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Jon L. Richter, D.M.D., Ph. D v. Geico Indem. Co

June 23, 2011


The opinion of the court was delivered by: Joyner, C.J.


Before this Court are Defendant's 12(b)(6) Motion to Dismiss in Part Counts II and III of the Amended Complaint (Doc. No. 6), Plaintiff's response in opposition thereto (Doc. No. 7), and Defendant's reply in further support thereof (Doc. No. 8). For the reasons set forth in this Memorandum, Defendant's Motion is denied.


Plaintiff was involved in a motor vehicle accident while driving his 2009 Honda Ridgeline, totaling the vehicle and sustaining personal injuries. (Am. Compl. ¶¶ 5, 8, Doc. No. 4.) Plaintiff thereafter submitted a claim to Defendant, with whom Plaintiff had an insurance policy, for (1) collision benefits for damage to the vehicle, and (2) Personal Injury Protection (PIP) benefits for medical expenses. (Id. ¶ 10, 12.) Defendant denied the claim, asserting that the vehicle Plaintiff was driving had not been listed on the policy and that there was thus no coverage for the accident. (Def.'s Mem. 3, Doc. No. 6-3.)

Plaintiff then brought suit, contending that coverage for the vehicle had been sought on multiple occasions and that the claim was thus improperly and unreasonably denied by Defendant. (Am. Compl. ¶¶ 6, 7, 9-12, 14, Doc. No. 4.) Count I alleges breach of contract and seeks damages for the value of the vehicle, the unpaid medical bills, and interest and costs. (Id. at 1-2.) Count II alleges a violation of the bad faith statute, 42 Pa. Cons. Stat. Ann. § 8371, and seeks interest, punitive damages, court costs, and attorney's fees. (Id. at 2-3.) Count III seeks payment of unpaid medical bills with 12% interest and attorney's fees under the Motor Vehicle Financial Responsibility Law (MVFRL), 75 Pa. Cons. Stat. Ann. § 1716. (Id. at 3.)

Defendant is now moving to dismiss Count II, to the extent that it is based on a claim for PIP benefits, on the ground that § 8371 is preempted by § 1797 of the MVFRL. (Def.'s Mot. ¶¶ 8-10, Doc. No. 6.) Defendant is also moving to dismiss Count III, on the ground that § 1716 only provides a private cause of action to medical providers seeking interest on bills that were untimely paid. (Id. ¶ 12.)


A Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted tests the sufficiency of a complaint's allegations. Hickey v. Allstate Prop. & Cas. Ins. Co., 722 F. Supp. 2d 609, 612 (M.D. Pa. 2010). In determining whether to grant such a motion to dismiss, the court must accept all of the facts alleged in the complaint as true and decide if the plaintiff has presented enough facts to justify advancing the case under the applicable laws. Id.

Moreover, when a federal court is sitting in diversity, it must "apply state substantive law, statutory and decisional[,] as interpreted by the highest court of the state." Burgh v. Borough Council, 251 F.3d 465, 474 (3d Cir. 2001). "In the absence of a reported decision on point by the Pennsylvania Supreme Court," the court "look[s] to the decisions of the intermediate appellate courts for guidance." Id.


A. Whether § 8371 is preempted by § 1797 of the MVFRL

It is a well-established rule of statutory construction that a more specific statutory provision usually applies over a general statutory provision on the same point. See 1 Pa. Cons. Stat. Ann. § 1933 ("Whenever a general provision in a statute shall be in conflict with a special provision in the same or another statute, the two shall be construed, if possible, so that effect may be given to both. If the conflict between the two provisions is irreconcilable, the special provisions shall prevail and shall be construed as an exception to the general provision, unless the general provision shall be enacted later and it shall be the manifest intention of the General Assembly that such general provision shall prevail."). Section 8371 is a general statute that lists three remedies for bad faith claims in "actions on insurance policies." See 42 Pa. Cons. Stat. Ann. § 8371. *fn1 Section 1797 is a more specific statute that deals with the reasonableness and necessity of medical treatment for which a claim is made after a motor vehicle accident. See 75 Pa. Cons. Stat. Ann. § 1797(b)(4),(6). *fn2

The Third Circuit, in predicting how the Pennsylvania Supreme Court would interpret the statutes, has indeed stated that "the specific provisions of 75 Pa. C.S. § 1797 must be deemed an exception to the general remedy for bad faith contained in 42 Pa. C.S. § 8371." Gemini Physical Therapy & Rehab., Inc. v. State Farm Mut. Auto. Ins. Co., 40 F.3d 63, 67 (3d Cir. 1994) (citing Barnum v. State Farm Mut. Auto. Ins. Co., 635 A.2d 155, 159 (Pa. Super. Ct. 1993), rev'd on other grounds, 652 A.2d 1319 (1994) (per curiam)). Accordingly, Defendant cites Gemini and Barnum, among other cases, in support of its preemption argument. The present case is distinguishable from those cases, however, because those involved disputes over the reasonableness of amounts owed and the necessity of treatment; the insurers had already acknowledged that there was (some) coverage arising from the accidents, and § 1797 was clearly implicated. See, e.g., 40 F.3d at 64-65; 635 A.2d at 156.

Numerous courts have held that "[i]n those situations in which the insurer's actions do not fall squarely under § 1797, claims under § 8371 should not be dismissed as barred by § 1797." Schwartz v. State Farm Ins. Co., No. 96-0160, 1996 WL 189839, at *5 (E.D. Pa. Apr. 18, 1996). As suggested supra, "the applicability of § 1797 to a particular claim depends . . . on whether the dispute is over the reasonableness and necessity of medical treatment." Roppa v. Geico Indem. Co., No. 10-1428, 2010 WL 5600899, at *7 (Dec. 29, 2010) (report & rec.), adopted, 2011 WL 181531 (W.D. Pa. Jan. 19, 2011). Hence, many courts have held that "an insured may raise a § 8371 claim based on allegations of bad faith conduct on the part of an insurer which goes beyond the scope of § 1797(b), such as claims involving contract interpretation or claims that the insurers did not properly invoke or follow the PRO process." Perkins v. State Farm Ins. Co., 589 F. Supp. 2d 559, 564-65 (M.D. Pa. 2008). See, e.g., Stephano v. Tri-Arc Fin. Servs. Inc., No. 07-0743, 2008 WL 625011, at *6-7 (M.D. Pa. Mar. 4, 2008) (rejecting the § 1797 preemption argument when the plaintiff was challenging the insurer's total refusal of coverage and direction to seek coverage from another insurer); Seeger v. Allstate Ins. Co., 776 F. Supp. 986, 990-91 (M.D. Pa. 1991) (allowing a ยง 8371 claim ...

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