In Gibson v. Progressive Specialty Insurance Company, the Court found that an insured stated a bad faith claim by alleging that his insurer used a biased peer review organization (“PRO”) in denying him coverage. The insured obtained an automobile insurance policy from his insurer, for $100,000 in primary coverage and $1,000,000 in excess coverage. In December 2010, the insured was involved in a motor vehicle accident and suffered various injuries, and sought coverage for his medical care and treatment.
The insurer contracted to have a “peer records review” performed on the insured’s treatment and care. The doctor performing the review concluded that any treatment beyond January 17, 2014 was unnecessary. The insurer notified several of the insured’s medical providers that it would not provide coverage for any treatment beyond that date.
The insured alleged breach of contract and bad faith, arguing, among other things, that the entity responsible for the review had a financial interest in providing the insurer with a biased report. The Court stated that 42 Pa. C.S. § 8371 “establishes a separate and independent cause of action for bad faith claims against insurance companies related to their handling of an insured’s claims.” The insurer argued that “an insured whose claim has been denied based on a PRO determination cannot bring a claim for statutory bad faith” because these remedies conflict with those available under the Pennsylvania Motor Vehicle Financial Responsibility Law (“PMVFRL”), which concerns motor vehicle liability insurance.
The Court found that under the Pennsylvania Rules of Statutory Construction, the PMVFRL must apply here because “it is a specific statute limited to motor vehicle liability insurance, while § 8371 applies generally to insurance claims,” and pointed to case law for the proposition that when a conflict between two statutory provisions is irreconcilable, the more specific provision should apply. However, the Court also observed that recent federal and state decisions have found that “an insured is not precluded from seeking damages under § 8371 if he raises bad faith allegations beyond the scope of [the PMVFRL], such as claims involving contract interpretation or claims that the insurer did not properly invoke or follow the PRO process.”
Here, the insured asserted that the insurer retained the reviewing entity in bad faith because of its alleged “financial interest in providing biased reports to [the insurer]” and because that entity had “provided negative reports to [the insurer] and others to maintain a steady source of business.” The Court found that because “this claim does not fall within the scope of [the PMVFRL], it alleges a proper basis for a statutory bad faith claim.”
However, the Court held that Gibson could not seek statutory bad faith damages based on his claims that Progressive failed to conduct a reasonable investigation because it was essentially a challenge to Progressive’s decision to deny first-party coverage and fell within the scope of the PMVFRL.
Date of Decision: May 12, 2015
Gibson v. Progressive Specialty Ins. Co., Civil Action No. 15-1038, 2015 U.S. Dist. LEXIS 63144 (E.D. Pa. May 12, 2015) (Rice, J.)