Gibson v. Progressive Specialty Insurance Co., 2015 U.S. Dist. LEXIS 63144 (E.D. Pa. May 13, 2015)

Plaintiff’s bad faith claim dismissed to the extent that it fell within the scope of Section 1797(b) of the Motor Vehicle Financial Responsibility Law regarding peer reviews

Progressive had issued an auto policy to the plaintiff. Following a motor vehicle accident, the plaintiff made a claim under the policy for his medical care and treatment. Progressive subsequently contracted with MES Solutions to perform a peer records review of the plaintiff’s treatment and care. The peer review doctor determined that all treatment, injections and compound medications on January 17, 2014, and beyond were considered unreasonable and unnecessary for injuries allegedly sustained in the accident. Progressive then denied payment for treatment provided on or after January 17, 2014, based upon the peer review. The plaintiff sued Progressive in the Eastern District Court, arguing that it had breached its insurance contract by denying his claim for medical services; that Progressive had acted in bad faith by using MES to perform the peer review when it had a financial interest in providing Progressive with a biased peer review report, failed to conduct a reasonable investigation, failed to timely deny the claim and various other allegations; and for violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL) for not promptly offering indemnification and objectively and fairly evaluating his claims. Progressive argued that an insured whose claim has been denied based on a PRO determination cannot bring a claim for statutory bad faith because the remedies set forth in the bad faith statute conflict with the remedies available under section 1797(b) of the Motor Vehicle Financial Responsibility Law (MVFRL). The court agreed that there was a conflict between the statutes because the bad faith statute allows for interest at the prime rate plus 3%, punitive damages, costs and attorney fees, whereas the MVFRL provides for interest at 12%, plus reasonable attorney’s fees. The court also considered that section 1797(b) must apply because it is a specific statute limited to motor vehicle liability insurance, while the bad faith statute applies generally to insurance claims. While the Pennsylvania Supreme Court has not addressed this issue, the court predicted that it would limit an insured’s remedies to those specified by section 1797(b) where the insurer submitted the claim to a PRO. The court also predicted, however, that the Supreme Court would find that an insured is not precluded from seeking damages under section 8371 if he/she raises bad faith allegations beyond the scope of section 1797(b). The plaintiff’s claim that MES had a financial interest in providing biased reports was outside the scope of section 1797(b) and could, therefore, proceed. All other allegations of statutory bad faith were dismissed. The plaintiff’s UTPCPL claim was also dismissed because the UTPCPL relates solely to claims concerning the improper sale of a policy and the statutory bad faith act is limited to claims concerning the handling of an insurance claim.

Case Law Alerts, 3rd Quarter, July 2015

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