Correa v. Pennsylvania Mfrs. Ass'n Ins. Co.

• Decision Date: 09 September 1985
• Docket Number: Civ. A. No. 84-593-WKS.
• Parties: Juan CORREA and Doris Correa, his wife, and Dora Marie Lillard, Plaintiffs, v. PENNSYLVANIA MANUFACTURERS ASSOCIATION INSURANCE COMPANY, a foreign corporation licensed to do business in the State of Delaware, Defendant.
• Court: U.S. District Court — District of Delaware

618 F. Supp. 915

Juan CORREA and Doris Correa, his wife, and Dora Marie Lillard, Plaintiffs, v. PENNSYLVANIA MANUFACTURERS ASSOCIATION INSURANCE COMPANY, a foreign corporation licensed to do business in the State of Delaware, Defendant.

Civ. A. No. 84-593-WKS.

United States District Court, D. Delaware.

September 9, 1985.

COPYRIGHT MATERIAL OMITTED

John J. Schmittinger, Kevin M. Howard, Douglas W. Lundblad, Schmittinger & Rodriguez, Dover, Del., for plaintiffs.

J.R. Julian, Roger A. Brown, J.R. Julian, P.A., Wilmington, Del., for defendant.

OPINION

STAPLETON, Circuit Judge:¹

This is a diversity action brought by Juan Correa, together with his wife, Doris Correa, and Dora Marie Lillard (together "plaintiffs") against Pennsylvania Manufacturers Association Insurance Company ("PMA").² Plaintiffs seek to recover from PMA allegedly unpaid worker's compensation medical benefits and damages for, inter alia, emotional distress caused by PMA's alleged bad faith towards and unfair dealing with the plaintiffs. PMA has moved to dismiss the complaint for failure to state a claim upon which relief can be granted, and, in the alternative, for summary judgment. For the reasons set forth hereinafter, PMA's motion will be granted in part and denied in part.

BACKGROUND

On March 12, 1983, Juan Correa was injured in an industrial accident while employed by Steiner & Company ("Steiner"). On January 6, 1984, PMA accepted, on behalf of Steiner as its insurer, Correa's injury as a compensable industrial accident and agreed to pay temporary total disability benefits as well as all medical expenses related to the accident. The amount of the disability benefits was fixed pursuant to an agreement entered into by Correa and Steiner at about the same time.

Dora Marie Lillard was injured in an industrial accident on March 19, 1975, while employed by the Delaware Home & Hospital ("DH & H"). Following this injury, Lillard and DH & H entered into an agreement as to compensation, thereby rendering Lillard eligible for benefits under her employer's worker's compensation insurance policy with PMA.

It is undisputed that both Juan Correa and Dora Marie Lillard are entitled to receive worker's compensation benefits from PMA as a result of their injuries. Correa and Lillard both assert, however, that notwithstanding their undisputed right to receive such benefits from PMA, PMA has systematically refused to pay and/or delayed paying bills for compensable medical treatment relating to the industrial accidents suffered by Correa and Lillard.

More specifically, Correa alleges in the complaint that on twelve different occasions since PMA assumed coverage for payment of worker's compensation benefits arising out of Correa's accident, Correa submitted to PMA bills for compensable medical treatment in the total amount of $1,173.60 which PMA has failed to pay. Correa further alleges that as a result of PMA's failure to pay these medical bills, the Dickinson Medical Group brought suit against Correa and his wife and obtained a judgment in its favor for $759.60 plus costs. Correa contends in Count I of the complaint that this failure by PMA to pay compensable medical expenses constitutes a wrongful termination of compensation benefits in violation of 19 Del.C. § 2347 (1979). Hence, according to Correa, he is entitled to the remedies available under 19 Del.C. § 2357 (1979) including attorneys' fees, court costs, liquidated damages, and "all general, special and consequential damages" arising out of PMA's breach of duty. Complaint, ¶ 31. In addition, in Count II of the complaint, Correa asserts that PMA's failure to pay medical benefits was done "unreasonably, intentionally, wrongfully, and maliciously," Complaint, ¶ 37, and that consequently, PMA breached its duty of good faith and fair dealing owed to him and is guilty of intentional infliction of emotional distress. Finally, Correa claims that as a result of PMA's "bad faith and outrageous conduct," his physicians have refused to treat him and that both he and his wife have suffered emotional distress, loss of reputation, and an impairment to their credit rating, thereby entitling Correa and his wife to damages. Complaint, ¶¶ 42, 43.

Dora Marie Lillard sets forth similar allegations. In Count III of the complaint, she claims that on fourteen separate occasions she submitted to PMA compensable medical bills in the amount of $523.05 which PMA has failed and refused to pay. Moreover, Lillard alleges that on June 9, 1981, she was forced to file a petition with the Delaware Industrial Accident Board ("Board") to hold PMA in contempt for failure to pay medical bills, but that the petition was voluntarily dismissed upon PMA's promise to satisfy the outstanding medical expenses and to abide by its continuing obligations. Similarly, in March, 1982, Lillard claims she was again forced to file a petition with the Board because PMA, "without reason or justification," denied payment of a medical bill owed to Ash Memorial Hospital. As with the earlier petition, this petition was voluntarily dismissed after PMA agreed to pay the bill. According to Lillard, this pattern of conduct constitutes unreasonable claims settlement practices by PMA and evidences an ill will and malice toward her. In addition, Lillard asserts that the failure to pay these compensable medical expenses constitutes a wrongful termination of compensation benefits under 19 Del.C. § 2347 (1979), and therefore, she is entitled to the remedies provided for by 19 Del.C. § 2357 (1979). Lillard also claims, in Count IV of the complaint, that PMA, in failing to pay properly compensable medical bills, acted "unreasonably, intentionally, wrongfully and maliciously," Complaint, ¶ 74, in breach of its duty of good faith and fair dealing owed to her. Furthermore, Lillard alleges that such conduct constitutes intentional infliction of emotional distress. As a result, Lillard asserts that she has suffered severe emotional distress, loss of reputation, and impairment to her credit rating and is therefore entitled to damages.

In response, PMA has raised a plethora of alleged legal defects with the claims asserted by plaintiffs. In addition, PMA has attacked the factual basis for plaintiffs' claims through an affidavit of Patrick J. Duffy, the PMA claims supervisor in charge of handling Correa's and Lillard's worker's compensation claims. With respect to Correa, PMA through Duffy asserts that as of October 2, 1984, "the only outstanding medical bill received but not paid by PMA on behalf of Correa was from the Dickinson Medical Group in the amount of $775.60 which was being held pending receipt of medical substantiation." Duffy Aff., ¶ 4(q). Therefore, according to PMA, far from refusing to pay Correa's compensable medical bills, PMA has conscientiously paid all bills that have been submitted to it and that have been substantiated.

As to Lillard, PMA concedes that it did not promptly pay a $35.00 medical bill from Baker & Zimmerman, but that the remaining factual allegations raised by Lillard in the complaint are simply incorrect. PMA contends, relying on Duffy's affidavit for support, that all but three of the bills submitted to it by Lillard had been paid at the time suit was filed, and that of the three bills which had not been paid, two were paid in November, 1984, approximately one month after the suit was brought, and the other was never substantiated.

DISCUSSION

A

Counts I and III and to some degree Counts II and IV of the complaint rest on the contention that failure by PMA to pay allegedly compensable medical expenses incurred by plaintiffs constitutes a wrongful termination of compensation benefits in violation of 19 Del.C. § 2347 (1979). That statutory provision provides in relevant part as follows:

On the application of any party in interest on the ground that the incapacity of the injured employee has subsequently terminated, increased, diminished or recurred or that the status of the dependent has changed, the Board may at any time, but not oftener than once in 6 months, review any agreement or award.

On such review, the Board may make an award ending, diminishing, increasing or renewing the compensation previously agreed upon or awarded, and designating the persons entitled thereto, subject to this chapter, and shall state its conclusions of facts and rulings of law. The Board shall immediately send to the parties a copy of the award by personal delivery or by registered mail.

* * * * * *

Compensation payable to an employee, under this chapter, shall not terminate until or unless the Industrial Accident Board enters an award ending the payment of compensation after a hearing upon review of an agreement or award, provided that no petition for review, hearing or an order by the Board shall be necessary to terminate compensation where the parties to an award or an agreement consent to the termination.

19 Del.C. § 2347 (1979).

Plaintiffs rely on the last quoted paragraph. Since it is undisputed that PMA's alleged refusal to pay compensable benefits occurred without the consent of the plaintiffs and without a hearing on the merits and an appropriate order by the Board, plaintiffs assert that PMA's refusal to pay compensable medical expenses was a termination of compensation in direct contravention of 19 Del.C. § 2347 (1979).

More specifically, in plaintiffs' view, the proper construction to be given to 19 Del.C. § 2347 (1979) and 19 Del.C. § 2357 (1979)³ is that where a claimant submits a bill to his or her employer or the employer's insurer and makes a demand for payment, the employer or insurer has thirty days in which to take a position as to payment. Plaintiffs contend that in the event that the employer or insurer takes the position that no payment is required, then the employer or insurer must petition the Board to review this decision and only if the Board confirms that no payment is necessary may the employer or insurer refuse...