Washington Case Law Update: Use of Maximum Medical Improvement Limitation in PIP Policy Violates Regulation
From the Desk of Smith Freed Eberhard: Insurers operating in Washington are governed by numerous statutes and regulations, including Washington Administrative Code (“WAC”) 284-30-395(1), which contains a list of permissible limitations on PIP benefits. If an insurer’s policy limits PIP benefits to treatment that is essential to achieving “maximum medical improvement,” will the policy be in violation of WAC 284-30-395(1)? Read on to find out.
Claims Pointer: In this case arising out of an automobile accident, the Washington Supreme Court made it clear that it favors full compensation of medical benefits to injured motorists. In response to its first certified question, the Court answered that a policy that limits medical benefits to those that only achieve “maximum medical improvement,” violate WAC 284-30-395(1). For the second question, the Court answered that the term “maximum medical improvement” is not consistent with the definition of “reasonable” or “necessary,” as set out in WAC 284-30-395(1).
Durant v. State Farm, No. 94771-6, Washington Supreme Court (June 7, 2018).
After suffering injuries in a car accident, Plaintiff Bret Durant (“Durant”) sought PIP benefits from his insurer, State Farm Mutual Automobile Insurance Company (“State Farm”). In turn, State Farm provided Durant with a “coverage letter,” which noted:
The policy provides coverage for reasonable and necessary medical expenses that are incurred within three (3) years of the accident. Medical services must also be essential in achieving maximum medical improvement for the injury you sustained in the accident.
(emphasis added). Durant sought treatment with a chiropractor. Four months after the accident, State Farm sent the chiropractor a letter asking if Durant reached maximum medical improvement (“MMI”), and if not, what the target date was for Durant’s maximum medical improvement. The chiropractor noted that Durant’s target date should be February 1, 2013. After February 1, 2013 had passed and Durant continued treating, State Farm contacted the chiropractor to inquire why Durant was still treating, to which the chiropractor replied, “Patient was not stable and needed treatment to 3/27/2013.” Durant continued treatment, and his care providers continued to bill his PIP claim, but State Farm denied the bills stating that “your provider advised us you previously reached maximum medical improvement.”
Durant filed suit, and State Farm responded by removing the case to federal district court. The federal court sent two certified questions to the Washington Supreme Court. The first question asked whether an insurer violates “WAC 284-30-395(l)(a) or (b) if that insurer denies, limits, or terminates an insured’s medical or hospital benefits claim based on a finding of ‘maximum medical improvement.’” The second question was whether “the term ‘maximum medical improvement’ [is] consistent with the definition of ‘reasonable’ or ‘necessary’ as those terms appear in WAC 284-30-395(l).”
In response to the first question, the Washington Supreme Court looked to the actual text of the regulation, WAC 284-30-395(l), which provided in part that “an insurer may deny, limit, or terminate benefits” if the insurer determines that the services:
(a) Are not reasonable;
(b) Are not necessary;
(e) Are not related to the accident; or
(d) Are not incurred within three years of the automobile accident.
These are the only grounds for denial, limitation, or termination of medical and hospital services permitted pursuant to RCW 48.22.005(7), 48.22.095, or 48.22.100.
The Court pointed out that the final sentence unambiguously restricted the insurer’s ability to deny PIP benefits “only” for the reasons listed under WAC 284-30-395(l). State Farm made various arguments that the Washington Supreme Court struck down, such as the fact that its language was “merely definitional.” The Court pointed out that the regulation did not define “reasonable” and “necessary,” but by looking to the ordinary (dictionary) meaning, “State Farm’s MMI standard is clearly more restrictive than what would ordinarily be considered reasonable and necessary medical care.” The Court noted that Durant’s treatment would be permissible under the plain language of WAC 284-30-395(l), but not permissible under State Farm’s “more restrictive MMI standard,” which according to the Court, “disallows such treatments and does so in violation of the regulation.” (emphasis added).
The Washington Supreme Court looked to the second question, whether the term “maximum medical improvement” was consistent with the definition of “reasonable” or “necessary” as set out in WAC 284-30-395(l). Since the terms “reasonable” and “necessary” were not defined in the regulation, the Court looked to other PIP regulations and statutes, and found that those statutes and regulations reflected “Washington’s strong public policy in favor of the full compensation of medical benefits for victims of road accidents.” The Court pointed out that while WAC 284-30-395(l) permitted denial for treatment that was not reasonable or necessary, State Farm’s policy language went one step further and denied payments for services that were not “essential in achieving maximum medical improvement.” The Court noted that the limitation language in State Farm’s policy denied Durant medical benefits that were “necessary to return him to his pre-injury state.” The Court stated that such denial violated the public policy reflected in PIP statutes and regulations. As a result, the Court concluded that State Farm’s “maximum medical improvement” provision was not consistent with the definition of “reasonable” or “necessary” as set out in WAC 284-30-395(l).
View full opinion at: https://www.courts.wa.gov/opinions/pdf/947716.pdf
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