Another Decision Setting Parameters for Bad Faith Claim in First Party Medical Benefits Context

On June 25, 2010, Judge James M. Munley of the Federal District Court for the Middle District Court of Pennsylvania issued an Opinion in the case of Hickey v. Allstate Prop. and Cas. Ins. Co., No. 3:10cv00907 (M.D.Pa. June 25, 2010, Munley, J.) in which he granted the carrier's F.R.C.P. 12(b)(6) Motion to Dismiss the Plaintiff's bad faith claim in a first party medical benefits case.

In Hickey, he Plaintiff was injured in a car accident and began to recieve first party medical benefits under his own policy with Allstate for the payment of his medical treatment. Allstate paid the benefits for about two years and then stopped the payments on the basis of an independent medical examination which led the examining doctor to conclude that the Plaintiff had reached maximum medical improvement.

In response, the Plaintiff sued Allstate in state court for breach of the insurance contract and bad faith under 42 Pa.C.S.A. Section 8371. Allstate removed the matter to Federal Court and filed a Motion to Dismiss primarily asserting that the Motor Vehicle Financial Responsibility Law, i.e. 75 Pa.C.S.A. Section 1797, provided for the exclusive remedies for the type of claim brought by the Plaintiff, thereby pre-empting any claim under the bad faith statute found at Section 8371. Judge Munley agreed with the carrier's position.

The Judge noted that, since there was no Pennsylvania Supreme Court precedent on the issue, he had to predict how that court would address this issue. Reviewing the case law from other Pennsylvania federal court decisions, Judge Munley held that "section 8371 is preempted by section 1797 where an insured alleges only that an insurer wrongly denied payment of first-party medical benefits based on a determination of the propriety of treatment and associated charges."

The Judge further explained that "[c]laims based on allegations outside this narrow scope, such as a claim involving contract interpretation, a claim of abuse of the PRO process, or a claim disputing the cause of the injury, go beyond the scope of section 1797 and may be pursued under section 8371." Citing Perkins v. State Farm, 589 F.Supp. 559 (M.D.Pa. 2008).

Reviewing the Plaintiff's allegations in this matter, Judge Munley determined that the bad faith allegations were preempted by section 1797 because the dispute over the findings of the IME doctor revolved around a dispute over whether the Plaintiff's treatment was reasonable or necesary. As such, the Plaintiff's claim was found to trigger the remedies and procedures found under section 1797 of the Motor Vehicle Financial Responsibility Law.

However, Judge Munley did allow a portion of the Plaintiff's section 8371 bad faith claim to stand. The court found that the Plaintiff's claims that the Defendant carrier "had and has a practice of attempting to terminate medical treatment by 'independent medical examination' without reasonable cause to do so," were claims that alleged an abuse of the PRO process. Judge Munley found that those types of claims stated a cause of action for bad faith under section 8371 that were not preempted by section 1797.


I note that Judge Munley decision in Hickey, i.e. that where a 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, is consistent with two recent decisions out of the Lackawanna County Court of Common Pleas by Senior Judge Harold A. Thomson, Jr. and Judge Carmen D. Minora. See Skiro v. Erie Ins. Exchange, No. 09-CV-7077 (Lacka Co. May 19, 2010 Thomson, S.J.); Veltri v. Travelers Commercial Insurance Company, 08-CIVIL-8534 (Lacka. Co. September 2, 2009 Minora, J.)

Click on this link to go to my June 11, 2010 synopsis of those Lackawanna County decisions
on Tort Talk: http://www.torttalk.com/2010/06/bad-faith-claim-allowed-to-proceed-in.html.