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.)

In L.R. Costanzo Company, Inc. v. Ohio Casualty Insurance Company, the insured was a construction company that served as the general contractor for a building erected for the Pocono Mountain Regional Police Commission (“PMRPC”).  The building suffered water leakage problems, and the PMRPC filed suit against the insured, alleging claims of negligence, breach of contract, and breach of the duty of good faith on the part of the insured.

The insured claimed that the insurer provided it with a general liability insurance policy, and that when it requested that the insurer retain counsel and appear in court to defend the PMRPC’s lawsuit against it, the insurer refused to do so.  The insured then filed its own suit against the insurer, alleging bad faith and breach of contract in failing to conduct a reasonable investigation of the claims at issue and unreasonably failing to defend the insured in the lawsuit against it.

The insurer had claimed that no insurance contract ever existed between the parties.  However, the court held that the insured had sufficiently alleged that a contract of insurance existed between the parties, as evidence indicated that the insurer was listed as the “serving office” on the insurance policy, and the insurer’s logo headed each page of the policy.  The court therefore denied the insurer’s Motion to Dismiss with respect to both the breach of contract and bad faith claims.

Date of Decision:  June 11, 2010

L.R. Costanzo Co. v. Ohio Cas. Ins. Co., No. 3:10cv774, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 57697 (M.D. Pa. June 11, 2010) (Munley, J.)