section 1797. Id. at 990 (citing 31 Pa.Code § 68.2(b) ("Under [Act 6], PROs may not be utilized for the purpose of mediating as to appropriate charges or costs, but rather may only be utilized to evaluate the reasonableness and necessity of medical treatment.")).
The same reasoning applied in Daumer v. Allstate Ins. Co., 1992 U.S. Dist. LEXIS 3386, 1992 WL 57673 (E.D. Pa. 1992), a case on all fours with this action. In Daumer, the court held that the language of section 1797 expressly limits the peer review and appeal procedure to the specific purpose of "confirming that such treatment, products, services or accommodations conform to the professional standards of performance and are medically necessary." Medical necessity is "conceptually distinct from the question whether that injury is causally related to a particular motor vehicle accident, and, hence, is an injury covered by liability benefits." "Nowhere in section 1797 . . . is the determination of causation . . . vested in a peer review organization."
The facts in the case sub judice are, for the purpose of this summary judgment motion, precisely the same as those considered by the Daumer court. Defendant disputes whether Grove's injuries stem from the 1980 auto accident. Following the reasoning of Seeger and Daumer, section 1797 does not preempt a section 8371 claim, since it is undisputed that Grove's treatment was medically necessary. The dispute is over causation: were the injuries for which Grove has submitted treatment bills caused by the 1980 accident, or by something else? Because the procedures of section 1797 apply only to PRO reviews for the purpose of determining "medical necessity," plaintiff's section 8371 claim may not be dismissed because of section 1797 preemption.
Defendant's argument that 42 Pa.C.S.A. § 8371 cannot be applied retroactively to claims arising out of insurance policies issued before July 1, 1990, the effective date of the statute's enactment, is foreclosed by the contrary holding of the Court of Appeals for the Third Circuit in Colantuno v. Aetna Ins. Co., 980 F.2d 908, 1992 WL 349281 (3d Cir. 1992). In Colanunto, the court expressly held that "section 8371 may be applied to any insurance contract regardless of date. The relevant inquiry . . . is not the contract date, but rather when [the insurer] is alleged to have committed the bad faith conduct, . . . or . . . refused to provide benefits. . . ."
The majority of courts to have considered the issue have held that "bad faith conduct" in the context of section 8371 refers to a bad faith denial of coverage. Id. See also, Gavaghan v. Replacement Rent-A-Car, Inc., 811 F. Supp. 1077, 1992 WL 368132 (E.D. Pa. 1992); Barbaro v. Old Line Life Ins. Co. of America, 785 F. Supp. 70, 71 (E.D. Pa. 1992); Wazlawick v. Allstate Ins. Co., 1990 U.S. Dist. LEXIS 15986, 1990 WL 294273 (E.D. Pa. 1990) ("Denial of coverage is the action which determines whether 42 Pa.C.S.A. § 8371 [applies].").
Plaintiff alleges that, beginning August 8, 1990, defendant has repeatedly notified Grove that his claims for medical treatment were being reviewed, rather than paid under the insurance policy. Plaintiff's Memorandum Of Law In Opposition To Defendant's Motion For Partial Summary Judgment 11. However, an insurer's refusal to pay benefits for a period of time, though frustrating to the insured claimant, is not necessarily equivalent to an outright rejection of the insured's claim.
With respect to denials of benefits, the Pennsylvania No-Fault Motor Vehicle Insurance Act, 40 P.S. § 1009.101 et seq. expressly provided:
An obligor who rejects a claim for basic loss benefits shall give to the claimant written notice of the rejection promptly, but in no event more than thirty days after the receipt of reasonable proof of the loss. Such notice shall specify the reason for such rejection and inform the claimant of the terms and conditions of his right to obtain an attorney. If a claim is rejected for a reason other than that the person is not entitled to basic loss benefits claimed, the written notice shall inform the claimant that he may file his claim with the assigned claims bureau. . . .