Brownell v. State Farm Mut. Ins. Co.

• Decision Date: 31 January 1991
• Docket Number: No. 90-2224.,90-2224.
• Citation: 757 F. Supp. 526
• Parties: Maria BROWNELL v. STATE FARM MUTUAL INSURANCE COMPANY and Worldwide Auditing Services, Inc.
• Court: U.S. District Court — Eastern District of Pennsylvania

757 F. Supp. 526

Maria BROWNELL v. STATE FARM MUTUAL INSURANCE COMPANY and Worldwide Auditing Services, Inc.

No. 90-2224.

United States District Court, E.D. Pennsylvania.

January 31, 1991.

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Ronald Jay Smolow, Trevose, Pa., for plaintiff.

James J. McCabe, James T. Moughan, Melvin R. Shuster, Philadelphia, Pa., for Worldwide Auditing.

MEMORANDUM

WALDMAN, District Judge.

I. BACKGROUND

On February 23, 1990, plaintiff filed this action in Philadelphia Common Pleas Court, alleging RICO and civil rights violations, as well as several state law claims. Defendants timely removed the action to this court following service. Presently before the Court are defendants' motions to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), plaintiff's amended complaint filed in June of 1990.

Plaintiff is the insured under a policy issued by defendant State Farm Mutual Automobile Insurance Company ("State Farm"). On January 10, 1989, plaintiff was injured in a motor vehicle accident.¹ She sought medical treatment from Dr. Robert Bell and submitted his bills to State Farm. Relying on an assessment of plaintiff's claim by defendant Worldwide Auditing Services, Inc. ("Worldwide"), State Farm disallowed plaintiff's claim for benefits.

Defendant Worldwide is in the business of auditing the services that doctors and other health care providers render to persons claiming insurance benefits to determine whether the treatment provided was necessary and the cost reasonable. Plaintiff alleges that for over six years State Farm and Worldwide conspired summarily to reject, in whole or in part, claims based on soft tissue injury. She alleges that a contingency fee was paid by State Farm to Worldwide, based on a percentage of money saved, and that this fee was in effect a "kickback." Plaintiff alleges that her claim was rejected pursuant to this conspiracy.

II. APPLICABLE LAW AND LEGAL STANDARD

In deciding a motion to dismiss for failure to state a cognizable claim, the court must accept as true all of plaintiff's factual allegations and draw from them all reasonable inferences favorable to the plaintiff. D.P. Enterprises, Inc. v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir.1984). A case should not be dismissed for failure to state a claim unless it appears that no relief can be granted under any set of facts that could be proved consistent with plaintiff's allegations. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). A Rule 12(b)(6) motion may be granted as to portions of a complaint. Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir.1982); Fielding v. Brebbia, 399 F.2d 1003, 1006 (D.C.Cir.1968).

As to the applicable law, federal law governs the federal claims. As to the state law claims, the arguments of both parties are premised upon Pennsylvania law and Pennsylvania law will be applied. See Mellon Bank, N.A. v. Aetna Business Credit, 619 F.2d 1001, 1005 n. 1 (3d Cir.1980).²

III. PLAINTIFF'S MVFRL CLAIM

Plaintiff's first claim is brought under the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL), 75 Pa. Cons.Stat.Ann. §§ 1701 et seq., for amounts due under plaintiff's insurance contract. She seeks judgment against State Farm only. Under the MVFRL an insurer must provide certain benefits. Section 1711 provides in pertinent part:

An insurer issuing or delivering liability insurance policies covering any motor vehicle ... shall include coverage providing a medical benefit in the amount of $10,000 ... with respect to injury arising out of the maintenance or use of a motor vehicle....

75 Pa.Cons.Stat.Ann. § 1711 (Purdon Supp. 1990). The type of medical benefits and the standard under which they must be provided is set forth in section 1712 which provides in pertinent part:

An insurer issuing or delivering liability insurance policies ... shall make available for purchase first party benefits with respect to injury arising out of the maintenance or use of a motor vehicle as follows:

(1) Medical benefit.—Coverage to provide for reasonable and necessary medical treatment and rehabilitative services, including, but not limited to, hospital, dental, surgical, psychiatric, psychological, osteopathic, ambulance, chiropractic, licensed physical therapy, nursing services, vocational rehabilitation and occupational therapy, speech pathology and audiology, optometric services, medications, medical supplies and prosthetic devices, all without limitation as to time, provided that, within 18 months from the date of the accident causing injury, it is ascertainable with reasonable medical probability that further expenses may be incurred as a result of the injury....

Id. at § 1712 (Purdon Supp.1990) (emphasis added).

The MVFRL provides for prompt payment of first party benefits upon the receipt of "reasonable proof of the amount of the benefits,"³ and for a cause of action if such payment is not made.⁴ Defendants contend that plaintiff has not stated a cause of action under the MVFRL because she has not alleged that her medical treatment and bills were reasonable and necessary. In her amended complaint, plaintiff alleges, inter alia, that she was insured under a policy issued by State Farm, that on January 10, 1989 she suffered injuries in an automobile accident, that she sought treatment for her injuries, that in February 1989 she submitted bills to State Farm, and that "State Farm, has rejected her claims without medical examination, without cause, without reasonable foundation, and in an unreasonable manner." Taken in a light most favorable to plaintiff, in alleging that defendant rejected her claim without reasonable foundation, she sufficiently alleges that her claim was reasonable.

Accordingly, plaintiff adequately states a claim for benefits due under her insurance contract pursuant the MVFRL, and State Farm's motion to dismiss Count I will be denied.⁵

For the same reasons, Count VI setting forth plaintiff's breach of contract claim against State Farm, which essentially duplicates her MVFRL claim, will not be dismissed. Plaintiff, of course, had no contract with Worldwide and does not seek damages from it for breach of contract.

IV. PLAINTIFF'S CONSUMER PROTECTION LAW AND FRAUD CLAIMS

In Count II of her complaint, plaintiff alleges that defendants' conduct violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("CPL"). The defendants argue that the Unfair Insurance Practices Act ("UIPA"), and inferentially the Pennsylvania Supreme Court decision in D'Ambrosio v. Pennsylvania Nat'l Mut. Cas. Ins. Co., 494 Pa. 501, 431 A.2d 966 (1981), bar plaintiff's CPL and common law fraud claims.

The CPL is designed to protect consumers from a number of unfair trade practices listed in the statute. See 73 Pa.Stat. § 201-2. A purchaser of goods or services who is injured by an unfair practice, as defined by the statute, may bring a private action for damages against the seller. Id. at § 201-9.2.

The UIPA was enacted in 1974 for the purpose of "regulating trade practices in the business of insurance ... by defining unfair practices and by prohibiting the trade practices so defined...." 40 Pa. Stat. § 1171.2. The statute authorizes the Insurance Commissioner to investigate whether insurers are in violation of the UIPA's provisions, and to conduct administrative hearings. Id. at §§ 1171.7 and 1171.8. The UIPA also provides for administrative and civil penalties, to be imposed by the Commissioner. Id. at §§ 1171.9 and 1171.11. UIPA does not expressly provide a private cause of action for violations of the statute.

In D'Ambrosio, the Court declined to recognize a new common law cause of action to supplement the enforcement provisions of UIPA. The plaintiff in D'Ambrosio sought to recover damages from his insurer for infliction of emotional distress and bad faith denial of a claim for benefits. The Court concluded that "there is no evidence to suggest, and ... no reason to believe, that the system of sanctions established under UIPA must be supplemented by a judicially created cause of action." Accordingly, the plaintiff's action based on the insurer's alleged bad faith conduct was dismissed.

In Layton v. Liberty Mut. Fire Ins. Co., 577 F.Supp. 1 (E.D.Pa.), aff'd, 725 F.2d 668 (3d Cir.1983), the court, through Judge Pollack, held that a plaintiff could not maintain an action under the CPL for alleged violations of UIPA. The court reasoned that, in light of several cases refusing to recognize common law causes of action, the Pennsylvania appellate courts would likely also deny a claim under the CPL. See Layton, 577 F.Supp. at 2. Relying on Layton, other judges in this district subsequently held that D'Ambrosio bars claims under the CPL which are within the purview of the UIPA.⁶

These cases, however, are in conflict with several Pennsylvania Superior Court decisions. In Pekular v. Eich, 355 Pa.Super. 276, 513 A.2d 427 (1986), appeal denied, 516 Pa. 635, 533 A.2d 93 (1987), the Pennsylvania Superior Court held that the UIPA does not bar a private cause of action against an insurance carrier under the CPL. Noting that the CPL has been construed liberally and that Pennsylvania courts have held violations of various other statutes to be violations of the CPL, the Court concluded:

... that there is no inherent irreconcilable conflict which is supported by the fact the UIPA contains no provision either stating or implying that the power vested in the Insurance Commission represents the exclusive means by which an insured's unfair or deceptive acts are to be penalized or that the insured is precluded from seeking private compensation for damages incurred. Further, as noted previously, we are mindful of the fact that our Legislature did not see fit to exclude insurers, insurance agents or insurance transactions from the broad scope of CPL regulations in either the original enactment of the CPL in 1968 or, more

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