Don’t mess with PIP benefits
Krista Peoples and Joel Stedman purchased personal injury protection (PIP) automobile liability coverage from United Services Automobile Association (USAA) and Progressive Direct Insurance Company, respectively. After they were injured in car accidents, they made claims for PIP benefits. When their PIP benefits were terminated or denied, they filed class action suits against their respective insurance carriers under several causes of action, including the Washington State Consumer Protection Act (CPA), claiming their insurers violated state insurance regulations.
Specifically, Peoples alleged that USAA refused, without any individualized assessment, to pay medical provider bills whenever a computerized review process determined that the bill exceeded a predetermined limit. According to Peoples, USAA’s failure to investigate or make an individualized determination regarding the reasonableness or necessity of a provider’s charges before denying payment violated state law. She alleged that because it used this practice of algorithmic review, USAA routinely failed to pay all reasonable medical expenses for treating an insured’s injuries that arise from a covered event. She and class members sought actual damages, including unpaid medical bills and expenses incurred to investigate USAA’s wrongful conduct.
Stedman alleged that Progressive terminated PIP benefits whenever an insured reached “maximum medical improvement” and that this practice violated a state law that lists the only permissible reasons to terminate PIP benefits. He alleged that by terminating benefits on the basis of “maximum medical improvement,” Progressive routinely failed to pay all reasonable medical expenses for treating an insured’s injuries arising from a covered event, in violation of a state PIP statute. He and class members sought to enjoin Progressive from using “maximum medical improvement” to limit PIP claims and sought actual damages, including unpaid medical bills.
USAA and Progressive moved to dismiss the CPA claims on the grounds that the insureds were not “injured in [their] business or property.” The federal district court consolidated the cases for the purpose of asking the Supreme Court of Washington whether the plaintiffs alleged cognizable CPA injuries. The certified questions were:
With regards to the injury to “business or property” element of a CPA claim, can insureds in Ms. Peoples’ and/or Mr. Stedman’s circumstances, who were physically injured in a motor vehicle collision and whose Personal Injury Protection (“PIP”) benefits were terminated or limited in violation of WAC 284-30-330, bring a CPA claim against the insurer to recover out-of-pocket medical expenses and/or to compel payments to medical providers?
With regards to the “injury to business or property” element of a CPA claim, can insureds in Ms. Peoples’ and/or Mr. Stedman’s circumstances, who were physically injured in a motor vehicle collision and whose Personal Injury Protection (“PIP”) benefits were terminated or limited in violation of WAC 284-30-330, bring a CPA claim against the insurer to recover excess premiums paid for the PIP coverage, the costs of investigating the unfair acts, and/or the time lost complying with the insurer’s unauthorized demands?
In its review, the Supreme Court of Washington stated that it was asked whether the wrongful denial of PIP benefits was an injury to “business or property” under the relevant state law. The insurance companies argued that under case law it was not, and therefore an insured cannot bring a CPA action for a violation of the insurance regulations when his or her policy is for PIP.
The court noted that the case law cited by the insurers did not bar claims by insureds who seek to recover wrongfully denied PIP benefits. In this case, the court said, the plaintiffs did not allege that the defendants caused their personal injuries. Their CPA suits did not seek to vindicate their right to be free of bodily harm but rather their property interest in the benefits they bargained for in their insurance contracts.
An insured, the court stated, has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith. Claims mishandling and wrongful denial of benefits invade this property interest, regardless of the kind of event that triggers coverage.
Ultimately, the court said, the insurance companies’ interpretation of the injury requirement in the cases they cited “would thrust violations of Washington’s PIP regulations entirely outside the reach of the CPA’s private enforcement provision. It would also exclude violations of Washington’s general claims handling regulations whenever PIP benefits are involved. Such a result would undermine the provision of the CPA that makes violations of the insurance laws subject to the CPA’s private enforcement provision.”
Accordingly, the court answered “yes” to the first certified question and held that insureds who are wrongfully denied PIP benefits are injured in their “business or property.” A person injured in his or her business or property by a CPA violation may seek, among other things, injunctive relief and actual damages. Therefore, to the extent proved, the plaintiffs may recover actual damages, including out-of-pocket medical expenses that should have been covered, and can seek injunctive relief to compel the payment of benefits to medical providers.
The court declined to answer the portion of the second question that asked about excess premiums. With respect to the remainder of the question, the court held that when a CPA claim is predicated on an insurer’s mishandling of a PIP claim, ordinary CPA principles govern whether investigation costs or time lost constitute injuries to business or property.
Certification from the United States District Court for the Western District of Washington in Krista Peoples, Plaintiff, v. United Services Automobile Association and USAA Casualty Insurance Company, Defendants. Joel Stedman and Karen Joyce, Plaintiffs, v. Progressive Direct Insurance Company, Defendant—Supreme Court of Washington—November 27, 2019—No. 96931-1.