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In Martino v. Allstate Indemnity Company, Plaintiff was injured in December of 2003, when her vehicle was struck by a Greyhound bus.  Plaintiff was the beneficiary of an automobile policy of insurance issued by Allstate.  Following the accident, Plaintiff submitted a claim for first party medical benefits to Allstate, which began paying for her treatment.  Plaintiff had an anterior cervical discectomy in September of 2005 and continued to receive medical treatment, including treatment for a prescription pain medication dependence.  In August of 2006 and July of 2007, Allstate obtained peer review reports from two different doctors regarding Plaintiff’s continued treatment.  Both doctors concluded that none of Plaintiff’s treatment was reasonable or necessary.  The doctors’ reports were based in part on the lack of documentation for the December 2003 motor vehicle accident and the fact that there was no reason why Plaintiff would still require chiropractic care nearly four years after the accident.

Relying on these reports, Allstate stopped paying for Plaintiff’s treatment.  Plaintiff sued the insurer for bad faith under 42 Pa. C.S.A. §8371, specifically alleging that the peer review organization employed by Allstate provided biased peer review reports to Allstate, and that Allstate acted in bad faith in denying payment for medical treatment and prescriptions that were reasonable and necessary.  Allstate moved to dismiss the claim under Federal Rule of Civil Procedure 12(b)(6).

Allstate argued that a bad faith claim is effectively preempted by §1797 of the Pennsylvania Motor Vehicle Financial Responsibility Law (the “MVFRL”).  Section 1797 of the MVFRL set up a peer review plan by which an insurer could challenge the reasonableness and necessity of an insured’s treatment.  According to §1797(b), insurers were required to contract with a peer review organization (“PRO”) “for the purpose of confirming that such treatment, products, services or accommodations conform to the professional standards of performance and are medically necessary.”  Plaintiff argued that the doctors who performed the peer reviews made causation determinations, namely, that the injuries for which she was receiving treatment were not caused by the December 2003 accident.  Plaintiff argued that a causation determination falls outside the PRO process, and therefore §1797 would not preempt her bad faith claim.

The Court recognized that in certain circumstances §1797 of the MVFRL preempts a bad faith claim under 42 Pa. C.S.A. §8371.  However, the Court held that a bad faith claim is not preempted by §1797 when the allegations do not invoke the remedies and procedures in §1797(b), such as a dispute over whether a motor vehicle accident caused the medical expenses.  In these situations, courts have reconciled the two statutes and found bad faith claims supplement claims under §1797.  The Court found that the peer reports indicated that the doctors did not determine whether Plaintiff’s treatment was “reasonable and necessary,” but considered whether the treatment was for injuries related to her December 2003 accident.  The Court held that the doctors were considering Plaintiff’s care in relation to the injuries sustained as a result of the accident.  Additionally, the Court held that allegations of bias are not within the scope of §1797, and fall within §8371.  Accordingly, the Court denied Allstate’s motion to dismiss Plaintiff’s bad faith claim.

Date of Decision: September 22, 2009

Martino v. Allstate Indemnity Company, U.S. District Court, Middle District of Pennsylvania, Civil Action No. 08-1985, 2009 U.S. Dist. LEXIS 86612 (M.D. Pa. September 22, 2009) (Vanaskie, J.)