SEPTEMBER 2011 BAD FAITH CASES APPELLATE COURT AFFIRMS AWARD OF ATTORNEY’S FEES UNDER SECTION 1797 OF PENNSYLVANIA’S MOTOR VEHICLE FINANCIAL RESPONSIBILITY LAW (Superior Cout)

In Herd Chiropractic Clinic, P.C. v. State Farm Mutual Automobile Insurance Company, the court was faced with a carrier’s appeal from the trial court’s award of attorney’s fees to a chiropractor that had treated the insured.  The insured suffered injuries following a car accident and sought medical care, including chiropractic treatment.  Pursuant to § 1797 of the Pennsylvania Motor Vehicle Financial Responsibility Law, the carrier submitted the insured’s bills to a peer review organization for review.  The peer review deemed the insured’s chiropractic treatments not medically necessary and the carrier refused to pay.

The chiropractor filed suit against the carrier, seeking unpaid medical expenses, as well as attorneys’ fees and treble damages for bad faith.  After a non-jury trial, the trial court found that the chiropractic treatment was necessary and allowed unpaid medical expenses of $1,380.68, but refused to award treble damages and attorneys’ fees.  The chiropractor filed a motion for reconsideration and the court awarded $27,047.50 in attorneys’ fees. 

The carrier filed this appeal and raised three issues: “(1) Whether an error of law was committed where the Court of Common Pleas interpreted . . . § 1797 . . . to allow imposition of attorneys fees even though it was held that [the carrier] complied . . . in conducting a peer review”; “(2) Whether an error of law was committed where the Court of Common Pleas failed to recognize and follow the mandatory authority of the Superior Court’s opinion in Barnum v. State Farm . . . disallowing attorney’s fees where an insurer follows the peer review process; and “(3) Whether the court erred or abused its discretion where the court limited the testimony of [an expert witness] to whether [the insured’s] conduct was “wanton,” and . . . [to the law’s] intention of limiting recovery to the outstanding bills plus interest where an insurer complies with the peer review process.”

The court began by analyzing the carrier’s compliance with § 1797, finding that, since the carrier engaged in the peer review process it could not be liable for bad faith under the statute.  Because the trial court properly denied treble damages for bad faith, the court found no error in the trial court’s reasoning.  Examining the text of §1797, the court held that “There is nothing in the language of the statute that specifically precludes attorneys’ fees where a peer review decision is challenged and the court finds the treatment reasonable and necessary.”

The court also rejected the carrier’s reliance on Barnum, finding that the case did not address the issue of attorney’s fees, but stands for the proposition that an insurer who follows the peer review process cannot be liable for treble damages for bad faith.

Lastly, the court discarded the carrier’s claim that the trial court abused its discretion by limiting the testimony of an expert witness.  The court noted that the chiropractor’s motion to exclude this testimony was denied, subject to a limitation of the testimony to the issue of the carrier’s “wanton conduct.”  At that time, the carrier waived its objection, preventing any opportunity to raise the issue on appeal.  As a result, the appellate court affirmed the judgment of the trial court.

Date of Decision: August 23, 2011

HERD CHIROPRACTIC CLINIC, P.C v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., No. 882 MDA 2010, Superior Court of Pennsylvania, 2011 Pa. Super. LEXIS 2243 (Pa. Super. Aug 23, 2011) (Lazarus, J.)