GEICO General Insurance Company v. Green, 308 A.3d 132

Background

GEICO processes Delaware PIP claims using two automated rules: the Geographic Reduction Rule (GRR) (sets payment at the CPT‑code 80th percentile within a GeoZIP/type-of‑provider cohort) and the Passive Modality Rule (PMR) (flags certain passive therapies as non‑necessary after eight weeks).
GRR and PMR generate recommendations; licensed GEICO adjusters retain discretion, send Explanation of Review (EOR) notices, and offer re‑evaluation procedures.
Plaintiffs (insured Yvonne Green and provider Rehabilitation Associates) sued as a class for breach of contract, bad‑faith breach, declaratory relief under 21 Del. C. §§ 2118/2118B, and deceptive trade claims, alleging the Rules arbitrarily reduce/deny covered PIP benefits.
The Superior Court granted summary judgment to GEICO on breach and bad‑faith claims, but entered declaratory judgment that the Rules violate §§ 2118 and 2118B; both sides appealed.
The Delaware Supreme Court (en banc) affirmed the Superior Court’s rulings for GEICO on contract and bad‑faith claims, held the judiciary may adjudicate claims under § 2118, but reversed the declaratory judgment because claimants disavowed proving their expenses were reasonable and necessary.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether GEICO breached the PIP policy by using the Rules to deny/reduce payments	GEICO’s rules substitute arbitrary automated reductions for contractually required payment of "reasonable and necessary" medical expenses	Policy requires payment of reasonable/necessary expenses but is silent on methodology; GEICO’s process aims to measure reasonableness and adjusters retain discretion	Affirmed for GEICO: plaintiffs disavowed proving their billed charges were reasonable/necessary, so they cannot show breach
Whether the Rules violate Regulation 603 as an undisclosed sublimit/cap	Rules operate as de facto sublimits/caps or percentage reductions requiring a signed election under Regulation 603	Rules do not impose a uniform policy sublimit; effects vary by claimant/region and are not a contractual sublimit across all policies	Held for GEICO: Rules are not per se sublimits/caps subject to Regulation 603; claim under Reg. 603 fails
Whether GEICO’s use of the Rules amounts to bad‑faith breach of contract	Use of automated rules that ignore provider/time/provider skill is ‘‘clearly without any reasonable justification’’	GEICO’s process has reasonable justification (industry data, medical literature, adjuster review and re‑evaluation)	Affirmed for GEICO: plaintiffs failed to show an underlying contract breach or that denial was clearly without reasonable justification
Whether the court may enter declaratory relief that the Rules violate §§ 2118/2118B and whether claimants may challenge the Rules in the abstract	Plaintiffs seek a declaration that the Rules are unlawful generally; need not first prove their own charges are reasonable/necessary	Clark limits judicially crafted remedies when statute provides remedies; but §2118 is silent on use of rules — court can adjudicate only if plaintiffs show GEICO denied reasonable/necessary expenses	Mixed: Court holds judiciary has authority to decide §2118 questions, but reverses the declaratory judgment because plaintiffs failed to prove their medical expenses were reasonable and necessary (so abstract challenge fails)

Key Cases Cited

Clark v. State Farm Mut. Auto. Ins. Co., 131 A.3d 806 (Del. 2016) (court refused a declaratory remedy that would supplant a statute’s prescribed remedy when the statute expressly allowed the conduct)
State Farm Mut. Auto. Ins. Co. v. Spine Care Delaware, 238 A.3d 850 (Del. 2020) (plaintiff challenging an MPR had burden to prove its own charges were reasonable before contesting rule application)
Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254 (Del. 1995) (bad‑faith nonpayment actionable only when denial is clearly without reasonable justification)
VLIW Tech., LLC v. Hewlett‑Packard Co., 840 A.2d 606 (Del. 2003) (contract‑interpretation framework and elements required for breach of contract)