APRIL 2016 BAD FAITH CASES: MVFRL DID NOT PRE-EMPT STATUTORY BAD FAITH CLAIMS BASED ON ABUSE OR MISUSE OF PEER REVIEW PROCESS (Middle District)

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In Urena v. Allstate Insurance Company, the court addressed what portions of the undersinsured motorist plaintiff’s statutory Bad Faith claims were pre-empted by Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).

The basic rule is that “[w]here both the Pennsylvania MVFRL and the Pennsylvania Bad Faith statutes are premised on the same conduct, i.e. an unreasonable denial of first-party benefits, the statutes are irreconcilable and, as the specific provisions of the MVFRL will preempt the general provisions of Pennsylvania bad faith statute.”

On the other hand “where a plaintiff’s claims are premised on conduct beyond the scope of § 1797, such as an insurance company’s alleged abuse of the peer review process, alleged mishandling of the insured’s claims, or unreasonable denial of benefits based on a peer review report, several courts have predicted that the Pennsylvania Supreme Court will find that these claims may proceed pursuant to Pennsylvania’s Bad Faith Statute.”

Relevant to the instant case, “claims of the mishandling of insurance claims and the abuse or misuse of the peer review process fall outside the scope of the protections afforded an insured by the MVFRL because the MVFRL does not provide specific relief for such claims.”

The following claims were pre-empted: failing to pay the first party medical benefits due to the Plaintiff for injuries she sustained in the subject motor vehicle accident; failing to objectively and fairly evaluate Plaintiff’s first party medical benefit claim; refusing to effectuate a prompt and fair resolution of the Plaintiff’s first party medical benefit claim; failing to promptly, objectively and fairly evaluate the Plaintiff’s claim for first party benefits; and failing to investigate the Plaintiff’s claim within a reasonable time limit.

However, taking the allegations in the light most favorable to the plaintiff as the non-moving party, the remaining claims were based on allegations of an abuse or misuse of the peer review process that would permit brining a statutory bad faith claim:

Compelling the institution of this Complaint in order to obtain policy benefits that should have been paid promptly and without the necessity of litigation;

asserting defenses without a reasonable basis in fact;

engaging in dilatory and abusive claims handling; repeatedly delaying and terminating the Plaintiff’s first party medical benefits in order to cause her financial hardship so that the Plaintiff would discontinue her treatment and her claims for first party medical benefits;

terminating Plaintiff’s first party medical benefits for the sole purpose of placing its own financial interest before that of its insured in order to limit its exposure of paying first party medical benefits pursuant to her policy with a $100,000 coverage limit;

deciding to retain a Peer Review Organization for the sole purpose of terminating the first party medical benefits of their insured when Allstate had no reasonable basis to do so and consciously disregarding their lack of reasonable basis to terminate their insured’s first party medical benefits;

violating 40 P.S. § 1171.1 (Unfair Insurance Practices Act) and 40 P.S. § 1171.5 (Unfair Methods of Competition and Unfair or Deceptive Acts or Practices) evidenced by the above actions and/or inactions of Defendant Allstate;

reporting to offer $100,000 in first party medical benefits, when in fact, Allstate had no intention of providing this coverage;

representing that the Plaintiff purchased $100,000 in first party medical benefits, when in fact, said promise was wholly illusory;

charging a premium based upon $100,000 in first party medical benefits, when in fact, Allstate purposely avoided fulfilling its contract with the Plaintiff;

representing that the Plaintiff purchased $100,000 in first party medical benefits, when in fact, Allstate without justification, refused and continues to refuse to pay said benefits;

denying Plaintiff first party medical benefits without a reasonable basis; denying Plaintiff first party medical benefits with the knowledge, or a reckless disregard, that such denial was without a reasonable basis;

violating the policy and covenant of Good Faith and Fair Dealing; retaining the Peer Review Organization to challenge the reasonableness and necessity of the Plaintiff’s medical treatment in order to force the Plaintiff’s healthcare providers to stop treatment necessary for accident related injuries and to assist in the defense and to compromise Plaintiff’s claims for first party medical benefits;

improperly utilizing the Peer Review process to challenge the reasonableness and necessity of Plaintiff’s medical treatment from all of her medical providers when only obtaining a Peer Review of the Plaintiff’s physical therapy treatment in order to protect its own financial interests and cause financial hardship to the Plaintiff so that the Plaintiff would discontinue or compromise her claim for first party medical benefits;

violating 75 Pa. C.S.A. Section 1797(b) by improperly utilizing the Peer Review performed by physical therapists to deny payment of the Plaintiff’s medical treatment from all of her providers;

and

retaining a Peer Review organization to challenge the reasonableness and necessity of the Plaintiff’s physical therapy treatment and then utilizing the physical therapy Peer Review to deny payment of all of the Plaintiff’s medical treatment from all of her providers in violation of 75 Pa. C.S.A. Section 1797.

Date of Decision:  March 14, 2016

Urena v. Allstate Ins. Co., No. 3:15-CV-570 2016 U.S. Dist. LEXIS 32562 (M.D. Pa. Mar. 14, 2016) (Mariani, J.)

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