Green v. GEICO Gen. Ins. Co.

YVONNE GREEN, WILMINGTON PAIN & REHABILITATION CENTER,and REHABILITATION ASSOCIATES, P.A.,on behalf of themselves and all others similarly situated, Plaintiffs, v. GEICO GENERAL INSURANCE COMPANY, Defendant.

C.A. No.: N17C-03-242 EMD CCLD

SUPERIOR COURT OF THE STATE OF DELAWARE

Submitted: May 15, 2019¹

August 27, 2019

Upon Plaintiffs' Motion for Class Certification

GRANTED

Richard H. Cross, Jr., Esquire, Christopher P. Simon, Esquire, Cross & Simon, LLC, Wilmington, Delaware Attorneys for Plaintiffs.

Paul A. Bradley, Esquire, Stephanie A. Fox, Esquire, Maron Marvel Bradley Anderson & Tardy LLC, Wilmington, Delaware, George M. Church, Esquire, Laura A. Cellucci, Esquire, Miles & Stockbridge P.C., Baltimore, Maryland, Meloney Perry, Perry Law, P.C., Dallas, Texas Attorneys for Defendant GEICO General Insurance Company.

DAVIS, J.

I. INTRODUCTION

Yvonne Green, Wilmington Pain & Rehabilitation Center ("WPRC"), and Rehabilitation Associates, P.A., on behalf of themselves and others similarly situated (collectively, the "Plaintiffs") filed suit against GEICO General Insurance Company ("Geico"). As alleged, Geicouses two computerized models (collectively, the "Rules") to evaluate personal injury protection ("PIP") claims of its insureds. The Plaintiffs argue that Geico uses the Rules to deny valid claims without evaluating the facts underlying the claims. The Plaintiffs seek certification of a class action under Superior Court Civil Rule 23.

As part of the Civil Rule 23 process, the Plaintiffs filed their Plaintiffs' Motion for Class Certification (the "Motion"). The Court held a hearing on the Motion on May 10, 2019. For the reasons set forth below, the Court GRANTS the Motion.

II. RELEVANT FACTS

A. PARTIES

Ms. Green is an individual who resides in Delaware.² Ms. Green holds an automobile insurance policy that includes "personal injury protection" or "PIP" coverage with Geico.³ Ms. Green has tendered a claim for PIP benefits under her Geico insurance policy.

WPRC provides medical services in Delaware and tenders claims for PIP benefits under Geico's insurance policies.⁴ Similarly, Rehabilitation Associates, P.A. provides medical services in Delaware and tenders claims for PIP benefits under Geico's insurance policies.⁵

Geico is an insurance company that is incorporated in Maryland with its principal place of business in Washington, D.C.⁶ Geico regularly sells insurance within Delaware.⁷

B. GEICO'S CLAIMS PROCESSING

The Plaintiffs challenge Geico's process for evaluating PIP claims. Under Delaware law and the insureds' policies, Geico must reimburse all "reasonable and necessary expensesincurred within two years from the date of the accident"⁸ after an insured submits a proof of loss. The reimbursement includes compensation for medical and hospital services. The Plaintiffs contend that Geico relies on computerized Rules to evaluate PIP claims, which purportedly analyze all claims the same way, regardless of the facts giving rise to the underlying claim.⁹ The Plaintiffs argue that this process violates Delaware law and the terms of Geico's insurance policies. The Rules and Geico's use of the Rules in assessing PIP claims are the basis of this litigation.

The first rule at issue is the Geographic Reduction Rule (the "GRR").¹⁰ Under the GRR, Geico sets an alleged arbitrary cap at the "80^th percentile" of claims submitted to Geico within a particular geographic region.¹¹ As a result of the GRR, the Plaintiffs claim that 20% of bills submitted to Geico for reimbursement are automatically deemed "unreasonable," without inquiry into the facts giving rise to the claim or any factors that could impact pricing.¹² Based on this, the Plaintiffs allege that the GRR is, in effect, a secret cap on what Geico will pay.¹³

The second rule at issue is the Passive Modality Rule (the "PMR").¹⁴ Under the PMR, the Plaintiffs allege that Geico automatically denies payment for certain "passive modalities" when treatment occurs more than eight weeks from the date of the automobile accident.¹⁵ Geico enforces the PMR without making any inquiry into the facts or treatment to determine if treatment is appropriate.¹⁶ Based on this, the Plaintiffs allege that the PMR is, in effect, a secretpolicy exclusion on what Geico will pay.¹⁷ When Geico denies its insureds' claims, the insureds are often "balance billed" by medical providers.¹⁸ Collection agencies then collect these bills from the insureds, rather than from Geico.¹⁹

In the Amended Complaint, the Plaintiffs describe Geico's claims process. Geico first confirms that there is a causal connection between the underlying accident and the treatment for which an insured seeks payment.²⁰ Then, Geico uses its claims processing system, which includes the Rules, to approve or deny claims.²¹ Finally, Geico's system generates an explanation of benefits, which is sent to the insured and medical provider.²² For example, when Geico reduces a bill under the GRR, Geico sends a letter, which states "[t]he service charge exceeds an amount that is reasonable when compared to the charges of other providers in the same geographic area." Geico allows insureds to challenge Geico's reduction or denial of claims.²³ Pursuant to a re-evaluation, Geico will re-run a claim through its claims processing system. The Plaintiffs contend that Geico does not disclose its claims handling policies or the GRR or the PMR to its insureds.²⁴

The Plaintiffs contend that Geico has conflicting policies and provides inconsistent information to its insureds. As evidence, the Plaintiffs cite the following facts: Geico's internal documents note that Geico only resolves claims disputes with medical providers, but Geicorepresents to its insureds that the insureds may dispute their claims;²⁵ Geico has noted, in its internal discussions, that it does not negotiate problems with medical providers.²⁶

C. PLAINTIFFS SUBMITTED PIP CLAIMS TO GEICO

Ms. Green was injured in a car accident on September 12, 2011.²⁷ After receiving medical treatment, Ms. Green, as an individual insured, submitted her medical bills to Geico for repayment under her PIP policy.²⁸ Geico used the GRR and PMR in processing Ms. Green's claims for PIP benefits.²⁹ As a result, the Plaintiffs contend that Geico denied payment of covered PIP benefits to Ms. Green without reasonable justification.³⁰

Similarly, WPRC and RA, as assignees of their insured patient's claims, submitted claims to Geico for processing and payment for treatment they provided.³¹ When WPRC and RA submitted claims to Geico directly, Geico treated WPRC and RA as the claimants under the insured's policy.³² In processing WPRC and RA's claims for PIP benefits, Geico used the GRR and the PMR.³³ As a result, the Plaintiffs assert that Geico denied payment of covered PIP benefits to WPRC and RA without reasonable justification.³⁴

D. PROCEDURAL HISTORY

On March 10, 2014, Ms. Green filed the initial class action complaint (the "Initial Chancery Complaint") against Geico in the Delaware Court of Chancery. The Initial Chancery Complaint alleged causes of action for Injunctive Relief, Bad Faith Breach of Contract, Breachof Duty of Fair Dealing, Consumer Fraud, and Tortious Interference with Contract. The Initial Chancery Complaint also sought class action status pursuant to Court of Chancery Rule 23. Geico filed its initial responsive pleading on April 14, 2014.

The case was dormant until February 2015 when the Chancery Court requested a status report from the parties. Ms. Green's counsel requested a stay pending the outcome of a motion to decertify classes filed in a similar case in the United States District Court for the District of Delaware (the "Delaware District Court") titled Johnson v. GEICO Casualty Co. In September 2015, the Delaware District Court decertified two classes previously certified. Upon being advised on this outcome, the Chancery Court conducted a status conference on November 3, 2015.

On December 11, 2015, Ms. Green filed an amended class action complaint (the "Amended Chancery Complaint") in the Chancery Court. The Amended Chancery Complaint added two additional plaintiffs, WPRC and RA, and replaced four of the five original counts. The Amended Chancery Complaint asserted claims for Breach of Contract, Bad Faith Breach of Contract, Declaratory Relief, and Deceptive Trade Practices Act violations.

Geico then moved to dismiss the Amended Chancery Complaint. Following a hearing and additional briefing, the Chancery Court dismissed the Amended Chancery Complaint for lack of subject matter jurisdiction on February 1, 2017. The Plaintiffs then elected a timely transfer to this Court on February 24, 2017.

On March 20, 2017, Plaintiffs filed the Class Action Complaint. The Class Action Complaint is essentially identical to the Amended Chancery Complaint, asserting the same claims for Breach of Contract, Bad Faith Breach of Contract, Declaratory Relief, and DeceptiveTrade Practices Act violations.³⁵ The Class Action Complaint alleged class certification on behalf of all persons, including insureds and medical providers, whose claims for PIP benefits were denied or reduced as a result of the GRR and the PMR. The members of this class are referred to as "The Claimant Class" and the "The Insured Class."

On April 4, 2017, Geico moved to dismiss the Class Action Complaint through Defendant Geico General Insurance Company's Motion to Dismiss Plaintiffs' Class Action Complaint (the "Original Motion"). On July 12, 2017, the Court granted a stipulation to allow Plaintiffs to file the Amended Complaint thereby rendering the pending motion moot.³⁶

The Amended Complaint has four counts, which are substantially similar to the counts in the previous pleadings. In Count I, the Plaintiffs allege that Geico breached the Plaintiffs' insurance policies by Geico's use of the Rules. In Count II, the Plaintiffs' assert that Geico committed a bad faith breach of contract by arbitrarily reducing or denying the Plaintiffs' insurance...