Schappell v. Motorists Mutual Insurance

SCHAPPELL, D.C., Behalf Edward On All

of Himself and Others

Similarly Situated

v.

MOTORISTS MUTUAL INSURANCE

COMPANY, State Farm Automobile Company

Insurance and GEICO Cor-

poration, Appellants. Pennsylvania.

Superior

Argued Aug.

Filed Dec.

fеndant claim that insurers the MVFRL does private right not create a of action Schappell and that must first exhaust his administrative remedies.- The trial court held that a action for interest only may brought. disagree, We and re- verse.

¶2 Analysis statutory of the relevant sections reinforces the notion that MVFRL confusing is one of the most stat- utes ever drafted. We are unaware of comprehensive statutory scheme man- ages to pack many so uncertainties so few sections.1 interplay 3 This c'ase involves the MVFRL, between two sections of the sec benefits) tion (regarding payments and section (regarding charges for treatment). ¶4 Although section 1716 is titled as Onufrak, Michael N. Philadelphia, .for “Payment benefits,” it addresses the GEICO. payments. issue of overdue Moughan, James T. Philadelphia, for paid Benefits are if not overdue within State Farm. after the insurer receives rea Levin, Daniel C. Philadelphia, for appel- proof sonable of the amount of the bene

lee. fits.. not proof supplied reasonable is benefits, as to all portion supported HUDOCK, KLEIN, Before: JJ. and by proof is if not reasonable overdue McEWEN, P.J.E. paid within proof after the received the insurer. bene KLEIN, Overdue J.: fits shall bear interest at the rate of 12% ¶ 1 Plaintiff Edward Schappell, C. a chi- per annum from the date the benefits ropractor, brings a class action against became due. In the event the insurer is three insurance carriers. alleges He found in an to have acted unreasonable ultimately while he was for services manner in refusing benefits patients injured rendered to who were due, pаy, the insurer shall addi subject automobile accidents and tion to the benefits owed and inter Pennsylvania Motor Vehicle Financial Re- thereon, attorney est a reasonable fee (MVFRL), sponsibility Law 75 Pa.C.S.A. based expended. § 1701 et seq., paid beyond he was the 30 75 Pa.C.S. day -payment period and therefore is enti- bring is, tled to a private action for 5 A or “first party “benefit” benefit” provided under thе MVFRL. The de- purpose analysis, of this 1. We imply legisla- do not mean to that the covered automobile insurance law that it entirely ture was remiss in the creation undoubtedly nigh impossible unto con- proven MVFRL. There have many to be so everything. sider permutations variety to the wide of situations But it manner.” A acted an unreasonable “medical benefit. Pa.C.S. to raises found whom? “coverage question: defined as benefit” further court, by a necessary first is to conclude provide impulse reasonable implicit services.” 75 to be an authoriza- appears treatment rehabilitative which 1712(1). However, § sec- comparing Pa.C.S. The use the word tion to sue. does fit within the this initial precisely “benefits” not tion section 1716 with Rather, provided.2 to impulse definition that word is shown be incorrect. the first sentenсe means that we believe bring a The authorization to for are payment medical services rendered unpaid an is found lawsuit to collect bill if paid overdue not within 80 of rea- 1797(b)(4). Schappell’s is section It Dr. proof charged amount for sonable of the right bring his to a lawsuit contention that (or alternatively, those services reasonable interest on his otherwise unpaid of the ser- рroof amount of As satisfied is found this section. bills provided).3 vices above, noted section deals with over ¶ 6 The statute next tells us that “over- due involved bills. Part confusion (meaning payment benefits” late for due an is unpaid this case is that while bill treatment) necessary carry reasonable overdue, definition an overdue bill is not per surcharge. a 12% annum the bills may it late. necessarily unpaid, simply be are not within 80 of reasonable important. This is distinction (what proof proof defines reasonable is the reha- provider A of medical treatment or subject of currently another lawsuit wend- an or merchandise or bilitative services way system), ing through legal its may challenge a court an insured before required premium. is a pay insurer to 12% fu- pay past refusal to for or insurer’s anything, More than this feе appears 12% ture medical treatment or rehabilitative to be an pay incentive for insurers to merchandise, the reasonable- services or presented in a timely the bills to it man- necessity of which has not been ness or provides It ner. no direct benefit to the a con- challenged before PRO. Conduct injured party billing first-party as for ben- subject shall ‍‌​​​‌‌​‌‌​‌‌‌‌‌​​​‌‌​​​​​​‌‌‌​​​​‌‌​‌​​​​​​‌‌​‌‌‍to sidered to be wanton directly еfits is a matter handled between to the damages of treble provider and insurer. Pa.C.S. injured party.- 1797(a). § 1797(b)(4)Appeal to court. Pa.C.S. ¶ 7 The final sentence of this section is section, 1716, spe- unlike section This particular note. In the event found in court. cifically right challenge allows that the insurer unreasonably acted re- It limits to also chal- (bills) due, fusing pay the benefits lenge pay to a refusal for trеatment. only pay the insurer shall not the benefit noted, bill may represent As an overdue (bill) interest, a reasonable attor- but refused, further inves- bill that has so been ney time expended. fee based on actual tigation is needed. well be might interpret- At first blush this If, (4), a court bring pursuant paragraph an ed as authorization to lawsuit— that medical treatment “In event is found to have determines the insurer meaning рroof of what is phrase "coverage provide 3. The of reasonable Trade the necessary appeal. reasonable and treatment” for the not at in this issue beginning at the word "benefits” as found end of the section. first sentence this quite not sense. It does make rehabilitative services Thus, or merchandise al expended) as well as costs. medically were necessary, thе insurer bill under section 1716 requires provider must the outstand- provider the medical to show the insurer 12%, ing plus amount at as well acting unreasonably bill, was to collect the challenge the costs and all provides but damages. lower This attorney fees. sense, makes no and we cannot read sec- 1797(b)(6) 75 Pa.C.S. tion 1716in this determina- manner.4 tion in favor of or insured. ¶ 12 bill An-unpaid and an overdue bill ¶ 10 It apparent in comparing sections separate are two leg- considerations in the 1716 and legislature 1797 that islative scheme and the provid- addressing two distinct situations without separate ed two dealing means of- with an intended overlap. the pay- overdue them. Section 1797 specifically deals with ment referred to in section 1716 in- unpaid bills and overdue bills cannot be bill, tended to an unpaid include as re- shoe-horned into this section. 1797, ferred to in legislature section the ¶ provided would not have separate two 13 We must return to section remedies. Under section 1716 a medical 1716 and question the raised earlier— provider is entitled to attorney’s recover “found whom?” Solomon v. United if, fees based expended time States Systems Pennsylva Healthcare of if, only it is found the late payment nia, Inc., (Pa.Super.2002), 797 A.2d 346 1797, was unreasonable. In section a med- determining reiterated the factors for ical provider is only entitled to recover not implicitly whether a statute pri creates a fees, attorney’s well, but costs as and these right vate of action. damages are automatically awarded once [fjirst, plaintiff is the ‘one of the class for provider the medical shows the bills arе especial whose the benefit statute was proper. enacted,’ is, does the statute cre- —that ¶ 11 If section 1716 had been intended to ... right ate a in favor of the plaintiff? include bills in the definition of Second, is there of legisla- indication payment, overdue this would mean that intent, explicit tive either implicit, provider under section 1716 a could a file remedy deny create such a or tо one? (and lawsuit. Upon winning the lawsuit Third, underly- is it consistent with the only this could done a showing be that ing purpose of the legislative scheme to provided the services were reasonable and imply plaintiff? remedy such a necessary), showing that insurer the Id. at 352 Est. v. (quoting of Witthoeft was unreasonable in not paying, pro- the Kiskaddon, 340, 623, 557 Pa. 733 A.2d vider would be able to also collect attor- (1999)).5 ney’s subject fees to actual time expended. ¶ However, By referring finding if to a provider merely unreasonableness, showed that legislature the treatment rendered was was al (a medically necessary quantum lowing lower some manner of redress proof) the medical In provider entitled to medical who is late. sec (not attorney’s subject 1797, receive fees legislature to actu- tion demonstrated turn, language Witthoeft, 4. The relevant in sections 1716 and derived factors from together, Ash, 2080, 1797 were enacted therefore 1 Pa. Cort v. 422 U.S. 95 S.Ct. instructing C.S. the courts to effect to (1975). L.Ed.2d 26 language inapplicable. the later for a it specifically especially that it knew how allow limits a unreason- attorney’s finding fees to on private portion action enforce a right to delay of payment. ableness did legislature of the MFVRL. Yet the allow sec- not a Schappell’s represents 17 Dr. action That tion 1716. is the first indication believe proposed class action. do not We action is not solution to this intending this law legislature drafted situation. primary class action lawsuits to be of enforcement. This would method practical 15 As a matter it also seems at odds with the stated intent greatly legislature unlikely that intended to lower rates. Fi- the MVFRL insurance private right A deter- provide of action. pri- nally, if the had intended court, mination of unreasonableness seeking actions as vate class the method itself, in and of no sense. This makes remedy nonpayment of interest then implies paid, along that the bill has been attor- would not have limited the award of required leaving only with the interest — to actual ney’s expended fees delay in payment whether the was unrea- only after a unreasonable finding then question. sonable as unanswered This Therefore, a matter practical behavior. as filing determination would of a require reject legislature the notion we that complaint declaratory as no judgment, a action private right intended to create of monetary other are at issue. Yet damages this issue. on situation, in this the only pay- additional ¶ Looking analysis ment that could be of at payment had is 18 the above attorney’s fees. This absurd of the factors patently light is a Solomon/Witthoeft/Cort appears although result and we will not the statute section 1716 cre- interpret Schappell a in favor Dr. right this manner. ates of (the may similarly who be situated those ¶ Therefore, а finding unreason- of bills), it right to 12% interest on overdue must in conjunction ableness be with some in- appear does not that the statute was It complaint. complaint other a cannot be an implicit right pri- to create to tended bills, unpaid as above demonstrated right action nor to vate would the (this would render the unreasonableness fit appear legislative action to the entire finding suрerfluous, attorney’s fees and MVFRL, particularly of the scheme automatically pre- costs are awarded when reducing the stated of light purpose bills) vailing on the issue of so the Therefore, insurance we automobile costs. only possible situation left for a court to Dr. reject Schappell’s argument must is the non-payment determine of interest. he is so entitled. case, In the most еxtreme if an insurer ¶ legislature Depart- 19 The created $5,000 (typi- does not interest on a bill charge it in placed ment of Insurance and benefits) first-party cal limits of for 90 “the execution of of this Com- the laws (an days has insurer to determine monwealth relation to insurance.” challenge through whether a treatment part power, § 41. As of that P.S. PRO) annum, per a at 12% this amounts to has set forth the rules for Department In a un- example, less extreme $150.00. first-party ben- filing complaints regarding $1,000 a late paid interest on bill 30 31 Pa.Code 69.26. efits. it is not un- amounts While $10.00. ¶ $150.00, un- if Schappell to sue for it seems that even argues thinkable 20 Dr. of In- likely legislature legislature Department that the intended to en- and the $10.00, apply intended section 69.26 to courage spate a lawsuits for surance (f) claim, paragraph McEWEN, P.J.E., this dissenting: still reserves the right to complaint file a at law. Paragraph majority While author (f) states: opinion provides perceptive expression rationale, I am compelled dissent from

This section does not limit or restrict analysis that erudite Sections any person with an interest in a medical 1797 of the Motor Vehicle Financial Re- claim from making complaint (MVFRL), sponsibility I Law because be- Department to the govern- another lieve legal right the statute does bestow a jurisdiction having mental unit over providers to recover interest party to a medical claim. payments on overdue from insurance com- 69.26(f). 31 Pa.Code legis- Because the panies. The medical providers provide jurisdiction lature has not conferred for a medical treatment at pursu- reduced rates courts, claim only for interest to the this ant requirements ‍‌​​​‌‌​‌‌​‌‌‌‌‌​​​‌‌​​​​​​‌‌‌​​​​‌‌​‌​​​​​​‌‌​‌‌‍1797 of Section paragraph cannot give be read to MVFRL, exchange and in an obvious that does not otherwise exist. fees, imposition of these reduced has that their determined ¶ 21 If Schappell Dr. similarly and those properly filed to be claims are situated are correct their claim that promptly.6 these defendаnts have denying been small statutorily amounts of required interest to specifically provides, Section 1716 in- medical providers, represents this a seri- ter alia: charge. ous While each individual amount Overdue benefits shall bear interest at small, may of interest a matter of 5 to the rate of annum per 12% from the dollars, 20 up when added over numerous date the In benefits become due. the claims, thеy represent could a significant event the insurer to have is found acted such, windfall to the insurers. As and in in refusing an unreasonable manner commenting without on the merits of Dr. due, to the pay the benefits when insur- Schappell’s defense, claim or the insurer’s pay, er the shall in addition to benefits encourage we the Department of Insur- thereon, owed a reason- and the give ance to this claim due attention. attorney able fee based on expended. ¶ 22 As a result of analysis, the above we § supplied). 75 Pa.C.S. 1716 (emphasis hold the trial court improperly denied majority that despite 3 The concludes summary judgment in favor of the defen- clear, duty legally enforceable of the dants. 1716, prescribed leg- carrier Section ¶23 Order reversed. The case is re- islature could not have mеant to sanction entry manded to the trial court for of an court action for the interest due medical granting summary order judgment fa- writing provider against care an insurer vor of defendants. Jurisdiction relin- coverages Pennsylvania. motor vehicle quished. majority upon so concludes based (1) findings 1797 “Section ¶ McEWEN, P.J.E., 24 bills[,] files a deals with and overdue bills section”, Dissenting Statement. this cánnot be shoe-horned into requires payment days properly 6. The statute within 30 contested treatments have been doc- receipt appropriate proof 1716, of the claim § 75 Pa.C.S. umented. insurer, provided that the claims un-

7 (2) proceed pursuant and the amounts which could be recov- er must to Section 1797. dispute If there no as to the reasonable- erable as interest are such that “it seems treatment, necessity but ness or unlikely intended to than after the paid the bill is more $10.00, encourage spate lawsuits proof’ insurer receives “reasonable especially limits the claim, 1716, to pursuant then Section attorney’s a finding fees to unreason- [of] medical care is owed 12% interest in delay payment.” ableness on 12% interest the bill. While the ¶ 4 persuasive However this rationale of automatic, mandatory, giv- and the court is majority, compelled differing I am to a en to award “a reasonable attor- discretion view, namely that pri Section 1797 was ney expended” fee based actual time (1) marily drafted to establish the maxi ... if “the insurer is found to have acted permissible charges provid mum refusing in an unreasonable manner treating injured could bill for patients ers ” .... pay the benefits when due 75 Pa. accidents, in motor vehicle 75 Pa.C.S. § (emphasis supplied). C.S. 1716 see, 1797(a), e.g., Pittsburgh Neurosur to, majority appellant 6 The cites Asso., Danner, 1279, gery Inc. v. 733 A.2d panel relies decision of this upon, denied, (Pa.Super.1999), appeal Sys Solomon v. U.S. Healthcare (2) (2000), Pa. 751 A.2d 192 Inc., al, Pennsylvania, tems et 797 A.2d system create administrative to effi denied, (Pa.Super.2002), appeal ciently adjudicate challenges by insurers (2002), Pa. A.2d wherein a necessity reasonableness or of health panel Healthcare of this Court studied the professionals’ treatments, care charges, summary judgment Act and concluded that products; provided or accommodations properly for the defendant insurer was injured in individuals motor vehicle acci seeking plaintiffs’ entered on the action 1797(b). dents. 75 Pa.C.S. The refer interest on uncontested medical bills 1797(b)(4), ences to the courts in Section submission, more than 30 after be (6) (7), must, view, in my read with specifically create cause the statute did not reference to all of provisions of Section cause of action. the Motor While 1797 and are restricted to dis Financial bears Responsibility Vehicle Law putes involving the reasonableness or ne little resemblanсe to the statute at issue cessity of treatment. See: v. Terminato Solomon, must, respectfully, I most differ Co., Pennsylvania National Insurance my distinguished colleagues who de with (1994) ‍‌​​​‌‌​‌‌​‌‌‌‌‌​​​‌‌​​​​​​‌‌‌​​​​‌‌​‌​​​​​​‌‌​‌‌‍60, 70, 1287, 538 Pa. 645 A.2d 1292 Solomon, I that cided since believe Solo (“Nor statutory does provision (1) misinterpreted three-pronged mon [1797(b)]provide remedy nonpay for the pronounced by test the United States Su benefits.”) ment of medical Ash, 66, v. prеme Court Cort U.S. ¶ hand, 5 Section 1716 on the other re- 2080, (1975),7 45 L.Ed.2d 26 S.Ct. quires (2) that be paid benefits within 30 of applicable provisions overlooked the receipt of of “reasonable proof’. there Act8 in reach Statutory Construction disagreement specifically, is a as to the reasonableness I am ing its decision. More services, necessity mindful of the mandate of Section 1929 of or the the insur- 340, 346, Kiskaddon, by v. 557 Pa. prong 7. The three test enunciated the Unit- of Witthoeft 623, (1999). Ash, 733 A.2d Supreme ed States Court in Cort v. 2080, 66, (1975), U.S. 95 S.Ct. 45 L.Ed.2d 26 3, 6, 1972, No. 290 8. See Act of December adopted by Supreme in Estate our 1501, etseq. §§ Pa.C.S. Statutory Act directing Construction Gary WIMER, Appellee, E. provision statute for “[t]he penalty forfeiture its violation shall v. deprive injured not be construed to an person to recover from the EMPLOYEES PENNSYLVANIA damages by offender sustained rеason BENEFIT FUND TRUST the violation of statute.” such Pa.C.S. (PEBTF), Appellant. (emphasis § 1929 supplied). by Pennsylvania. am I persuaded majority Superior 7 Nor Court of providers that actions healthcare Argued Sept. properly interest on submitted claims not (30) requisite thirty within the Filed Jan. be for de minimis amounts. If a would were one to institute suit each year against an insurer for all due

on all claims which the .insurer failed had fashion, timеly sums substantial likely

would be at issue. website Pennsylvania ‍‌​​​‌‌​‌‌​‌‌‌‌‌​​​‌‌​​​​​​‌‌‌​​​​‌‌​‌​​​​​​‌‌​‌‌‍Insurance Commission9 gathered

provides data on bill payment plans care

practices managed licensed

Pennsylvania, so to ascertain the level compliance 45-day with

requirement Quality Healthcare (Act 68).

Accountability Protection Act sug-

The data collected the Commission timely

gests that the failure to remit sums may be a rather practice

due than

oversight on the of certain part insurers.10

Thus, private to recover “interest actions

only” provisions claims will that the insure the statute followed are insurers

selling policies Pennsylvania residents. ‍‌​​​‌‌​‌‌​‌‌‌‌‌​​​‌‌​​​​​​‌‌‌​​​​‌‌​‌​​​​​​‌‌​‌‌‍legisla- As I am convinced clearly by

ture envisioned actions providers for interest due them

healthcare statute, I affirm order

under the would per court

entered trial learned F.

Judge Cherry. John (PA tabulating pay- the late www.insurance.state.pa.us Dept. report, while See: insurers, no mention of makes Insurance). ments any action of kind In- administrative against insurers. Commissioner surance

Case Details

Case Name: Schappell v. Motorists Mutual Insurance

Court Name: Superior Court of Pennsylvania

Date Published: Dec 15, 2004

Citation: 868 A.2d 1

Court Abbreviation: Pa. Super. Ct.