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Shea v. USAA

United States District Court, E.D. Pennsylvania

July 25, 2018



          R. BARCLAY SURRICK, J.

         Presently before the Court is Defendant USAA Casualty Insurance Company's Motion (ECF No. 7) pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Counts I, IV, and V of the First Amended Complaint. For the following reasons, the Motion will be denied.

         I. BACKGROUND

         Plaintiff Elizabeth Shea purchased an automobile insurance policy from Defendant USAA, which provided her with first-party and extraordinary medical benefits. On September 16, 2016, while the policy was in force, Plaintiff was injured in a motor vehicle accident.[1] This action arises as a result of Defendant's denial of Plaintiff's claim for medical benefits under the policy.

         On October 5, 2017, Plaintiff filed a Complaint. On December 18, 2017, in response to Defendant's first motion to dismiss, Plaintiff filed an Amended Complaint. (Am. Compl., ECF No. 6). The Amended Complaint alleges that Defendant refused to pay Plaintiff's medical benefits in breach of the terms of the insurance contract (Count I) and in violation of Pennsylvania's Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa.C.S.A. §§ 1701-1799.7 (West 2018) (Counts II, III). In addition, Plaintiff alleges that Defendant abused the MVFRL's Peer Review Organization (“PRO”) process, id. § 1797, by procuring sham medical opinions to support its denial of medical benefits. That conduct, Plaintiff contends, mandates compensatory damages for breach of the insurance contract's implied covenant of good faith and fair dealing (Count I); punitive damages and other remedies for violation of Pennsylvania's bad faith statute, 42 Pa.C.S.A. § 8371 (West 2018), (Count IV); and damages under Pennsylvania's Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. §§ 201-1-201.9.3 (West 2018) (Count V). On February 16, 2018, Defendant moved to dismiss Counts I, IV, and V.


         Plaintiff's treating providers submitted bills to Defendant for Plaintiff's medical treatment, which in the opinion of those providers was reasonable, necessary, and related to the accident. (Am. Compl. ¶¶ 20, 45-51, Exs. B, C, D.) Her treatment included surgery to her right shoulder. (Id. ¶ 45, Exs. B, C.) The bills currently total $250, 229.14, and Plaintiff expects that ongoing treatment will be necessary. (Id. ¶¶ 10, 20.) Defendant has paid $3, 560.31 of those bills. (Id. ¶ 21.)

         The Amended Complaint alleges that Defendant “had a business model which relied upon improperly refusing to pay medical treatment for customers [insureds such as Plaintiff] who select high levels of first party medical coverage.” (Am. Compl. ¶ 7.) It is alleged that Defendant “[chose] to acquire medical opinions through the peer review process, for the purpose of minimizing any potential exposure to” Plaintiff's claims for insurance benefits. (Id. ¶¶ 15-16.) “[T]hese reviews were not rendered independently and were focused on generating false and misleading reports in order to save USAA money at the expense of Plaintiff.” (Id. ¶ 53.)

         Defendant used the PRO Disability Management Consultants (“DMC”). It is alleged that DMC's consultants “performed substantial peer review work” for Defendant; “continuously and regularly provided . . . peer reviews unfavorable to the interests of Defendant's customers; and have a financial interest in providing Defendant a biased peer review report.” (Id. ¶¶ 24-25, 76. It is alleged that DMC “has, or may have been continuously providing negative peer review reports to Defendant and other insurance companies for the purpose of maintaining a steady source of business, therefore showing a pattern of abuse of the peer review process.” (Id. ¶ 76.)

         Finally, the Amended Complaint alleges that Defendant “has undertaken a course of conduct” which has “been designed to unilaterally, and without justification, refuse to honor Plaintiff's claim for medical benefits [causing] . . . Plaintiff to become personally responsible for medical bills” stemming from the accident. (Id. ¶ 59.) All nine peer reviews of Plaintiff's medical bills were performed by DMC. (Id. ¶¶ 25, 26-43.) However, none of the peer reviewers examined Plaintiff. (Id. ¶ 44.) Nevertheless, each of the peer reviewers concluded that some or all of Plaintiff's treatment was not medically necessary, and that Plaintiff required no further treatment. (Id. ¶¶ 26-44.) All of Plaintiff's treating physicians offered opinions that her treatment was and will be medically necessary. (Id. ¶¶ 45-51.)


         Under Rule 8, a pleading stating a claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 12 provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A motion under Rule 12(b)(6) tests the sufficiency of the complaint against the pleading requirements of Rule 8(a)(2). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         A claim is plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). Courts need not accept “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 556 U.S. at 678. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. at 679. This “‘does not impose a probability requirement at the pleading stage,' but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element.” Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556)).

         In determining whether the pleading standard has been met, “our analysis unfolds in three steps.” Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012). “First, we outline the elements a plaintiff must plead to state a claim for relief.” Id. (citing Iqbal, 556 U.S. at 675). “Next, we peel away those allegations that are no more than conclusions and thus not entitled to the assumption of truth.” Id. (citing Iqbal, 556 U.S. at 679). “Finally, we look for well-pled factual allegations, assume their veracity, and then ‘determine whether they plausibly give rise to an entitlement to relief.'” Id. “This last step is ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'” Id.

         Neither party disputes the applicability of Pennsylvania's substantive law. However, there are conflicting decisions of the state courts and the federal courts regarding a crucial issue-whether the MVFRL's provisions for peer review of first-party medical benefits supplants the claims for breach of contract, bad faith, and consumer protection law violations. Pennsylvania's Supreme Court has not addressed how the peer review provisions interact with any of these laws. In predicting how that court would resolve the issues presented here, we must give “‘due deference'” to the decisions of Pennsylvania's intermediate courts. Crystallex Int'l Corp. v. Petróleos de Venezuela, S.A., 879 F.3d 79, 84 (3d Cir. 2018) (quoting In re Makowka, 754 F.3d 143, 148 (3d Cir. 2014)). “Unlike our role in interpreting federal law, we may not ‘act as a judicial pioneer' in a diversity case.” Id. (quoting Sheridan v. NGK Metals Corp., 609 F.3d 239, 254 (3d Cir. 2010) (citation omitted)).


         Defendant contends that the MVFRL preempts Plaintiff's claims for breach of contract, bad faith, and consumer protection law violations in Counts I, IV, and V of the Amended Complaint. Specifically, Defendant argues that the peer review provisions set forth in Section 1797 of the MVFRL, 75 Pa.C.S.A. § 1797, provide the “exclusive” and “sole remedies” for an insurer's wrongful refusal to pay its insured first-party medical benefits. (Def. Br. 5, 7, 8, 9, 10.) Our analysis begins with a review of the MVFRL and Section 1797's peer review provisions.

         A. Statutory Framework of the MVFRL's Peer Review Process

         Under the MVFRL, an insurer issuing a liability insurance policy covering a motor vehicle of the type required to be registered under title 75 must include coverage that provides a medical benefit in the minimum required amount of $5, 000. 75 Pa.C.S.A. § 1711(a). With regard to overdue payments of medical benefits, the statute provides:

Benefits are overdue if not paid within 30 days after the insurer receives reasonable proof of the amount of the benefits. If reasonable proof is not supplied as to all benefits, the portion supported by reasonable proof is overdue if not paid within 30 days after the proof is received by the insurer. Overdue benefits shall bear interest at the rate of 12% per annum from the date the benefits become due. In the event the insurer is found to have acted in an unreasonable manner in refusing to pay the benefits when due, the insurer shall pay, in addition to the benefits owed and the interest thereon, a reasonable attorney fee . . . .

Id. § 1716.

         Section 1797 of the MVFRL sets forth procedures for evaluating charges for medical treatment rendered to an injured person who is insured for first-party medical benefits, using the criterion of the reasonableness and necessity of the treatment. Section 1797 provides in part:

Peer review plan.-Insurers shall contract jointly or separately with any peer review organization established for the purpose of evaluating treatment, health care services, products or accommodations provided to any injured person. Such evaluation shall be for the purpose of confirming that such treatment, products, services or accommodations ...

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