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Insurance Companies Shouldn’t Deny PIP Coverage for Automobile Accidents in Bad Faith

The following post is part of our Law Student Blog Writing Project, and is authored by Mark Ashley Hatfield, a Juris Doctor student at the University of Kentucky College of Law.

Insurance is a major part of everyday life. You may have home insurance that protects your home and valuables within it, health insurance that protects you from the high costs of treating illnesses, liability insurance to protect your business from certain events, or auto insurance to protect your automobile and the people that it transports. This article will break down Houchens v. Government Employees Insurance Company (GEICO), a recent case from the Kentucky Court of Appeals that discusses one of the forms of insurance mentioned above, automobile insurance. While everyone may have a base knowledge of automobile insurance, not everyone has been in an accident that forced them to consult their auto policy. As we will explore below, the GEICO case illuminates an issue that often arises when an automobile accident leads to an injury.

Why Did GEICO Deny Coverage for this Car Accident?

First, we will cover some of the background information on the case itself. In 2011, Anita Houchens and Jordan Sanders were involved in an automobile accident and both suffered injuries that required medical treatment. As most people who are covered by insurance do, the injured parties submitted their medical bills to their insurer, GEICO. Upon receiving the bills, GEICO did what insurers typically do in these situations; it requested the medical records of the injured parties. The events that followed give rise to the legal issue of importance.

Upon receiving the records, GEICO hired third-party doctors to conduct independent medical reviews of Houchens’ and Sanders’ records. Upon review of the records, the independent medical reviews concluded that Houchens and Sanders had received unnecessary medical treatment. Based on these reviews alone, GEICO notified Houchens and Sanders that their benefits would be terminated retroactively to specific dates in October and September, respectively. Essentially, GEICO was saying that, based upon the medical reviews, Houchens and Sanders only required treatment for their injuries up to a certain date. Any treatment received after those particular dates would not be covered by the parties’ insurance with GEICO, leaving Houchens and Sanders responsible for the costs.

Houchens and Sanders subsequently brought an action, individually and as class representatives, against GEICO “to recover outstanding no-fault benefits, 18% interest on the overdue benefits, and attorney fees.” This claim was brought because GEICO had unilaterally terminated payment of Houchens and Sanders medical bills after doing nothing more than conducting its review of their medical records. The lower court granted GEICO’s request for summary judgment finding that nothing in Kentucky law prohibits an insurer from “denying or terminating benefits based solely upon a review of an insured’s medical records.” The Circuit Court of Appeals then reviewed the case, and for reasons this article will review, reversed and remanded the decision granting GEICO summary judgment.

Why Did the Kentucky Court of Appeals Require the Insurance Company to Pay PIP Benefits to the Accident Victim?

In order to uphold a ruling of summary judgment, the appeals court must find that there were no genuine issues regarding material facts, and therefore the moving party (here, GEICO) was entitled to a judgment as a matter of law. As stated in the case, summary judgment is proper only when the moving party (GEICO) can show that the non-moving party (the injured parties) could not prevail under any circumstances. Using the standard laid out above, the Court of Appeals reviewed the facts present and found the summary judgment order for GEICO to be improper.

In reaching its ruling, the court looked to Kentucky’s Motor Vehicle Reparations Act (“MVRA”). This Act “requires automobile insurers in Kentucky to provide coverage for reasonable and necessary medical expenses arising from a covered automobile accident without regard to fault.” This coverage is what GEICO unilaterally determined it would not cover based solely on its medical reviews. In overturning and remanding the favorable lower court decision for GEICO, the court of appeals mentioned several important statutes from the MVRA. First, KRS § 304.39-210(1) requires an insurer (GEICO) to pay a medical expense submitted to it by an insured (Houchens and Sanders) within 30 days of receiving “reasonable proof of the fact and amount of loss realized.” Here, GEICO used its review of medical records to determine that some of the medical expenses were necessary, but others were not, leading them to retract its coverage for what it deemed unnecessary treatments.

Second, and in conjunction with KRS § 304.39-210(1), the court mentioned KRS § 304.39-020(5)(a). This particular statute is vital to any insurance claim because it states that, “there shall be a presumption that any medical bill submitted is reasonable.” This is a very friendly statute to the insured; without taking steps to prove that your treatment is unnecessary or unreasonable, your insurer is mandated by law to accept the medical bills you submit as reasonable, and in turn cover the expenses if they are part of your policy. The steps taken to validate your medical bills were the primary issue presented in this case, and lead us into perhaps the most important statute focused on by the court.

This third statute is KRS § 304.39-270(1). This statute essentially states that if an injury occurred (mental or physical), and is important to the claim at hand, the insurance provider “may petition the circuit court for an order directing the person to submit to a mental or physical examination by a physician… the court may make the order for good cause shown.” The phrase “may petition the circuit court” was the point that the case turned on. In granting summary judgment to GEICO, the lower court agreed with GEICO that the meaning of the phrase was that an insurer may, but is not required, to seek a court order for an independent medical exam (“IME”). However, the court of appeals would review case law and the MVRA itself to determine that the interpretation by the lower court violated the intent and spirit of the MVRA.

The court of appeals looked at various cases to determine whether or not the lower court erred in its summary judgment order. The ultimate conclusion was that while an insurer is expressly allowed by KRS § 304.39-270(1) to consult an “independent medical examiner to evaluate” claims, the insurer “cannot compel its insured to submit to an IME simply upon demand without good cause.” The court went on to distinguish the cases used by the lower court by noting that insurers can use medical record reviews to establish ‘good cause’ for requesting an IME, but could not use medical record reviews as the sole means to unilaterally deny or terminate an insured’s benefits. As the court noted, siding with GEICO’s argument as the lower court did would put them in the position of “judge, jury and executioner.”

What Should I Do If My Insurance Company Denies PIP Coverage from My Car Insurance Policy?

Ultimately, this case provides a clear takeaway point for the insured: be familiar with your policy and allow it to work for you. There are statutes in place that require insurers to honor their policies, and when an event occurs that requires you make a claim against your policy, the court of appeals has set precedent with this case saying the presumption of valid medical bills is in your favor. If you have an accident and you must seek medical treatment as a result, keep records of your treatment, keep track of your bills, and turn them over to your insurance provider to ensure you are getting what you pay for.

Have you been involved in an automobile accident and having trouble with bills or lost wages? Give Lawrence & Associates a call and ask for a free consultation with one of our attorneys! We’re Working Hard for the Working Class, and we’d like to help you!