Farmers Insurance Wins Appeal in Medical Expenses Coverage Class Action

Farmers Insurance Wins Appeal in Medical Expenses Coverage Class Action

By Anne Bucher

On Monday, November 18, the Tenth Circuit Court of Appeals ruled that state law allowed Farmers Insurance Exchange to limit its coverage of medical expenses incurred from an accident that injured a Colorado man, who subsequently filed a class action lawsuit against the insurance company. 

Plaintiff Lawrence Countryman initially filed the class action lawsuit against Farmers Insurance, accusing the company of violating its contract by adjusting the prices of medical claims based on faulty database information. As a result, the company allegedly refused to pay reasonable and necessary medical expenses on its automobile insurance policies.

The statute at issue in the class action lawsuit is known as the Colorado Med-pay statute. Enacted in 2008, the Med-pay statute requires motor vehicle liability insurance policies to include coverage for medical payments. Specifically, the three-judge panel considered whether the Med-pay statute forbids an insurer from limiting its medical expense coverage to two years.

Countryman bought an insurance policy from Farmers with medical payment benefit coverage up to $25,000. After he suffered serious injuries from a car accident, Farmers allegedly paid him $14,920 in benefits for two years but refused to pay any further claims based on the policy’s two year limit. He subsequently filed the class action lawsuit in March 2010 for breach of contract and related claims.

According to Countryman’s class action lawsuit, Farmers and Mid-Century Insurance Company issued policies in Colorado that cover medical expense benefits, limited to “reasonable and customary expense(s) for necessary medical services furnished within two years from the date of the accident.” Countryman claims the two-year limit is unenforceable under Colorado law.

Farmers and Mid-Century removed the class action lawsuit to federal court and sought to dismiss the claims regarding the two-year limit. After the district court dismissed all claims, Countryman filed an appeal. On appeal, the Tenth Circuit judges agreed with the district court, finding that the two-year limit was not prohibited under Colorado’s Med-pay statute.

The three-judge panel found that Colorado’s Med-pay statute was not specific regarding time limits. “The silence could indicate intent to disallow any time limits or to allow whatever time limit an insurer may choose,” the appellate court said. “Because the statute is susceptible to at least two reasonable interpretations, it is ambiguous.” 

Because the appellate judges found the statutory language to be ambiguous, they looked to legislative history and public policy to determine whether the two-year limit was unreasonable. Specifically, they looked to the conflicting goals over the bargaining power and freedom of contracts between insurers and policyholders. “We conclude that the statutory language, though ambiguous, is more amenable to allowing time limits than prohibiting them. The legislative history leans in the same direction. The multiple public policy considerations lend support to both sides but do not determine the issue. We therefore hold that Defendants’ policy does not violate Colorado’s Med-pay statute.”

Countryman is represented by Robert B. Carey, John M. DeStefano and Craig R. Valentine of Hagens Berman Sobol Shapiro LLP and Paul W. Gertz of Gertz Adair Law Firm.

The Farmers Insurance Medical Expense Coverage Class Action Lawsuit is Lawrence Countryman, et al. v. Farmers Insurance Exchange, et al., Case No. 12-1456, in the U.S. Court of Appeals for the Tenth Circuit.

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