Bad Faith Claim Allowed To Proceed in First Party Benefits IME Case

In a recent decision, Judge Harold A. Thomson, Jr., senior judge specially presiding in Lackawanna County, denied a carrier's preliminary objections seeking to preclude a bad faith claim in the automobile insurance first party benefits case of Skiro v. Erie Ins. Exchange, No. 09-CV-7077 (Lacka Co. May 19, 2010 Thomson, S.J.).

In Skiro, Erie had paid first party medical benefits over the first five years following a motor vehicle accident to its insured. The insured exhausted his $100,000 in PIP medical benefits and then began to receive additional benefits under his extra ordinary medical benefits where he had a $1 million dollar policy limit available.

Erie referred its insured for an independent medical examination [IME] pursuant to 75 Pa.C.S. Section 1796 (as opposed to engaging in a peer review under 75 Pa.C.S. Section 1797). The IME doctor found that the insured had reached maximum medical improvement and that the ongoing treatment was not medically reasonable or necessary for the alleged injuries from the subject motor vehicle accident.

Accordingly, Erie stopped the medical benefits payments. The insured responded by suing Erie for breach of contract and bad faith. Erie responded to the Complaint by filing preliminary objections to the Complaint asserting that the bad faith claims brought under the bad faith statute (Section 8371) must be dismissed because the Motor Vehicle Financial Responsibility Law [MVFRL] provided, under 75 Pa.C.S. Section 1798, for the sole remedies available for the denial of benefits pursuant to the mental and physical evaluation process.

Under Section 1798, if it is determined that the carrier acted unreasonably in refusing to pay benefits, the carrier would be compelled to pay the medical expenses, any interest, and a reasonable attorneys fee to the injured party for having to fight the issue [but punitive damages are not provided for]. The Plaintiff apparently pursued a bad faith claim under Section 8371 in part because that statute provides for the additional remedies of additional interest, costs, and punitive damages.

While Erie attempted to analogize the issues presented in this matter involving an IME in the first party context to those peer review cases where it has been held that MVFRL provides the exclusive remedies for first party disputes, the insured countered with the argument that the issue presented under the first party benefits IME scenario had not been definitively decided by the appellate courts.

Judge Thomson issued a one line Order, without an Opinion, on May 19, 2010 overruling Erie's preliminary objections and allowing the bad faith claim to proceed in this context.

I note that Judge Thomson's decision is consistent with a prior decision issued by Judge Carmen Minora also out of Lackawanna County in the case of Veltri v. Travelers Commercial Insurance Company, 08-CIVIL-8534 (Lacka. Co. September 2, 2009 Minora, J.) [I do not have a copy of this decision--UPDATE (6/13/10) I have now secured a copy of this opinion should anyone need a copy--contact me at dancummins@comcast.net].

In Veltri, Travelers’ decided to terminate first party benefits after a favorable IME pursuant to 75 Pa.C.S. Section 1796. This led to the filing of a breach of contract and bad faith Complaint by the Plaintiff.

Travelers responded with Preliminary Objections to the bad faith count of the Complaint alleging that the general tenants of the bad faith statute at 42 Pa. C.S.A. §8371 are essentially trumped by the specific remedies of the MVFRL found at 75 Pa. C.S.A. §1716 and §1798.

Judge Minora denied Travelers’ Preliminary Objections and rejected the carrier's contention that the rules of statutory construction mandate that the provisions for the nonpayment of first party benefits found under the MVFRL negate or trump the general bad faith statute.

The court in Veltri essentially ruled that where the Complaint specifically alleges culpable misconduct both within and beyond the coverage of the specific statutes of the MVFRL, then the remedies under the general bad faith statute at §8371 (i.e., punitive damages, costs and interest) may additionally apply as well.

For more info on Judge Minora's decision in the Veltri case, click on this link to the Tort Talk post on that case:

http://www.torttalk.com/2009/11/lackawanna-county-judge-carmen-minora.html


Also of note on this issue is the fact that Judge Zulick of the Monroe County Court of Common Pleas reached the opposite decision in the case of O'Connor v. Erie Ins. Exchange, No. 8654 CV 2009 (Monroe Co. Feb. 9, 2010 Zulick, J.).

In O'Connor, Judge Zulick struck a bad faith claim against the carrier in a matter pertaining to a denial of PIP medical benefits after an IME. The Monroe County Court of Common Pleas ruled that the Plaintiff's remedy was limited to those remedies provided for under the provisions of the Motor Vehicle Financial Responsibility Law (MVFRL) pertaining to first party benefits.

For more info on the O'Connor decision, click on this link to the Tort Talk post on that case:

http://www.torttalk.com/2010/03/bad-faith-claim-dismissed-from-first.html.

The above recitation of cases is not meant to be exhaustive on this issue but only serves to point out those cases that have been brought to my attention. Based on the above cases, there appears to be a split of authority on the issue among the trial courts and no appellate case on point to provide guidance.



I send thanks to Erie's defense attorney Robert Panowicz, Esquire for bringing the Skiro case to my attention.

Anyone desiring a copy of Skiro v. Erie Ins. Exchange court filings or court Order or the decision in O'Connor v. Erie Insurance Exchange may contact me at dancummins@comcast.net.

As stated, I do not have the Veltri v. Traveler's decision but if you click on the link above to the other Tort Talk post on Veltri you will find info on how to order a copy of that case from the Instant Case Service run by the Pennsylvania Law Weekly. [UPDATE (6/13/10): I now have a copy of the Veltri opinion should anyone one need it].