JULY 2015 BAD FAITH CASES: SECTION 8371 BAD FAITH CLAIM NOT PREEMPTED BY PENNSYLVANIA’S MOTOR VEHICLE FINANCIAL RESPONSIBILITY LAW (Middle District)
In Odgers v. Progressive Northern Insurance Company, the court denied the insurer’s motion to dismiss Plaintiff’s statutory bad faith claim on the basis that Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”) preempted the § 8371 claim.
An insured ran over Plaintiff with his car as she walked within a pedestrian crosswalk. After the insured ran over Plaintiff the first time, he placed his automobile in reverse and ran over Plaintiff a second time. Plaintiff screamed for the insured to stop, yet he placed his automobile in drive and ran over Plaintiff for the third time, causing severe injuries.
At the time of the accident, Plaintiff lived alone, did not own a car, and was not covered under any other automobile insurance policy. She informed the insurer that she would be filing a claim pursuant to 75 Pa. Cons. Stat. Ann. § 1713(a), which allowed her to recover first-party benefits from an insurance policy on any motor vehicle involved in the accident. The insurer responded that Plaintiff “would be required to complete an application for benefits, submit proof of residency, and sign a broad medical authorization release of information prior to the processing of any first-party benefits claim.” Plaintiff alleged that she submitted her first medical bill to the insurer, who nonetheless refused to process Plaintiff’s claim.
Plaintiff filed a complaint against the insurer in state court, and also provided the insurer with three months of her pay stubs, which indicated her residential address. However, the insurer allegedly “engaged in a pattern and practice of dilatory tactics, including feigning ignorance of Plaintiff’s residence, resulting in the failure to approve Plaintiff’s first-party benefits claim.” The insurer failed to approve or deny Plaintiff’s claim for over a year, until an order was issued compelling the insurer to produce its claims manuals and investigation notes. The insurer refused to produce this material, and instead responded that it would now accept Plaintiff’s claim and begin paying benefits.
Plaintiff filed a five-count complaint, including a bad faith claim for punitive damages. The insurer filed a motion to dismiss the claim, arguing that the MVFRL, which does not allow punitive damages, preempted Plaintiff’s section 8371 bad faith claim.
The found that the MVFRL did not provide the exclusive remedy for Plaintiff’s bad faith claim. While section 8371 “is a general statute authorizing recovery for an insurance company’s bad faith towards an insured,” the MVFRL “is a more specific statute requiring automobile insurers to provide medical benefit coverage ‘for reasonable and necessary medical treatment and rehabilitative services … ‘after a motor vehicle accident.” The court stated that where “an insurer’s malfeasance goes beyond the scope of [the MVFRL], however, courts have reconciled the two statutes and found bad faith claims to supplement claims under [the MVFRL].”
The bad faith claim did not fall within the MVFRL because Plaintiff did not allege the insurer conducted an improper PRO, and her claims did not involve the “denial of first-party benefits regarding the reasonableness or necessity of medical treatment.”
Further, the insurer never actually denied first-party benefits. Plaintiff’s complaint alleged that the insurer “created an environment conducive to allowing her first-party benefits claims to exist in a perpetual state of uncertainty.” Thus, because the bad faith claim did not fall within the more specific requirements under the MVFRL, the court denied the insurer’s motion to dismiss Plaintiff’s bad faith claim.