In Watson v. Nationwide Mut. Ins. Co. of N. Am., the court heard a carrier’s motion for summary judgment after its insured sued for breach of contract and bad faith. The insured originally filed suit in the Lancaster County Court of Common Pleas, but the carrier removed and filed a motion to dismiss, which the court denied. The case stemmed from the carrier’s denial of first-party medical and uninsured motorist (“UM”) benefits under the insured’s automobile insurance policy after the insured was injured in a car accident.
After the accident, the insured began to feel pain in her lower back. After filing a personal injury protection claim under her policy and engaging in negotiations with the carrier, the insured received benefits through mid-2009. In 2010, the insured re-initiated contact with the carrier. An adjuster for the carrier determined at that point that the insured’s future medical bills should be evaluated through the peer review process. A series of four peer reviews each held that the insured’s post-2009 tests and medical consultations were unreasonable and medically unnecessary, prompting the carrier to deny coverage.
The insured’s first claim was that the carrier acted in bad faith through the peer review process. The court recognized that under the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”), some bad faith claims related to peer reviews are preempted. For instance, where an insured claims that bad faith resulted from the insured’s denial of benefits on the basis of a peer review, the MVFRL preempts the insured’s claims. Yet, where an insurance company submits a claim for peer review in bad faith, such a claim may exist. (See also this blog).
Despite acknowledging the existence of such a claim, the court rejected the insured’s contention that the carrier acted in bad faith by referring all future medical bills to peer review. The court also found no evidence of partiality and rejected the insured’s claim that there was a conflict of interest between the carrier and one of its peer reviewers. A transactional relationship between the carrier and its peer reviewer did not raise an inference of bad faith, prompting the court to grant summary judgment for the carrier on these claims.
With respect to the insured’s claim that the carrier acted in bad faith while investigating her UM claim, the court granted summary judgment to the carrier. The record indicated that the carrier and the insured had engaged in significant negotiations that included many offers and counter-offers. As such, the insured’s claim was without any factual basis.
Lastly, the court held that the carrier did not act in bad faith during the ongoing litigation. Although the carrier hired several attorneys to deal with the case, there was no evidence that it had engaged in frivolous behavior as alleged by the insured. Finding no evidence of inappropriate conduct, the court granted summary judgment to the carrier on the insured’s bad faith claims, leaving only the breach of contract action for adjudication.
Date of Decision: June 13, 2012
Watson v. Nationwide Mut. Ins. Co. of N. Am., NO. 11-1762, 2012 U.S. Dist. LEXIS 83065, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. June 13, 2012) (Surrick, J.)