AUGUST 2010 BAD FAITH CASES
BAD FAITH CLAIM BASED ON ABUSE OF PEER REVIEW PROCESS NOT PRE-EMPTED AND INSURED PERMITTED TO PROCEED WITH CLAIM (Middle District)

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In Cieplinski v. State Farm Mutual Insurance Company, the insured was involved in a motor vehicle accident, causing her to suffer bodily injury.  The policy she had with the insurer provided her with first party medical benefits.  After peer review, the insurer determined that medical expenses incurred by the insured for her treatment by a chiropractor would not be covered.  The insured filed a suit, and the insurer proceeded to cover the disputed expenses for the time being.

At a later date, the insurer again reviewed the insured’s situation, and it determined that chiropractic care had not been clinically necessary for the past two months, and it would not continue to cover the bills.  The insured then filed suit again, alleging that the insurer refused to pay her medical claims without conducting a reasonable investigation, failed to adopt and implement reasonable standards for prompt investigation of medical claims, did not attempt to effectuate prompt, fair and equitable settlement of her claims, and abused the peer review process.  The Complaint contained both breach of contract and bad faith claims.

In addressing the insurer’s Motion to Dismiss the bad faith claim, the court stated that the insurer argued that all bad faith claims for first party medical benefit denials were preempted by 75 Pa. Cons. St At. § 1797, which discusses the peer review plan for challenges to the reasonableness and necessity of treatment.  However, the court determined that while that statute preempted bad faith claims based on failure to conduct a reasonable investigation, evaluate coverage, or promptly notify her of a denial of first party benefits, a claim that an insurer has abused the peer review process in bad faith was not preempted.  Therefore, the court determined that the insured had properly pled a cause of action for bad faith, and it therefore denied the insurer’s motion to dismiss the bad faith claim.

Date of Decision:  July 26, 2010

Cieplinski v. State Farm Mut. Auto. Ins. Co., Civil Action No. 3:10-CV-1093, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 75257 (M.D. Pa. July 26, 2010) (Caputo, J.)

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BAD FAITH CLAIM BASED ON ABUSE OF PEER REVIEW PROCESS NOT PRE-EMPTED AND INSURED PERMITTED TO PROCEED WITH CLAIM (Middle District)”


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