OCTOBER 2006 BAD FAITH CASES COURT LOOKS TO STATUTORY CONSTRUCTION OF BAD FAITH TO INTERPRET MVFRL (Pennsylvania Supreme Court)
Plaintiff’s medical care was covered under an HMO contract issued by Defendant insurer. After an automobile accident settlement, Defendant asserted a subrogation lien for its costs. After paying the costs, Plaintiff brought a class action suit alleging unjust enrichment and that the lien violated Section 1720 of Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL).
The MVFRL provides that in actions arising out of the maintenance or use of a motor vehicle, there shall be no right of subrogation from a claimant’s tort recovery with respect to, among other things, benefits paid by a group contract or other similar arrangement. Defendant asserted it was exempt from the MVFRL because of Section 1560(a) of the HMO Act, which provides that HMOs are not subject to state laws relating to insurance companies.
The Supreme Court of Pennsylvania looked to Pennsylvania’s bad faith case law, where Pennsylvania courts have interpreted that the facially comprehensive language of the bad faith statute was not sufficient to preclude application of the HMO exemption to bad faith claims. Based upon this specific statutory interpretation, the Court determined that although the MVFRL included a “program, group contract or other arrangement,” this was not specific and exact enough to apply to HMOs.
The Court concluded that an HMO is exempt from complying with the anti-subrogation provision of the MVFRL.