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An insurance company’s reliance on a peer review’s recommendation to deny claims does not protect the insurer from liability for attorney fees if the peer review is found to be invalid, the state Superior Court has ruled.

The court ruled May 2 to overturn a trial court’s decision not to award attorney fees to a health care provider after Travelers Personal Insurance Co. denied claims for treatment based on a peer review the court found to be invalid.

Writing the majority opinion for the court, Judge Sallie Updyke Mundy said that simply pursuing a peer review before denying a claim was not enough to ensure that an insurer would not be liable for attorney fees under the Motor Vehicle Financial Responsibility Law.

“We construe the relevant language of Section 1797(b)(4) of the MVFRL, to wit, ‘challenged before a [peer review organization],’ to mean a completed, compliant and valid peer review determination,” Mundy said. “We conclude the legislature intended the phrase ‘challenged before a PRO’ to mean the successfully completed peer review process, not merely an attempt to invoke that process.”

Mundy was joined in Doctor’s Choice Physical Medicine & Rehabilitation Center v. Travelers Personal Insurance by Judges Christine L. Donohue and Cheryl Lynn Allen.

According to Mundy, Angela LaSelva, who was insured by Travelers, sustained an injury in a motor vehicle accident. LaSelva received payments for the injuries through various health care providers, including a chiropractor with Doctor’s Choice Physical Medicine & Rehabilitation Center.

The health care provider billed Travelers directly for services, and Travelers submitted the bills to IMX Medical Management Services for peer review of the claims. IMX designated chiropractor Dr. Mark Cavallo to conduct the peer review, Mundy said.

Citing a review of the medical records and self-selected medical literature, Cavallo concluded that some of the treatments were unnecessary and that LaSelva had already achieved maximum benefit for her treatments. Travelers refused payment of the bills for treatment that Cavallo deemed unnecessary, Mundy said.

Doctor’s Choice filed a complaint against Travelers, claiming the insurer improperly denied payment in violation of the MVFRL.

The matter proceeded to trial, in which Doctor’s Choice was awarded $82,287 to cover the denied claims, attorney fees and other costs. The trial court specifically found that Cavallo’s report was “invalid” as a peer review, Mundy said.

After Travelers filed a post-trial motion seeking to have the award of attorney fees reversed, the trial court removed the attorney fee award, holding that the state Supreme Court’s 2012 decision in Herd Chiropractic Clinic v. State Farm Mutual Auto Insurance was applicable. According to Mundy, the trial court said state law indicated that if a peer review has been pursued within the permitted timeframe, the carrier cannot be liable for attorney fees.

Doctor’s Choice appealed to the Superior Court and urged the court to find that because Cavallo’s review did not meet the requirements, no peer review had been performed. The provider further argued that Herd did not apply to the circumstances, and that the Superior Court’s decision in Levine v. Travelers Property Casualty Insurance supported its position.

Travelers maintained that Herd applied and that attorney fees cannot be awarded if an insurer “dutifully challenged the treatment before a PRO,” Mundy said. Levine was distinguishable, Travelers additionally argued, because it was based on a finding that bills had not been submitted to a PRO.

Mundy said the crux of the case came down to whether the “challenged before a PRO” language in Section 1797(b)(4) should be interpreted as mandating procedural compliance, or as requiring a valid, completed peer review.

Mundy said that because Herd dealt with whether or not a peer review had been performed in a case, it was not dispositive, but determined that Levine, which dealt with an insurer referring contested claims to an independent medical examination, was more appropriate.

“Travelers’ assertion that our Supreme Court’s holding in Herd merely requires ‘that if treatment is sent to be reviewed through a peer review, attorney fees cannot be awarded under Section 1797(b),’ is not well founded,” Mundy said. “It is clear from Levine … that the phrase ‘challenged before a PRO’ as employed in Section 1797(b)(4) requires more than a mere referral to a PRO of bills for contested treatment provided to its insured. Such referral must result in a peer-reviewed determination upon which an insurer can rely in deciding whether to pay the bills.”

Mundy remanded the case for reinstatement of attorney fees to Doctor’s Choice.

“The Superior Court held that the legislature never intended the absurd result of an insurance carrier relying on an invalid peer review to deny benefits to its insured,” said Robert Claraval of Claraval & Claraval, who represented Doctor’s Choice, in an emailed statement. “The decision is important because it keeps the courthouse door open for doctors and patients to get their bills paid when patients are injured in a motor vehicle crash and the auto insurance carrier wrongfully denies payment.”

Jessica Heinz of Cipriani & Werner, who represented Travelers, did not return a call for comment.

Max Mitchell can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI.

(Copies of the 21-page opinion in Doctor’s Choice Physical Medicine & Rehabilitation Center v. Travelers Personal Insurance, PICS No. 14-0763, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •