Herd Chiropractic Clinic, P.C. v. State Farm Mutual Automobile Insurance

64 A.3d 1058, 619 Pa. 438, 2013 WL 625580, 2013 Pa. LEXIS 304
CourtSupreme Court of Pennsylvania
DecidedFebruary 20, 2013
StatusPublished
Cited by17 cases

This text of 64 A.3d 1058 (Herd Chiropractic Clinic, P.C. v. State Farm Mutual Automobile Insurance) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Herd Chiropractic Clinic, P.C. v. State Farm Mutual Automobile Insurance, 64 A.3d 1058, 619 Pa. 438, 2013 WL 625580, 2013 Pa. LEXIS 304 (Pa. 2013).

Opinions

OPINION

Justice SAYLOR.

This appeal concerns the sustainability of an award of attorneys’ fees against an insurance company under the peer-review provisions of the Motor Vehicle Financial Responsibility Law.

Section 1797 of the Motor Vehicle Financial Responsibility Law (the “MVFRL”),1 captioned “[c]ustomary [1060]*1060charges for treatment,” limits the amount providers may charge for treatment, accommodations, products, or services rendered to patients injured in automobile accidents, where the injury is covered by an automobile insurance policy.2 75 Pa. C.S. § 1797(a). The enactment also requires providers to seek remuneration directly from insurers and bars provider recourse against covered patients with regard to the difference between the provider’s ordinary charges and those paid by insurers. See id.

In furtherance of the same underlying cost-containment objective, the statute also establishes a process by which insurers may contest their obligation to fund treatment, through implementation of a “peer review plan.” Id. at § 1797(b)(1). These plans entail contracts between insurance companies and “peer review organizations” (“PROs”), which are approved by the Insurance Department to evaluate the reasonableness and necessity of treatment. Id.; see also 31 Pa. Code § 69.55 (delineating the Department’s application and approval process for PROs). If, upon a timely challenge, a PRO determines that treatment is unreasonable or unnecessary, the provider may not collect (or must return with interest) any related payments. See 75 Pa.C.S. §' 1797(b)(7).

In the present case, an individual obtained treatment from Appellee, Herd Chiropractic Clinic, P.C. (“Provider”), for injuries sustained in a motor vehicle accident. The automobile insurer for the patient’s family, Appellant State Farm Mutual Automobile Insurance Company (“Insurer”), submitted Provider’s invoices to a PRO pursuant to Section 1797(b). The PRO determined that certain chiropractic treatments were not necessary or reasonable, and Insurer refused to pay for such treatment.

Provider then commenced a civil action against Insurer, seeking compensation for unpaid bills in the amount of $1380. Provider also sought treble damages and attorneys’ fees, under the theory that these are authorized under Section 1797(b)(4) and (6), which provide as follows:

(4) Appeal to court. — A provider of medical treatment or rehabilitative services or merchandise or an insured may challenge before a court an insurer’s refusal to pay for past or future medical treatment or rehabilitative services or merchandise, the reasonableness or necessity of which the insurer has not challenged before a PRO. Conduct considered to be wanton shall be subject to a payment of treble damages to the injured party.
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(6) Court determination in favor of provider or insured. — If, pursuant to paragraph (4), a court determines that medical treatment or rehabilitative services or merchandise were medically necessary, the insurer must pay to the provider the outstanding amount plus interest at 12%, as well as the costs of the challenge and all attorney fees.

75 Pa.C.S. § 1797(b).

On the attorneys’ fee question, in relevant part, Insurer defended on the basis that such an award is authorized, under Section 1797, only where insurers fail to invoke the peer-review process as a prerequisite to refusals to pay for otherwise covered treatments. Insurer stressed that Section 1797(b)(6), on its terms, is implicated only where proceedings have occurred [1061]*1061under Section 1797(b)(4). See 75 Pa.C.S. § 1797(b)(6) (opening with the proviso: “If, pursuant to paragraph (4), ... ”). Since, per its plain language, subsection (b)(4) applies only where an insurer has not invoked the peer-review process, see id. at § 1797(b)(4) (establishing providers’ entitlement to challenge in the courts an insurer’s refusal to pay for treatment, “the reasonableness or necessity of which the insurer has not challenged before a PRO”), it was Insurer’s core position that Section 1797(b)(6) simply cannot apply where an insurer has proceeded with peer review. According to Insurer, Section 1797(b)(5)— which does not authorize fee shifting— reflects the appropriate limits on an award by a court on review of a refusal supported by a peer-review determination. See id. at § 1797(b)(5) (“If a PRO determines that medical treatment [was] ... necessary, the insurer must pay to the provider the outstanding amount plus interest at 12% per year on any amount withheld by the insurer pending PRO review.”).

The common pleas court, however, rejected this position. Initially, the. court observed that Insurance Department regulations authorize provider appeals regardless of whether insurers invoke the peer-review process. See 31 Pa.Code § 69.52(m) (“Upon determination of a reconsideration by a PRO, an insurer, provider or insured may appeal the determination to the courts.”). While recognizing that those regulations facially contemplate initial recourse to a reconsideration process, see generally 75 Pa.C.S. § 1797(b)(2) (“An insurer, provider or insured may request a reconsideration by the PRO of the PRO’S initial determination.”), the court explained that this Court had refused to treat reconsideration as a necessary prerequisite to appeals under the regulations. See Terminato v. Pa. Nat’l Ins. Co., 538 Pa. 60, 71, 645 A.2d 1287, 1293 (1994).

Based on these considerations, the common pleas court reasoned:

it appears that through regulation and judicial interpretations of both the statute and the regulations, any party adversely impacted by a peer review decision has recourse in the nature of a challenge before a court under 75 Pa. C.S. § 1797(b)(4). In such a proceeding under that subsection, the statute further provides that, if the court determines that the treatment was medically necessary, the insurer must pay to the provider the outstanding amount, plus interest “as well as the costs of the challenge and all attorneys fees.” 75 Pa.C.S. § 1797(b)(6).
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... Had the legislature intended to grant immunity [to insurers that pursue the peer review process] ..., it certainly could have done so, but it did not. We do not believe that the legislature intended that an insurer’s use of a peer review process which results, even if unintentionally, in a decision which during a court proceeding is proved to be flawed, to exempt the insurer from the statute’s requirement that fees be awarded. [Insurer’s] immunity interpretation would, in our opinion, only serve to provide an incentive to all insurers to send all bills to a peer review process in which all semblance of objectivity could be all but ignored, so long as the insurer’s conduct is not “wanton”, and the provider (or an insured) would be left with the enormous expense of seeking redress in the courts with no possibility of recovering those costs and fees.

Herd Chiropractic Clinic v. State Farm Mut. Auto. Ins. Co., No. 2006-CV-01320-CV, slip op. at 6-7, 2009 WL 8482227 (C.P. Dauphin Apr. 30, 2010).

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Bluebook (online)
64 A.3d 1058, 619 Pa. 438, 2013 WL 625580, 2013 Pa. LEXIS 304, Counsel Stack Legal Research, https://law.counselstack.com/opinion/herd-chiropractic-clinic-pc-v-state-farm-mutual-automobile-insurance-pa-2013.