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Home My WebLink About93-1940 Civil KAREN A. ROBISON and : IN THE COURT OF COMMON PLEAS OF BARRY D. ROBISON, : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiffs : : v. : CIVIL ACTION - LAW : GENERAL ACCIDENT : INSURANCE COMPANY, : Defendant : NO. 1940 CIVIL 1993 IN RE: DEFENDANT'S PRELIMINARY OBJECTION BEFORE BAYLEY and OLER, JJ. ORDER OF COURT AND NOW, this ~ day of January, 1994, upon careful consideration of Defendant's Preliminary Objection in the nature of a demurrer, as well as the briefs and oral arguments presented in the matter, Defendant's Preliminary Objection is SUSTAINED, and Count II of Plaintiffs' Complaint is DISMISSED, with leave GRANTED to Plaintiffs to amend the Complaint within 10 days of this date in accordance with the accompanying Opinion. Defendant is GRANTED 20 days from service of any amended complaint to file an answer or preliminary objections and, in the absence of an amended complaint, 30 days from this date to file an answer. BY THE COURT, 'Wesley Ole~ Jr., Jill M. Wineka, Esq. 1719 North Front Street Harrisburg, PA 17102 Attorney for Plaintiffs Douglas B. Marcello, Esq. 305 North Front Street P.O. Box 999 Harrisburg, PA 17108-0999 :rc KAREN A. ROBISON and : IN THE COURT OF COMMON PLEAS OF BARRY D. ROBISON, : CUMBERLAND COUNTY, PENNSYLVANIA Plaintiffs : : v. : CIVIL ACTION - LAW : GENERAL ACCIDENT : INSURANCE COMPANY, : Defendant : NO. 1940 CIVIL 1993 IN RE: DEFENDANT'S PRELIMINARY OBJECTION BEFORE BAYLEY and OLER, JJ. OPINION AND ORDER OF COURT Oler, J. At issue in the present case is a preliminary objection in the nature of a demurrer filed by General Accident Insurance Company (Defendant) in response to a complaint filed by Karen A. Robison and Barry D. Robison (Plaintiffs). For the reasons set forth in this Opinion, Defendant's preliminary objection will be sustained, with leave granted to Plaintiffs to amend the complaint. It is well settled in Pennsylvania that "[t]he question presented by a demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible, and where a doubt exists as to whether a demurrer should be sustained, this doubt should be resolved in favor of overruling it." Scarpitti v. Weborg, 530 Pa. 366, 369, 609 A.2d 147, 148-49 (1992). In considering this question, the court must keep in mind that "a demurrer admits every well-pleaded fact and all inferences reasonably deducible therefrom." Rutherfoord v. Presbyterian- University Hospital, 417 Pa. Super. 316, 321-22, 612 A.2d 500, 502 (1992). "If [a] demurrer is sustained, the question arises whether the 1940 Civil 1993 court should merely require the filing of an amended pleading by the adverse party or whether it should enter a final judgment in favor of the demurrant." 2 Anderson, Pennsylvania Civil Practice S1017.175, at 570 (1976). In this regard, there is a "policy of the law against entering final judgment on demurrer,-~ and "it is generally an abuse of discretion to dismiss a complaint without leave to amend." Harley Davidson Motor Co. Inc. v. Hartman, 296 Pa. Super. 37, 42, 442 A.2d 284, 286 (1982). "If a preliminary objection ... in the nature of a demurrer is sustained, as a general rule, the court has a duty to allow the pleader, against whom the objection was sustained, the opportunity to file an amended pleading." 5 Standard Pennsylvania Practice 2d S25:66, at 177-78 (1993); see Otto v. American Mutual Insurance Co., 482 Pa. 202, 393 A.2d 450 (1978). In accordance with the foregoing authority, the facts of the present case, as set out in Plaintiffs' Complaint, may be summarized as follows: On May 19, 1990, Defendant issued an insurance policy to Plaintiffs2 which provided that "Plaintiffs were to enjoy first-party medical loss benefits and wage loss ~ 2 Anderson, Pennsylvania Civil Practice ~1017.175, at 571 (1976). 2 Plaintiffs' Complaint, paragraph 4. 2 1940 Civil 1993 benefits in the respective amounts of $10,000 and $1,000/$5,000..'3 This policy was in effect on July 26, 1990,4 when Plaintiff-Wife was involved in an automobile accident resulting in jaw, head, neck, low back and other traumatic injuries,s As a result of these injuries, Plaintiff-wife "has been obliged to receive medical attention and care and to expend sums of money and to incur medical expenses with a potential to incur additional expenses for an indefinite period.-6 Plaintiffs have submitted to Defendant requests for payment of bills for "reasonable and necessary treatment" in connection with Plaintiff- Wife's injuries,7 but none of the bills associated with these requests for payment has been paid by Defendant.8 With respect to these requests for payment, Defendant contracted with a peer review organization ("PRO"), known as Worldwide, to review Plaintiffs' requests for payment.9 Based upon the reports that it had received from Worldwide, Defendant refused Plaintiffs' Complaint, paragraph 5. Plaintiffs' Complaint, paragraph 3. Plaintiffs' Complaint, paragraph 6. Plaintiffs' Complaint, paragraph 7. Plaintiffs' Complaint, paragraph 9. The costs of these services exceed $20,000. Id. 8 Plaintiffs' Complaint, paragraph 10. 9 Plaintiffs' Complaint, paragraph 12. 3 1940 Civil 1993 to pay Plaintiff-Wife's bills, because they were "not accident related.,,~0 Plaintiffs aver that "Defendant, in violation of Section 1797(b)(1) [of the Motor Vehicle Financial Responsibility Law], has used the aforementioned peer review organization to determine the causal connection between the accident and [Plaintiff-Wife's] ... injuries.''~ Additionally, Plaintiffs aver, "[t]he Peer Review Report relied upon by Defendant ... was prepared by an unidentified source whom Plaintiff believes therefor was not a licensed practitioner of like specialty or a licensed practitioner with experience providing and prescribing the care subject to review.''~2 In Count I of the Complaint, Plaintiffs allege that Defendant breached its contract with Plaintiffs; they seek payment of the aforesaid medical bills and certain damages under Section 1797 of the Motor Vehicle Financial Responsibility Law.~3 In Count II of the Complaint, Plaintiffs aver that Defendant's conduct in denying Plaintiffs' requests for payment constituted bad faith. In so contending, Plaintiffs state that they "believe and therefore aver Plaintiffs' Complaint, paragraphs 15-16. Plaintiffs' Complaint, paragraph 18. Plaintiffs' Complaint, paragraph 24. Act of February 12, 1984, P.L. 53, ~3, 75 Pa. C.S. ~1797 (1993 Supp.) Since Defendant has filed a demurrer to Count II of the Complaint only, Plaintiffs' breach of contract claim will not be discussed in depth in this Opinion. 4 1940 Civil 1993 that Defendant has employed Worldwide ... in bad faith, in that: (a) The aforesaid Organization does a substantial amount of peer review work for Defendant, giving Worldwide a financial interest in providing to Defendant a biased Peer Review Report; (b) Worldwide has or may have continu- ously been providing negative Peer Review Reports to Defendant and other insurance companies for the purpose of maintaining a steady source of business; (c) In violation of Section 1797(b)(1), Worldwide gave its opinion that the injuries were not related and/or caused by the acci- dent; and (d) Defendant, with the assistance of Worldwide, chose a pattern of abuse of the peer review process.-~4 Based upon these allegations, Plaintiffs aver that, "pursuant to 42 [Pa. C.S.]~s ~8371, Defendant is guilty of bad faith.''~6 Defendant has filed a preliminary objection in the nature of a demurrer to Count II of Plaintiffs' Complaint, maintaining the following: (a) Plaintiffs fail to set forth a cause of action for bad faith; (b) Plaintiffs' claim of bad faith is barred or preempted by the provisions of the Finan- cial Responsibility Act; ~4 Plaintiffs' Complaint, paragraph 42. ~s Act of February 7, 1990, P.L. 11, ~3, 42 Pa. C.S. §8371 (1993 Supp.). ~6 Plaintiffs' Complaint, paragraph 43. 5 1940 Civil 1993 (c) Plaintiffs' claim for bad faith is barred or preempted by the statutory and regulatory ~uthority of the insurance department includ- Ing but not limited to the Unfair Insurance Practices Act; (d) Plaintiffs fail to state a cause of action for bad faith or the acts of Defendant upon which Plaintiffs base their claim of bad faith as required by the amendments to the Financial Responsibility Act. ~7 Based upon these contentions, Defendant has requested this Court to dismiss Count II. With respect to Defendant's contention that Plaintiffs' claim of bad faith under Section 8371 is barred or preempted by the provisions of the Motor Vehicle Financial Responsibility Act, it should be noted that the statute upon which Plaintiffs base their claim reads as follows: 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. Defendant's Preliminary Objection, paragraph 10. 6 1940 Civil 1993 Act of February 7, 1990, P.L. 11, §3, 42 Pa. C.S. S8371 (1993 Supp.). On the other hand, Sections 1797(b)(5) and (b)(6) of the Motor Vehicle Financial Responsibility Law set forth a specific remedy for a health care provider or insured whose claims for first party benefits have been denied via the use of the PRO process. Section 1797(b)(6) provides that if 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. Act of February 12, 1984, P.L. 53, S3, 75 Pa. C.S. §1797(b)(6) (1993 Supp.).~8 Moreover, pursuant to Section 1797(b)(4), if a court determines that the insurer's conduct was wanton, the insurer "shall be subject to a payment of treble damages to the injured party." Id., 75 Pa. C.S. ~1797(b)(4). The Superior Court of Pennsylvania has recently addressed the issue of the apparent conflict between these two damage provisions, ~8 Section 1797(b)(5) reads as follows: If a PRO 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% per year on any amount withheld by the insurer pending PRO review. Act of February 12, 1984, P.L. 53, ~3, 75 Pa. C.S. §1797(b)(5) (1993 Supp.) 7 1940 Civil 1993 noting that [t]he 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. The provisions of 75 Pa. C.S. ~1797 are narrowly limited to those situations in which a disputed claim is to be submitted to the PRO procedure. With respect to such claims, the procedure to be followed is set forth with specificity, and the remedy, whether the procedure is followed or not, is set forth with equal specificity. If the procedure is followed by an insurer, its liability cannot be greater than as therein set forth. If it follows the PRO procedure, it cannot be subjected to damages for bad faith. 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. The provisions of 75 Pa. C.S. ~1797 are to be applied to claims for first party benefits under the Motor Vehicle Financial Responsibil- ity Law. Barnum v. State Farm Mutual Automobile Insurance Co., No. 1003 Philadelphia 1993, 1993 Pa. Super. Lexis 4047 (Pa. Super. Dec. 16, 1993). Accordingly, the Superior Court sustained the lower court's dismissal of a complaint seeking bad faith damages under Section 8371 based upon an insurer's denial of first party benefits under the Motor Vehicle Financial Responsibility Law. Id. Since Plaintiffs in Count II of the Complaint have challenged the propriety of Defendant's actions with respect to the use of the PRO process, the damage provisions of Section 1797 of the Motor 8 1940 Civil 1993 Vehicle Financial Law, and not those of Section 8371 of the Judicial Code as pled, are applicable. The demurrer to this Count of the Complaint must thus be sustained. In accordance with the principle that, where a demurrer is sustained permission to amend should be liberally allowed, Plaintiffs will be granted leave to amend the Complaint, should they desire, to assert their bad faith claim wholly in the context of Section 1797 of the Financial Responsibility Law.~9 ORDER OF COURT AND NOW, this ~ day of January, 1994, upon careful consideration of Defendant's Preliminary Objection in the nature of a demurrer, as well as the briefs and oral arguments presented in the matter, Defendant's Preliminary Objection is SUSTAINED, and Count II of Plaintiffs' Complaint is DISMISSED, with leave GRANTED to Plaintiffs to amend the Complaint within 10 days of this date in accordance with the accompanying Opinion. Defendant is GRANTED 20 days from service of any amended complaint to file an answer or preliminary objections and, in the absence of an amended complaint, 30 days from this date to file an answer. BY THE COURT, s/ J. Wesley Oler, Jr. J. Wesley Oler, Jr., J. ~9 As a result of the Court's disposition of this case, dismissing Count II of Plaintiffs' Complaint as requested by Defendant, and in the absence of an amended complaint at this time, it is unnecessary to consider the other grounds for relief asserted by Defendant. 9 1940 Civil 1993 Jill M. Wineka, Esq. 1719 North Front Street Harrisburg, PA 17102 Attorney for Plaintiffs Douglas B. Marcello, Esq. 305 North Front Street P.O. Box 999 Harrisburg, PA 17108-0999 :re 10