The matters, Sayles v. Allstate and Scott v. Travelers, involved Pennsylvania's automobile insurance companies’ demands of its insureds to attend PIP (Personal Injury Protection) medical exams in accordance with the terms of the insurance policy.
William Scott was covered by an automobile insurance policy issued by Travelers Insurance Company (“Travelers”), which contained a clause requiring Scott, if he filed a claim for first-party medical benefits, to submit, as often as reasonably required by Travelers to physical exams by physicians selected by Travelers. Scott was injured in an automobile accident, and he sought reimbursement from Travelers under his automobile policy for first-party medical expense benefits. Travelers requested that Scott submit to an independent medical exam (“IME”) in accordance with the insurance policy. Scott’s attorney requested a list of three doctors from which he would consider permitting the exam. Travelers did not send a list, but, instead, renewed its request that Scott submit to an IME it had scheduled. Scott did not attend the IME, and Travelers discontinued paying Scott’s outstanding medical bills. Scott then sued Travelers in state court alleging that Travelers had breached its contract with him by imposing its IME requirement, which he contended conflicted with Section 1796(a) of the MVFRL, which requires a court order, based upon a showing of good cause by an insurer paying first-party benefits, to compel an insured to submit to an IME.
Section 1796(a) provides:
(a) General rule.--Whenever the mental or physical condition of a person is material to any claim for medical, income loss or catastrophic loss benefits, a court of competent jurisdiction or the administrator of the Catastrophic Loss Trust Fund for catastrophic loss claims may order the person to submit to a mental or physical examination by a physician. The order may only be made upon motion for good cause shown. The order shall give the person to be examined adequate notice of the time and date of the examination and shall state the manner, conditions and scope of the examination and the physician by whom it is to be performed. If a person fails to comply with an order to be examined, the court or the administrator may order that the person be denied benefits until compliance.
Travelers removed the case to U.S. District Court of the Middle District of Pennsylvania (Judge Schwab), and the trial court determined that Section 1796(a) was plain and unambiguous in requiring the insurer to petition a state court to obtain an order for an IME, and similarly clear in requiring the insurer to demonstrate good cause for the issuance of such order. In doing so, the federal court disregarded Fleming v. CNA Ins. Co., 597 A.2d 1206 (Pa. Super. 1991) (holding that insurer was entitled to have its insured submit to an IME when insured submitted claims for medical bills and lost wages under provision of its automobile policy which gave it the right to request such an exam; however, the court specifically noted that insured did not challenge this provision as being void as against public policy). Instead, the federal court predicted that the Pennsylvania Supreme Court “would find that, absent voluntary compliance on the part of the insured, insurers . . . are not free to disregard the statutory language in § 1796, which sets forth the standard by which an insured may be forced to undergo an IME.”
Similarly, Samantha Sayles was covered by an automobile policy issued by Allstate Insurance Company (“Allstate”). Allstate’s policy contained a clause that, in order to receive first-party medical benefits, the insured “shall submit to mental and physical examinations by physicians selected by us when and as often as we may reasonably require.” Sayles was injured in an automobile accident, necessitating her medical treatment. She sought reimbursement of the amount of her medical bills under her policy’s provision for the payment of first-party medical benefits, which obligated Allstate to pay her up to $5,000 per person. In response, Allstate sent a letter to Sayles’ attorney requesting that she submit to an IME, which would be performed by a doctor of Allstate’s choosing, and refused to pay Sayles’ medical bills until she did so. Sayles never submitted to an IME, and Allstate refused to pay her claim for medical benefits. Sayles subsequently sued Allstate in state court alleging that Allstate’s conditioning her first-party medical benefits on the IME violated Section 1796(a).
Allstate removed the case to the U.S District Court for the Middle District of PA (Judge Caputo), and after reviewing the terms of Section 1796(a), and finding Fleming, Supra unpersuasive, the court found the language of Section 1796(a) to prohibit the IME which Allstate requested. Both cases were appealed to and consolidated by the US Third Circuit Court of Appeals. The PA Supreme Court accepted the Third Circuit’s petition for certification of the following question: Whether, under Pennsylvania law, a contractual provision in a motor vehicle insurance policy that requires an insured to submit to an independent medical examination by a physician selected by the insurer, when and as often as the insurer may reasonably require, as a condition precedent to the payment of first-party medical benefits under that policy, conflicts with the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S. § 1796(a), and is therefore void as against public policy.
The Supreme Court rejected the insurance companies’ argument that Section 1796(a) imposes no mandatory duty on them as insurers with respect to how they may compel a policyholder who has filed a claim for first-party benefits to submit to an IME after the policyholder has refused the insurer’s request to voluntarily do so, merely because it does not utilize the terms “insurer,” or “shall.” After concluding that Section 1796(a) imposes mandatory obligations on insurers, the Supreme Court compared the IME provisions contained in the policies and the requirements of Section 1796(a); and, determined that a plain reading of both indicates that they are in irreconcilable conflict.
First, the Court determined that under the policies, and contrary to Section 1796(a), the insured receives no suitable advance notice of the request for an IME, the reasons for which it is being requested, information about how the examination will be conducted, nor, critically, does the insured have the opportunity to challenge the request before a neutral judicial decision-maker on the grounds that it lacks good cause. Second, Section 1796(a) requires a judge to adjudicate the petition. Third, under Section 1796(a), if the judge does grant an insurer’s request for the IME, the judge selects the physician who will perform the IME, and, importantly, sets the manner, conditions, and scope of the examination. Fourth, the IME policy provisions allow the insurer to determine whether, as a result of the insured’s alleged noncompliance with the conditions the insurer places on the conduct of the IME, the insured’s benefits should be terminated. By contrast, Section 1796(a) vests this authority solely with the judge who orders the IME. Finally, the Court rejected the insurance companies’ contention that, because the Insurance Department has, by regulation, promulgated sample language for insurance policies governing medical claims for injuries caused by uninsured motorists which mirrors the language of the clauses at issue, see 31 Pa.Code § 63.2, this constitutes approval of the use of such policy language, holding that the Insurance Department cannot, by regulation, legally approve an insurer’s use of policy language which conflicts with the express requirements of the MVFRL as enacted by the General Assembly. See Ins. Fed’n of Pa. v. Pa. Dep’t of Ins., 889 A.2d 550 (Pa. 2005) (holding that the Insurance Department did not have legal authority to enact a regulation which mandated that all insurance coverage disputes involving uninsured or underinsured motorist coverage besubject to binding arbitration, inasmuch as neither the MVFRL nor the Uninsured Motorist Act allowed imposition of such a requirement).
In sum, the PA Supreme Court held that the above-referenced IME policy provisions, and those similarly situated, are void as against the public policy.