Green v. Geico General Insurance Company

Citation: Not availableDocket: N17C-03-242 EMD CCLD

Court: Superior Court of Delaware; August 27, 2019; Delaware; State Appellate Court

Original Court Document: View Document

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Yvonne Green, Wilmington Pain Rehabilitation Center (WPRC), and Rehabilitation Associates, P.A. filed a class action lawsuit against GEICO General Insurance Company, claiming that GEICO uses computerized models (the "Rules") to evaluate personal injury protection (PIP) claims, leading to unjust denials of valid claims without proper factual evaluation. The plaintiffs, representing themselves and others similarly situated, seek class certification under Superior Court Civil Rule 23. 

The plaintiffs argue that GEICO's claims processing violates Delaware law and insurance policy terms by employing two specific rules: the Geographic Reduction Rule (GRR) and the Passive Modality Rule (PMR). The GRR imposes an arbitrary cap at the 80th percentile of claims in a geographic area, resulting in 20% of submitted bills being deemed "unreasonable" without consideration of individual case facts. The PMR denies payment for certain treatment types if more than eight weeks have elapsed post-accident, also without case-specific inquiry. The court held a hearing on the plaintiffs’ motion for class certification on May 10, 2019, and subsequently granted the motion on August 27, 2019.

Geico's claims handling process involves the confirmation of a causal link between an accident and the treatment sought by its insureds. Claims are processed through a system that applies specific rules to determine approval or denial, followed by the issuance of an explanation of benefits to both the insured and the medical provider. Insureds often face "balance billing" from medical providers when claims are denied, leading collection agencies to pursue payments from them instead of Geico. Plaintiffs allege that Geico fails to disclose its claims handling policies, including the GRR (General Reduction Rule) and PMR (Provider Management Rules), and provide inconsistent information regarding the claims dispute process. Evidence includes internal documents indicating that Geico resolves disputes only with medical providers, despite claiming to allow insureds to contest denials. 

The case involves Ms. Green, who submitted PIP claims after a 2011 accident, and WPRC and RA, who submitted claims as assignees. Both Ms. Green and the medical providers allege that Geico unjustly denied their claims for covered PIP benefits using the GRR and PMR. Ms. Green filed a class action complaint against Geico in the Delaware Court of Chancery on March 10, 2014, citing various causes of action including bad faith breach of contract and consumer fraud, and sought class action status. After a period of dormancy in the case, a status report was requested by the court in February 2015, and a stay was requested pending the outcome of a related case in federal court, which eventually resulted in the decertification of two classes in September 2015. This led to a status conference in the Chancery Court in November 2015.

On December 11, 2015, Ms. Green filed an Amended Chancery Complaint in the Chancery Court, adding plaintiffs WPRC and RA and replacing four of the five original counts. The complaint included claims for Breach of Contract, Bad Faith Breach of Contract, Declaratory Relief, and violations of the Deceptive Trade Practices Act. Geico moved to dismiss the complaint, which the Chancery Court granted on February 1, 2017, due to lack of subject matter jurisdiction. The plaintiffs transferred the case to this Court and filed a Class Action Complaint on March 20, 2017, which mirrored the Amended Chancery Complaint and sought class certification for those whose PIP benefits were denied or reduced due to Geico's policies. 

On April 4, 2017, Geico filed a motion to dismiss the Class Action Complaint. The Court later allowed the plaintiffs to file an Amended Complaint, which maintained similar counts. The four counts in the Amended Complaint included allegations of Geico breaching insurance policies, committing bad faith breaches, unlawfully using certain rules, and engaging in unfair practices by failing to disclose its use of these rules. The plaintiffs sought monetary damages, attorneys’ fees, and a declaratory judgment. Key differences between the Amended Class Action Complaint and the current Class Action Complaint included the replacement of an injunction request with a demand for damages and the inclusion of a request for punitive damages in the latter.

On August 1, 2017, Geico moved to dismiss the Amended Complaint, and on April 24, 2018, the Court partially granted this motion, dismissing Count IV but allowing the other claims to proceed. Subsequently, the plaintiffs filed their motion for class certification, to which Geico responded. A hearing on the motion took place on May 10, 2019, followed by submission of additional correspondence by both parties to the Court.

The Plaintiffs propose four classes for a potential class action against Geico related to its Delaware automobile insurance policy's Personal Injury Protection (PIP) coverage for claims submitted between March 10, 2011, and the date of class notice. 

1. **Claimant Class, GRR**: Individuals whose claims were paid below policy limits and reduced due to the "Geographic Reduction Rule."
2. **Claimant Class, PMR**: Individuals whose claims were paid below policy limits and denied due to the "Passive Modality Rule."
3. **Insured Class, GRR**: Insured individuals whose claims were paid below policy limits and reduced due to the "Geographic Reduction Rule."
4. **Insured Class, PMR**: Insured individuals whose claims were paid below policy limits and denied due to the "Passive Modality Rule."

The document notes that Delaware's class action rules align closely with federal rules, requiring a two-step analysis for certification. The first step involves satisfying Civil Rule 23(a) criteria: numerosity, commonality, typicality, and adequacy. If these are met, the second step assesses if the action fits within one of the three categories outlined in Civil Rule 23(b), which includes concerns about inconsistent adjudications, actions generally applicable to the class, or predominance of common legal or factual issues. The burden to prove these requirements falls on the Plaintiffs.

Additionally, the excerpt addresses the concept of standing, which determines a party's right to bring a legal claim. Standing requires an injury-in-fact that is concrete, a causal connection to the defendant's conduct, and the ability of the court to redress the injury. Delaware follows the standing criteria set forth in the U.S. Supreme Court's decision in Lujan v. Defenders of Wildlife.

Standing was a central issue in the Hearing, with parties submitting letters to the Court concerning the standing of class representatives. Geico contends that Ms. Green lacks standing, arguing she is not pursuing monetary damages and does not face a substantial likelihood of future injury, citing A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co. In contrast, the Plaintiffs assert that Ms. Green has standing due to an injury stemming from Geico's failure to pay her claim, which they argue is ongoing as she is not receiving the contractual benefits of her insurance policy.

The Eleventh Circuit in the cited case determined that the plaintiff lacked standing for a declaratory judgment because there was no valid claim for damages, and future injury was deemed speculative. The court indicated that future injury would only arise under specific conditions, none of which were present.

The Court here finds that Ms. Green has sufficiently alleged an injury-in-fact, as Geico's alleged failure to fully pay her claim constitutes an ongoing injury, potentially leading to future claims that Geico might deny. Thus, a favorable ruling could remedy her situation by requiring Geico to reconsider her claim without the disputed Rules or pay the full amount owed under her policy. However, the Court may reassess Ms. Green’s standing after discovery, particularly focusing on the severity of her ongoing injury and whether she is indeed being deprived of her contractual rights.

Additionally, WPRC and Rehabilitation Associates, P.A. are found to have standing. Although they are not seeking monetary damages, they regularly treat patients with Geico's PIP policies and are likely to submit future claims that Geico may deny or reduce under the Rules. The Court concludes that these representatives have a substantial likelihood of injury from Geico's actions, which a favorable ruling could address by halting Geico’s use of the Rules and ensuring payment for future claims.

Civil Rule 23(a) mandates that a trial court must conduct a rigorous analysis to certify a class, ensuring that the prerequisites are met, which often intersects with the merits of the underlying claim. 

1. **Numerosity**: A class must be sufficiently large so that joinder of all members is impracticable. While there is no strict numerical cutoff, classes over 40, particularly over 100, have been deemed adequate. Delaware courts assess impracticability based on the case's circumstances rather than just the number of members, considering the "litigational inconvenience" of separate lawsuits. The Plaintiffs claim 500 members, a point not disputed by Geico, leading the Court to conclude that the numerosity requirement is satisfied.

2. **Commonality**: There must be common questions of law or fact affecting the class, with Plaintiffs sharing the same injury and claims dependent on a common contention capable of classwide resolution. The Plaintiffs assert that Geico's systematic imposition of caps and exclusions violates its duty under insurance policies and applicable law. Geico argues that proving the claims necessitates individualized analysis, referencing Johnson v. GEICO Cas. Co. and Wilmington Pain Rehab. Ctr. P.A. v. USAA Gen. Indem. Ins. Co., which both found insufficient commonality due to the need for a claim-by-claim assessment under Delaware's PIP statute. The Court recognizes that the Plaintiffs have adjusted their Amended Complaint to align with the findings in Wilmington Pain Rehab. Ctr. P.A.

Plaintiffs allege that Geico violated Section 2118B through bad faith actions, including improperly reducing or denying claims without adequate investigation, allowing balance billing, and providing conflicting information to insureds and medical providers. Under Section 2118B, insurers are required to promptly pay claims, with Section 2118(a) emphasizing the importance of timely processing to avoid financial hardship for policyholders. Specifically, Section 2118B(c) mandates that insurers respond to claims within thirty days, either paying the claim or providing a written explanation for any denial. Non-compliance results in increased unpaid benefits at specified monthly rates and potential entitlement to costs and attorneys’ fees if a suit is filed and a judgment is obtained.

The Plaintiffs argue that Geico's reliance on its internal Rules instead of a proper claims process suggests a failure to comply with Section 2118B. They assert that Geico's actions, including the lack of individual investigation and the use of conflicting information, may constitute violations of the statute. The Plaintiffs’ claim for declaratory relief raises a common legal question regarding the legality of Geico's Rules under Section 2118, contrasting with individualized claims about payment amounts. The focus is on the legality of the processing methods employed by Geico rather than the specific payments made to the Plaintiffs.

A breach of an insurance contract requires a valid contract, compliance by the insured with conditions for coverage, and a failure by the insurer to provide that coverage. The insured must prove that their claims are reasonable and necessary. The Court finds that the Plaintiffs meet the commonality requirement for the breach of contract claim, as they raise common legal questions about whether certain Rules act as secret exclusions and violate Geico’s obligation to pay premiums.

Under Delaware law, insurers have a duty of good faith and fair dealing. A bad faith breach occurs when an insurer fails to properly investigate or processes claims or deliberately delays payments without reasonable justification. The Court determines that the Plaintiffs also meet the commonality requirement for the bad faith breach claim, as they question whether Geico's application of the Rules arbitrarily reduces or denies claims and whether claims were individually reviewed by humans.

For typicality, the representative parties' claims must reflect those of the class. The Court finds that the Plaintiffs' claims are typical because they allege that Geico failed to conduct reasonable investigations and used the Rules to deny claims arbitrarily.

To satisfy the adequacy requirement, representative parties must protect the class's interests. Geico claims a conflict exists among the Plaintiffs regarding remedy allocations. The Court acknowledges that while a hypothetical conflict could arise—if the policy cap is insufficient to cover claims from multiple medical providers—such a conflict does not preclude the adequacy requirement. The Court reinforces that competing interests for relief do not inherently undermine the representative's ability to serve the class's interests.

Civil Rule 23(b)(1) allows for class certification if separate actions could lead to inconsistent adjudications or impede the interests of non-parties. The Plaintiffs argue that multiple suits against Geico could result in conflicting standards of conduct regarding the use of the GRR and PMR. Geico contends that individual actions would better assess the reasonableness of claims. The Court certifies the class under 23(b)(1), noting that a ruling on the legality of the Rules for the Plaintiffs would impact all class members, potentially disadvantaging those not involved in individual suits.

Under Civil Rule 23(b)(2), class certification is appropriate when the opposing party's actions affect the entire class, allowing for final injunctive or declaratory relief. In a similar case, Wilmington Pain. Rehab. Ctr. P.A. v. USAA Gen. Indem. Ins. Co., certification was denied due to insufficient class cohesiveness. However, in A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co., the court certified a class for declaratory relief concerning Geico’s GRR, finding that a ruling would support future injunctive relief due to the unchanged policy since 2013. The current Court follows this reasoning, certifying the class under 23(b)(2) because the Plaintiffs seek to declare the Rules unlawful, contrasting with the lack of cohesiveness in Wilmington Pain.

The plaintiff's standing was challenged because Geico had fully paid the plaintiff’s Personal Injury Protection (PIP) benefits prior to the filing of the complaint. The court referenced the case A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co. to support the notion that a determination regarding Geico's application of its rules does not necessitate an individualized analysis of each claim, and that declaratory relief could apply to future policies with similar language. 

Under Civil Rule 23(b)(3), class certification requires that common questions of law or fact predominate over individual questions and that a class action is the superior method for resolving the controversy. Factors considered include the interests of class members in controlling separate actions, existing litigation related to the controversy, the appropriateness of the forum, and potential management difficulties of a class action. 

While plaintiffs claim they are owed damages due to Geico's violation of relevant policies, Geico contends that the plaintiffs have not provided a sufficient damages model, thus complicating the assessment of whether individual claims would overshadow common liability issues. The court noted that previous rulings, such as Johnson v. GEICO Casual Co., highlighted that individual damage claims could predominate over common liability questions, leading to decertification in that case.

Conversely, in DeMaria v. Horizon Healthcare Services Inc., the court certified a class action despite the need for individual damages assessments, focusing instead on the legality of the bundling policy on a class-wide basis. 

In this instance, the court decided to certify the plaintiffs’ class specifically to evaluate whether Geico's use of the GRR and PMR constituted a breach of contract or bad faith, affirming that this question is common to all class members. However, it clarified that individual liability and damages would not be addressed at this stage, allowing common issues to take precedence over individual damage claims. The court subsequently granted the Motion for class certification.