United States District Court, E.D. Pennsylvania
BARCLAY SURRICK, J.
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.
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. This action arises as a result of
Defendant's denial of Plaintiff's claim for medical
benefits under the policy.
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.
ALLEGATIONS OF THE AMENDED COMPLAINT
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.)
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.)
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.)
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.)
LEGAL STANDARD AND APPLICABLE LAW
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
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)).
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.'”
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)).
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.
Statutory Framework of the MVFRL's Peer Review Process
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.
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 ...