Opinion ID: 834924
Heading Depth: 2
Heading Rank: 1

Heading: Whether Farmers was precluded from rebutting the reasonableness of plaintiffs' medical expenses with individualized evidence

Text: On review to this court, the first issue that Farmers raises is whether it was permitted to present a full defense to plaintiffs' claims. Specifically, Farmers asserts that the trial court did not permit Farmers to present evidence to the jury that would have rebutted the reasonableness of the medical charges submitted by individual class members for PIP reimbursement and, conversely, that would have established the reasonableness of Farmers's investigation of those individual PIP claims. Before turning more directly to that issue, it is helpful to describe, as context for our discussion, the relevant core theories on which the parties proceeded at trial. A key component of all of plaintiffs' claimsincluding the fraud claimwas the allegation that Farmers, by using their percentile-reduction claims handling process, had failed to pay the class members' reasonable medical charges. At trial, the parties took different positions on plaintiffs' burden to establish the reasonableness of the class members' medical charges. Farmers's position was that plaintiffs were required to present individualized proof as to the reasonableness of each class member's medical charges. Plaintiffs' position was that, under the statutory scheme governing PIP benefits, the amounts charged by medical providers, as presented by their bills, were presumed reasonable. Thus, according to plaintiffs, once class members produced their medical bills, the burden shifted to Farmers to disprove the reasonableness of the billed medical charges. The trial court resolved that central dispute through summary judgment proceedings, concluding that plaintiffs were legally entitled to a presumption of reasonableness, based on the amounts that their medical providers charged. Consequently, in the trial court's view, once plaintiffs produced evidence of the medical bills for the individual class members, the burden shifted to Farmers to rebut the presumption that the amounts charged were reasonable. After the trial court's summary judgment ruling, Farmers continued to preserve its position on that question, as reflected in certain procedural motions that Farmers raised. For example, at the end of plaintiffs' case-in-chief, Farmers renewed its position by moving to decertify the class on that theory, among others, that plaintiffs' claims (including the fraud claim) were not conducive to class treatment, because plaintiffs were required to present individualized proof of the reasonableness of their medical charges. Likewise, Farmers moved for a directed verdict at that point, urging, inter alia, that plaintiffs had the burden to prove the reasonableness of the individual medical charges submitted for PIP reimbursement and that they had failed to sustain that burden. At each juncture, the trial court adhered to its ruling that plaintiffs' evidence of their medical bills presumptively established the reasonableness of the charges, and that the burden then shifted to Farmers to rebut reasonableness. On appeal to the Court of Appeals, Farmers assigned error to the trial court's rulings on that issue, arguing, among other points, that the reasonableness of the class members' medical expenses required individualized proof and should not be presumed based on their medical bills. Plaintiffs argued the converse. By the time the Court of Appeals issued its decision, this court had decided Ivanov v. Farmers Ins. Co., 344 Or. 421, 185 P.3d 417 (2008). Relying on Ivanov, the Court of Appeals rejected Farmers's position: In our view, Ivanov defeats Farmers' contention that plaintiffs failed to offer sufficient proof of the reasonableness of their medical expenses. In this case, as in Ivanov, the `gravamen of plaintiffs' complaint was that Farmers' review methodology was an impermissible one.' Id. at 430 [185 P.3d 417]. Thus, plaintiffs were not required to offer any additional evidence that, at the time the bills were submitted, they were reasonable; the expenses were presumptively reasonable at that point. Instead, Farmers had the burden of establishing that `the procedures it employed to deny plaintiffs' claims satisfied its statutory and common-law duties.' Id.  Strawn, 228 Or.App. at 465, 209 P.3d 357. On review to this court, Farmers no longer maintains that plaintiffs had the burden to present individualized proof of the reasonableness of their medical expenses. Rather, given the holding in Ivanov, Farmers now accepts that the amounts of plaintiffs' medical bills presumptively established the reasonableness of their medical charges. Farmers further accepts that, once that presumption was in place, the burden shifted to Farmers to rebut that presumption by showing that its investigation and processing of the claims resulted in payment of plaintiffs' reasonable and necessary medical expenses, thus satisfying Farmers's legal obligation. What Farmers does dispute, however, is whether the trial court permitted Farmers to make that rebuttal showing. According to Farmers, the trial court cut off Farmers's ability to do so by excluding evidence relevant to whether Farmers reasonably investigated the individual claims and whether Farmers reimbursed plaintiffs in an amount that represented their reasonable medical expenses. Farmers urges that, by excluding such evidence, the trial court effectively made the presumption of the reasonableness of plaintiffs' medical charges irrebuttable, which was not the plan envisioned by Ivanov.  Farmers also argues that the excluded evidence had relevance beyond the narrow question of whether Farmers reimbursed the individual plaintiff class members for their reasonable medical charges. Withholding that evidence from the jury, Farmers urges, also skewed the case in favor of a classwide finding of liability and a damages award by not permitting the jury to consider evidence relevant to the reprehensibility of Farmers's conduct. An essential problem with Farmers's arguments, however, is that they are not arguments that Farmers made to the trial court or to the Court of Appeals. To be sure, Farmers points to some items of evidence that the trial court ruled inadmissible before and during trial. But having reviewed the rulings that Farmers challenges, we agree with plaintiffs that the trial court did not foreclose Farmers from offering any evidence for the purpose that Farmers now asserts the evidence would have been relevant viz., to establish the reasonableness of Farmers's investigation of the individual claims or to show that the payments that Farmers made to the individual class members met Farmers's obligation to pay their reasonable medical expenses. In other words, Farmers did not present to the trial court the theories of admissibility that it advances now. Some specific rulings are illustrative. [7] Before trial, plaintiffs filed a motion in limine to exclude evidence that medical providers had written off the balances of the bills that Farmers had not paid under its percentile reduction procedure. Plaintiffs also filed a motion in limine to exclude evidence that some class members either had a right to be paid, or actually had been paid, by third-party tortfeasors for the amounts that Farmers had refused to pay under the percentile reduction program. Plaintiffs argued (among other things) that those categories of evidence either were not relevant, or that, if relevant, were inadmissible under OEC 403 because the evidence would unduly prejudice or confuse the jury. In response, Farmers argued a more narrow theory of relevancy than it now advances. With regard to provider write-offs, Farmers urged that the evidence showed that class members often did not become liable for the unpaid portions of the bills, which Farmers asserted was relevant both to damages and punitive damages. Similarly, Farmers urged that evidence of third-party tort liability was relevant to damages. [8] The trial court granted the motions in limine, concluding that the challenged evidence was inadmissible under OEC 403 (although the trial court later permitted evidence of third-party liability during the post-verdict claims administration phase of the case). Farmers did not argue to the trial courtas it now does to this courtthat evidence of write-offs and third-party liability should be admitted to rebut the presumption that the class member plaintiffs' medical charges were reasonable. Rather, throughout trial, after losing the issue on summary judgment, Farmers held to its theory that plaintiffs had the burden to produce individual evidence of the reasonableness of their medical expenses and that Farmers had no burden in that regard. Farmers also asserts to this court that the trial court denied it the ability to present individualized evidence through what Farmers characterizes as a blanket exclusion that effectively required Farmers to present only collective evidence as to how Farmers treated PIP benefit claims. The ruling that Farmers cites, however, was again more narrow. Before plaintiff Strawn brought this class action against Farmers, Farmers had reduced reimbursement for one of Strawn's medical bills, because that bill exceeded Farmers's percentile cutoff. At trial, Farmers sought to introduce evidence that the bill was for medical services that had been unnecessary, which, Farmers believed, would support a conclusion that Farmers lawfully could have refused to pay the bill in its entirety. See ORS 742.524(1)(a) (PIP benefits cover medical expenses that are both reasonable and necessary (emphasis added)). The trial court sustained plaintiffs' objection to that evidence, reasoning that Farmers, having reduced reimbursement for the charge based only on its percentile cutoff, could not, at that point, shift its reasoning and claim that the entire charge was medically unnecessary. That ruling does not support Farmers's claim that the trial court made a broad or blanket ruling excluding evidence of how Farmers had reviewed and handled individual claims; the court merely refused to allow Farmers to present a new and after-the-fact reason for denying a particular bill. Nothing in that ruling prohibited Farmers from introducing individualized evidence about how it handled PIP benefit claims, and Farmers did not argue to the trial court that the evidence was relevant on that theory. As a final example, Farmers asserts that the jury never learned that Farmers actually overrode RC40/B2 recommended reductions, paying submitted medical charges in full, in numerous individual cases. Farmers's argument in that regard, however, is telling. Farmers acknowledges that [t]he focus of the trial here was not on the investigation but on the reasonableness of the underlying charges.  (Emphasis in original.) In other words, the fight at trial was over whether plaintiffs' medical bills established a rebuttable presumption of reasonableness, not over whether Farmers had rebutted that presumption by showing the reasonableness of its investigation. That was the focus because, as Farmers concedes, the law on the point had not yet been settled by Ivanov. Despite conceding that the trial was so focused, Farmers urges that, had individualized evidence been admitted, Farmers could have shownand did show during the claims administration processthat it had a reasonable investigation process. In particular, Farmers urges that it could have shown, for example, that it overrode the recommended percentile reductions in many cases or had other reasons why reimbursement was reduced. What Farmers now recognizes it could have shown with certain evidence is beside the point, however. The issue is whether the trial court prevented Farmers from placing evidence before the jury that was relevant to the reasonableness of its claims handling process and its PIP payments to plaintiffs. Farmers points to no place in the record where Farmers offered, and the trial court excluded, evidence that Farmers overrode the recommended reductions in individual cases. Farmers may appreciate now what it could have argued based on evidence that it either did not seek to place before the jury, or that it placed before the jury for other reasons. [9] But that hindsight appreciation establishes no error on the trial court's part or a fundamental denial of Farmers's right to defend against plaintiffs' fraud claim. [10]