In a landmark decision, Schiff v. Liberty Mutual Fire Insurance Co., 2 Wn.3d 762 (2024), on April 19, 2024, the Washington Supreme Court ruled on the use of FAIR Health database by insurance companies when handling Personal Injury Protection (PIP) claims
Background of the Case
Dr. Stan Schiff, M.D., PhD, filed a lawsuit against Liberty Mutual. He argued that the insurer’s practice of capping payments at the 80th percentile of charges using a computer-generated FAIR Health database violated the requirement to pay "all reasonable and necessary" medical expenses under PIP insurance. Schiff claimed this practice was unfair and violated Washington’s Consumer Protection Act (CPA). Liberty Mutual defended its method, stating that using the 80th percentile of charges from the FAIR Health database was a reasonable and fair way to determine payment amounts.
The Supreme Court's Decision
The Washington Supreme Court reversed the earlier decision from the Court of Appeals, siding with Liberty Mutual. The key points of the ruling are:
Reasonableness of the 80th Percentile Method:
The Court ruled that using the FAIR Health database to cap payments at the 80th percentile of local charges is a reasonable method for determining what is "reasonable and necessary." This approach considers regional variations in medical costs and provides an objective benchmark.
Definition of "Reasonable Investigation":
The Court clarified that insurers do not need to conduct individualized assessments of each medical provider’s qualifications. Instead, comparing charges for similar treatments in the same geographic area is considered a reasonable investigation.
Compliance with CPA:
The Court concluded that Liberty Mutual’s practice did not violate the CPA. Insurers are required to adopt reasonable standards for prompt and fair investigations, but this does not mean they must perform more detailed reviews of each claim.
What This Means for You
If you are a policyholder relying on PIP insurance to cover medical expenses after an accident, this ruling impacts how your claims may be processed and evaluated:
Understanding Payment Caps: Insurers can use percentile-based benchmarks, like the 80th percentile in FAIR Health database, to determine the reasonableness of your medical expenses. This means that your medical bills might be compared against the charges for similar treatments in your area, potentially affecting the amount you are reimbursed.
Expectations for Claims Investigation: The ruling confirms that insurers can use standardized methods for investigating claims. While this may streamline the process, it’s important to be aware that not every aspect of your medical treatment will be individually assessed. If you are seeing a specialist, whose bills are above 80th percentile of other medical doctors in the area, the specialist bills with not be covered in full.
Challenges in Disputing Claims: Given the Supreme Court’s decision, disputing a claim based on the argument that the insurer’s investigation was unreasonable might be more challenging. However, this does not mean that you should accept any decision without question.
Conclusion
The Washington Supreme Court’s decision in Schiff v. Liberty Mutual underscores the importance of understanding how PIP insurance claims are evaluated. Auto injury victims may be responsible for any payments not covered by their PIP insurance if their medical provider’s billing amount exceeds the 80th percentile of the specific billing code in the provider’s geographic area
If you have questions about your PIP insurance claims or need assistance, our experienced personal injury attorneys are here to help. Contact us today to discuss your case and learn how we can support you in securing the compensation you need.