Good cause for compelled no-fault physical examinations: WHITE V. ALLSTATE INSURANCE CO. (COA 12/21/2007)

INSURANCE:  No fault (compelled medical examinations by PIP)
DATE RENDERED: 12/21/2007

PRELIMINARY REMARK:  Good cause was shown by the PIP carrier who was concerned about the prolonged medical treatment of the insured, and upon a refusal by the treating physician to explain and a refusal by their insured to submit to a physical examination, the PIP carrier obtained a report from a physician conducting a records review and then filed a petition under KRS 304.39-270.  The trial court granted the petition, and this appeal followed.  However, the rub is that the COA opinion uses the term "independent medical examination" when neither "independent" nor "medical" are used in the statute.  Rather, the phrase is "physical or mental examination"; plus upon court order it is obviously "compelled".  Since the examiner has been selected and paid by the insurance company questioning the treatment, then it is obviously not "independent" in a practical sense.  Therefore, "independent" is not a legally appropriate or statutorily correct description.

The Whites (mother Cyndia, son Bryan) appeal an order compelling them to submit to independent medical examination to be performed by a physician selected by their insurance company, Allstate InsuranceCompany (Allstate) under their no fault policy for PIP benefits.  The COA affirmed the trial court that Allstate demonstrated good cause to justify "independent physical examinations" as required by KRS 304.39-270.

Allstate claimed it became "concerned" that the treatment for BOTH had been unusually prolonged; and sent several requests to the treating physician Knopp for an explanation as to the necessity of Bryan’s treatment. Then similary requests were sent to the physician regarding Cyndi’s  treatment. No responses satisfying these requests were received.  After Knopp failed to respond, Allstate mailed a letter to Cyndi on February 6, 2006, requesting that she and Bryan attend independent medical examinations.  When Allstate received no response from the Whites, then they had the records reviewed by a physician.  After receiving the report from the records review, Allstate then filed a petition to compel Cyndi and Bryan to attend independent medical examinations. After a hearing on June 26, 2006, the court granted Allstate’s petition.

KRS 304.39-270(1) provides that:

If the mental or physical condition of a person is material to a claim for past or future basic or added reparation benefits, the reparation obligor may petition the circuit court for an order directing the person to submit to a mental or physical examination by a physician. Upon notice to the person to be examined and all persons having an interest, the court may make the order for good cause shown. The order shall specify the time, place, manner, conditions, scope of the examination, and the physician by whom it is to be made. Emphasis added.

The COA noted that "This statute expressly permits an independent medical examiner to evaluate basic reparation benefit claims. However, equally clear is that the insurer cannot compel its insured to submit to an independent medical examination simply upon demand without “good cause.”"

The pivotal case interpreting the “good cause” provision is Miller v. United States Fidelity & Guaranty Company, 909 S.W.2d 339 (Ky.App. 1995)(“Good cause” is more than a mere suspicion that the
insured’s treatments were unnecessary or unreasonable and the insurer must present some proof that the insurer has taken measures to determine the validity or extent of the insured’s injuries less intrusive than an unwanted independent medical examination. Id at 342-343.)

Having failed in its efforts to receive cooperation from Cyndi and Bryan, Allstate then sent all the related records in its possession to Dr. Hillyer for his review. It was not until after receiving Dr. Hillyer’s report expressing his opinion that the fees were unnecessary and unreasonable that Allstate filed its petition pursuant to KRS 304.39-270.

Under these circumstances, COA had no difficulty in concluding that the trial court properly ruled that Allstate had met its burden of demonstrating “good cause” for the independent medical examinations.

COMMENT:  The COA reached the correct result in this matter since the reparations obligor (PIP carrier Allstate) obtained a peer review of the records prior to filing its petition and used the peer review’s opinion to document "good cause" since the adjuster’s thoughts and ideas would be mere speculation and even though the peer or records review physician was paid by Allstate to do the records review.

However, what is irritating is that the COA opinion by Judge Thompson perpetuates the myth of an "independent" medical examination when nothing could be further from the truth.  First, the statute does not use the word "independent".  Second, the examination in this case upon a court order would more appropriately be called a "compelled" examination.  Third, in all cases it is most unqualifiedly an "insurance company" or "defense" medical examination.  Use of the label is inaccurate, misleading, and wrong.  The COA needs to clean this misconception up as the examiner is paid by the insurance company to do the examination.  An examination by a treating physician is not called "independent".  So, stop it!

Practitioners also need to read carefully the second paragraph of the statute regarding a request for the report.  Unfortunately, the legislature played "fast and loose" with the concept of privilege such that by simply requesting a copy of the medical examiner’s report you have opened the door to disclosure.  However, there is no practical need to request the report since the obvious import of the findings will be apparent upon the termination or continuation of PIP payments. 

The implication by this section is that the report is thus privileged and should not be produced or disclosed to the secured party when the reparations obligor seeks subrogation for its payments.  Should the reparations obligor produce the report in the absence of a court order, waiver by request, and failure to assert the privilege (and notify the insured) could be a separate cause of action for breach of a fiduciary duty or obligation the insured.

Of course, section 2 of the statute is illogical and creates a crazy patchwork in the statutes where the insured has an obligation to cooperate under the policy (and expecting the PIP carrier to honor the privilege) but when a dispute arises and a court order to submit to the compelled examination, the privilege is held hostage in the interest of less than full disclosure.

Probably, the best alternative is upon request by the PIP carrier to submit to the insurance company examination is to do so under the duty to cooperate, not invoke the statutory procedure for "good cause" and thus not allow section 2 and loss of privilege to apply, and then ask for a copy of the report without running the risk of a loss of privilege to the report.

On a similar vein, the medical examination should be freely witnessed and videotaped since the rules of discovery are not applicable, yet.

Michael Stevens

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