Trial Set On State Farm Injury Database

The Colorado Court of Appeals in Denver has ruled that a jury should decide the accuracy of a State Farm database that was used to determine the reasonableness of medical charges for an auto injury.

That unanimous finding last week by a three-judge panel overturned a trial court summary judgment the insurer obtained in the case of a woman who was injured in 2001. The case now goes back for trial.

A State Farm spokesperson, May Martinez Hendershot, said the firm is “disappointed with the court's decision and we are exploring our legal options. We believe the bill review process we used is in compliance with department of insurance regulations, the no-fault law and even our own policies.”

Asked if legal options could involve a request for a State Supreme Court review, Ms. Hendershot said at this point she could not comment.

Attorney Rob Carey of Hagens Berman Sobol Shapiro–representing the plaintiffs Pauline Reyher and her physician, Dr. Wallace Brucker–said in a statement that the ruling opens the door for a prospective class-action lawsuit.

According to the lawyer, the class would represent physicians and patients who had payments from State Farm unilaterally reduced after the insurance company processed the charges through the Sloans Lake Auto Injury Management medical database.

State Farm argued at the trial that the database–used to compare physician charges against “same or like services” in a geographic region–was allowed by the state insurance department.

The carrier had rejected bills for Ms. Reyher's treatment and reduced payments by various amounts, saying the database showed other physicians in the geographic area charged less for the similar services.

However, according to the plaintiffs, Dr. Brucker is the orthopedic surgeon in his area who performs the type of medical services Ms. Reyher required.

In sending the case back for trial, the appeals court cited a Florida court ruling that a computer database may be accurate in assessing the reasonableness of charges, but “in other cases, it may be far from the mark.”

The Colorado court said whether a database has made an accurate determination is a fact question for a jury.

Reasonable jurors, according to the decision, could infer from Dr. Brucker's bills that the charged amount was reasonable, and that the company failed to pay “all reasonable and necessary” expenses under the state's no-fault auto insurance law.

According to attorney Carey, the ruling against State Farm follows closely on another ruling in a similar case against American Family Mutual Insurance Company issued earlier this month.

In that case, the Colorado Court of Appeals reversed the trial court's decision denying class certification for certain claims, and sent the case back to the trial court for further proceedings.

That case involved the claims of Tania LaBerenz, who was injured in an accident in October of 2001, and her doctor, J. Bradley Gibson.

According to the complaint filed in April 2003, American Family paid only a portion of the physician's charges, saying the reductions were recommended by the MDR National Fee Database of charges for similar procedures.

Ms. LaBerenz and Dr. Gibson sought to represent a class of insureds and medical providers whose bills had been reduced based on the review by the database, charging that the database was flawed and did not accurately assess the reasonableness of the doctor's bills. The trial court denied class certification.

The Court of Appeals reversed the trial court's decision, finding that certain requirements for class certification were met, and sent it back to the trial court with instructions to reconsider class certification of the provider's claims.

This article updated 10:27 a.m. Sept.26