownell v. State Farm Mutual
Automobile Ins. Co., No. 90-2224 Civil Action (D.C.E.D. Pa.) (July
31, 1992), precluded extra-contractual claims against Defendant
arising out of its allegedly improper use of peer review
organizations and (2) on the ground that as a matter of statutory
construction such fees are not recoverable under the MVFRL, where
the insurer has utilized the peer review process in accordance with
Section 1797.
With respect to the first ground, which is in essence a res
judicata defense, the preliminary objections contain as an
attachment an order of the federal court dated July 31, 1992,
certifying as the "settlement class" in the case:
2 Act of February 12, 1984, P.L. 26, §3, 75 Pa. C.S. S1716
(1995 Supp.).
3 Act of February 12, 1984, P.L. 26, §3, 75 Pa. C.S. §1798(b)
(1995 Supp.).
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NO. 94-6456 CIVIL TERM
From February 24, 1984 to the date of final
order, all persons and entities (other than
defendants, their subsidiaries, parents and
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 preliminary objections also contain as an attachment an
order of the federal court dated May 4, 1993, approving a
settlement in the class action. This order provides, 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
("MVFRL"), Act 6, 42 Pa. Cons. Stat. ~ 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;
Plaintiff's amended complaint contains no reference to the
federal class action. Defendant's preliminary objections contain
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NO. 94-6456 CIVIL TERM
few records pertaining to it. The preliminary objections do not
include a notice to plead, and no answer has been filed by
Plaintiff to the preliminary objections.
With respect to the second ground of Plaintiff's preliminary
objections, which is a statutory construction argument, Section
1797(b) of the MVFRL provides in pertinent part as follows:
(4) Appeal %o 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 costs of the
challenge and all attorney fees.4
DISCUSSION
Res judicata. Under Pennsylvania Rule of Civil Procedure
1030(a), with certain exceptions not here relevant, "all
affirmative defenses including ... res judicata ... shall be
pleaded in a responsive pleading under the heading "New Matter."
Act of February 12, 1984, P.L. 53, S3, 75 Pa. C.S.
S1797(b)(4), (b)(6) (1995 Supp.).
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NO. 94-6456 CIVIL TERM
The defense of res judicata is not among the list of proper
subjects of preliminary objections provided in Pennsylvania Rule of
Civil Procedure 1028.
It is well settled in this Commonwealth that
unless the complaint sets forth in detail the
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 and
not by preliminary objection.
MacNeal v. I.C.O.A., Inc., 382 Pa. Super. 430, 437-38, 555 A.2d
916, 919-20 (1989).
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,
Plaintiff's amended complaint makes no reference to the federal
class action relied upon by Defendant as a basis for its res
judicata defense; the record contains no admissions by Plaintiff in
response to Defendant's averments concerning the federal action; ....
certain relevant portions of the federal case, such as the
settlement agreement and notice of settlement, appear only as
attachments to Defendant's brief and are technically not part of
the record; and other portions of the federal case which might be
of use in determining the issues litigated therein, such as the
pleadings, have not been offered in any form.s
5 "[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).
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NO. 94-6456 CIVIL TERM
A federal class action can have res judicata effect as to a
class member in a subsequent 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 court in this case is not in a position on the basis of
the record to find that Plaintiff's claim for attorney's fees under
Sections 1716 and 1798 of the MVFRL, arising out of an allegedly
unreasonable refusal of benefits following PRO analyses focusing
upon questions of causation, is barred under the doctrine of res
judicata by the prior federal class action settlement in Brownell.
For this reason, Defendant's preliminary objection based upon the
doctrine of res judicata can not be sustained.6
Statutory construction. The issue of whether the utilization
of the peer review process by an insurer under Section 1797 of the
MVFRL insulates it from liability for attorney's fees under
Sections 1716 and 1798 of the law has recently been decided
adversely to insurers by this court. Birt v. State Farm Mutual
6 The court is aware that under more compelling circumstances
a court may choose to determine a res judicata issue pursuant to a
preliminary objection. See 3 Goodrich-Amram 2d ~10:36 (1991).
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NO. 94-6456 CIVIL TERM
Automobile Ins. Co., No. 94-5693 (Cumberland County, March 17,
1995) (Sheely, P.J.).?
In the absence of appellate authority to the contrary, the
court is not disposed to revisit the issue at this time to reach a
different conclusion. A copy of the Birt decision is attached
hereto and its rationale adopted herein. For this reason,
Defendant's preliminary objection based upon a construction of
Section 1797 of the MVFRL which would abrogate the right to seek
attorney's fees under Sections 1716 and 1798 of the law cannot be
sustained.8
ORDER OF COURT
AND NOW, this 12th day of December, 1995, after careful
consideration of Defendant's preliminary objections to Plaintiff's
amended complaint, and for the reasons stated in the accompanying
Opinion, the preliminary objections are DENIED.
BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
7 The court appreciates defense counsel's reference to this
case in Defendant's brief and at oral argument.
~ Cf. Barnum v. State Farm Mut. Automobile Ins. Co,., 430 Pa.
Super. 488, 635 A.2d 155 (1993), rev'd, 539 Pa. 673, 652 A.2d 1319
(1994).
8
NO. 94-6456 CIVIL TERM
John D. Briggs, Esq.
Richard Oare, Esq.
1776 South Queen Street
York, PA 17403-4628
Attorneys for Plaintiff
Rolf E. Kroll, Esq.
Reynolds & Havas
101 Pine Street
P.O. Box 932
Harrisburg, PA 17108-0932
Attorneys for Defendant
: rc
WADE BIRT AND CATHY BIRT, : IN TBE COURT OF COMMON PLEAS OF
Plaintiffs : CUMBERLAND COUNTY, PENNSYLVANIA
:
V :
:
STATE FARM MUTUAL AUTOMOBILE .': NO. 94-5693
INSURANCE COMPANY, :
Defendant : CIVIL ACTION - LAW
:
: JURY TRIAL DEMANDED
IN RE: DEFENDANT'S PRELIMINARY OBJECTIONS
BEFORE SHEELY, P.J., ROFFER, J. AND OLER, J.
OPINION AND ORDER OF COURT
The present action arose after plaintiff filed an action
seeking an award of counsel fees pursuant to section 1716 and
1798 of the Motor Vehicle Financial Responsibility Law.~ Before
us today are defendant's preliminary objections in the nature of
a demurrer.
FACTS
The relevant facts in this matter are as follows: On July
9, 1993, plaintiffs were injured in an automobile accident and
sought payment of certain medical expenses from defendant,
claiming them to be first party medical benefits. Defendant
submitted these expenses for review by a peer review organization
[hereinafter PRO] pursuant to section 1797 of the Motor Vehicle
Financial Responsibility Law [hereinafter MVFRL]. Defendant
denied payment to plaintiffs upon the PRO's determination that
the treatment was not reasonable or necessary. Plaintiffs then
~ 75 Pa.C.S.A. §~1701 et seq.
requested reconsideration of the PRO's determination pursuant to
section 1797(b) of the MVRFL. The PRO again decided in favor of
defendant. Plaintiff then filed a complaint on October 5, 1994,
seeking, inter alia, an award of counsel fees pursuant to section
1716 and 1798 of the MVFRL.2 Defendant has demurred to this
claim.
2 Section 1798 states as follows:
(a) Basis for reasonable fee - No attorney's fee for
representing a claimant in connection with a claim for first
party benefits provided under Subchapter B. (relating to motor
vehicle liability insurance first party benefits) or a claim for
catastrophic loss benefits under Subchapter F. (relating to
Catastrophic Loss Trust Fund) shall be calculated, determined or
paid on a contingent fee basis, nor shall any attorney's fees be
deducted from the benefits enumerated in this subsection which
are otherwise due such claimant, an attorney may charge a
claimant a reasonable fee based upon actual time expended.
(b) Unreasonable refusal to pay benefits - In the event
an insurer is found to have acted with no reasonable foundation
in refusing to pay the benefits enumerated in subsection (a) when
due, the insurer shall pay, in addition to the benefits owed and
the interest thereon, a reasonable attorney fee based upon actual
time expended.
Section 1716 states as follows:
Benefits are overdue if not paid within thirty (30) days
after the insurer receives reasonable proof of the amount of the
benefits. If reasonable proof is not supplied as to all
benefits, the portion supported by reasonable proof is overdue if
not paid within thirty (30) days after the proof is received by
the insurer. Overdue benefits shall bear interest at the rate of
12% per annum from the date the benefits become due. In the
event the insurer is found to have acted in an unreasonable
manner in refusing to pay the benefits when due, the insurer
shall pay, in addition to the benefits owed and the interest
thereon, a reasonable'attorney fee based upon actual time
expended.
1984, Feb. 12, P.L. 26, No. 11 S3, effective Oct. 1, 1984.
2
NO. 94-5693 CIVIL ACTION - LAW
DISCUSSION
We first note the well-settled standard of review for
granting or denying a demurrer:
...All material facts set.forth in
the complaint, as well as all
inferences reasonably deducible
therefrom, are admitted as true for
purposes of review. Eckell v.
Wilson, 409 Pa. Super. 132, 135, 597
A.2d 696, 698 (1991). However, we
cannot accept as true conclusions
of law. I__d. The question
presented.by a demurrer is whether,
on the facts averred, the law says
with certainty that no recovery is
possible. Id. A demurrer should
be sustained only in cases where
the plaintiff has clearly failed to
state a claim on which relief may
be granted. Id. A demurrer should
not be sustained if there is any
doubt as to whether the complaint
adequately states a claim for
relief under any theory. .Id. at
135-36, 597 A.2d at 698.
Pittsburqh National Bank v. Perr, 431 Pa. Super. 580, 584, 637
A.2d 334, 336 (1994).
The issue this court must decide in light of the above
standard is whether plaintiffs have lost the opportunity to
request counsel fees where they have requested reconsideration of
a PRO's denial of first party benefits and have subsequently been
denied. Both parties have directed us to Barnum v. State Farm,
430 Pa. Super. 488, 635 A.2d 155 (1993). Defendant argues that
although the Pennsylvania Supreme Court overruled Barnum, the
NO. 94-5693 CIVIL ACTION - LAW
court only addressed the narrow issue of whether a claimant is
required to seek reconsideration of a PRO review in order to seek
redress in the courts. See Terminato v. Pennsylvania Nat'l Ins.
~o., Pa. , 645 A.2d 1287 (1994) (holding that an insured
is not required to request reconsideration of a peer review
decision before proceeding to court). Defendant urges that in
Terminato, our supreme court did not address the following dicta
in Barnum and therefore, the dicta still carries precendential
weight:
Where the insured denies a claim
without first obtaining a PRO
evaluation, the claimant may
immediately commence a court
action. If the court finds in
favor of the claimant, the insurer
becomes liable, in addition to the
amount of the claim, for counsel
fees, costs, and interest at the
rate of 12%. Moreover, if the
court finds that the insurer acted
wantonly in denying a claim, treble
damages may be awarded.
Conversely, if the insurer uses the
Peer Review Drocess, its potential
liability is limited to the amount ~-
of the claim plus interest.
Barnum, 430 Pa. Super. at 493, 635
A.2d at 157.
On the other hand, plaintiffs contend that since the supreme
court has overruled Barnum, any precendential value of the dicta
defendant cites is questionable. Plaintiffs also note that
defendant can cite to no statutory provision that explicitly
denies a claimant the opportunity to recover counsel fees if the
4
NO. 94-5693 CIVIL ACTION - LAW
insurer has submitted claims for peer review. Plaintiffs have
cited to the particular sections of the MVFRL that allow for
counsel fees if the insurer is found to have acted with no
reasonable foundation in refusing to pay benefits. See supra at
footnote 2. Plaintiffs have also cited to the regulations that
contain standards for when an insurer may use the peer review
process,3 contending that if they can develop an evidentiary
record to prove a violation of one of these regulations, they
should be entitled to collect counsel fees.
After examining the Barnum and Terminato cases and the
relevant statutes and regulations, we find that plaintiff should
not be denied the opportunity to submit their claim for counsel
fees to the court. The dicta to which defendant directs us, even
if it still carries precedential weight, is inapposite here. We
believe the dicta should be interpreted as meaning that those
plaintiffs who seek reconsideration of their claim and succeed
should receive an award limited to the amount of the claim plus
interest. In the present case, plaintiffs have been denied their
benefits and seek redress in the court. If we were to grant
defendant's demurrer and plaintiffs were to later succeed in
court on their first party benefits claims, our decision here
would be inconsistent with 75 Pa.C.S.A. ~1798(b) which directs
the insurer to pay counsel fees.
In conclusion, we find it premature to dismiss plaintiffs'
3 Se~ 31 Pa. Code ~69.52
5
NO. 94-5693 CIVIL ACTION - LAW
· claim for counsel fees. If plaintiffs proceed to court and are
successful on their first party benefit claim, we believe they
should also be entitled to claim counsel fees at that time.
ORDER OF COURT
.........AND NOW, this / ~ day of MARCH, 1995, we hereby DENY
defendant's preliminary objections to plaintiffs' request for
counsel fees.
By the Court,
/s/ Harold E. Sheely
Harold E. Sheely, P.J.
Fred H. Hait, Esquire
For the Plaintiff
Rolf E. Krcll, Esquire -
For the Defendant
:sld
6