JULY 2010 BAD FAITH CASES BAD FAITH ALLEGATION SURVIVES MOTION TO DISMISS WHEN INSURED SUFFICIENTLY ALLEGES AN ABUSE OF PEER REVIEW PROCESS (Middle District)

In Hickey v. Allstate Property and Casualty Insurance Company, the insured was involved in a motor vehicle accident in which he suffered injuries to his back and neck.  He was insured by the defendant insurer, and the policy contained first-party medical benefits coverage for $100,000.

The insured received medical care for over two years, and the insurer paid all of the bills promptly.  The insurer then informed the insured that it would require an independent medical examination before paying any further bills.  The examining physician concluded that the while the insured did still require treatment and therapy, he had “essentially reached his point of maximum medical improvement.”  Because of this, the insurer then notified the insured that it would not pay any further medical bills.  The insured filed a complaint that contained counts for breach of contract and bad faith.

The Pennsylvania Motor Vehicle Financial Responsibility Law mandates that automobile insurers provide medical benefit coverage “for reasonable and necessary medical treatment and rehabilitative services.”  The insured asserted that the insurer “has a practice of attempting to terminate medical treatment by independent medical examination without reasonable cause to do so,” and it complained that the insurer made its decision to deny future coverage independent of any PRO process or determination.

There was a clear dispute over whether the insured’s treatment was reasonable or necessary, and the insurer was thus required to contract with a peer review organization under 75 Pa.C.S. § 1797.  The insurer allegedly made its decision independent of the peer review organization process, and the court therefore determined that the insurer had alleged an abuse of the process.  Accordingly, the court denied the insurer’s Motion to Dismiss with respect to the allegation of abuse of the peer review organization process.

Date of Decision:  June 25, 2010

Hickey v. Allstate Prop. & Cas. Ins. Co., No. 3:10cv00907, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 63225 (M.D. Pa. June 25, 2010) (Munley, J.).