Court Opinion

ID: 9940875
Source: CourtListenerOpinion
Date Created: 2024-02-15 16:20:55.87595+00
Date Added: 2024-06-11T13:45:56.285736
License: Public Domain

FILE                                                              THIS OPINION WAS FILED
                                                                             FOR RECORD AT 8 A.M. ON
                                                                                FEBRUARY 15, 2024
       IN CLERK’S OFFICE
SUPREME COURT, STATE OF WASHINGTON
       FEBRUARY 15, 2024
                                                                                ERIN L. LENNON
                                                                             SUPREME COURT CLERK

          IN THE SUPREME COURT OF THE STATE OF WASHINGTON

       STAN SCHIFF, MD, PhD, on behalf              )
       of himself and a class of similarly situated )     No. 101576-3
       providers,                                     )
                                                      )
                           Respondent,                )   En Banc
                                                      )
             v.                                       )
                                                      )
       LIBERTY MUTUAL FIRE INSURANCE )
                                                          Filed: February 15, 2024
       COMPANY and LIBERTY MUTUAL                     )
       INSURANCE COMPANY, foreign                     )
       insurance companies,                           )
                                                      )
                           Petitioners.               )
                                                      )

              JOHNSON, J.—This case looks at what an insurer must do to meet the

       “reasonable investigation” requirement and the requirement to pay “all reasonable

       and necessary” medical expenses under the personal injury protection (PIP)

       statutes, ch. 48.22 RCW; accompanying regulations; and the Washington
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

Consumer Protection Act (CPA), ch. 19.86 RCW. WAC 284-30-330(3); RCW

48.22.005(7).

         Dr. Stan Schiff brought a class action suit claiming the practice of reducing

provider bills to an 80th percentile cap based on a computer-generated calculation

violated the CPA. Schiff argues that the formulaic approach violates the PIP

statutory requirement to pay “‘all reasonable and necessary’” medical expenses

and is not a reasonable investigation, resulting in a violation of Washington’s CPA.

Resp. of Resp’t Dr. Schiff to Liberty Mut.’s Pet. for Rev. at 1-2 (emphasis added).

Liberty Mutual Fire Insurance Company and Liberty Mutual Insurance Company

(collectively Liberty) contend that the statutory requirement to conduct a

reasonable investigation into medical expenses is satisfied by determining the 80th

percentile of charges for a treatment in the geographic area and is not an unfair

practice under the CPA. The trial court denied both Schiff’s and Liberty’s

summary judgment motions. The Court of Appeals reversed as to Schiff. Schiff v.

Liberty Mut. Fire Ins. Co., 24 Wn. App. 2d 513, 520 P.3d 1085 (2022), review

granted, 1 Wn.3d 1001 (2023).We reverse the Court of Appeals in part and hold

that Liberty’s 80th percentile practice is not an unfair practice under Washington’s

CPA. 1

         1
          Liberty also challenges the Court of Appeals’ rejection of the two affirmative defenses
raised: the safe harbor defense, based on the Office of the Insurance Commissioner’s approval of
the policy and an exemption in the CPA statute, and the good faith defense, based on

                                                2
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

                        FACTS AND PROCEDURAL HISTORY

       Liberty provides PIP and MedPay (supplemental medical payment coverage)

policies to insureds in Washington State. When Liberty receives a medical bill for

a policyholder, Liberty uses a third-party database called FAIR Health to

determine the reasonableness of the medical provider’s charges. FAIR Health is an

independent, nonprofit, national medical claim database. FAIR Health allows

insurers to compare providers’ charges for specific treatments in a geographical

area and determine different percentiles of those charges. Under Liberty’s bill

review practice, if a medical provider’s bill is below the 80th percentile for the

area, Liberty pays the bill in full. If the provider’s charge exceeds the 80th

percentile benchmark, the payment is reduced to that amount.

       Over several years, Schiff submitted 20 treatment bills to Liberty. Based on

Liberty’s bill review practice, 2 of Schiff’s bills were reduced to the 80th

percentile. A 2015 bill was originally $380.00 and was reduced to $339.00. A 2016

bill was originally $945.00 and was reduced to $841.73. The total reduction was

$144.27.

Washington CPA case law. Because of our holding, we need not analyze the two defenses raised
by Liberty.

                                                3
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

       On May 8, 2017, Schiff sued individually and on behalf of similarly situated

Washington health care providers, alleging that Liberty’s practice of reducing

payments to medical providers was a violation of Washington’s PIP statutes, the

WACs, and Washington’s CPA. Schiff sought class certification, damages,

prejudgment interest, attorney fees, and litigation expenses. In an amended

complaint, Schiff also requested that Liberty be enjoined from making reductions

to providers’ bills and from not conducting a reasonable investigation of a bill

before refusing to pay in full. Liberty asserted defenses that their conduct is

protected by the CPA “‘safe harbor’” defense, set forth in RCW 19.86.170, and/or

by the “‘good faith’” exception to CPA liability established under Washington case

law. Clerk’s Papers at 4159.

       Both parties filed for summary judgment as to whether Schiff had legal

standing to bring the class action and individual claims alleged in his pleadings, or

whether he was barred from asserting those claims based on the settlement

agreement in an Oregon case, Froeber v. Liberty Mutual Insurance Co., 222 Or.

App. 266, 193 P.3d 999 (2008). The trial court concluded that the class action

settlement barred Schiff from asserting the class action claims, but did not bar him

from pursuing his individual CPA claim for monetary damages based on the two

bill reductions.2

       2
           The decision on the class action claim has not been appealed.

                                                 4
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

       Schiff then motioned for partial summary judgment on liability based on the

Court of Appeals’ decision in Folweiler Chiropractic, PS v. American Family

Insurance Co., 5 Wn. App. 2d 829, 429 P.3d 813 (2018), which the trial court

denied. The court outlined the undisputed facts, including stipulations that (1)

Liberty relied solely on its 80th percentile bill review methodology to review and

reduce the payment on Schiff’s 2015 and 2016 bills and (2) Liberty did not do

individualized investigations with respect to those bills. The trial court ultimately

denied summary judgment because there were genuine issues of material fact as to

whether Liberty’s conduct is protected by the CPA “safe harbor” defense or the

“good faith” exception to CPA liability. Included in that factual dispute is whether

the Office of the Insurance Commissioner (OIC) affirmatively approved Liberty’s

methodology and whether Liberty acted in compliance with whatever approval the

OIC gave. The trial court also denied both parties’ subsequent cross motions for

summary judgment.

       Both parties sought discretionary review of the trial court’s denial of

summary judgment in the Court of Appeals. The Court of Appeals granted review.

The trial court stayed the case pending the outcome of their motions for

discretionary review. In a published opinion, the Court of Appeals reversed the

trial court’s denial of Schiff’s motion for summary judgment and affirmed the trial

court’s denial of Liberty’s motion for summary judgment. Schiff, 24 Wn. App. 3d

                                                5
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

at 547. The court reasoned that under Folweiler, an insurer engages in an unfair

practice by failing to conduct an individualized assessment of the reasonableness

of a medical provider’s bill. Schiff, 24 Wn. App. 2d at 526. The court noted that

RCW 48.22.095(1)(a) and RCW 48.22.005(7) require “an individualized

assessment rather than substituting a formulaic approach that pays only 80 percent

of the average charge for a large geographic area.” Folweiler, 5 Wn. App. 2d at

838. Liberty then sought this court’s review, 3 which we granted. 4

                                            ISSUE

       Whether Liberty’s use of the FAIR Health database and the 80th percentile

practice to determine the reasonableness of medical providers’ bills violates the

Washington CPA.5

                                         ANALYSIS

       This court reviews orders on summary judgment de novo. We engage in the

same inquiry as the trial court. “‘Summary judgment is proper where there are no

       3
          Schiff filed an answer opposing review. Amici briefs supporting review were filed by
the American Property Casualty Insurance Association (APCIA) and Mitchell International Inc.
(Mitchell).
        4
          Mitchell, APCIA, FAIR Health Inc., and the United States Chamber of Commerce
submitted amici briefs for Liberty. The Washington State Association for Justice Foundation, the
Northwest Consumer Law Center, the attorney general of the State of Washington, and the
Washington State Chiropractic Association submitted briefs supporting, to a limited extent,
Schiff.
        5
          The petition for review presented four issues. Issue one asked whether the Court of
Appeals’ decision conflicted with Washington insurance law, and issue two asked whether Schiff
met the elements of a CPA claim. The issues present the same analysis and arguments, and are
therefore combined under issue one in this opinion. We decline to address the two additional
issues regarding affirmative defenses that Liberty raised.

                                                6
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

genuine issues of material fact and the moving party is entitled to judgment as a

matter of law.’” Kut Suen Lui v. Essex Ins. Co., 185 Wn.2d 703, 710, 375 P.3d 596

(2016) (quoting Durland v. San Juan County, 182 Wn.2d 55, 69, 340 P.3d 191

(2014)); see CR 56(c). This case also concerns statutory interpretation, which is a

question of law that is reviewed de novo. This court’s objective in determining

statutory meaning is to carry out the legislature’s intent. We look at the act as a

whole and give effect to all of the language. If the statute is plain on its face, then

we give effect to its plain meaning. If the statute is ambiguous, it is subject to

judicial construction. Durant v. State Farm Mut. Auto. Ins. Co., 191 Wn.2d 1, 8,

419 P.3d 400 (2018).

       Schiff argues that the Court of Appeals’ decisions in Folweiler and this case

should be affirmed. He states that Liberty’s 80th percentile practice violates the

PIP requirements and thus violates the CPA. Schiff’s assertion is that Liberty’s

80th percentile practice is not a “reasonable investigation” into medical charges,

and Liberty has failed to pay “all reasonable and necessary expenses.” Resp. of

Resp’t Dr. Schiff to Liberty Mut.’s Pet. for Rev. at 2, 17, 12. Liberty counters that

its use of FAIR Health and the 80th percentile practice is reasonable based on the

language of the insurance code and WAC regulations, which do not mandate the

individual provider inquiry that Schiff desires. Since the investigation is

reasonable, there is no PIP violation and thus no CPA violation.

                                                7
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

       The primary question before us thus centers on what is the meaning of

“reasonable” in the context of the PIP statutes. Ch. 48.22 RCW. We must

determine whether an objective formulaic review process can meet the

requirements of reasonable investigation, who decides whether an action is

reasonable, and whether any limits exist on a general formula used by insurers.

       Starting with the CPA, Washington’s version was adopted by the legislature

in 1961 and codified at chapter 19.86 RCW. Hangman Ridge Training Stables, Inc.

v. Safeco Title Ins. Co., 105 Wn.2d 778, 783, 719 P.2d 531 (1986). RCW

19.86.020 provides that “[u]nfair methods of competition and unfair or deceptive

acts or practices in the conduct of any trade or commerce are hereby declared

unlawful.” The legislature’s purpose in adopting the CPA was “to protect the

public and foster fair and honest competition,” with further direction that “[t]o this

end[,] this act shall be liberally construed that its beneficial purposes may be

served.” RCW 19.86.920. The intent to protect the public and competition is

balanced with an intent to protect legitimate business: “this act shall not be

construed to prohibit acts or practices which are reasonable in relation to the

development and preservation of business or which are not injurious to the public

interest.” RCW 19.86.920.

       Later, the legislature amended the CPA to provide for a private right of

action, allowing citizens to bring suits to enforce the CPA and acquire damages

                                                8
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

and other fees for CPA violations. Hangman Ridge, 105 Wn.2d at 784. The

statutory basis for private claims provides that

       [a]ny person who is injured in his or her business or property by a
       violation of RCW 19.86.020 . . . may bring a civil action in superior
       court to enjoin further violations, to recover the actual damages
       sustained by him or her, or both, together with the costs of the suit,
       including a reasonable attorney’s fee.

RCW 19.86.090. The legislature has also provided that violations of insurance

regulations are subject to the CPA, though nothing permitted to be done by the

insurance code, Title 48 RCW, or by the regulating agency, can be a CPA

violation. RCW 19.86.170.

       Our case law has developed an applicable framework on how CPA claims

are analyzed. In Hangman Ridge, we adopted five elements that must be

established by a plaintiff in order to prevail under a private CPA action: (1) an

unfair or deceptive act or practice (2) in trade or commerce, (3) which affects the

public interest, (4) an injury to plaintiff’s business or property, and (5) a causal link

between the unfair or deceptive act or practice and the injury. 105 Wn.2d at 784-

85. As to the first element, we have noted that “‘[b]ecause the act does not define

“unfair” or “deceptive,” this court has allowed the definitions to evolve through a

“gradual process of judicial inclusion and exclusion.”’” Klem v. Wash. Mut. Bank,

176 Wn.2d 771, 785, 295 P.3d 1179 (2013) (alteration in original) (quoting

Saunders v. Lloyd’s of London, 113 Wn.2d 330, 344, 779 P.2d 249 (1989)).

                                                9
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

Whether an act or practice qualifies as unfair or deceptive is a question of law.

Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d 27, 47, 204 P.3d 885 (2009).

       In Klem, we clarified that “a claim under the Washington CPA may be

predicated upon a per se violation of statute, an act or practice that has the capacity

to deceive substantial portions of the public, or an unfair or deceptive act or

practice not regulated by statute but in violation of public interest.” 176 Wn.2d at

787. Part of Liberty’s argument is that Schiff has made a per se claim, which he

lacks standing to bring as a noninsured. See Tank v. State Farm Fire & Cas. Co.,

105 Wn.2d 381, 394, 715 P.2d 1133 (1986). While a third-party noninsured lacks

standing to bring a per se CPA violation claim, a statutory violation can

demonstrate that an action violates public policy and is unfair for the purposes of a

non-per-se-CPA violation. See Klem, 176 Wn.2d at 787. Further, this court has

liberally construed the requirements of pursuing a CPA violation claim, and we

have declined to add an element of standing. Panag, 166 Wn.2d at 38. Schiff thus

has standing to bring a non-per-se-CPA action as a third-party noninsured.

       Turning to the first Hangman Ridge element, Schiff must show that the act

or practice in question is unfair. In examining fairness, we are directed to the PIP

statutes. RCW 48.22.095(1)(a) states that insurers offering auto insurance policies

must offer minimum personal injury protection of at least $10,000 for medical and

hospital benefits. RCW 48.22.005(7) states that “‘[m]edical and hospital benefits’

                                               10
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

means payments for all reasonable and necessary expenses.” WAC 284-30-330

outlines specific unfair claims settlement practices. One such practice is “[f]ailing

to adopt and implement reasonable standards for the prompt investigation of claims

arising under insurance policies.” WAC 284-30-330(3). Another is “[r]efusing to

pay claims without conducting a reasonable investigation.” WAC 284-30-330(4).

The standards for prompt, fair, and equitable settlements provide that an insurer

must determine whether medical and hospital services are (1) not reasonable, (2)

not necessary, (3) not related to the accident, or (4) not incurred within three years

of an accident, and insurers must provide notification of such determinations.

WAC 284-30-395(1).

       Based on these statutes and regulations, the Court of Appeals in Folweiler

held that American Family’s claims evaluation process, the same process that

Liberty uses here, may constitute an unfair practice under the CPA. 5 Wn. App. 2d

at 838. The Court of Appeals interpreted the PIP requirement to pay “all

reasonable and necessary expenses” as a requirement that insurers review each

claim and provider through an individual assessment to determine what is

reasonable and necessary before reducing payments, rather than using a formulaic

approach. Folweiler, 5 Wn. App. 2d at 838. The individualized assessment should

consider and independently evaluate “the identity, background, credentials, or

experience or any personal characteristic of the individual provider or whether the

                                               11
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

amount charged was reasonable for the individual treatment provided.” Folweiler,

5 Wn. App. 2d at 838.

       Though the Court of Appeals cited to the relevant statutes and regulations, it

failed to explain how they mandate an inquiry into the qualifications of the medical

provider and did not cite any cases to bolster its interpretation. The PIP statutes and

the insurance code do not have any express requirement that the insurers look

specifically at the qualifications of a medical provider to determine the

reasonableness of the charge. By its language, the insurance code places the onus

on insurers to determine whether to deny, limit, or terminate an insured’s medical

and hospital benefits if the insurer determines that the claim is not reasonable or

necessary. Insurers are tasked with creating their own reasonable investigations

and reasonable standards for prompt investigation of claims. Schiff’s briefing also

appears to acknowledge that under WAC 284-30-330, insurers are able to adjust

medical charges, as long as the insurers conduct an investigation and determine

whether the amount billed is unreasonable. Suppl. Br. of Resp’t Dr. Schiff at 8.

       The Court of Appeals also made a fundamental mathematical error in

Folweiler, which it quoted again in its decision for this case, that Liberty’s

approach “‘pays only 80 percent of the average charge for a large geographic

area.’” Schiff, 24 Wn. App. 2d at 527 (quoting Folweiler, 5 Wn. App. 2d at 838).

This is incorrect. Eighty percent of average is not equivalent to 80th percentile.

                                               12
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

Percentile is determined by first ordering all data points (or bills as charged) from

lowest to highest. The 80th percentile of that set of data is the value at which 80

percent of data points fall below it. Under the 80th percentile practice, 80 percent

of the bills at the low end are paid in full automatically. Only the highest 20

percent of bills are reduced to the 80th percentile level. Stated another way, if there

were 10 total charges ordered from lowest to highest (numbered 1-10), the 8 lowest

charges would be paid in full, and only the 2 highest bills (if higher than the 8th)

would be reduced to the amount of the 8th charge.

       Schiff argues this court’s holding in Durant supports the Court of Appeals’

reasoning here, but Durant did not speak to this practice. Rather, Durant’s holding

was that the plain language of WAC 284-30-395 prohibits the addition of

“maximum medical improvement” as grounds for the denial, limitation, or

termination of medical benefits because the statute provides specific and limited

grounds for what can be considered—not reasonable, not necessary, not related to

the accident, or not incurred within three years of the automobile accident. Durant,

191 Wn.2d at 18-19. Unlike the insurer in Durant, Liberty has not created any

additional grounds for denial, limitation, or termination of medical benefits.

Liberty’s review process can be characterized as a way to determine

“reasonableness” through comparison to other charges for the same treatment in

the same geographic area.

                                               13
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

       The FAIR Health database sets reasonableness on a scale by ordering

submitted claims by amount and providing various percentile markers. Schiff

argues that specific factors about providers must be incorporated into the review

process, but FAIR Health incorporates certain factors inherently. For example,

FAIR Health calculates the compensation for a doctor’s experience by including

all bills submitted to insurance providers in a given area.

       Though some concerns have been expressed that the 80th percentile practice

and the use of FAIR Health may result in treatment charges being reduced over

time, this would not occur based on anything within the control of FAIR Health.

The FAIR Health database contains claim bills as charged, not as paid. The market

controls the 80th percentile and the range of charges. The market range can shift,

but neither Liberty nor FAIR Health have the ability to shift the charged amount

downward. More likely, the scale will naturally shift upward over time if and when

providers increase their charges.

       The relevant subsections of the WAC, 284-30-330(3) and (4), require

insurers to adopt reasonable standards and a reasonable investigation into claims.

Comparing charges for the same treatment in the same geographic area is relevant

to the determination of reasonableness. We conclude that the use of FAIR Health

and the 80th percentile practice is not universally unfair by CPA requirements.

                                               14
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

       Finally, our conclusion is supported by decisions from other jurisdictions,

where the 80th percentile practice, and variations of it, have been upheld. Cases

about this practice involve use of the Ingenix database, a predecessor to FAIR

Health. In Lebanon Chiropractic Clinic, PC v. Liberty Mutual Insurance Co., No.

5-15-0111, 2016 IL App (5th) 150111-U, 2016 WL 546909 (Feb. 9, 2016)

(unpublished), the court reviewed a class action settlement between Lebanon and

Liberty after one of the plaintiff doctors from Washington argued that the

settlement was unfair to Washington plaintiffs, and the court concluded that the

settlement was fair, reasonable, and adequate. Under that settlement, Liberty could

continue to use the FAIR Health database and the 80th percentile practice.

Lebanon, 2016 WL 546909, at *5. That court also referenced a settlement in

Washington between a Dr. Kerbs and Safeco, now a subsidiary of Liberty, in

which a Washington court concluded that the use of the FAIR Health database and

an 85th percentile practice did not breach any duty under applicable Washington

law, which was part of the Lebanon court’s conclusion that Washington law would

not have provided the plaintiff any additional protections. In Chan Healthcare

Group PS v. Liberty Mutual Fire Insurance Co., 192 Wn.2d 516, 523, 431 P.3d

484 (2018), we reviewed whether the Lebanon settlement from Illinois should be

given full faith and credit, and noted that “[a]lthough differences do exist between

                                               15
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

Illinois and Washington consumer protection laws, the elements of a claim under

them are nearly identical and the relief available is roughly the same.”

       The practice was reviewed by the Delaware Supreme Court in GEICO

General Insurance Co. v. Green, 276 A.3d 462, 2022 WL 1052195 (Del. 2022)

(unpublished). There the court considered whether GEICO’s 80th percentile

practice using the FAIR Health database violated the state’s PIP statute, DEL. CODE

ANN. tit. 21, § 2118. It held no violation occurred. The court noted that section

2118(a)(2) requires insurers to compensate reasonable and necessary medical

expenses, the claimant did not demonstrate that the use of the practice and of FAIR

Health violated the statute, and the claimant failed to show that the original

medical expenses were reasonable and necessary.

                                       CONCLUSION

       We hold that the 80th percentile practice and the use of the FAIR Health

database is not unfair or unreasonable and does not violate the CPA or the PIP

requirements to establish standards under which reasonable charges for medical

procedures are determined. The Court of Appeals’ decision is reversed and the case

remanded to the trial court to enter a summary judgment order in favor of Liberty.

                                               16
Schiff v. Liberty Mut. Fire Ins. Co., No. 101576-3

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                                               17
                                      No. 101576-3

      STEPHENS, J. (dissenting)—Washington’s personal injury protection (PIP)

statutes require automobile insurers to cover “all reasonable and necessary [medical]

expenses” incurred by an insured “as a result of an automobile accident.” RCW

48.22.095(1)(a), .005(7). Our Consumer Protection Act (CPA) requires insurers to

“implement reasonable standards” and “conduct[] a reasonable investigation” into

claims. WAC 284-30-330(3), (4). The question in this case is whether Liberty’s

sole reliance on the FAIR Health database to determine if a provider’s charge is

reasonable satisfies these statutory mandates. It does not. While I agree with the

majority that “[c]omparing charges for the same treatment in the same geographic

area is relevant to the determination of reasonableness,” majority at 14, Liberty has

not shown that its application of an 80th percentile rule using the FAIR Health

database constitutes a reasonable investigation into a specific charge or establishes

that a provider’s charge is unreasonable. It is entirely possible that patients may

incur reasonable medical expenses greater than the 80th percentile benchmark in a

                                             1
given geographic area, and Liberty does not demonstrate how FAIR Health provides

sufficient information to categorically reject all charges above the 80th percentile. I

would affirm the Court of Appeals’ holding that Liberty’s sole reliance on its 80th

percentile rule violates the PIP statutes and therefore constitutes an unfair practice

under the CPA. I would also reject Liberty’s asserted affirmative defenses.

                                   DISCUSSION

      Let me begin by clearly stating what is not at stake in this case. Contrary to

some elevated rhetoric in the briefing, a decision allowing Dr. Stan Schiff’s CPA

claim to go forward does not signal the end of insurance companies’ ability to use

billing databases in meeting their obligations under the PIP statutes. Databases such

as FAIR Health provide a useful tool that can help insurers timely process medical

claims. But the key word is “help.” The question is whether Liberty’s sole reliance

on the database and its chosen percentile cutoff constitutes a reasonable investigation

and is sufficient to determine that a provider’s charge is not reasonable.

      Liberty stipulated below that it relies solely on FAIR Health to compare

providers’ charges for a specific treatment in a given geographic area. Majority at

3-5. Liberty pays charges up to the 80th percentile for bills in the area; higher

charges are automatically reduced to the 80th percentile. Id. FAIR Health delineates

a provider’s geographic area based on the “geozip,” which it defines as the first three

digits of the provider’s zip code. Though Liberty checks the “accuracy of the data

                                              2
on the bill . . . and what is being charged for . . . from a service standpoint,” it does

not further inquire into the reasonableness of a specific provider’s charges. Clerk’s

Papers at 1351-52; see also Verbatim Rep. of Proc. (Feb. 28, 2020) at 125. Stated

in terms of Liberty’s obligations under the PIP statutes, Liberty determines that the

amount of a bill is categorically unreasonable if it exceeds the 80th percentile in the

relevant geographic area. This truncated basis for determining reasonableness fails

for the same reason this court held the “maximum medical improvement”

methodology at issue in Durant failed: it is “clearly more restrictive” than the

ordinary meaning of “reasonable” requires. Durant v. State Farm Mut. Auto. Ins.

Co., 191 Wn.2d 1, 12, 419 P.3d 400 (2018).

      Liberty’s sole reliance on FAIR Health to determine maximum

reimbursement rates for medical bills does not comport with the legislative mandate

to pay all reasonable and necessary expenses under the PIP statutes. This conclusion

follows from what we have previously said about reasonableness in this context. In

Durant, we explained that “reasonable” in the PIP context must be given its

“ordinary (dictionary) definition” in the absence of a statutory definition: “‘not

conflicting with reason : not absurd : not ridiculous . . . being or remaining within

the bounds of reason : not extreme : not excessive.’” 191 Wn.2d at 12 n.3 (alteration

in original) (quoting WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1892

(2002)). Under this commonsense definition, we held that State Farm’s maximum

                                               3
medical improvement standard to determine payment of PIP claims was “clearly

more restrictive than what would ordinarily be considered reasonable . . . medical

care.” Id. at 12. The majority attempts to distinguish Durant based on the fact that

a different WAC was at issue in that case and that the specific concept used by the

insurer was “maximum medical improvement” rather than a percentile rule for

determining the reasonableness of charges. Majority at 13; see 191 Wn.2d at 14.

But this purported distinction misses the essential point in Durant: the PIP statutes

require an insurer to pay all reasonable and necessary medical bills and do not allow

reliance on “additional criterion that must be met for medical payments.” 191 Wn.2d

at 9. Liberty essentially substitutes a bright line 80th percentile cutoff for a

reasonable investigation, and it makes no attempt to determine if a charge above the

80th percentile in a geozip area is, in fact, unreasonable. Liberty’s categorical

reduction of any charge over the 80th percentile as “unreasonable” is too restrictive

a measure, just as in Durant. 1

1
  Nothing in the record suggests that Liberty’s decision to reduce medical charges after the
80th percentile, as opposed to some other threshold, marks the outer limit of what is
reasonable. Safeco, a subsidiary of Liberty, uses the 85th, rather than the 80th, percentile
to reduce charges. Wash. Sup. Ct. oral arg., Schiff v. Liberty Mut. Fire Ins. Co., No.
101576-3 (Sept. 26, 2023) at 33 min., 59 sec., video recording by TVW, Washington
State’s Public Affairs Network, http://www.tvw.org/; see also Lebanon Chiropractic
Clinic, PC v. Liberty Mut. Ins. Co., No. 5-15-0111, 2016 IL App (5th) 150111-U, 2016
WL 546909, at *3 (Feb. 9, 2016) (unpublished). The majority offers no explanation for
why a charge that is reasonable under another insurer’s percentile rule is nonetheless
unreasonable under Liberty’s rule. There is no articulated principle of “reasonableness”

                                                4
       Consistent with Durant, the Court of Appeals in Folweiler held that an

insurer’s reliance on FAIR Health to assess whether medical provider bills are

reasonable within the meaning of the PIP statutes constitutes an unfair practice under

the CPA. Folweiler Chiropractic, PS v. Am. Fam. Ins. Co., 5 Wn. App. 2d 829, 429

P.3d 813 (2018). The majority recognizes that Folweiler is directly on point but

refuses to credit its sound reasoning. Majority at 11-12. Instead, the majority

erroneously recasts Folweiler as having added a requirement to the PIP statutes by

mandating consideration of a provider’s credentials and qualifications in

determining reasonableness. Id. (stating Folweiler “express[ly] require[s] that the

insurers look specifically at the qualifications of a medical provider to determine the

reasonableness of the charge”). But that aspect of the Court of Appeals opinion

referred to the specific “allegations in Folweiler’s complaint”—that the company

did not “consider and independently evaluate the identity, background, credentials,

or experience or any personal characteristic of the individual provider or whether the

amount charged was reasonable for the individual treatment provided”—and the

court held those allegations were “sufficient to establish an unfair act in violation of

the CPA.” Folweiler, 5 Wn. App. 2d at 838 (emphasis added). The court simply

included individual providers’ characteristics as one example of relevant factors that

under the majority’s analysis that prevents an insurer from dropping its percentile threshold
to the 75th percentile, or to the 70th—or below.

                                                 5
may inform the reasonableness of an individual bill. Id. The actual holding in

Folweiler reflects the clear language of the PIP Statutes:

       The statutes necessarily impose a duty to look at each claim
       individually in order to determine the reasonable and necessary
       expenses for the insured. The law requires an individualized assessment
       rather than substituting a formulaic approach that pays only 80 percent
       of the average charge for a large geographic area.

Id. (emphasis omitted). 2

       Like the practice at issue in Folweiler, Liberty’s practice involves no

individual assessment but instead applies “a geographic based formula to each claim

regardless of the individual circumstances.” Id. at 839. This formula is too

restrictive to meet the PIP statute because the cost of a specific treatment will

inevitably vary based on each patient’s condition, medical history, and living

circumstances, implicating treatment complexity, necessity, and urgency, among

other factors. Indeed, the very use of a tool that collects and compares medical

2
  The majority also criticizes Folweiler, and in turn the Court of Appeals below, for “a
fundamental mathematical error” that conflates distinct concepts of percentage and
percentile. Majority at 12. This is a distraction. A close reading suggests the Folweiler
court’s use of the term “percent” rather than “percentile” was likely an inadvertent
misstatement. 5 Wn. App. 2d at 837-38. In the opinion’s description of the insurer’s
practices, the court accurately describes FAIR Health’s process in arriving at the 80th
percentile billing benchmark. See id. at 833-34. Though it later uses the term percentage,
the court’s holding does not depend on whether the insurance company paid 80 percent of
a provider’s charges or paid bills in full up to the 80th percentile for billing in the geozip
area. The essential point remains that an automatic reduction of bills to a percentile
benchmark, lacking any individual assessment of reasonableness, violates the PIP statutes
and therefore is an unfair practice under the CPA. Id. at 839.

                                                 6
charges acknowledges that a range of charges is to be expected. Liberty concludes

that charges above the 80th percentile are, per se, unreasonable, but it does not show

any process for evaluating the reasonableness of a provider’s charge beyond a bare

comparison of charges. And, then it focuses only on the reasonableness of charges

at the high end, without any analysis of the comparator charges—what if charges in

the bottom 20th percentile are unreasonably low? This is the problem with rote

application of a percentile benchmark based on a general data set; it fails to account

for the possibility that some patients may require treatment that—perhaps due to the

patient’s health profile or urgency—costs more or less than the insurer’s selected

benchmark maximum. In fact, the majority seems to acknowledge that other factors

are necessary to evaluate a bill’s reasonableness, stating that FAIR Health

“incorporates certain factors inherently,” such as “the compensation for a doctor’s

experience by including all bills submitted to insurance providers in a given area.”

Majority at 13-14. But Liberty has not demonstrated that it evaluates any additional,

relevant factors in bills greater than the 80th percentile (or in lower bills, for that

matter). We should endorse the holding in Folweiler under which Liberty’s practice

is inconsistent with the PIP statutes and cannot survive CPA scrutiny. Liberty’s sole

reliance on FAIR Health’s 80th percentile benchmark violates the PIP statutes’

requirement that it pays insureds “all reasonable” medical charges.              RCW

48.22.005(7) (emphasis added).

                                              7
      Additionally, it is unrealistic to suppose that Liberty’s reliance on FAIR

Health and its 80th percentile rule has no impact on medical costs. No one disputes

that insurers have been relying increasingly on databases such as FAIR Health to

adjust charges for medical care. Liberty lauds these tools as having a beneficial

effect in controlling excess billing and providing timely payments, while Schiff

insists that they distort and shrink the health care market. But while the parties point

to the market effects of practices like Liberty’s in the PIP context and beyond, the

majority claims these practices have no effect. Majority at 14 (concluding any

reduction in charges over time is not “based on anything within the control of FAIR

Health” because the “database contains bills as charged, not as paid”). It is naive at

best to pretend that insurance coverage limits and reimbursements do not inform

providers’ charges over time. Long used in determining usual and customary

charges for out-of-network health care services, the introduction of such tools in the

PIP context naturally shapes market behavior. Specifically, it directly links the

concept of “usual and customary” charges in network-based health care coverage

with the determination of a maximum reimbursement rate for providers submitting

medical bills to PIP insurers. We should therefore closely examine Liberty’s

assertion that its practices help control costs.

      Research commissioned by Alaska’s Office of Management and Budget

reveals that the 80th percentile rule, which Alaska had codified for health insurance

                                               8
coverage,3 puts upward pressure on health care costs and insurance premiums.

MOUHCINE GUETTABI, INST. OF SOC. & ECON. RSCH. & DEP’T OF ECON. & PUB.

POL’Y, UNIV. OF ALASKA ANCHORAGE, HOW HAS THE 80TH PERCENTILE RULE

AFFECTED ALASKA’S HEALTH-CARE EXPENDITURES? 30 (2018), 4 (between 2004 and

2014, the 80th percentile rule has caused an 8.61 percent to 24.65 percent increase

in          health           care          expenditures            in           Alaska),

https://www.commerce.alaska.gov/web/Portals/11/pub/INS_ISER_2018Study.80th

Percentile.pdf [https://perma.cc/Z4EH-AER3]. The 80th percentile rule may serve

as a “disincentive for providers to join insurance networks, [which] drives up the

cost of insurance.” Id. at 9. Effective January 2024, Alaska’s Division of Insurance

is repealing the 80th percentile rule. DIV. OF INS., DEP’T OF COM., CMTY. & ECON.

DEV.,    80TH        PERCENTILE     FREQUENTLY        ASKED      QUESTIONS       (2023),

https://www.commerce.alaska.gov/web/Portals/11/Pub/FAQ%2080th%20Percentil

e%20Regulation%2010.30.2023.pdf.           In the repeal process, the Division of

Insurance tracked the rate of change of FAIR Health’s 80th percentile benchmark

over four years for selected treatment codes in various jurisdictions, including

Seattle, where it found a 13 percent increase. DIV. OF INS., DEP’T OF COM., CMTY &

3
  See 3 AAC 26.110(a)(2).
4
  The rule operates similarly to Liberty’s 80th percentile methodology. GUETTABI, supra,
at 4 (“As a result of the regulation, when charges for out-of-network care are billed to
insurers, the insurers are required to pay an amount that is at least as much as the 80th
percentile of billed charges for that service in that geographical area.”).

                                               9
ECON. DEV., COMPARISON OF FOUR YEAR 80TH PERCENTILE BILLED CHARGES

(2018),

https://www.commerce.alaska.gov/web/Portals/11/pub/80thPercentileBilledCharge

s_2019.01.pdf. Increases in the 80th percentile may reflect the fact that “providers

can potentially increase their charges over time, and insurance company

reimbursements have to keep pace with the cost increases.” GUETTABI, supra, at 9.

      While the majority points to a few cases in other jurisdictions in support of its

conclusion that Liberty’s practice is fair and reasonable, majority at 14-15, Alaska’s

recent repeal of the 80th percentile rule indicates a rational, legitimate concern,

backed by data, about using FAIR Health to determine reimbursement rates. The

use of databases and percentile benchmarks cannot be isolated from their effects,

and for that reason, we should leave to policymakers the broader question of the

circumstances under which they may appropriately be used. We should focus on the

clear statutory mandate for PIP reimbursement, which requires insurers like Liberty

to show not the overall reasonableness of their practices, but that an individual

provider’s charge they refuse to pay is unreasonable, i.e. that it is “‘absurd,’”

“‘ridiculous,’” or “‘excessive.’” Durant, 191 Wn.2d at 12 n.3 (quoting WEBSTER’S,

supra, at 1892).

      Because I would hold that Liberty’s sole use of FAIR Health to determine

charges’ reasonableness violates the PIP statutes, it is necessary to consider Liberty’s

                                              10
affirmative defenses. I agree with the Court of Appeals’ analysis and would affirm

its holding that these defenses fail. First, in view of the minimal evidence in the

record of any affirmative approval of the 80th percentile practice from the Office of

the Insurance Commissioner, I would hold that Liberty does not meet the safe harbor

exception in the CPA. And, because a good faith argument cannot exist in parallel

with Liberty’s per se CPA claim, I would hold that its good faith defense is irrelevant

to this case.

                                   CONCLUSION

       Washington’s PIP statutes require insurers to cover “all reasonable and

necessary expenses” of an insured resulting from an automobile accident. RCW

48.22.095(1)(a), .005(7). Insurers have the authority to adjust medical charges, so

long as they conduct a “reasonable investigation.” WAC 284-30-330(3),(4). As we

held in Durant, these mandates require an individual assessment of the

reasonableness of an insured’s medical bills, not reliance on a chosen proxy for

“reasonableness.” While I do not disagree that use of FAIR Health may provide

information that is “relevant to the determination of reasonableness,” majority at 14,

Liberty’s sole reliance on its 80th percentile rule violates the PIP statutes and

constitutes an unfair practice under the CPA. I would affirm the Court of Appeals.

                                             11