News + Insights

Insurer Obligated to Defend Chiropractor Against State Farm Claims

March 26, 2018

GTTC partners Frank Cordell and Matthew Pierce represent a Washington chiropractor against whom State Farm brought a lawsuit. State Farm alleged that the chiropractor and his colleagues were performing unnecessary treatments on patients for whom State Farm was paying the bills, either because the patient was a State Farm insured, claiming benefits under their PIP coverage, or the treatments resulted from an automobile collision in which the tortfeasor was a State Farm insured. Our client strongly denied State Farm’s allegations. State Farm’s lawsuit one of many that it and other major auto insurers have brought against chiropractors around the country, asserting fraud and related claims for allegedly providing care that is not medically necessary.

Our client’s professional liability insurer was PACO Assurance Company/OUM, a major provider of chiropractic professional liability coverage. PACO agreed to defend under reservation of rights, but later filed a declaratory judgment action in federal court in Seattle, seeking a determination that it was not obligated to defend. PACO filed a motion for summary judgment, arguing that State Farm’s claims were not for a covered “malpractice incident” as defined in the policy, but rather constituted a mere billing or commercial dispute, or financial fraud, that did not trigger the insurer’s duty to defend. Our client opposed the motion, arguing that:  (1) State Farm’s claims of overbilling were based on the insurer’s contention that the insured chiropractor’s professional judgment regarding the proper course of treatment were flawed; and (2) that the policy, contrary to State Farm’s position, did not limit coverage to traditional malpractice claims brought by patients, but rather covered any claims alleging damages due to errors or omissions in the provision of chiropractic care.

The court agreed with the insured, denied PACO’s motion, and thereby held that PACO was obligated to defend. The decision appears to be the first of its kind, and is notable because of the growing number of lawsuits being brought by auto insurers against chiropractors.

The order is available here.  

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