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The insured was involved in a motor vehicle accident, and he alleged that it caused various injuries to his back, legs, and feet, and that he incurred medical expenses as a result of these injuries.  He was insured under a policy issued by the insurer, which provided for first party medical benefits up to $100,000.

More than seven years after the collision, the insured’s treating physician suggested that he undergo a new course of treatment.  He then began seeing a new physician who administered a course of treatment that included multiple spinal injections and left lumbar nerve blocks.

According to the insured, the insurer eventually determined that he had reached his maximum medical improvement and that further medical treatment was neither reasonable nor necessary.  One-and-a-half years after the insured began the new treatment, he filed a suit in state court, alleging that the insurer breached its contract and acted in bad faith by refusing to pay first party benefits under the policy.  The case was removed to federal court under diversity jurisdiction, and the insurer filed a motion to dismiss the bad faith portion of the Complaint.

In its motion to dismiss, the insurer argued that the Motor Vehicle Financial Responsibility Law (“MFVRL”) was the exclusive remedy for bad faith denials of first party insurance benefits by insurance companies.  Specifically, § 1797 of the MFVRL “sets forth the procedure to be followed if the insurer wishes to challenge the reasonableness and necessity of an insured’s medical treatment,” and it preempts any claim for bad faith under other statutes.  The insured had alleged a violation of Pennsylvania’s bad faith statute, 42 Pa. Cons. Stat. Ann. § 8371, and the insurer argued that the claim was preempted by the MVFRL.

The Pennsylvania Supreme Court had not directly addressed the issue of whether the MVRFL preempts the bad faith statute under the facts presented in this case, so the court had to predict the result.  The court first acknowledged that both the Pennsylvania Supreme Court and the Third Circuit follow the general rule that the MVFRL preempts § 8371 when both apply.  It noted, however, that when an insured “states a claim for bad faith under § 8371, and where the claim is premised upon allegations beyond the scope of the MVFRL, the claim will not be preempted by [the MVFRL] in its entirety, and the [insured] may be allowed to pursue punitive damages under § 8371 to the extent of those claims beyond the scope of the MVFRL.”

The insured had raised ten bad faith allegations in support of his § 8371 claim, and the court determined that eight of them constituted a challenge to the denial of first party benefits based on the reasonableness and necessity of treatment that were therefore preempted by § 1797.  For example, allegations that the insurer failed to objectively and fairly evaluate the insured’s first party benefit claim, unreasonably and abruptly terminated his first party benefits, and failed to carry out its fiduciary obligations to the insured in good faith could only be brought under § 1797.  The only bad faith claims that were not preempted were that the insurer allegedly (1) put its own monetary interests ahead of the insured’s to the detriment of the insured, and (2) employed the independent medical examination process for an improper purpose.  The court therefore granted the motion to dismiss the bad faith portion of the Complaint with respect to all but the two allegations not preempted by the MVFRL.

Date of Decision:  December 29, 2010

Roppa v. Geico Indem. Co., Civil Action No. 10-1428, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 140033, (Dec. 29, 2010) (Lenihan, U.S.M.J.)

The foregoing Report and Recommendation was adopted by the District Court on January 9, 2011 by the Honorable Nora Barry Fisher of the Western District.