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Case Law Alerts

Information Regarding Payments Made to Third Parties in the Course of Exhausting PIP Benefits is Discoverable - Such Payments Do Form the Basis of a Litigious Issue That is Not Frivolous

Access Medical Svcs, Inc., a/a/o Renee Dukes v. Progressive American Ins. Co., County Court, 9th Judicial Circuit in and for Orange County. Case No. 2022-SC-005831-O

January 1, 2023

This suit involved a medical provider seeking payment on treatment rendered to the plaintiff on dates of service June 11, 2018 through July 30, 2018. The defendant asserted exhaustion of benefits as its affirmative defense. Following the filing of its answer and affirmative defense, the defendant served the plaintiff with a Safe Harbor Letter and a Proposed Motion for Sanctions pursuant to Fla. Stat. 57.105 on March 22, 2022. The proposed motion for sanctions included unverified copies of the defendant’s PIP Log, Explanations of Benefits, and Declaration page. However, as the court pointed out, the defendant failed to include its policy of insurance, Health Insurance Claim Forms (HCFA), medical records, proofs of mailing, or any other documents which would attest to the accuracy of those documents. The court noted that on April 8, 2022, 17 days after the defendant served their proposed motion for sanctions and safe harbor letter, the defendant responded to the plaintiff’s request for production. The proposed motion was then filed on April 14, 2022, and the plaintiff dismissed its suit on May 26, 2022, after which, the defendant sought its fees pursuant to the 57.105 motion for sanctions. 

In analyzing the defendant’s entitlement to fees, the court noted that Florida appellate courts have consistently ruled that: “[w]hen assessing attorney’s fees against a losing party’s attorney, the trial court must find that there were no justiciable issues of law or fact and that the losing party’s attorney did not act in good faith based on the representations of his or her client.” Citing Siegel v. Rowe, 71 So. 3d 205, 211 (Fla. 2d DCA 2011). In determining whether the instant suit was frivolous, the court turned to the 4th DCA decision in Progressive Select Inc. Co. v. Dr. Rahat Faderani, DO, MPH, P.A., 330 So. 3d 928, 929 (Fla. Dist. Ct. App. 2021, in which the 4th DCA held that “[b]ecause the use of NCCI edits comports with the statute, Progressive did not make improper payments or act in bad faith in using the edits to reduce the bill of the third-party provider.” The court used this ruling to conclude that Faderani demonstrates that the discovery of improper payments will preclude the findings on proper exhaustion, thus, plaintiffs are allowed to conduct discovery before determining whether benefits were properly exhausted. 

When applying this principle to the instant case, the court made the following finding: “Thus, it is very clear that Defendant’s payments to other providers, along with their failure to provide the required supporting documentation requested by Plaintiff to verify that said payments were properly made, permitted Plaintiff the opportunity to discern whether any overpayments and/or gratuitous payments resulting in a premature/errant exhaustion of the PIP benefits at issue under the policy had taken place.” Because this documentation was not provided in its demand response, nor in the proposed motion for sanctions, and said documents were provided in discovery responses 17 days after the safe harbor letter and proposed motion for sanctions were served, the court found that the use of a 57.105/safe harbor letter was nothing more than an improper intimidation tactic.

Ultimately, the court found that information regarding payments made to third parties in the course of an exhaustion of PIP benefits is discoverable and such payments do form the basis of a litigious issue that is not frivolous. The implications of this order are that if a carrier wishes to seek sanctions on an exhaustion suit, their best practice would be to provide the PIP Log, Explanations of Benefits, Policy, HCFA’s, medical records, and proof of mailing in its demand response. Having said that, if these documents are not provided in the pre-suit demand response, they should be provided to the plaintiff prior to serving a proposed motion for sanctions pursuant to Fla. Stat. 57.105, as the plaintiff must be given an opportunity to analyze these documents to confirm whether or not their suit is indeed frivolous.
 

Case Law Alerts, 1st Quarter, January 2023 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2032 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.

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Florida Supreme Court Rules Florida Statute §627.70152 Does not Apply Retroactively

In a decision that resolves years of appellate uncertainty and confirms that insurers and insureds alike can rely on the legal framework in place when a policy is issued, the Supreme Court of Florida last week found that Florida Statute §627.70152, which involves an insured’s requirement to provide an insurer with pre-suit notice before filing a suit, cannot be applied retroactively. In Universal Property & Casualty Insurance Company v. Hughes, the Court was presented with the issue of whether the statutory pre-suit notice requirement applied retroactively and whether it would apply to a breach of contract of an insurance policy that was issued before the statute went into effect. Before the Court was an appeal from a homeowner, Ms. Hughes, who sued her insurance carrier, Universal Property & Casualty Insurance Company (Universal) for breach of contract under an insurance policy that was in effect from April 24, 2019 through April 24, 2020. During the policy period, Ms. Hughes suffered a loss and, on May 29, 2019, made a claim for water damage. The carrier investigated the loss and issued payment; Ms. Hughes disputed the payment, finding the amount insufficient for repairs. On July 1, 2021, Florida Statute §627.70152 went into effect, which required insureds to provide notice of intent to initiate litigation against the carrier prior to filing a lawsuit; if an insured filed the lawsuit without complying with §627.70152, a court must dismiss the case without prejudice. On August 4, 2021, Ms. Hughes filed her lawsuit against Universal for breach of contract. Universal moved to dismiss based on her failure to comply with §627.70152. Ms. Hughes contended the notice requirement could not be applied retroactively. The trial court disagreed and dismissed the lawsuit without prejudice, and Ms. Hughes appealed. During the appeal, the Fourth District Court of Appeal, in Cole v. Universal Property & Casualty, 363 So. 3d 1089 (Fla. 4th DCA 2023), ruled that Florida Statute §627.70152 did apply retroactively to policies issued before the effective date of §627.70152. However, the Sixth District Court agreed with Ms. Hughes and overturned the trial court’s ruling, finding the statute could not retroactively apply to policies issued prior to the statute effective date. Thereafter, the other district courts weighed in, with the Third District Court agreeing with the Fourth District Court, and the First, Second and Fifth District Courts agreeing with the Sixth District Court. In resolving the conflict amongst the district courts, the Supreme Court advised “as a general rule, ‘the statute in effect at the time an insurance contract is executed governs substantive issues arising in connection with that contract.’ Hassen v. State Farm Mut. Auto. Ins. Co., 674 So. 2d 106, 108 (Fla. 1996). The Court applied the two-step test when deciding whether a statute has retroactive application: “First, the Court must ascertain whether the Legislature intended for the statute to apply retroactively. Second, if such an intent is clearly expressed, the Court must determine whether retroactive application would violate any constitutional principles.” Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 877 (Fla. 2010). In analyzing the Legislature’s intent, the Court must determine whether the Legislature has manifested a clear command for retroactivity in the statutory text.  In review of the statutory text, the Court found nothing in the language of the statute to indicate that the phrase “all suits” was serving another purpose of expanding its reach to suits based on policies that both predate and postdate the enactment of the statute. Buis v. Universal Prop. & Cas. Ins. Co., 394 So. 3d 738, 741 (Fla. 2d DCA 2024). Further, the Court noted the statute has an effective date, which has long been considered to be evidence against retroactive application of a statute. The Court concluded that, on its face, no provision of §627.70152 speaks to application of the statute to insurance policies issued before the statute’s effective date and therefore, the Legislature did not clearly command retroactivity of the statute to include insurance policies issued prior to the enactment of the statute. The Court briefly reviewed Universal’s argument that the presuit notice requirement was procedural, not substantive, and therefore should be applied retroactively; however, the Court agreed with the Sixth District Court’s finding that, in its entirety, §627.70152 transformed an insured’s ability to sue an insurance company under a property insurance policy and an insurer’s obligations to respond to and pay insurance claims, thus making the requirement a substantive change. The Court thereby upheld the decision of the Sixth District and disapproved the decision of the Fourth District in Cole.

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CLM 2026 Focus Conference

Allison joins three insurance industry leaders to discuss how cyber coverage disputes, the growing impact of social inflation on bodily injury claim valuation, and the use of artificial intelligence are reshaping the bad faith landscape. The panel will examine emerging sources of extra-contractual exposure, including evolving cyber insurance coverage issues and the challenges of accurately valuing bodily injury claims. Practical approaches to claim evaluation using AI, along with defense strategies designed to help prevent or successfully defend against bad faith litigation, will also be addressed. 

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The Tolling Trap: Filing Alone Will Not Toll the Statute Without Good-Faith Service

The Eastern District of Pennsylvania recently reinforced a critical limitation on bad faith claims, holding that a timely filing alone will not preserve a cause of action absent a good-faith effort to serve the original process. The plaintiff had presented a claim for underinsured motorist benefits to his auto insurer. The insurer evaluated the claim and determined that the plaintiff’s accident-related damages did not exceed the bodily injury liability insurance limits of the at-fault driver and denied his claim. Among other claims, the plaintiff sought to present a claim for insurance bad faith under 42 Pa. C.S.A. § 8371, to which a two year statute of limitation applies. He first filed a praecipe for writ of summons before the expiration of the statute of limitation. However, the plaintiff did not attempt to serve the praecipe or writ until after the statute of limitations had expired. Additionally, the service failed as the plaintiff had mailed the original process to an incorrect address. Despite receipt of the Postal Service’s failure to deliver the original process, the plaintiff did not attempt to re-serve the writ. Two months later, the plaintiff filed a complaint and then successfully served that complaint. The insurer sought to dismiss the plaintiff’s bad faith claim as time-barred by the statute of limitations. The district court agreed. Though the plaintiff had filed a praecipe for a writ of summons prior to the expiration of the statute of limitations, the statute is only tolled if there is a good faith effort to serve that original process. In this case, the court determined that the plaintiff had failed to perform a “good faith effort to serve the original process”. Additionally, though the filing and service of a complaint can serve as alternative original process when the lawsuit is commenced by the filing of a praecipe for a writ of summons, the plaintiff filed his complaint after the statute of limitations had expired. The plaintiff’s bad faith claim was therefore determined to be barred by the statute of limitations and dismissed by the court, with prejudice. A key takeaway for the defense is not to assume that the statute of limitations has been successfully tolled by a plaintiff merely because a praecipe for a writ of summons or complaint has been filed prior to the expiration of the statute. A filed complaint or writ is only part of the equation. The defense should carefully review the docket and filings to confirm that the plaintiff also performed the requisite good faith effort to serve that original process. A thorough review of the docket may reveal that the plaintiff failed to make the good-faith service efforts necessary to toll the statute of limitations.

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Commonwealth Court Reaffirms the Constitutionality of Act 111's IRE Provisions

In this case, the claimant sustained a work injury of January 6, 1994, which was acknowledged by Notice of Compensation Payable (NCP). After the claimant’s receipt of 104 weeks of temporary total disability benefits, the employer filed a Request for an Impairment Rating Examination (IRE). The IRE was performed in May 2023 and the IRE physician found that the claimant had a 5% whole person impairment, under the AMA Guides. The employer filed a Petition based on the IRE results, and the Petition was granted by the WCJ. During litigation, the claimant argued that the IRE provisions of Act 111 (Section 306(a.3) of the Act) were not applicable to her injury, since it predated June 24, 1996, the date Act 57 went into effect, and that the IRE provisions were unconstitutional. The Workers’ Compensation Judge (WCJ)) granted the Petition and the Board affirmed. On appeal to the Commonwealth Court, the claimant argued that Act 111 violated the nondelegation doctrine and that its retroactive application to the claimant’s injury was unconstitutional. The court rejected the arguments on the basis that they had already found the same arguments without merit in multiple, prior cases. The court also addressed an argument made by the claimant that Act 111 was procedurally defective under the Pennsylvania Constitution because it was only considered on two days in each House after having undergone amendments and reassignments. The court noted that the Pennsylvania Constitution requires every bill to be considered on three different days in each House. The claimant maintained that, according to the legislative history, the bill did not receive three separate days of consideration from each House when it was assigned a new bill number. The court pointed out, however, that the bill number, H.B. 1840 remained constant and was considered on three occasions by the House. Further, the court concluded that minor amendments to the bill were germane to its original subject, which was to modify the Act’s IRE process, in accordance with Protz II.

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