JULY 2011 BAD FAITH CASES
INSURED’S BAD FAITH CLAIM NOT PRE-EMPTED BY MOTOR VEHICLE FINANCIAL RESPONSIBILITY LAW WHERE THE REASONABLENESS OF THE INSURED’S MEDICAL TREATMENT NOT IN DISPUTE (Philadelphia Federal)

The plaintiff was involved in a car accident, totaling his Honda truck. He held an insurance policy with GEICO and submitted a claim for coverage of both the damage to his vehicle and his personal medical expenses. GEICO, however, denied the claim on the grounds that the particular vehicle involved in the accident had not been listed on plaintiff’s policy and as such an accident in that vehicle was not covered under that policy.

Plaintiff brought suit and alleged that he had attempted to cover his truck under the policy several times and that each time coverage had been unreasonably denied, thereby constituting bad faith. GEICO countered by claiming that the plaintiff’s bad faith claim under Pennsylvania’s Bad Faith Statute is pre-empted by the more narrowly tailored Motor Vehicle Financial Responsibility Law (75 Pa. C.S. § 1797), a statute dealing with the reasonableness and necessity of medical treatment for which a claim is made after a motor vehicle accident.

While the United States District Court for the Eastern District of Pennsylvania recognized Third Circuit authority stating that the provisions of the latter, more specific statute do serve as exceptions to the general statutory remedy for bad faith, the court also noted that the applicability of section 1797 (the more specific, potentially pre-emptive statute) depends on whether the dispute is over the reasonableness and necessity of medical treatment. Here, the Court noted, the defendant never suggested that the medical treatment plaintiff received was unnecessary or financially unreasonable.

Thus, the court cited a proposition adopted by numerous Pennsylvania courts in finding that where insurers’ actions do not fall squarely under section 1797, claims under section 8371 (the general Bad Faith Statute) should not be dismissed as barred by section 1797.

As such, plaintiff’s bad faith claim was deemed not pre-empted and GEICO’s motion to dismiss that claim was denied.

Date of Decision: June 23, 2011

Richter v. GEICO Indem. Co., Civil Action No. 10-CV-7133, United States District Court for the Eastern District of Pennsylvania, 2011 U.S. Dist. LEXIS 67021, 797 F. Supp. 2d 529 (June 23, 2011) (Joyner, J.)