Arizona District Court Holds "Reasonable" Medical Expenses Are Amounts Accepted by Providers as Payment in Full Rather Than Billed Amounts

In Jimenez v. Progressive Preferred Ins. Co., 2020 WL 2037113 (D. Ariz. Apr. 28, 2020), a putative breach of contract and insurance bad faith class action arising from a MedPay claim, the Arizona District Court held the phrase "reasonable expenses incurred for necessary medical services' are those expenses which the healthcare provider accepts as payment in full.”

• If an insurer’s policy limits MedPay benefits, or perhaps UM or UIM benefits, to “reasonable medical expenses,” then the insurer should determine whether an insured’s medical providers contracted to accept less than the amount billed as payment in full to determine the benefits owed.
• Because Arizona’s model personal injury damages instruction, RAJI Personal Injury Damages 1 (Measure of Damages), limits Arizona personal injury plaintiffs' recovery of medical expenses to “reasonable expenses of necessary medical care,” some Arizona insurers and personal injury defendants may begin to cite Jimenez and argue the recovery of medical expenses by Arizona personal injury plaintiffs and insureds should be limited to the amounts accepted by medical providers as payment in full rather than billed amounts.

In Jimenez, the Policy stated the Insurer would pay MedPay benefits for “reasonable expenses incurred for medical services” and the Insurer would “determine whether the expenses for medical services are reasonable.” The Insurer had contracted with an entity that entered “Provider Agreements” with medical providers that agreed to deliver medical services at specific contract rates. The Insurer had also contracted with another entity that made the Insurer part of a Virtual Provider Network in which a network of medical providers similarly agreed to deliver medical services for the entity’s clients, such as the Insurer, at reduced rates.

The Insured was in a car accident, incurred $6,719 of medical expenses, had no health insurance, and made a MedPay claim for his $5,000 MedPay limits. The Insurer determined the Insured’s medical providers had contracted with the above two entities and agreed to accept reduced rates, specifically $3,455, as payment in full, and paid that amount of MedPay benefits.

The Insured filed a putative class action against the Insurer for himself and other insureds whom the Insurer paid less than policy limits because of similar contracts/Voluntary Provider Networks and asserted claims, among others, for breach of contract and bad faith. The...