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Oklahoma Supreme Court Addresses an Insurer’s Ability to Question Reasonableness of Medical Bills in First-Party UM Claim

Jan 23, 2018 - Court Decisions by

In the recent case of Falcone v. Liberty Mutual Ins. Co., 2017 OK 11, 391 P.3d 105, the Court addressed a bad faith cause of action against an insurance company in the uninsured motorist context.  In that case, the insurer withheld payment of UM benefits, claiming that the medical bills the insured received from a health care provider were excessive in amount.  The plaintiff had been taken by ambulance to an emergency room, and then transferred to a trauma center, incurring billed fees in the amount of $47,203.00, which later increased to $67,098.23.  The insurer conducted its own review of the billing, and concluded it was excessive, and suggested that the treatment the plaintiff received was far in excess of what was necessary.  The plaintiff eventually sued the insurer in order to get his medical bills paid, and requested additional damages for the alleged “bad faith” conduct on the part of the insurer.  The trial court granted summary judgment, finding it was reasonable as a matter of law for the insurer to question the reasonableness of the medical charges.

The Supreme Court reversed, and remanded, finding that defendant offered less than the maximum amount of its evaluations, took the position that certain treatment was unwarranted, and forced plaintiff to file a lawsuit  — after which the insurer sent a check for full policy limits.  The Court noted that the amount of her medical bill was beyond her control, as was the decision of the ER doctor to send her to the particular trauma center at issue.

Notably, two justices on the Court would have remanded for a trial on damages only; they found the insurer committed bad faith as a matter of law.  The concurring justices found that the UM language of the insurance policy did not allow the insurer to “question the reasonableness or necessity of the medical services or expenses.  Nor is there any statutory authority to allow an insurance company to withhold payment.”  The Court held that the “very act of using the utilization reviewers as a pretext to deny payment of the emergency room bill in this case is bad faith” and that the insurer “had no justifiable reason for withholding payment under the policy.”

The decision re-emphasizes the importance of reviewing the precise policy language at issue before reducing a first-party claim for benefits, and recognizes the risks associated with using third-party bill reviewing services in that regard.  It also underscores the fact that an insurer cannot, absent unusual circumstances, offer to resolve a claim at an amount that is less than its own internal estimates of the claim (i.e., a concept often referred to as “low-balling”).