The U.S. District Court for the Easter District of Pennsylvania recently considered whether punitive damages are available to parties who seek recovery under the Motor Vehicle Financial Responsibility Law (“MVFRL”), which provides No-fault benefits to injured parties in Pennsylvania.

The MVFRL provides that if an insurer denies a claim for medical expenses but a court later determines that such expenses were “medically necessary” and should have been paid by the insurer, the insurer must pay the expenses as well as a 12% interest payment, attorney’s fees and the cost of the challenge. Furthermore, if the conduct of the insurer is deemed “wanton” then the insurer will be subject to treble damages as well.

In Yang v. State Farm Mutual Automobile Insurance Company, et al., plaintiff claimed that in addition to compensatory damages, she was also entitled to punitive damages because the insurer’s wrongful conduct caused her to incur costs and may have adversely affected her credit.

The punitive damage claim was brought pursuant to Pennsylvania’s bad faith insurance statute, which provides for an award of 3% interest, punitive damages, and attorney’s fees where there is a finding of bad faith.  The Court, however, found that plaintiff’s bad faith claims were preempted by the specific provisions of the MVFRL, because the statute provides for its own penalties for improper conduct that do not include punitive damages.  Therefore, plaintiff’s punitive damage claims were dismissed.

Thanks to Thalia Staikos for her contribution to this post.  If you would like more information, please write to Mike Bono.