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Green v. Geico General Insurance Co.

Superior Court of Delaware

August 27, 2019

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.

          Submitted: May 15, 2019[1]

         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.

          ERIC M. DAVIS, JUDGE.

         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, Geico uses 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 expenses incurred 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 "80th 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 secret policy 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 Geico represents 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, Breach of 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 Deceptive

         Trade 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 claims. In Count III, the Plaintiffs seek a declaratory judgment that Geico's continued use of the Rules is unlawful and violates 21 Del. C. § 2118. Finally, in Count IV, the Plaintiffs contend that Geico engaged in unfair and deceptive practices in violation of 6 Del. C. §2532(a)(5) and (12). Specifically, the Plaintiffs claim that Geico violates 6 Del. C. §2532(a)(5) and (12) by failing to disclose its use of the Rules to insureds and failing to perform an investigation before reducing or denying insureds' claims. The Plaintiffs seek monetary damages, attorneys' fees, and a declaratory judgment.

         On August 1, 2017, Geico filed a Motion to Dismiss the Amended Complaint (the "MTD"). The Court issued an opinion granting in part and denying in part the MTD on April 24, 2018. The Court dismissed Count IV but allowed the rest of the claims to proceed.

         On August 17, 2018, the Plaintiffs filed Plaintiffs' Opening Brief in Support of Motion for Class Certification. Then, on February 15, 2019, Geico filed Defendant Geico General Insurance Company's Answering Brief in Opposition to Plaintiffs' Motion for Class

         Certification (the "Opposition"). The Plaintiffs filed Plaintiffs' Reply Brief in Support of Motion for Class Certification (the "Reply") on April 2, 2019. On May 10, 2019 the Court held a day-long hearing (the "Hearing") on the Motion, the Opposition and the Reply. On May 13, 2019 and May 15, 2019, GEICO and the Plaintiffs submitted post-Hearing letters to the Court addressing questions raised during the Hearing.

         E. Proposed Class Action

         In their submissions, the Plaintiffs propose four classes: [37]

         1. The Claimant Class - GRR (All Counts): All persons who, during the period from March 10, 2011 to the date of class notice, submitted a claim to Geico pursuant to Geico's Delaware automobile insurance policy's PIP coverage, which claim:

a. was paid by Geico at an amount less than the stated policy limits, and
b. was reduced by Geico as a result of the "Geographic Reduction Rule."

         2. The Claimant Class - PMR (All Counts): All persons who, during the period from March 10, 2011 to the date of class notice, submitted a claim to Geico pursuant to Geico's Delaware automobile insurance policy's PIP coverage, which claim:

a. was paid by Geico at an amount less than the stated policy limits, and
b. was denied by Geico as a result of the "Passive Modality Rule."

         3. The Insured Class - GRR (Count III): All persons who, during the period from March 10, 2011 to the date of class notice, were insureds whose claim was submitted to Geico pursuant to Geico's Delaware automobile insurance policy's PIP coverage which claim:

a. was paid by Geico at an amount less than the stated policy limits and
b. was reduced by Geico as a result of Geico's "Geographic Reduction Rule."

         4. The Insured Class - PMR (Count III): All persons who, during the period from March 10, 2011 to the date of class notice, were insureds whose claim was submitted to Geico pursuant to Geico's Delaware automobile insurance policy's PIP coverage which claim:

a. was paid by Geico at an amount less than the stated policy limits and
b. was denied by Geico as a result of Geico's "Passive Modality Rule."

         III. STANDARD OF REVIEW

         The Delaware civil rule[38] on class actions is substantially similar to the federal civil rule[39] on class actions.[40] "Where . . . the Superior Court's Rules of Civil Procedure closely track the Federal Rules of Civil Procedure, cases interpreting the federal rules are persuasive authority for [the Court's] construction purposes."[41]

         Delaware follows a two-step analysis to certify a class. The first step requires that a class satisfy the following requirements in Civil Rule 23(a): (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy.[42]

         If the Civil Rule 23(a) requirements are met, the second step is to properly fit the action "within the framework provided for in [Civil Rule 23(b)]."[43] Civil Rule 23(b) sets forth three disjunctive requirements: (1) prosecution of separate actions would create a risk of (i) inconsistent or varying adjudications or (ii) adjudications as to one member of the class would be dispositive as to members that are not parties to the adjudications; (2) the party opposing the class has acted or refused to act in a manner generally applicable to the class, thereby making appropriate final equitable relief or corresponding declaratory relief with respect to the class as a whole; or (3) cases where common issues of law or fact predominate.[44] The Plaintiffs argue for class certification under all three categories in Civil Rule 23(b).

         The plaintiff bears the burden of establishing that the class meets the Civil Rule 23(a) and (b) requirements.[45]

         IV. DISCUSSION

         A. Standing

         "The concept of 'standing,' in its procedural sense, refers to the right of a party to invoke the jurisdiction of a court to enforce a claim or redress a grievance."[46] "It is concerned only with the question of who is entitled to mount a legal challenge and not with the merits of the subject matter of the controversy."[47] "[S]tate courts apply the concept of standing as a matter of self-restraint to avoid the rendering of advisory opinions at the behest of parties who are 'mere intermeddlers.'"[48]

         Delaware follows the standing requirements articulated by the U.S. Supreme Court in Lujan v. Defenders of Wildlife.[49] The elements of standing are: (1) an injury-in-fact to a legally protected interest that is concrete and particularized, actual or imminent, and not conjectural or hypothetical; (2) a causal connection between the injury and the defendant's conduct; and (3) that the claim is redressable by the Court's favorable decision.[50]

         The concept of standing arose at the Hearing and the parties subsequently submitted letters to the Court regarding the class representatives' standing. Geico argues that Ms. Green does not have standing because she is not seeking monetary damages and does not have a substantial likelihood of future injury. Geico relies on A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co., [51] to support its argument. In response, the Plaintiffs argue that Ms. Green has standing because she suffered an injury when Geico failed to pay her claim. The Plaintiffs additionally contend that Ms. Green has an ongoing injury and that she is not receiving the benefit of the contractual rights to which she is entitled under her Geico insurance policy.

         In A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co., [52] the United States Court of Appeals for the Eleventh Circuit found that a plaintiff did not have standing to bring a claim for declaratory judgment against Geico. This was because the plaintiff did not have a valid claim for monetary damages or a substantial likelihood of future injury. Specifically, the court found that Geico had already paid the limits of the plaintiff's insurance policy, so the plaintiff was not entitled to monetary damages. Additionally, the plaintiff's claim for future injury was too speculative and so did not raise a substantial likelihood of future injury. The court noted that the plaintiff could only suffer a future injury if (i) the plaintiff got into another accident, (ii) the plaintiff sustained an injury covered under her PIP benefits, and (iii) Geico used the same interpretation of its policy to reduce or deny the plaintiff's claim.

         The Court finds that the Plaintiffs have sufficiently alleged that Ms. Green has standing at this stage in the proceedings. Ms. Green has an injury-in-fact because Geico allegedly failed to pay her entire claim of loss under her insurance policy. In addition, Ms. Green continues to suffer injury and may need to submit an additional PIP claim to Geico, which Geico may deny using the Rules. Ms. Green's ongoing injury creates a likelihood of future injury. Next, Geico's denial of Ms. Green's claim is the cause of Ms. Green's injuries because Ms. Green did not receive the payment to which she is entitled. Finally, a favorable ruling by the Court will remedy Ms. Green's harm. Ms. Green is not seeking monetary damages in this case. A favorable ruling will provide a remedy to Ms. Green because the ruling will either (i) require Geico to assess Ms. Green's claim without using the Rules, which may lead to Ms. Green receiving a payment or (ii) require Geico to pay the entire amount of Ms. Green's initial claim . A favorable ruling will also provide a remedy because the ruling will allow Ms. Green to receive the contractual privileges of her insurance policy with Geico.

         However, the Court may reconsider Ms. Green's standing after the parties have concluded the discovery process. Specifically, after discovery, the Court may consider the nature and severity of Ms. Green's ongoing injury to see if the injury creates a substantial likelihood that Ms. Green will make another PIP claim. The Court will also consider whether the Plaintiffs have sufficiently alleged that Ms. Green is not receiving the benefit of her bargain with Geico by Geico's continued use of the Rules.

         The Court also finds that WPRC and Rehabilitation Associates, P.A. have standing. These class representatives are also not seeking monetary damages. But, these class representatives regularly provide treatment for insureds with Geico's PIP insurance policies. The representatives are likely to submit another claim to Geico which Geico will assess using the Rules. Therefore, the Court finds that these class representatives (i) have a substantial likelihood that Geico will reduce or deny their claims using the Rules, (ii) the reduction or denial will cause the representatives to suffer an injury, and (iii) a favorable decision will stop Geico's use of the Rules and allow the representatives to receive payment for their future claims.

         B. Civil Rule 23(a)

         A trial court may certify a class only if "the trial court is satisfied, after a rigorous analysis, that the prerequisites of Civil Rule 23(a) have been satisfied . . . ."[53] "Frequently that 'rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim."[54]"[T]he class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff[s'] cause of action.'"[55]

         i.Numero ...


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