Case Title: State Farm v. Spine Care Delaware

Citation: 

Docket Number: 

State: delaware

Court: Delaware Supreme Court

Date: 2020-09-09T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
STATE FARM MUTUAL   
 
§ 
AUTOMOBILE INSURANCE 
 
§ 
COMPANY and STATE FARM  
§ 
FIRE AND CASUALTY COMPANY, § 
No.  469, 2019 
 
 
 
 
 
 
§ 
 
Defendants-Below,  
 
§ 
 
Appellants,  
 
 
§ 
Court Below:  Superior Court 
 
 
 
 
 
 
§ 
of the State of Delaware 
 
v. 
 
 
 
 
§ 
 
 
 
 
 
 
§ 
SPINE CARE DELAWARE, LLC 
§ 
 
 
 
 
 
 
§ 
C.A. No.  K18C-07-008 
 
Plaintiff-Below, 
 
 
§ 
 
Appellee. 
 
 
 
§ 
 
Submitted: 
July 29, 2020 
Decided: 
September 9, 2020 
 
Before VALIHURA, VAUGHN, and MONTGOMERY-REEVES, Justices. 
 
Upon appeal from the Superior Court.  REVERSED and REMANDED. 
 
Colin M. Shalk, Esquire (argued), Casarino Christman Shalk Ransom & Doss, P.A., 
Wilmington, Delaware.  Of Counsel:  Kyle G.A. Wallace, Esquire, Gavin Reinke, Esquire, 
Alston & Bird LLP, Atlanta, Georgia for Appellants.  
 
John S. Spadaro, Esquire (argued), John Sheehan Spadaro, LLC, Smyrna, Delaware for 
Appellee.   
 
 
 
 
 
 
 
 
 
VALIHURA, Justice:
 
1 
 
At issue in this appeal is the Superior Court’s determination that State Farm Mutual 
Auto Insurance Company and State Farm Fire and Casualty Company’s  (collectively, 
“State Farm”) payment practices with Spine Care Delaware, LLC (“SCD”) for medical 
fees incurred by its Personal Injury Protection (“PIP”) insureds in connection with covered 
multi-injection spine procedures contravene 21 Del. C. § 2118(a)(2).1  When State Farm 
receives SCD’s charges for a multi-injection procedure performed on one of its PIP 
insureds, it unilaterally applies a Multiple Payment Reduction (“MPR”) to the charges for 
injections after the first injection in a manner consistent with Medicare guidelines.  Thus, 
SCD is paid less than what it charged. 
 
Questioning the propriety of State Farm’s MPRs, SCD stipulated to certain essential 
facts with State Farm and filed a declaratory judgment action in Superior Court.  SCD 
alleged that State Farm’s application of its MPRs is inconsistent with section 2118(a)(2)’s 
requirement of reasonable compensation for covered medical expenses, and sought a 
declaration that State Farm must pay SCD any reasonable amount charged for PIP-related 
medical expenses, without applying MPRs.  Both parties then moved for summary 
judgment.  The court, in its October 29, 2019 opinion and order (the “Opinion”),2 held that 
State Farm failed to show that the MPR reductions correlate to reasonable charges for the 
multiple-injection treatments, and thus contravened  section 2118(a)(2).  Accordingly, the 
                                              
1 Although there are two State Farm entities in this appeal, we refer to them here as one, as their 
distinction is inconsequential for purposes of this opinion. 
2 Spine Care Delaware, LLC v. State Farm Mutual Auto. Ins. Co., 2019 WL 5581441 (Del. Super. 
Oct. 29, 2019) [hereinafter Opinion]. 
 
2 
Superior Court granted declaratory relief to SCD, stating that State Farm must pay SCD 
for “any reasonable amount charged by [SCD] for covered, PIP-related medical expenses,” 
and that “State Farm’s practice of applying Medicare-prescribed MPRs to reduce [SCD]’s 
bills for bilateral and multilevel procedures violates 21 Del. C. § 2118(a)(2).”3 
 
State Farm appeals the Superior Court’s determination.  State Farm contends that 
the court incorrectly placed the burden of proof on State Farm to demonstrate that its 
application of MPRs is reasonable, and that SCD failed to meet its burden of demonstrating 
that State Farm’s application of MPRs is a failure to pay reasonable and necessary expenses 
under the statute.  Alternatively, State Farm argues that even if it had the burden of proof, 
it satisfied that burden.  SCD counters that the Superior Court appropriately addressed the 
issue that the parties had “teed up,” and that State Farm failed to demonstrate that its 
application of MPRs is permissible under the statute. 
 
For the reasons more fully explained below, we agree with State Farm that the court 
erred in assigning State Farm the burden of proof.  We therefore REVERSE and REMAND 
the Superior Court’s decision for proceedings consistent with this opinion. 
I. 
Factual and Procedural Background 
 
The essential facts in this case are undisputed and, for the most part, stipulated 
between the parties.4 
                                              
3 Id. at *5. 
4 See App. to Answering Br. at B1–B3 (Stipulation). 
 
3 
 
Plaintiff-Appellee SCD is an Ambulatory Surgery Center (“ASC”) with its principal 
place of business in Newark, Delaware.  As part of its practice, SCD performs minimally 
invasive spinal injections on patients, including those injured in automobile accidents.  
Defendant-Appellant State Farm Fire and Casualty Company is a wholly-owned subsidiary 
of Defendant-Appellant State Farm.  State Farm sells automobile insurance to 
Delawareans, including PIP coverage.5   
 
SCD’s patients include insureds, covered under State Farm’s PIP coverage, who 
undergo bilateral and multilevel spinal injection procedures.  These procedures require 
injections on two sides of the spine or on multiple vertebral levels, respectively.  Though 
multiple injections are administered in these procedures, some tasks are performed only 
once in the operative session.  Such tasks include the preoperative assessment process, 
intravenous access on the patient, administration of intravenous antibiotics, and 
administration of preoperative medications.6  Nevertheless, SCD charges the same fee for 
each injection in accordance with its billing practice.  SCD’s facility fee is comparable to 
those of its two New Castle County ASC competitors—specifically, less than one, and 
more than the other.7   
 
To generate a bill, SCD utilizes Current Procedural Terminology (“CPT”) codes.  
The CPT codes are billing codes, copyrighted by the American Medical Association, to 
classify medical procedures.  Each CPT code corresponds to a specific medical procedure.  
                                              
5 Id. at B1 (Stipulation ¶ 4).   
6Opinion, 2019 WL 5581441, at *1. 
7 Id. 
 
4 
After a physician at SCD performs a spinal injection procedure, he or she uses the CPT 
codes to indicate which injections were performed.  The CPT codes are written on a billing 
sheet, which is sent to SCD’s billing department.  The billing department reviews the CPT 
codes on the billing sheet and generates a bill based on SCD’s prices for each type of 
injection, which it then submits to the patient’s insurer.8 
 
SCD will not always receive the billed amount.  SCD is “in-network” with some 
insurance companies, and is paid according to contractual terms.9  SCD also accepts 
Medicare and Workers’ Compensation patients, and is paid according to Medicare’s Claim 
Processing Guidelines (“Medicare Guidelines”) and the Workers’ Compensation fee 
schedule, respectively.10 
 
The Medicare Guidelines, issued by the Center for Medicare & Medicaid Services 
(“CMS”), provide that the first injection for a bilateral procedure be paid at one hundred 
percent, and the second injection at fifty percent of the first injection.11  Similarly, for a 
multilevel procedure, the guidelines instruct the first injection to be paid one hundred 
percent, and fifty percent for subsequent injections.  State Farm does not have a contractual 
agreement with SCD, nor is it affiliated with the federal government or connected to CMS.  
                                              
8 Id.   
9 App. to Answering Br. at B2 (Stipulation ¶ 13). 
10 Id.  
11 Opinion, 2019 WL 5581441, at *2. 
 
5 
However, it applies an MPR to SCD’s invoice in accordance with the Medicare 
Guidelines.12 
 
To determine whether State Farm is permitted to apply such MPRs to SCD’s billed 
amounts, the parties entered into the Stipulation which stated in part: 
10. 
It is SCD’s position that Delaware PIP law does not permit State Farm 
to apply the Medicare reductions in paying PIP claims, and that State Farm 
must reimburse SCD for 100% of any reasonable fee charged for otherwise 
covered PIP-related medical bills.  
 
. . . . 
 
12. 
It is State Farm’s position that payment of SCD’s bills in accordance 
with Medicare guidelines provides “compensation to injured persons for 
reasonable and necessary expenses” in a manner consistent with the 
requirements of 21 Del. C. § 2118(a)(2). 
 
. . . . 
 
15. 
SCD continues to perform bilateral spinal injections and spinal 
injections at multiple vertebral levels and to bill State Farm in the manner set 
forth above.  State Farm continues to reimburse SCD in the manner set forth 
above.  Thus, there is an ongoing controversy between SCD and State Farm 
with respect to whether State Farm is entitled to the reductions described 
above.13 
 
SCD then filed suit in the Superior Court on July 11, 2018, alleging that State Farm’s 
imposition of an MPR on SCD’s charges for bilateral and multilevel spinal injection 
treatments is inconsistent with section 2118(a)(2), results in unreasonably reduced 
payments, and is therefore unlawful.  Section 2118(a)(2) states that: 
                                              
12 In some instances, State Farm paid the full invoiced amounts for second and subsequent 
injections without applying the MPR.  Opinion, 2019 WL 5581441, at *2 n.7. 
13 App. to Answering Br. at B2 (Stipulation) (emphasis added). 
 
6 
(a) 
No owner of a motor vehicle required to be registered in this State, 
other than a self-insurer pursuant to § 2904 of this title, shall operate or 
authorize any other person to operate such vehicle unless the owner has 
insurance on such motor vehicle providing the following minimum insurance 
coverage: 
 
. . . 
 
(2) a. Compensation to injured persons for reasonable and necessary 
expenses incurred within 2 years from the date of the accident for:  
 
1. Medical, hospital, dental, surgical, medicine, x-ray, ambulance, 
prosthetic services, professional nursing and funeral services. 
Compensation for funeral services, including all customary charges and 
the cost of a burial plot for 1 person, shall not exceed the sum of $5,000.  
Compensation may include expenses for any nonmedical remedial care 
and treatment rendered in accordance with a recognized religious method 
of healing.14 
 
In its complaint, SCD sought declaratory relief to the following effect: 
a. When the defendants pay SCD for covered, PIP-related medical expenses, 
they must pay any reasonable amount charged, consistent with 21 Del. C.      
§ 2118(a)(2).  
 
b. The defendants’ practice of capping such payments at the Medicare 
reimbursement rate is inconsistent with section 2118(a)(2); results in 
unreasonably reduced payments; and is therefore unlawful.15   
 
After taking discovery, both parties moved for summary judgment.16 
                                              
14 21 Del. C. § 2118(a)(2) (emphasis added).  
15 App. to Opening Br. at A24–A25 (Compl. ¶ 2). 
16 As part of the discovery process, the parties exchanged interrogatories and State Farm deposed 
Bonnie O’Connor, SCD’s Administrator, and Toni M. Elhoms, a medical billing and coding 
expert.  Although both parties’ interrogatory responses contained objections, State Farm’s 
November 15, 2018 interrogatory responses were rife with objections and were notably evasive.  
See App. to Answering Br. at B4–B9 (Objs. and Resps. to Pls.’ First Interrogs.). 
 
7 
 
In the summary judgment proceedings, despite having entered into the Stipulation, 
the parties disagreed with how the court should approach the question the parties had “teed 
up.”  SCD argued that under section 2118, State Farm is required to pay the entirety of 
SCD’s fees, so long as the fees are reasonable.17  Reasoning that State Farm’s practice was 
illegal if it could show that its fees were reasonable, SCD spent most of its efforts 
attempting to show that its rates were reasonable.  Much of the evidence proffered 
addressed what other medical professionals in the locality charge for the same services, 
because, according to SCD, that is the “chief indicium of the reasonableness of medical 
fees.”18 
                                              
17 See Id. at B323 (SCD’s Reply Br. to Mot. for Summ. J.) (“Delaware’s PIP statute, 21 Del C. 
§ 2118, requires compensation for ‘reasonable and necessary’ medical expenses.  Consistent with 
the plain meaning of the phrase ‘reasonable expenses,’ the statute thus requires PIP insurers to pay 
any reasonable amount charged—whether at the high end of the range of reasonableness, the low 
end of that range, or somewhere in between—for otherwise covered medical expenses.”); App. to 
Opening Br. at A355–A356 (Cross-Mot. for Summ. J. H’rg Tr.) (“It’s the only question—are 
[SCD]’s charges for multilevel bilateral injections reasonable?  And the question is, would paying 
that bill constitute compensation for reasonable medical expenses?  That’s a close paraphrasing of 
the statute.”); Id. at A357 (“So the statute says reasonableness is the issue.  So if the charge is 
reasonable, that ends the inquiry on this motion, as it does for all PIP-related bills setting aside 
issues of causation, other types of coverage issues.  That’s always the issue on how much the PIP 
carrier has to pay.”).  In the proceedings below, SCD began its motion for summary judgment by 
framing the issue before the court:  “This lawsuit presents the Court with a single, straightforward 
question:  Are the plaintiff’s fees reasonable?”  Id. at A270 (SCD’s Opening Br. to Mot. for Summ. 
J.).  Although SCD’s arguments in the summary judgment proceeding addressed its contention 
that its fees were reasonable, the Superior Court stated that SCD’s complaint did not seek relief on 
that basis.  Accordingly, court refocused the issue based upon the relief sought, and resolved the 
cross-motions for summary judgment on that basis.  Opinion, 2019 WL 5581441, at *4. 
18 Answering Br. at 24.  In its motion for summary judgment, SCD stated that its fees were within 
the range charged by two of its New Castle County competitors, and that all but two Delaware PIP 
insurers have routinely paid the full amount of SCD’s fees for these procedures.  App. to Opening 
Br. at A287—A289.  SCD also stated that its per-case revenues were “quite close to the nationwide 
median” based on benchmarking reports, Id. at A279, and that it has modestly increased its fees 
over the years to keep up with the consumer price index.  Id. at A280. 
 
8 
 
State Farm, on the other hand, focused largely on the propriety of its MPR 
methodology, separate and apart from the reasonableness of SCD’s charges.  In its motion 
for summary judgment, State Farm stated that the “single straightforward question” before 
the court was:  “Does Delaware’s [PIP] statute prohibit insurers like State Farm from 
applying bilateral and [MPRs] when reimbursing providers for spinal injections performed 
bilaterally or at multiple vertebral levels?”19  State Farm’s position was that, “so long as 
the amount that State Farm reimburses [SCD] is reasonable, the statutory requirements of 
Delaware’s PIP statute are satisfied, even if State Farm does not reimburse [SCD] at the 
amount that [SCD] wishes to charge.”20  In framing the issue, State Farm asserted that 
SCD’s “refusal to accept State Farm’s payments with the application of MPRs is 
unreasonable as a matter of law.”21  In the argument below, State Farm further stated that, 
“the real issue is whether the Delaware PIP statute can be read to prohibit State Farm from 
applying MPRs just as many other payors do.  Put simply, this is not about the 
reasonableness of [SCD]’s rates.  It’s about the reasonableness of State Farm’s application 
of MPRs.”22  Thus, according to State Farm, SCD “cannot simply declare that its charges 
                                              
19 App. to Opening Br. at A110 (State Farm’s Mot. for Summ. J.).  
20 Id. at A121. 
21 Id. at A122. 
22 Id. at A309 (State Farm’s Resp. to SCD’s Mot. For Summ. J.); see Opinion, 2019 WL 5581441, 
at *4 (“State Farm posits that the question before this Court is ‘the reasonableness of State Farm's 
application of MPRs.’”).  State Farm’s counsel explained to the court in the proceedings below: 
THE COURT:  But why isn’t the issue the reasonableness of the fees rather than 
the reasonableness of what State Farm pays?  
MR. WALLACE:  Because the statute speaks to the reasonableness.  It speaks to 
State Farm’s obligation.  It speaks to State Farm's obligation.  And the only law that 
 
9 
are reasonable, but must show that State Farm’s application of MPRs is unreasonable,” and 
“[SCD] plainly cannot meet its burden as a matter of law as the undisputed facts amply 
demonstrate that State Farm’s application of MPRs is well-reasoned and is not arbitrary.”23 
 
The Superior Court rendered its decision on October 29, 2019, granting SCD’s 
motion for summary judgment and denying State Farm’s motion.  In reaching its decision, 
the court first clarified the issue at hand.  It stated that though SCD attempted to prove the 
reasonableness of its fees, the court was not tasked with resolving that particular issue, as 
SCD did not request in its complaint a declaration that its fees were reasonable.  In a 
footnote (footnote 15), the court expressly stated that, “the record would not support a 
determination that [SCD]’s fees for bilateral and multilevel procedures are reasonable as a 
matter of law,” as a number of factors guide the reasonableness determination, and SCD 
had only addressed one of those factors—the ordinary and reasonable charges of similarly 
situated professionals.24   
 
The court also disagreed with State Farm’s framing of the issue.  According to the 
court, the question before it was not, as State Farm contended, the reasonableness of State 
Farm’s application of MPRs, but rather, was “whether State Farm's application of 
                                              
we have in front of us to help us decide this case is the 2118(a) provision, and it 
speaks to what the obligations of the insurance company are towards the insured.  
And their obligation is to compensate the insured for reasonable and necessary 
expenses.  And that’s why, at its core, the true question is whether State Farm is 
doing that and if somehow applying the reductions means that State Farm is not 
doing that. 
App. to Opening Br. at A405 (Cross-Mot. for Summ. J. H’rg Tr.).  
23 App. to Opening Br. at A134 (State Farm’s Mot. for Summ. J.). 
24 Opinion, 2019 WL 5581441, at *2 n.15. 
 
10 
Medicare-prescribed MPRs represents an appropriate method to arrive at a reasonable fee 
for the subject services.”25 
 
To guide its reasonableness analysis, the court reviewed the Superior Court cases 
Anticaglia v. Lynch26 and Watson v. Metropolitan Property and Casualty Insurance Co.27  
Applying the reasonableness factors therein, the court held that State Farm had “failed to 
present evidence demonstrating that its MPRs correlate with reasonable charges for 
bilateral and multilevel injections.”28  Specifically, it found that State Farm had failed to 
retain an expert to explain how a fifty percent reduction for injections after the first 
injection correlated directly to reduced costs for SCD and reduced efforts for medical 
providers in SCD’s facility, or how the MPR reductions conformed to the Anticaglia and 
Watson factors.  The court discounted State Farm’s contention that MPRs are commonly 
used in the industry, stating that there is “no demonstrated correlation between the 
Medicare Guidelines and the reasonableness of medical fees under Delaware law.”29  The 
court also rejected State Farm’s argument that the MPRs were reasonable because it 
actually pays “substantially more” for the procedures than other private insurers like Aetna 
and Blue Cross Blue Shield, “because these private health insurers have contractual 
                                              
25 Id. at *4. 
26 1992 WL 138983 (Del. Super. Mar. 16, 1992). 
27 2003 WL 22290906 (Del. Super. Oct. 2, 2003). 
28 Opinion, 2019 WL 5581441, at *4. 
29 Id. 
 
11 
relationships with [SCD] that require acceptance of reduced payments.”30  Thus, it 
reasoned, “[t]he fact that State Farm, even with MPRs, is paying more than Medicare or a 
private health insurer is irrelevant when reduced payments from those payors are 
determined by federal law or private insurance contracts.”31  As a result, the court denied 
State Farm’s summary judgment motion, granted SCD’s motion, and declared that “(1) 
State Farm must pay [SCD] for any reasonable amount charged by [SCD] for covered, PIP-
related medical expenses; and (2) State Farm’s practice of applying Medicare-prescribed 
MPRs to reduce [SCD]’s bills for bilateral and multilevel procedures violates 21 Del. C. 
§ 2118(a)(2).”32 
 
State Farm appealed, arguing that the Superior Court incorrectly placed the burden 
of proof on State Farm.  State Farm contends that the burden should have been on SCD to 
show that State Farm’s MPR practice is inconsistent with State Farm’s obligation to pay 
reasonable and necessary expenses, and not on State Farm to show that its MPR practice 
is consistent with the obligation.  Further, State Farm claims that under the proper framing, 
SCD failed to carry its burden.  Moreover, even if State Farm had the burden to show that 
the MPR practice is consistent with its obligation to pay reasonable and necessary 
expenses, it argues that it did carry that burden and the Superior Court should have granted 
summary judgment in its favor.33 
                                              
30 Id. 
31 Id.   
32 Id. at *5. 
33 State Farm also raises an ancillary argument suggesting that there may have been an issue of 
material fact that precluded the entry of summary judgment.  Opening Br. at A27.  In oral argument 
 
12 
 
The thrust of SCD’s response is that the Superior Court correctly placed the burden 
of proof on State Farm, and State Farm failed to meet that burden.  Specifically, SCD 
responds that:  (1) the court resolved the issue as framed by the parties in the Stipulation, 
and, thus, there was no error in assigning the burden of proof; (2) there was no burden 
imposed on State Farm that did not already exist under settled law; (3) the court correctly 
rejected State Farm’s arguments because State Farm did not attempt to correlate its 
reductions to any particular duplicative service; (4) there are independent, alternative bases 
to affirm; (5) the Court should not consider State Farm’s comparisons with private insurers 
and Medicare; (6) State Farm’s discussion about whether other ASCs acquiesce in 
Medicare reductions does not support its argument; (7) State Farm cannot claim that there 
may be a question of fact; and (8) PIP limits should not be conserved, as State Farm argues, 
in derogation of the law or of the insureds’ interests.  SCD did not cross appeal the Superior 
Court’s finding in footnote fifteen that it had not established the reasonableness of its fees.   
 
 
 
                                              
below, the trial court specifically asked the parties whether they thought there were any issues of 
material fact and whether the cross-motions for summary judgment were being submitted for 
decision on the merits based on the record in accordance with Superior Court Rule 56(h).  See 
App. to Opening Br. at A349–A351 (Cross-Mot. for Sum. J. Hr’g Tr.).  Counsel for SCD stated 
that there were no issues of material fact.  Id. at A350.  State Farm’s counsel concurred, but 
qualified his answer by saying that if the court cannot find summary judgment in favor of State 
Farm, “it should at least find that it’s a fact question.”  Id. at A351–A353.  The court then told 
State Farm that if it believed there was an issue of material fact, State Farm was obligated to bring 
it to the court’s attention.  Id.  State Farm, however, did not raise any factual issues with the trial 
court. 
 
13 
II. 
Standard of Review 
 
This Court reviews the Superior Court’s decision on a motion for summary 
judgment de novo.34  The proper allocation of the burden of proof is a question of law that 
we review de novo.35 
III. 
Analysis 
 
State Farm’s principal argument on appeal is that the Superior Court incorrectly 
reversed the burden of proof.  We agree that the burden to prove its case rested with the 
plaintiff SCD, and not with the defendant State Farm.  We acknowledge that the parties 
entered into the Stipulation, which helped to narrow and frame the issues for the trial court.  
In paragraph fifteen of the Stipulation, the parties state, “[t]hus, there is an ongoing 
controversy between SCD and State Farm with respect to whether State Farm is entitled to 
the reductions described above.”36  The burden, however, is on SCD to show that State 
Farm is not entitled to take the Medicare guidelines-based MPRs.  And to answer that 
question, SCD first has to demonstrate that its charges for the second and subsequent 
injections are reasonable.  If it is determined that they are reasonable, then, under the 
statute, State Farm must pay them without reduction. 
 
The trial court’s statement that, “the record would not support a determination that 
[SCD]’s fees . . . are reasonable as a matter of law,” was based upon its application of the 
                                              
34 GMG Capital Inv., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012). 
35 Lynch v. City Rehoboth Beach, 894 A.2d 407, 2006 WL 568764, at *1 (Del. Mar. 7, 2006) 
(Order).  
36 App. to Answering Br. at B2 (Stipulation ¶ 15). 
 
14 
test articulated in two Superior Court cases, Anticaglia and Watson, and on its observation 
that SCD only offered evidence pertaining to the first factor in this test.  However, the test, 
as explained below, is designed to address specific reasonableness challenges in individual 
cases.  Given the manner in which the parties have framed the case, the parties are clearly 
seeking a determination on the application of State Farm’s MPRs to SCD’s charges as a 
general practice.37  Because the two cases address reasonableness challenges in an 
individualized context, certain factors are less relevant here, if at all.  As SCD argued, the 
first factor, which SCD did address, is more pertinent in the context where a billing 
methodology is at issue, as opposed to individualized, case-specific challenges.  Thus, it 
logically should carry more weight.  Because SCD’s evidence goes far in establishing the 
reasonableness of its fees, and because the court expressly found that State Farm’s MPRs 
bore no correlation to the fees, we could be tempted to affirm based upon the record before 
us.  However, we remand because SCD should have had the burden of proof as to the 
reasonableness of its fees, and because, as explained below, we think that the unique 
circumstances of this declaratory judgment action call for a more flexible approach to the 
reasonableness determination, as opposed to a rigid application of all factors set forth in 
Anticaglia and Watson.   
 
 
                                              
37 As State Farm stated in its Opening Brief, “the issue in this case is far different from Anticaglia 
and Watson,” since, “this case does not involve the reasonableness of a specific bill to a specific 
provider . . . .”  Opening Br. at 22.  Rather, “[i]t involves State Farm’s application of an industry-
standard payment methodology (MPRs) in certain circumstances . . . .”  Id. 
 
15 
A. The Superior Court Erred in Placing the Burden on State Farm 
 
The parties do not dispute that the Superior Court placed the burden on State Farm.  
Indeed, the court states that, “State Farm has failed to present evidence demonstrating that 
its MPRs correlate with reasonable charges for bilateral and multilevel injections.”38  The 
trial court also faulted State Farm for failing to retain an expert with respect to showing 
how the MPR reductions correlate directly to reduced costs and efforts, or how the MPR-
modified bills conform to the reasonableness factors.39  The court further stated that “State 
Farm has made no showing that its application of MPRs results in a fee that conforms to 
the Anticaglia and Watson standards—and conversely, that fees unreduced by those MPRs 
are per se unreasonable.”40  The court appeared to place the burden on State Farm because 
“Delaware provides a system in which the medical provider renders the initial bill for 
services provided, and the insurer then has the right to investigate the reasonableness of 
the charges.”41  The Superior Court cited Murphy v. United Services Auto Association42 for 
this proposition, and quotes the following statement from Murphy in a footnote:  “Delaware 
has consistently permitted insurers to investigate the reasonableness of expenses.”43   
                                              
38 Opinion, 2019 WL 5581441, at *4. 
39 Id. 
40 Id. 
41 Id. at *3. 
42 2005 WL 1249374, at *2 (Del. Super. May 10, 2005). 
43 Opinion, 2019 WL 5581441, at *3 n.28 (quoting Murphy, 2005 WL 1249374, at *2). 
 
16 
 
The plaintiff typically has the burden to prove its position.44  The issue, then, is 
whether the typical litigation burden is different in this case.  We hold that it is not.  Murphy 
does not suggest that this burden should change in this PIP context.  Rather, it reinforces 
State Farm’s contention that SCD has the burden of proof, as it states that, “[a]s a matter 
of law, the burden lies on the Plaintiff, not on the insurer, to show that the expenses were 
‘reasonable and necessary.’”45 
 
On appeal, SCD contends that the Superior Court was correct in placing the burden 
on State Farm because that is how the parties “teed up” the issue in the Stipulation.  
According to SCD, “[b]y agreement and design, the case has always been about the 
propriety of State Farm’s reductions.”46  However, the Stipulation does not alter the 
allocation of the burden of proof.  The question at hand, the “propriety of the reductions,” 
does not require State Farm to carry the burden of proof.  The issue is more properly 
resolved by SCD being required to prove that State Farm is not entitled to apply its MPRs 
                                              
44 See, e.g., Ramsey v. State Farm Mutual Ins. Co., 869 A.2d 327, 2005 WL 528846, at *1 (Del. 
Feb. 23, 2005) (Order); Gray v. Allstate Ins. Co., 668 A.2d 778, 778–79 (Del. Super. 1995) (the 
burden was on the cyclist-plaintiff to show he was entitled to recover PIP benefits for medical 
expenses under driver’s policy under 21 Del. C. 2118(a)(2) when plaintiff “solo crashed” and was 
the sole proximate cause of the accident and his own injuries when he sought to avoid a collision 
with the motor vehicle); Williams Field Serv’s Grp., LLC v. Caiman Energy II, LLC, 2019 WL 
4668350, at *15 (Del. Ch. Sept. 25, 2019) (“The party seeking a declaratory judgment assumes the 
burden of proving its position.”); San Antonio Fire & Police Pension Fund v. Amylin Pharms., 
Inc., 983 A.2d 304, 316 n.38 (Del. Ch. 2009), aff’d, 981 A.2d 1173 (Del. 2009). 
45 Murphy, 2005 WL 1249374, at *2.  Moreover, Murphy notes that, “[i]n fact, an insured who 
wants to challenge an insurer’s denial of benefits because of the insurer’s belief that they were not 
reasonable and necessary must bring a claim of bad faith denial of benefits against the insurer,” id.  
at *2 n.6, and “[i]n order to establish bad faith, a plaintiff ‘must show that the insurer’s refusal to 
honor [the claim] was clearly without any reasonable justification.’”  Id. (quoting Albanese v. 
Allstate Ins. Co., 1998 WL 437370, at *2 (Del. Super. July 7, 1998)). 
46 Answering Br. at 3. 
 
17 
because its fees are reasonable.  Moreover, State Farm did not concede the burden issue in 
the proceedings below, as it repeatedly asserted that SCD had the burden of proof.47 
 
SCD further defends the Superior Court ruling by contending that, “the Superior 
Court imposed no burden on State Farm that did not already exist under settled law.”48  For 
this proposition, SCD points to 21 Del. C. § 2118B(c) and this Court’s decision in Tackett 
v. State Farm Fire and Casualty Insurance Co.49   
 
We first note that SCD did not make this particular argument in the proceedings 
below and thus, the argument is waived.  Moreover, the argument evolved between SCD’s 
submission of its Answering Brief and oral argument on appeal.50  Even if these new 
arguments were not waived, they are not persuasive.   
                                              
47 See App. to Answering Br. at B247–B248 (State Farm’s Mot. for Summ. J.) (“The plaintiff bears 
the burden of establishing that the statutory prerequisites of entitlement to payment are satisfied.”); 
App. to Opening Br. at A401–A402 (Cross-Mot. for Summ. J. H’rg Tr.) (“And I don’t want to 
suggest that it’s our burden to prove up this case, so I’m not saying that.  It’s still their burden to 
show the unreasonableness of what State Farm is doing.”). 
48 Answering Br. at 19. 
49 653 A.2d 254 (Del. 1995). 
50 Counsel for SCD stated in oral argument on appeal: 
MR. SPADARO:  That’s the prima facie case, that the medical necessity element 
of the statute is met, and that the reasonableness of the dollar amount element of 
the statute is met.  The HCFA form which is essentially the bill, and the supporting 
medical records.  Now what does section 2118B say, 2118B(c) says, it says that 
once State Farm gets that package, which makes the prima facie case on 
reasonableness, it has 30 days to either pay it in full, to contest the supporting 
documentation and say we can’t reach a decision because the medical records don’t 
enlighten us, to deny it entirely, for example for lack of causation, or to deny it in 
part, in other words, to make partial payments.  And 2118B(c) says that within that 
30 day period if they deny in part they must explain in writing why they denied in 
part.  State Farm is trying to erect some sort of cosmic ethereal burden that providers 
can never meet, unless they actually do provide sworn affidavits with all their bills, 
which would be a catastrophic result for the medical community generally and has 
no basis in law.  The prima facie case, meeting the burden, is, here is the bill and 
 
18 
 
SCD argues that section 2118B(c)’s requirement that the insurer provide a written 
explanation for denying all or part of a claim is consistent with the burden placed on State 
Farm here to show that its MPR practice is consistent with the statute.51  Citing Tackett, a 
case concerning an insurer’s alleged bad faith delay in paying underinsured motorist 
benefits, SCD argues that, “[u]nder settled law, when an insurer pays a reduced amount on 
a covered bill, it must have a reasonable, articulable basis for the reduction.”52  However, 
neither side has argued that the present case challenges an insurer’s prompt payment or a 
prompt denial of coverage.  Further, neither the statute nor the holding in Tackett supports 
SCD’s position.  SCD ignores subsection (d) of section 2118(B), which states that if an 
insurer fails to comply with section 2118(c), “the claimant may recover the amount due 
                                              
the supporting documentation.  Now we are dealing with bills that were all paid, 
though not in full.  So coverage for these bills has been acknowledged in every 
single instance.  The only dispute is their partial payment, which is a partial denial, 
and under section 2118B(c), they have the burden of explaining the justification for 
that partial payment.  And that’s why the parties stipulated that the issue to be 
brought before the court without the benefit of a jury on cross motions for summary 
judgment would be the propriety of their reductions.  Not whether the bills were 
covered in the first instance. 
Oral 
Argument 
Video, 
at 
19:36–21:42, 
https://livestream.com/accounts/5969852/events/9188198/videos/209219166. 
51 Section 2118B(c) reads: 
When an insurer receives a written request for payment of a claim for benefits 
pursuant to § 2118(a)(2) of this title, the insurer shall promptly process the claim 
and shall, no later than 30 days following the insurer’s receipt of said written 
request for first-party insurance benefits and documentation that the treatment or 
expense is compensable pursuant to § 2118(a) of this title, make payment of the 
amount of claimed benefits that are due to the claimant or, if said claim is wholly 
or partly denied, provide the claimant with a written explanation of the reasons for 
such denial. . . .   
21 Del. C. § 2118B(c). 
52 Answering Br. at 19 (citing Tackett, 653 A.2d at 264).  
 
19 
through a civil action,” and “[t]he burden of proving that the insurer acted in bad faith shall 
be on the claimant.”53  Tackett also states that, “[a] lack of good faith, or the presence of 
bad faith, is actionable where the insured can show that the insurer’s denial of benefits was 
‘clearly without any reasonable justification.’”54  Thus, even in the context of bad faith, the 
insured bears the burden of proof.55 
                                              
53 21 Del. C. § 2118B(d) (emphasis added). 
54 Tackett, 653 A.2d at 264 (emphasis added). 
55 We observe that there is some debate on the burden of proof in declaratory judgment actions.  
See Rhone-Poulenc v. GAF Chems., 1993 WL 125512, at *3 (Del. Ch. Apr. 8, 1993) (“There is a 
split of authority as to whether a plaintiff seeking a declaratory judgment bears the burden of 
persuasion or whether the burden of persuasion rests with the party who would have borne that 
burden had it been brought as a conventional action, i.e., the declaratory defendant.”  (citing 6A 
Moore’s Federal Practice § 57.31 and Wright, Miller & Kane, Federal Practice and Procedure: 
Civil 2d, § 2770)); Am. Legacy Found. v. Lorillard Tobacco Co., 886 A.2d 1, 18 (Del. Ch. 2005) 
(citing Rhone-Poulenc, 1993 WL 125512, at *3), aff’d 903 A.2d 728 (Del. 2006).  In Rhone-
Poulenc, the Court of Chancery observed that, “[t]he few declaratory judgment cases that have 
imposed the burden of persuasion on a defendant are cases involving questions of insurance 
coverage or patent infringement.”  1993 WL 125512, at *3.  Federal Practice and Procedure 
explains:   
The question arises when the parties are reversed in the declaratory action, as when 
an insurance company seeks a declaration that an injury is not covered by the 
policy.  If there were no declaratory-judgment actions, the issue would come up 
when the insured or an injured person sued on the policy.  In that suit the person 
seeking to recover on the policy would have the burden of proving compliance with 
the policy conditions.  Thus, several courts have held that the burden should not be 
shifted merely because the insurer institutes the action as one for a declaratory 
judgment. 
10B Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure 
§ 2770 (4d ed.).  The Rhone-Poulenc court concluded that, “[t]he better view is that a plaintiff in 
a declaratory judgment action should always have the burden going forward.”  Rhone-Poulenc, 
1993 WL 125512, at *3.  We agree that this is the better view.  Yet, the court in Rhone-Poulenc 
acknowledged that it would not be possible to “establish a hard and fast rule as to who has the 
burden of persuasion as to a particular issue during trial because the burden may shift” in different 
contexts, such as if the issue is whether a breach of fiduciary duty had occurred.  Id.  Although this 
is an interesting debate, here there is no role-reversal or burden shifting.  SCD, in the shoes of the 
insured, is making a claim against defendant-insurer State Farm for what is functionally a partial 
 
20 
B. On Remand The Court Must Revisit Whether SCD’s Charges Are Reasonable  
 
 
The court analyzed State Farm’s MPRs without regard to the reasonableness of 
SCD’s fees, primarily because SCD did not seek a determination on the reasonableness of 
its fees in its complaint.  Further, the court stated in footnote fifteen that “the record would 
not support a determination that [SCD]’s fees for bilateral and multilevel procedures are 
reasonable as a matter of law,” because SCD only addressed one reasonableness factor, 
namely, “the ordinary and reasonable charges of similarly situated professionals.”56   
 
Although SCD did not cross appeal the Superior Court’s determination that the 
record “would not support a determination” that its fees were reasonable, we have held that 
“an appellee who does not file a cross-appeal, however, may defend the judgment with any 
argument that is supported by the record, even if it questions the trial court’s reasoning or 
relies upon a precedent overlooked or disregarded by the trial court.”57  SCD did argue on 
appeal that the Superior Court’s decision is supported by independent, alternative bases, 
including that “its fees for bilateral and multilevel procedures are comparable to those of 
its competitors . . . .”58  Because we are reversing and remanding on the burden of proof 
error, we address the reasonableness standard to be applied.   
                                              
denial of the claim.  This is consistent with the natural flow of PIP litigation, where an insured will 
make a claim against the insurer for failure to pay amounts due under the policy. 
56 Opinion, 2019 WL 5581441, at *2 n.15. 
57 Haley v. Town of Dewey Beach, 672 A.2d 55, 58–59 (Del. 1996); Winshall v. Viacom Int’l, Inc., 
76 A.3d 808, 815 n.13 (Del. 2013); In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 67 
(Del. 1995) (where Santa Fe was not challenging the judgment below or seeking to expand its legal 
rights, but instead, was offering an alternative ground for affirmance that was fairly presented 
below, no cross-appeal was required).   
58 Answering Br. at 35.   
 
21 
 
We find the court’s determinations in footnote fifteen to be erroneous for two 
reasons.  First, based on the Stipulation and Section 2118(a)(2), the reasonableness of 
SCD’s fees was central to the case.  The parties were not contesting State Farm’s MPRs in 
the abstract.  Rather, according to the Stipulation, the live, “ongoing controversy between 
SCD and State Farm” was with respect to whether State Farm could apply its MPRs to 
SCD’s fees.59  Under section 2118(a)(2), a PIP insurer must pay “reasonable and necessary 
expenses incurred.”  In other words, under the statute, State Farm is obligated to pay SCD’s 
fees so long as they are reasonable. 60  Accordingly, if the court finds that SCD’s fees are 
reasonable, State Farm cannot apply its MPRs to them.  Thus, the court must address on 
remand whether SCD’s fees for bilateral and multilevel injection procedures are 
reasonable. 
 
Second, the court’s reason for not determining that SCD’s fees were reasonable is 
problematic.  The court was guided by the reasonableness factors from Anticaglia and 
Watson: 
[T]he ordinary and reasonable charges usually made by members of the same 
profession of similar standing for services such as those rendered here, the 
nature and difficulty of the case, the time devoted to it, the amount of services 
rendered, the number of visits, the inconvenience and expense to which the 
physician was subjected, and the size of the city or town where the services 
                                              
59 App. to Answering Br. at B2 (Stipulation ¶ 15). 
60 In its Opening Brief on appeal and in the proceedings below, State Farm contested this 
interpretation of section 2118(a)(2).  According to State Farm, “the words ‘reasonable and 
necessary’ qualify the scope of benefits the insurance company must pay, and not the maximum 
amount that a provider is authorized to charge.”  Opening Br. at 36 (quoting Murphy, 2005 WL 
1249374, at *2) (internal quotation mark omitted).  As State Farm argued in its briefing to this 
Court, “so long as the amount that State Farm pays is reasonable, [SCD] is not entitled to a larger 
fee, even if that larger fee is also reasonable.”  Opening Br. at 36–37.  At oral argument, however, 
State Farm appeared to retreat from this position.  See Oral Argument Video, at 9:48–14:40.   
 
22 
were rendered.  The Court also should consider the physician’s education and 
training, experience, skill or capacity, professional standing or reputation, 
and the extent of the physician’s business or practice.  Finally, the Court 
should consider the ability of the defendant to pay.61  
 
The court stated that SCD had only addressed one factor—the ordinary and reasonable 
charges of similarly situated professionals—and this was not enough for the court to 
determine that the fees were reasonable. 
 
However, the Anticaglia and Watson factors address challenges to individual 
medical bills, whereas here, we are reviewing a discounting method being generally 
applied to a provider’s charges.  Indeed, Watson itself dealt with an insured’s challenge to 
the insurer’s denial of her individual medical expenses incurred.62  The factor most 
germane to this case is the ordinary and reasonable charges usually made by members of 
the same profession of similar standing.  In SCD’s words, this is the “chief indicium of the 
reasonableness of medical fees.”63  With respect to this factor, SCD presented facts that 
show that their rates are comparable to their two New Castle County ASC competitors.  
Thus, to the extent the court, on remand, refers to the Anticaglia and Watson factors in 
analyzing the reasonableness issue, we agree with SCD that the first factor is the most 
relevant.   
 
 
                                              
61 Opinion, 2019 WL 5581441, at *3 (quoting Anticaglia, 1992 WL 138983, at *6); see Watson, 
2003 WL 22290906, at *5–6 (applying the Anticaglia factors in the PIP context).  
62 Watson, 2003 WL 22290906, at *1.  
63 Answering Br. at 24. 
 
23 
C. Evidence of Payments Made by Other Third-Party Payors 
 
In order to be as helpful as possible, we also address State Farm’s disagreement with 
how the trial court treated evidence of payments made by other third-party payors.  In 
support of its motion for summary judgment, State Farm argued that it paid SCD 
substantially more for the bilateral and multilevel procedures than certain other insurance 
companies, including Blue Cross Blue Shield and Aetna.  The court discounted this 
evidence, however, because the insurers were in-network with SCD, and, thus, were paying 
according to contractual arrangements. 
 
We agree with the trial court’s conclusion that “the fact that Aetna and Blue Cross 
reduce billed amounts pursuant to contract, and then apply MPRs to those reduced rates, 
does not establish that it is appropriate for State Farm to employ MPRs in the PIP context, 
because these private health insurers have contractual relationships with [SCD] that require 
acceptance of reduced payments.”64  The amount that a contracted insurer pays is not 
particularly relevant for determining the fees a non-contracted insurer should pay because 
there are factors involved beyond the reasonableness of fees.65  There is, for example, 
consideration in the form of patient volume in exchange for discounted fees, which SCD 
                                              
64 Opinion, 2019 WL 5581441, at *4. 
65 See Gen. Motors Corp. v. English, 1991 WL 89812, at *2 (Del. Super. May 10, 1991) (stating 
in response to employer’s effort to rebut the reasonableness of fees with amounts paid by contract 
carriers, that the employer “does not have a contractual relationship with Wilmington Orthopaedic 
and is not entitled to the status or benefits of a contract to which it is not a party”), aff’d, 608 A.2d 
727 (Del. 1992) (Table). 
 
24 
noted in the proceedings below.66  Thus, the trial court aptly observed that situations 
involving Medicare or insurers who have contractual relationships with SCD are 
distinguishable.  With respect to other PIP insurers SCD supported its position by 
submitting evidence that nearly all other PIP insurers (other than State Farm and USAA) 
fully pay SCD’s fees for bilateral and multilateral injections.67  As to these facts, and any 
other evidence the trial court deems relevant, consistent with the guidance herein, we leave 
to the trial court the weight to be given to such evidence on remand.    
IV. 
Conclusion 
 
Accordingly, for the reasons stated above, we REVERSE the Superior Court’s 
ruling and REMAND for further proceedings consistent with this opinion. 
                                              
66 App. to Opening Br. at A340 (SCD’s Reply Br. to Mot. for Summ. J.) (“The designee thus made 
clear that, where Blue Cross is concerned, viewing a single bill in isolation offers a distorted 
picture, because SCD's willingness to contract for lower payments from Blue Cross is a function 
of valuable consideration—consideration in the form of the high volume of patients that Blue 
Cross brings to SCD’s door (all of which made sense to the examining attorney”).). 
67 See App. to Answering Br. at B221–B222 (O’Connor Aff. ¶ 7).