AUGUST 2018 BAD FAITH CASES: BAD FAITH CLAIM NOT PRE-EMPTED BY MVFRL; PLEADING ADEQUATE TO AVOID DISMISSAL AND PROCEED TO DISCOVERY (Philadelphia Federal)

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This opinion gives a detailed overview on the issue of when, and if, the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S. § 1797, pre-empts the bad faith statute, 42 Pa.C.S. § 8371. The court follows the majority Schwartz line of cases on pre-emption limits.

Thus, e.g., “Section 1797 does not extend to claims for interpretation of an insurance contract, disputes as to whether the motor vehicle accident caused the insured’s injuries, or claims that the insurer did not invoke or properly follow the peer review process.” Further, a bad faith claim is not at issue “where the peer review process set out in § 1797, namely to determine the propriety of treatment and charges therefore, is not actually followed.” Id. Section 1797 is “narrowly limited to those situations in which a disputed claim is to be submitted to the PRO procedure. . . . If the procedure is followed by an insurer, its liability cannot be greater than as therein set forth.”

Finally, “[w]here an insurer has not complied with Section 1797’s specific provisions, there is no reason to limit the damages recoverable from the insurer to those damages set out in Section 1797. … In those situations, as alleged here, Section 1797 and Section 8371 are not irreconcilable. … Both statutes can be given full effect: Section 1797 is the exclusive remedy when it applies; Section 8371 applies in all other cases.”

The court rejected a Twombly/Iqbal motion to dismiss, finding enough facts had been pleaded to state a plausible claim. The court added, in light of the allegations (if true), “it is reasonable to expect that discovery will reveal evidence that Plaintiff’s case was neither the only instance of abusive insurance practices nor an anomaly.”

Date of Decision: July 25, 2018

Shea v. USAA, U. S. District Court Eastern District of Pennsylvania, CIVIL ACTION NO. 17-4455, 2018 U.S. Dist. LEXIS 124163 (E.D. Pa. July 25, 2018) (Surrick, J.)

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