In Nordi v. Keystone Health Plan West Inc., the Superior Court of Pennsylvania addressed two issues: (1) whether the HMO or its service provider acted in bad faith when they refused to cover the insured’s additional physical therapy sessions, and (2) whether an HMO is exempt from the bad faith statute by the Health Maintenance Organization Act.
After the insured was injured in a car accident, her HMO approved twenty outpatient physical therapy visits beginning March 22, 2002, and ending May 21, 2002. On May 23, 2002, the insured requested additional therapy sessions. The HMO denied her request on the basis that the insured had exhausted her coverage, which permitted only 60 days of therapy.
The insurance policy provided that rehabilitation therapy services “are limited to treatment for conditions which in the judgment of the PCP and [insurer] are subject to significant improvement within a period of sixty (60) days and are limited to sixty (60) days from initiation of treatment per condition, per type of therapy.” The insured sued her HMO and its service provider for breach of contract and bad faith denial of insurance benefits. The insured argued that the policy language was ambiguous because it was not clear whether the language applied to sixty calendar days or to sixty therapy days. The trial court granted summary judgment in favor of the HMO on the basis that the plain meaning of the contract language was to provide therapy sessions over a sixty-day period beginning with the first therapy sessions. The trial court did not address the insured’s other claims.
The insured appealed. In an attempt to prove that the policy language was ambiguous, the insured asked the court to consider the admissions of the HMO’s administrative personnel that many insureds had made inquires or submitted administrative appeals regarding the coverage limitation. The Superior Court determined that the additional evidence did not prove that the policy language was ambiguous. It stated: “Just because some people have difficultly understanding insurance policy language does not mean that the language is ambiguous . . .” The Superior Court held that the plain and common sense meaning of the disputed contract language only obligated the HMO to pay for therapy services rendered within 60 days of the first visit.
Additionally, the Superior Court held that the statutory remedy for bad faith does not apply to HMOs “whose enabling legislation specifically exempts them from laws relating to insurance corporations.” Further, the Superior Court held that even assuming the service provider might be potentially liable for bad faith conduct as either a de facto insurer or participating tortfeasor, neither the HMO nor the service provider were guilty of bad faith handling of the insured’s claim.
Citing its earlier Greene decision, the court concluded “that the ‘motive of self-interest or ill will’ level of culpability is not a third element required for a finding of bad faith, but is probative of the second element identified in Terletsky, i.e., ‘the insurer knew or recklessly disregarded its lack of reasonable basis in denying the claim.’”
The Superior Court affirmed the trial court’s decision.
Date of Decision: January 22, 2010
989 A.2d 376 (January 22, 2010) (Cleland, J.)