HomeMy WebLinkAbout92-3198 CivilPATRICIA L. ALAPAS,
Plaintiff
V.
IN THE COURT OF COMMON pLp
'ASOF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
THE OHIO CASUALTY GROUP OF
INSURANCE COMPANIES,
Defendant
NO. 3198 CIVIL 1992
IN RE: DEFENDANT'S PRELIMINARY OBJECTION
BEFORE BAYLEY and OLER JJ.
ORDER OF COURT
AND NOW, this A2I day of June, 1993, upon careful consideration of Plaintiffs
Complaint and Defendant's Preliminary Objection thereto, as well as the
briefs and
oral arguments presented on the matter, Defendant's Preliminary Objection
in the
nature of a demurrer to Count II of the Complaint is SUSTAINED, with leave granted
to Plaintiff to file an amended pleading within 10 days of this
date.
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,
J Wesley Oler, Jr. J.
James A. Johnson, Esq.
301 Market Street
P.O. Box 109
Lemoyne, PA 17043-0109
Attorney for Plaintiff
Douglas B. Marcello, Esq.
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Attorney for Defendant
:rc
PATRICIA L. ALAPAS,
Plaintiff
V.
THE OHIO CASUALTY GROUP OF
INSURANCE COMPANIES,
Defendant
Oler, J.
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION - LAW
NO. 3198 CIVIL 1992
IN RE: DEFENDANT'S PRELIMINARY OBJECTION
BEFORE BAYLEY and OLER, JJ.
OPINION AND ORDER OF COURT
At issue in the present case is a preliminary objection in the nature of a
demurrer filed by the Ohio Casualty Group of Insurance Companies (Defendant) to a
count of insurance bad faith in a complaint filed by Patricia L. Alapas (Plaintiff). For
the reasons stated in this Opinion, Defendant's preliminary objection will be sustained,
with leave granted to Plaintiff to file an amended pleading.
Statement of facts. Plaintiff's complaint, which consists of a count for breach
of contract and a count for bad faith by an insurer under Section 8371 of the Judicial
Code,' arises out of Defendant's alleged refusal under an automobile insurance policy
to cover certain aspects of treatment of Plaintiff.' This refusal was accompanied by
utilization of the peer review organization (PRO) process prescribed in Pennsylvania's
Motor Vehicle Financial Responsibility Law.3 Count II of the complaint, relating to
bad faith, alleges in pertinent part as follows:
1 Act of February 7, 1990, P.L. 11, §3, 42 Pa. C.S. §8371 (1993 Supp.).
2 Plaintiff's Complaint, paragraph 16.
' Plaintiff's Complaint, paragraphs 13-15; See Act of February 12, 1984, P.L. 53, §3, as
amended, 75 Pa. C.S. §1797 (1993 Supp.).
No. 3198 Civil 1992
It is believed and therefore averred that Defendant has
employed said peer review organization in bad faith in that
the peer review organization does a substantial amount of
peer review work for Defendant, and therefore has a
financial interest in providing to Defendant a biased peer
review report. Said peer review organization has, or may
have, continuously been providing negative peer review
reports to Defendant [and] other insurance companies for
the purpose of maintaining a steady source of business,
thereby showing a pattern of abuse of the peer review
process.4
The factual background is more specifically alleged in Plaintiff's complaint as follows:
Plaintiff and Defendant entered into an automobile insurance contract wherein
Plaintiff was the insured and whereby Defendant agreed to provide Plaintiff with
$100,000 in first party medical loss benefits.' This insurance policy was in effect on
March 25, 1987, when Plaintiff was involved in a motor vehicle accident in which she
sustained personal injuries, including trauma in the cervical region.'
As a result of these injuries, Plaintiff has been required to receive medical
attention and care and to expend money and incur expenses therefor.' Her care has
included "reasonable and necessary treatment from Richard Seldow, D.C., ... [and the]
' Plaintiff's Complaint, paragraph 20.
' Plaintiff's Complaint, paragraph 5. The $100,000 coverage was provided in accordance
with the mandates of the Pennsylvania Motor Vehicle Financial Responsibility Law, Act of
February 12, 1984, P.L. 26, §3, as amended, 75 Pa. C.S. §§1701 et seq. (1993 Supp.).
' Plaintiff's Complaint, paragraphs 4-6.
' Plaintiff's Complaint, paragraph 7.
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No. 3198 Civil 1992
charges for this treatment as of August 24, 1992[,] are $1,237.70.i8 Plaintiff has also
been required to receive treatment from a massage therapist, and "[t]he fair and
reasonable charges through August 24, 1992[,] for his treatment which remain unpaid
by the Defendant are $1,080.00."9
On October 28, 1991, Defendant notified Plaintiff that it would no longer pay
for the aforesaid treatments which she had been receiving.'o Prior to this date,
Defendant had paid for these services, but it has denied all of Plaintiffs subsequent
requests for payments."
Pursuant to Section 1797(b)(1) of the aforesaid Financial Responsibility Law, 12
Defendant contracted with a PRO for a determination of whether "such treatment,
products or services conform[ed] to the professional standards of performance and
[were] medically necessary."" Subsequently, on November 25, 1991, Plaintiff
requested a peer review reconsideration under Section 1797(b)(2)14 of the Financial
s Plaintiff"s Complaint, paragraph 8.
s Plaintiffs Complaint, paragraph 10.
to Plaintiff"s Complaint, paragraph 12.
11
Plaintiff's Complaint, paragraphs 9, 11-12.
12 Act of February 12, 1984, P.L. 53, §3, as amended, 75 Pa. C.S. §1797(b)(1) (1993 Supp.).
" Plaintiff's Complaint, paragraph 13.
14 Act of February 12, 1984, P.L. 53, §3, as amended, 75 Pa. C.S. §1797(b)(2) (1993 Supp.).
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No. 3198 Civil 1992
Responsibility Law."
On March 23, 1992, after contracting with a PRO known as I-PRO/Intracorp,
located in State College, Pennsylvania, for the purported purpose of confirming the
medical necessity of such treatment, products or services and their conformity to
professional standards of performance, in accordance with the said law, Defendant
informed Plaintiff that it would no longer pay the said bills.18 "[A]ll medical bills,"
it is alleged, were in fact "fair and reasonable, and ... all treatment was medically
necessary."17 Based upon the aforesaid allegation of bad faith, Plaintiff has requested
in Count II, "judgment in her favor in an amount representing appropriate damages
pursuant to 42 P.S. §8371, including interest, punitive damages, court costs and
attorney fees." 18
In response to Count II of Plaintiff's Complaint, Defendant has filed the present
preliminary objection in the nature of a demurrer contending the following:
(a) Plaintiff fails to set forth a cause of action for bad faith;
(b) Plaintiff s claim of bad faith is barred or preempted by
the provisions of the Financial Responsibility Act;
(c) Plaintiff's claim for bad faith is barred or preempted by
" Plaintiff's Complaint, paragraph 14.
" Plaintifl"s Complaint, paragraphs 15-16.
" Plaintiff's Complaint, paragraph 16.
" Plaintiffs Complaint, Count II, ad damnum clause.
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No. 3198 Civil 1992
the statutory and regulatory authority of the insurance
department including but not limited to the Unfair
Insurance Practice Act;
(d) Plaintiff fails to state a cause of action for bad faith as
the acts of Defendant upon which Plaintiff [bases] its claim
of bad faith are required by the amendments to the
Financial Responsibility Act.19
Discussion. It is well settled in Pennsylvania that "[a] demurrer admits all well -
pleaded material facts in the pleading which it attacks, as well as all inferences which
may reasonably be deduced therefrom." International Association of Firefighters v.
Loftus, 80 Pa. Commw. 329, 333, 471 A.2d 605, 607 (1984). Moreover, a demurrer
should be sustained "only when it appears with certainty that the law permits no
recovery under the facts pled, and any doubts in the determination should be resolved
by overruling the [demurrer]." Paone v. City of Scranton, 9 Pa. D. & CAth 115, 117
(Montgomery Co. 1991).
When considering the contents of a pleading, it should be noted that
Pennsylvania Rule of Civil Procedure 1019 requires that "[t]he material facts on which
a cause of action ... is based shall be stated in a concise and summary form."
Additionally, "a pleading should be sufficiently speck so as to enable an opposing
party to prepare his or her response." 2 Goodrich Amram 2d, §1019:4 at 313 (1991) .
Furthermore, although Rule 1019(b) permits "a condition of mind to be averred
" Defendant's Preliminary Objections, paragraph 16.
5
No. 3198 Civil 1992
generally, that section was not meant to eliminate the requirement of pleading the
factual circumstances giving rise to an inference as to the state of mind of the actor."
Witchey v. Lisi, 17 Pa. D. & C.3d 131, 132-33 (Clinton Co. 1980). "At a minimum, a
pleader must set forth concisely the facts upon which his or her cause of action ... is
based." 2 Goodrich Amram 2d, §1019(a):9 at 325 (1991). If such facts are not pled in
the complaint, then it is subject to a demurrer.
In the event that a demurrer is sustained, "the question arises whether the 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, §1017.175, at 570 (1976). '[Mhere it is apparent that a
pleading can be cured by amendment, the ... court may not sustain a demurrer that
would put an end to a controversy without giving the pleader an opportunity to file an
amended complaint, if there exists a reasonable possibility that a cause of action may
be sustained." Del Turco v. Peoples Home Savings Association, 329 Pa. Super. 258,
273-74, 478 A.2d 456, 464 (1984).
With respect to Defendant's contention that Plaintiff's claim for bad faith under
Section 8371 of the Judicial Code is barred or preempted by the Financial
Responsibility Law,20 Section 1933 of the Statutory Construction Act of 1972 provides
as follows:
20 See Act of February 12, 1984, P.L. 53, §3, as amended, 75 Pa. C.S. §1797 (1993 Supp.).
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No. 3198 Civil 1992
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 later and it shall be the manifest intention of the
General Assembly that such general provision shall
prevail.21
The Superior Court of Pennsylvania has recently addressed the issue of
preemption which has been raised by Defendant. See Okkerse v. Prudential Property
and Casualty Insurance Co., No. 01868 (Pa. Super.) (filed May 4, 1993) (Lexis States
Pa. File). In Okkerse, the Court held that although a potential conflict may occur
between Section 8371 and Section 1797 of the Financial Responsibility Law, a plaintiff
must meet different standards to successfully recover under each of these statutes,
and, therefore, they cannot be considered to be in irreconcilable conflict. Id.
Moreover, the Court noted that at the pleading stage of the proceedings, "it is not clear
that [the Plaintiff] actually will be able to recover under both [Section 8371 and
Section 17971." Id. Therefore, dismissal of either claim based upon the potential
conflict of remedies would be premature in the initial phase of a case. Count II of
Plaintiff's complaint will not, therefore, be dismissed on the ground of preemption by
the Financial Responsibility Law.
" Act of December 6, 1972, P.L. 1339, §3, 1 Pa. C.S. §1933 (1993 Supp.).
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No. 3198 Civil 1992
With respect -to Defendant's contention that an action brought pursuant to
Section 8371 is "barred or preempted by the statutory and regulatory authority of the
insurance department, 1122 it is noted that this argument has not been pursued in
Defendant's brief. In accordance with to Cumberland County Rule of Procedure 210-
7,21 the issue will not be considered further at this time.
With respect to Plaintiff's contention that the elements of bad faith for purposes
of Section 8371 have not been pleaded, it is noted that the statute 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.
Act of February 7, 1990, P.L. 11, §3, 42 Pa. C.S.A. §8371 (1993 Supp.).
Although Section 8371 does not define "bad faith," it has been observed that "[i]n
the insurance context, the phrase `bad faith' has acquired a peculiar and universally
acknowledged meaning." Coyne v. Allstate Insurance Co., 771 F. Supp. 673, 677 (E.D.
Pa. 1991). In this regard,
' Defendant's Preliminary Objections, paragraph 16(c).
' Rule 210-7 provides that "[i]ssues raised, but not briefed, shall be deemed abandoned."
E:3
No. 3198 Civil 1992
"[b]ad faith" on [the] part of [the] insurer is any frivolous or
unfounded refusal to pay proceeds of a policy; it is not
necessary that such refusal be fraudulent. For purposes of
an action against an insurer for failure to pay a claim, such
conduct imports a dishonest purpose and means a breach of
a known duty ... through some nature of self-interest or ill
Will ....
Id. (emphasis added).24
In light of this definition of bad faith, we are of the opinion that Plaintiff's
complaint fails to aver facts which underlie an inference that Defendant's purpose in
refusing to pay Plaintiff s medical bills was dishonest or that Defendant's refusal was
a breach of a known duty. That Defendant is "believe[d]" to have employed a PRO
which had performed "a substantial amount of peer review work for Defendant, and
therefore ha[d] a financial interest in providing to Defendant a biased peer review
report"'M does not, in and of itself, establish bad faith on the part of Defendant.
Similarly, the suggestion that the PRO "may have ... continuously been providing
negative peer review reports to Defendant 121 does not give rise to the inference that
Defendant was acting in bad faith. For this reason, the following Order will be
entered:
24 See also Act of July 22, 1974, P.L. 589, §5, as amended, 40 P.S. §1171.5(10)(iv).
25 Plaintiff's Complaint, paragraph 20.
26 Id.
No. 3198 Civil 1992
ORDER OF COURT
AND NOW,, thi04'9d�'ay of June, 1993, upon careful consideration of Plaintiff's
t and Defendant's Preliminary Objection thereto, as well as the briefs and
Complain
ents resented on the matter, Defendant's Preliminary Objection in the
oral argum P
nature of a
demurrer to Count 11 of the Complaint is SUSTAINED, with leave granted
to Plaintiff to file an amended pleading within 10 days of this date.
Defendant is granted 20 days from service of any amended complaint to file an
reliminary objections, and, in the absence of an amended complaint, 30
answer or p
days from this date to file an answer.
James
A. Johnson, Esq.
301 Market Street
P.O. Box 109
Lemoyne, PA 17043-0109
Attorney for Plaintiff
Douglas B. Marcello, Esq.
305 North Front Street
P.O. Box 999
Harrisburg, PA 17108
Attorney for Defendant
:rc
BY THE COURT,
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