Court Opinion

ID: 6330585
Source: CourtListenerOpinion
Date Created: 2022-04-13 13:02:42.75303+00
Date Added: 2024-06-11T09:23:03.205080
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

GEICO GENERAL INSURANCE                 §       No. 107, 2021
COMPANY,                                §
                                        §       Court Below – Superior Court
      Defendant Below,                  §       of the State of Delaware
      Appellant/Cross-Appellee,         §
                                        §       C.A. No. N17C-03-242
           v.                           §
                                        §
YVONNE GREEN and                        §
REHABILITATION ASSOCIATES,              §
P.A., on behalf of themselves and all   §
others similarly situated,              §
                                        §
      Plaintiffs Below,                 §
      Appellees/Cross-Appellants.       §
                                        §
                                        §
YVONNE GREEN and                        §       No. 166, 2021
REHABILITATION ASSOCIATES,              §
P.A., on behalf of themselves and all   §       Court Below – Superior Court
others similarly situated,              §       of the State of Delaware
                                        §
      Plaintiffs Below,                 §       C.A. No. N17C-03-242
      Appellants/Cross-Appellees,       §
                                        §
      v.                                §
                                        §
GEICO GENERAL INSURANCE                 §
COMPANY,                                §
                                        §
      Defendant Below,                  §
      Appellee/Cross Appellant.

                         Submitted: January 19, 2022
                          Decided:    April 8, 2022

Before SEITZ, Chief Justice; VALIHURA, VAUGHN, TRAYNOR, and
MONTGOMERY-REEVES, Justices, constituting the Court en banc.
Upon appeal from the Superior Court. AFFIRMED IN PART AND REVERSED
IN PART.

Paul A. Bradley, Esquire, Stephanie A. Fox, Esquire, MARON MARVEL
BRADLEY ANDERSON & TARDY LLC, Wilmington, Delaware; Laura A.
Cellucci, Esquire (argued), Joshua F. Kahn, Esquire, MILES & STOCKBRIDGE
P.C., Baltimore, Maryland; George M. Church, Esquire, Cockeysville, Maryland;
Meloney Perry, Esquire, PERRY LAW P.C., Dallas, Texas; for GEICO General
Insurance Company.

Richard H. Cross, Esquire (argued), Christopher P. Simon, Esquire, Michael L. Vild,
Esquire, CROSS & SIMON, LLC, Wilmington, Delaware; for Yvonne Green and
Rehabilitation Associates.

                                        2
MONTGOMERY-REEVES, Justice:

      This appeal involves a challenge to how Geico General Insurance Company

(“GEICO”) processes insurance claims under 21 Del. C. § 2118. Section 2118

provides that certain motor vehicle owners must obtain personal injury protection

(“PIP”) insurance. Under this statute, insurance companies must, subject to a two-

year limitation period, compensate insureds for reasonable and necessary expenses

for injuries resulting from a motor vehicle accident. GEICO provides PIP insurance

to Delawareans under this statute. The plaintiffs below, all of whose claims for

medical expense reimbursement under a PIP policy have been denied, in whole or

in part, are either GEICO PIP policyholders who were injured in automobile

accidents or their treatment providers.

      The plaintiffs below allege that GEICO uses two automated processing rules

that arbitrarily deny or reduce payments without consideration of the reasonableness

or necessity of submitted claims and without any human involvement. The plaintiffs

below argue that GEICO’s use of the automated rules to deny or reduce payments

(1) breaches the applicable insurance contract, (2) amounts to bad faith breach of

contract, and (3) violates Section 2118. In the court below, they sought damages

and a declaratory judgment that GEICO’s use of the automated rules violates Section

2118. GEICO argues that its use of the automated rules does not violate any contract

or law because the automated rules account for the reasonableness and necessity of

                                          3
medical expenses and make recommendations that go to GEICO’s trained adjusters

who further assess the reasonableness and necessity of the expenses and then adjust

claims in their discretion.

      The court below decided multiple motions filed by the parties, but this

Opinion addresses only two of those decisions. First, the Superior Court granted in-

part and denied in-part GEICO’s motion to dismiss. Relevant to this appeal, GEICO

challenges the court’s ruling that the judiciary has the authority to issue a declaratory

judgment regarding a violation of the insurance code.

      Second, the parties filed separate motions for summary judgment. The

Superior Court entered judgment in favor of GEICO on the contract claims and

declaratory judgment in favor of the plaintiffs below. The plaintiffs below appeal

the court’s ruling as to the breach of contract and bad faith breach of contract claims,

and GEICO appeals the court’s issuance of a declaratory judgment that it violated

Section 2118.

      Having reviewed the parties’ briefs and the record on appeal, and after oral

argument, the Court affirms the Superior Court’s ruling that the judiciary has the

authority to issue a declaratory judgment that GEICO’s use of the automated rules

violates Section 2118. We also affirm the Superior Court’s judgment as to the breach

of contract and bad faith breach of contract claims. We conclude, however, that the

                                           4
issuance of the declaratory judgment was improper. Thus, we AFFIRM in part and

REVERSE in part.

I.    RELEVANT FACTS AND PROCEDURAL BACKGROUND

      A.       The Parties

               1.    Plaintiffs Below

      On September 12, 2011, Yvonne Green, plaintiff below and class

representative for the insured class, was injured in an automobile accident in

Delaware.1 Green was a Delaware resident at the time of the accident and had PIP

coverage through GEICO.2 She filed a claim under her policy, and her providers

submitted their medical bills directly to GEICO.3 While GEICO paid most of

Green’s medical expenses in full, a number of her claims for expenses were reduced

or denied.4

      Rehabilitation Associates, P.A. (“RA”) (collectively with Green, the

“Claimants”), plaintiff below and class representative for the claimant class, is a

medical center that provides treatment to people who have PIP coverage through

GEICO.5       From March 10, 2011, to the time the complaint was filed below, RA

1
  App. to GEICO’s Opening Br. 119, 460-61 (hereinafter, “A__”).
2
  Id. at 461.
3
  Id. at 462.
4
  Id.
5
  Id. at 121-22, 462.
                                          5
submitted medical bills to GEICO for processing and reimbursement.6 RA alleges

that GEICO has denied payment of their submitted bills.7

             2.     Defendant Below

      GEICO, defendant below, is an insurance company incorporated in Maryland

with its principal place of business in Washington, D.C.8 GEICO sells insurance in

Delaware and underwrites motor vehicle insurance, including PIP insurance, for

persons who are injured while driving or occupying an automobile.9

      B.     Delaware’s Personal Injury Protection Statute

      Under 21 Del. C. § 2118, owners of motor vehicles registered in the State

must obtain PIP insurance.10 Under Section 2118(a)(2), insurance companies must

“[c]ompensat[e] . . . injured persons for reasonable and necessary expenses” incurred

because of bodily injury arising out of the use of a vehicle.11

      Section 2118B governs the processing and payment of PIP benefits. When a

covered person is injured in a motor vehicle accident and notifies the insurer of his

or her intent to submit a claim, “the insurer shall, no later than 10 days following the

insurer’s receipt of said notification, provide that claimant with a form for filing such

6
  Id.
7
  Id. at 122.
8
  Id. at 104.
9
  Id. at 104-05.
10
   Those who are self-insured pursuant to 21 Del. C. § 2904 are exempt from Section 2118’s
requirement for insurance coverage. This exception is not relevant to this appeal.
11
   21 Del. C. § 2118(a)(2).
                                            6
a claim.”12 After the insured submits the claim, “the insurer shall promptly process

the claim” and, within thirty days, either pay reasonable and necessary expenses or

provide the insured with an explanation for a denial of the claim.13 If the insurer

does not pay the PIP benefits within the thirty-day period, the statute mandates that

the insurer pay an interest penalty on the amount of unpaid benefits due to the

insured.14 Section 2118B was enacted to “ensure reasonably prompt processing and

payment of sums owed by insurers to their policyholders and other persons covered

by their policies pursuant to § 2118 of this title, and to prevent the financial hardship

and damage to personal credit ratings that can result from the unjustifiable delays of

such payments.”15

      C.     The Rules

      When GEICO receives a PIP claim for payment of medical expenses from

either the insured or the insured’s treatment provider, GEICO first determines

whether there is a causal connection between the motor vehicle accident and the

complained of injury.16 Once that connection is confirmed, GEICO determines how

much of the PIP claim it will pay to the claimant. In making this payment

determination, GEICO utilizes two automated rules, the Geographic Reduction Rule

12
   Id. at § 2118B(b).
13
   Id. at § 2118B(c).
14
   Id.
15
   Id. at § 2118B(a).
16
   App. to Claimants’ Answering Br. and Opening Br. 69, 76 (hereinafter, “B__”).
                                           7
(the “GRR”) and the Passive Modality Rule (the “PMR”) (collectively, the

“Rules”).17

              1.    The Geographic Reduction Rule

      GEICO utilizes the GRR with respect to the reasonableness of a PIP claim.18

The GRR first finds the Current Procedural Terminology (the “CPT”) code for the

claimant’s treatment.19 The CPT is “a universal code assigned to each treatment

procedure.”20 For example, all office visits are assigned CPT code 99213.21 The

GRR then gathers information on the treatment’s CPT code from its database, which

contains submitted bills from all claimants.22 The database stores:

              (i) information on the date of the procedure; (ii) CPT code;
              (iii) the amount charged by the medical provider; (iv) the
              geographic location of the provider (using the first three
              digits of the zip code (“GeoZIP”)); and, (v) the type of
              provider (which is [] broken down in three broad
              categories – doctors, chiropractors and physical
              therapists).23

17
   GEICO’s Opening Br. 8 (hereinafter, “GEICO Opening Br.__”).
18
   GEICO Opening Br. 9; see Claimants’ Answering Br. and Opening Br. 12 (hereinafter,
“Claimants Opening Br.__”).
19
   GEICO Opening Br. 9; see A686-94.
20
   GEICO Opening Br. 9; see GEICO Opening Br. Ex. D, at 10 (hereinafter, “SJ Op.__”)
(“Each procedure performed by a medical provider is billed using a Current Procedural
Terminology code (‘CPT Code’) identifier—a universal code assigned to each treatment
procedure.”); Claimants Opening Br. 11.
21
   GEICO Opening Br. 9.
22
   Id. at 9-10; see A686-87; Claimants Opening Br. 11; SJ Op. 10 (“GEICO has a database
that contains all bills submitted by all claimants and is updated every six months.”).
23
   SJ Op. 10; see GEICO Opening Br. 11; Claimants Opening Br. 11.
                                           8
Thus, the GRR considers multiple factors of reasonableness, including the average

charge of medical providers, the type of treatment, the geographic region, and the

type of provider. The GRR then uses that information to arrange provider charges

for the identified CPT code from the lowest amount to the highest amount.24 Next,

the GRR identifies the amount equal to the eightieth percentile of all charges from

the identified CPT code and categorizes all submitted claims under and up to that

amount as reasonable and thus payable.25 Any claims with treatment costs over the

eightieth percentile receive partial payment up to the eightieth percentile amount.26

      GEICO first decided to use the GRR in the early 1990s and at that time

“determined that the 80th percentile was the industry standard.”27 Since 1994,

GEICO has used three different databases for the GRR: Medata, Fair Isaac/Mitchell,

and FAIR Health, Inc.28 These data processing systems “compare[] the submitted

medical charges to the charges of other providers in the same geographic area by

CPT code and date of service.”29          GEICO’s determination that the eightieth

percentile was reasonable was also made in reliance on Medata’s manuals, which

24
   SJ Op. 10; see GEICO Opening Br. 9; Claimants Opening Br. 11.
25
   GEICO Opening Br. 9; see A686-94; Claimants Opening Br. 11-12; SJ Op. 10 (“GEICO
sorts the claims from lowest amount to highest amount and [sic] amount that is at the 80 th
percentile in the linear stack is the maximum amount that GEICO will pay for a given CPT
code.”).
26
   Id.
27
   GEICO Opening Br. 11; see A1793-1812, 1872-76; SJ Op. 11 (“GEICO apparently
implemented the GRR in the 1990s.”).
28
   GEICO Opening Br. 10; see A686-94.
29
   GEICO Opening Br. 10; see A686-94, 698-703.
                                            9
defined “reasonable” as “‘the 80th percentile of actual charges in the provider’s

socio-demographic area.’”30

              2.    The Passive Modality Rule

       With respect to the medical necessity of medical expenses, GEICO utilizes

the PMR.31 GEICO does not consider certain passive treatments to be necessary

once an injury is outside the acute phase.32 “To be medically necessary, treatment

must be indispensable and not just for comfort or convenience.”33 GEICO considers

an injury to be outside the acute phase eight or more weeks after the injury. 34 As

such, “[t]he PMR flags certain treatments (e.g., ultrasound, hot/cold packs, electrical

stimulation, etc.) as providing no therapeutic benefit eight weeks after the injury (i.e.

when an injury becomes chronic).”35 If the PMR flags a treatment as providing no

therapeutic benefit, the database recommends denying payment.36 In other words,

the PMR determines that certain passive treatments are not necessary eight weeks

after the injury.

30
   GEICO Opening Br. 11; A925; see Claimants Opening Br. 13; SJ Op. 11.
31
   GEICO Opening Br. 12.
32
   Id.; see A861-62; Claimants Opening Br. 16.
33
   GEICO Opening Br. 12.
34
   Id.; see A861-62; Claimants Opening Br. 16; SJ Op. 11 (“GEICO utilizes the PMR to
review PIP claims submitted for passive treatment that occur more than eight weeks after
an accident.”).
35
   GEICO Opening Br. 12; see A520-22, 861-62.
36
   GEICO Opening Br. 12; see A520-22, 861-62; Claimants Opening Br. 16-17; SJ Op. 11.
                                           10
      GEICO adopted the PMR in 1996 “after it was analyzed and vetted by

Medata.” 37 GEICO relied on peer reviewed medical literature, including scientific

studies and medical guidelines in implementing the PMR.38

      D.     The PIP Claims Adjustment Process

      The GRR and PMR’s recommendations are not dispositive.39                  GEICO

employs licensed claims adjusters to consider the reasonableness and necessity of

submitted claims.40 Once the GRR and PMR render a recommendation, the adjusters

have an “obligation and the authority to adjust claims . . . .”41 GEICO’s adjusters

“evaluate reasonableness and necessity of a claim and, where circumstances warrant,

issue additional payment in response to a request for re-evaluation.”42

      Once GEICO determines how much of the submitted claim it will pay, it sends

the insured and the provider an Explanation of Review (an “EOR”), which

“identifies the treatment rendered, the amount of the bill, the amount of the payment

and a written explanation for any reduction or denial.”43 All EORs establish the

procedure for re-evaluation of the payment amount and provide re-evaluation

37
   GEICO Opening Br. 12; see A384-85.
38
   GEICO Opening Br. 12; see A384, 861-77, 913-21.
39
   GEICO Opening Br. 12; see A460-64, 849-56.
40
   GEICO Opening Br. 13; see A1443-44, 1446-55.
41
   GEICO Opening Br. 12; see SJ Op. 40 (“[A]djusters were ultimately given discretion . .
. .”).
42
   GEICO Opening Br. 12; see A927-45, 1320-21, 1341-45; Claimants Opening Br. 35-36.
43
   A462; see GEICO Opening Br. 8.
                                           11
criteria, should the insured or provider wish to challenge GEICO’s payment

determination.44

      E.     Procedural History

      On March 20, 2017, the Claimants filed a class action suit in the Superior

Court against GEICO.45 In the action, the Claimants alleged that GEICO violated

statutory and common law, bringing claims for breach of contract, bad faith breach

of contract, declaratory relief, and Deceptive Trade Practices Act violations on

behalf of themselves and all others whose PIP benefits claims were denied in whole

or in part because of the Rules.46

      On July 12, 2017, the Claimants filed a first amended class action complaint

(the “Class Action Complaint”) asserting the following four counts. First, the

Claimants alleged that GEICO breached certain provisions of its PIP insurance

contract by “reducing or denying payment of covered claims for PIP benefits through

the use of the [R]ules” (“Count I”).47 Second, the Claimants contended that GEICO

committed bad faith breach of contract because it “knowingly and intentionally

violated the applicable policies of insurance and applicable law by performing

arbitrary and improper bill reductions and denials, without justification” (“Count

44
   GEICO Opening Br. 8; see A463.
45
   SJ Op. 13.
46
   Id.
47
   A123-24.
                                        12
II”).48 Third, the Claimants sought a declaratory judgment that “(i) GEICO has

violated 21 Del. C. § 2118; and [that] (ii) GEICO may not lawfully use the

Geographic Reduction Rule or Passive Modality Rule” (“Count III”).49 Fourth, RA

argued that GEICO violated the Deceptive Trade Practices Act, 6 Del. C. §

2532(a)(5) and (12), by failing to disclose its use of the GRR and PMR and to

investigate claims (Count IV).50

      On August 1, 2017, GEICO filed a motion to dismiss the Class Action

Complaint.51 In relevant part, GEICO alleged that Count III must be dismissed

because, under Clark v. State Farm Mutual Automobile Insurance Co.,52 “the

Delaware judiciary does not have the authority to enforce violations of the insurance

code, rather, that authority is vested with the General Assembly and the Insurance

Commissioner.”53 In response, the Superior Court issued an opinion dismissing

Count IV, but allowing Counts I, II, and III to remain.54 On appeal, GEICO

challenges the Superior Court’s ruling as to its authority to issue the Claimants’

requested declaratory judgment.

48
   Id. at 124-25.
49
   Id. at 125-26.
50
   Id. at 126-28.
51
   SJ Op. 14.
52
   131 A.3d 806 (Del. 2016).
53
   GEICO Opening Br. Ex. A, at 17 (hereinafter, “Dismiss Op.__”).
54
   SJ Op. 14.
                                          13
      On January 3, 2019, GEICO filed a motion for summary judgment on Counts

I, II, and III, which the Superior Court stayed until after it decided the Claimants’

motion for class certification.55   After the court granted the motion for class

certification, the Claimants also filed a motion for summary judgment.56 In its

summary judgment opinion, issued on March 24, 2021, the Superior Court entered

summary judgment in favor of GEICO on Counts I and II.57 The Claimants

challenge these rulings on cross-appeal.58 As to Count III—the declaratory judgment

count—the Superior Court ruled in favor of the Claimants, holding that the Rules

violate 21 Del. C. §§ 2118(a)(2) and 2118B(c).59 GEICO challenges this ruling on

appeal.60

II.   STANDARD OF REVIEW

      On appeal, we review a trial court’s “rulings on motions to dismiss pursuant

to Rule 12(b)(6) and motions for summary judgment de novo.”61 A motion to

dismiss may be granted where “the plaintiff would not be entitled to recover under

any reasonably conceivable set of circumstances.”62        A motion for summary

55
   Id.
56
   Id.
57
   See id. at 48.
58
   Claimants Opening Br. 41-53.
59
   SJ Op. 39.
60
   GEICO Opening Br. 23-37.
61
   Ramirez v. Murdick, 948 A.2d 395, 399 (Del. 2008).
62
   Central Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531, 535
(Del. 2011).
                                         14
judgment is only properly granted when “there is no genuine issue as to any material

fact and [] the moving party is entitled to a judgment as a matter of law.”63

III.   ANALYSIS

       In this appeal, we consider the following questions: (1) whether GEICO’s use

of the Rules breaches the PIP insurance contract; (2) whether GEICO’s use of the

Rules constitutes bad faith breach of contract; and (3) whether the Superior Court

erred in issuing a declaratory judgment that GEICO’s use of the Rules violates

Sections 2118 and 2118B.64

       A.     GEICO’s Use of the Rules Does Not Breach the PIP Contract

       Under Delaware law, plaintiffs must establish the following three elements to

succeed on a breach of contract claim: (1) the existence of a contract, whether

express or implied; (2) breach of one or more of the contract’s obligations; and (3)

damages resulting from the breach.65

       Claimants allege that GEICO breached its form Delaware Family Automobile

Insurance policy (“PIP Insurance Policy” or the “Policy”) by (1) failing to comply

with its common law and statutory requirement to investigate insurance claims,

63
   Del. Super. Ct. Civ. R. 56(c).
64
   The parties presented two other questions in their opening briefs. First, GEICO appealed
the Superior Court’s certification of the class. Second, the Claimants appealed the Superior
Court’s denial of their motion for relief related to declaratory judgment. Because we
reverse the Superior Court’s determination that GEICO’s use of the Rules violates Section
2118 and 2118B, we need not reach these arguments.
65
   VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
                                            15
which Claimants argue the parties incorporated into the contract, and (2) improperly

imposing a sublimit, cap, or percentage reduction that the insureds did not consent

to in a signed written document, as Delaware Insurance Regulation 603 (“Regulation

603”) requires.66

                1.      The Claimants fail to show that GEICO’s use of the Rules violates
                        a contractual obligation

      Under the PIP Insurance Policy, GEICO is obligated to pay the “Medical

expenses” of the injured person.67 The Policy defines “Medical expenses” as

“reasonable expenses for necessary medical, hospital, dental, surgical, x-ray,

ambulance and professional nursing services, prosthetic devices, and treatment by

recognized religious healers.”68 Thus, the Policy requires GEICO to pay reasonable

and necessary medical expenses.

      The Policy also provides that “[a]ny terms of this policy in conflict with the

statutes of Delaware are amended to conform to those statutes” (the “Incorporation

Provision”).69 According to the Claimants, the Incorporation Provision means that

“Delaware statutory law is therefore expressly incorporated into GEICO’s

contracts.”70        In particular, the Claimants allege that the following Delaware

66
   Claimants Opening Br. 41-53.
67
   B13.
68
   Id.
69
   Id. at 28.
70
   Claimants Opening Br. 48.
                                             16
common law and statutory laws are incorporated into the contract: (1) the Delaware

common law requirement that “insurer[s] perform a proper investigation of a claim

before denying it” 71 and (2) 18 Del. C. §§ 2303 and 2304(16),72 which require

insurers to “perform an investigation based on all available information and to adopt

and implement reasonable standards for the prompt investigation of claims arising

under insurance policies.”73

       GEICO responds, and the Superior Court agreed, that the Claimants’

argument must fail because the Incorporation Provision is only implicated when the

Policy conflicts with Delaware law and the Claimants do not specify a provision that

does so.74 We reach the same conclusion.

       The Incorporation Provision states that the Policy will be amended to conform

to Delaware law if any terms of the Policy “conflict” with Delaware law.75 In other

words, the Incorporation Provision first requires the Claimants to identify a

71
   Id. at 46.
72
   18 Del. C. §§ 2301-2320 is the Delaware Unfair Trade Practices Act of the Insurance
Code. Section 2304(16) prohibits insurers from having a general business practice of
“[r]efusing to pay claims without conducting a reasonable investigation based upon all
available information.” Section 2303 states that “[n]o [insurer] shall engage in this State
in any trade practice which is defined in this chapter as, or determined pursuant to this
chapter to be, an unfair method of competition or an unfair or deceptive act or practice in
the business of insurance.”
73
   Claimants Opening Br. 48.
74
   GEICO’s Reply Br. and Answering Br. 32 (hereinafter, “GEICO Answering Br.__”); SJ
Op. 21 (“By not specifying a particular provision that conflicts with Delaware law,
Plaintiffs essentially argue that all Delaware law should be incorporated into the contract.
The absence of a provision does not mean that there is a conflict warranting reformation.”).
75
   B28 (emphasis added).
                                            17
provision in the Policy that is “different, opposed, or contradictory” to Delaware

law.76 They have not done so. The Policy only obligates GEICO to pay reasonable

and necessary medical expenses.77 It does not specify how GEICO must make that

determination. Thus, even if we assume arguendo the Claimants’ assertion that there

exists a common law duty for insurers to investigate all claims in a proper manner,78

and even if 18 Del. C. § 2304 contained a private right of action,79 nothing in the

76
   Conflict, Merriam-Webster, https://www.merriam-webster.com/dictionary/conflict (last
visited Feb. 18, 2022); see also Conflict, Oxford English Dictionary,
https://www.oed.com/view/Entry/38899?rskey=OJTWEa&result=2&isAdvanced=false#e
id (last visited Mar. 29, 2022) (defining “conflict” as “[t]o come into collision, to clash; to
be     at     variance,     be   incompatible”);      Conflict,    Cambridge      Dictionary,
https://dictionary.cambridge.org/us/dictionary/english/conflict (last visited Mar. 29, 2022)
(defining “conflict” as “to be in active disagreement, as between opposing opinions or
needs”).
77
   B13.
78
   We do not decide in this opinion whether that duty exists.
79
   It would be difficult to conclude that the parties intended to incorporate § 2304 into the
Policy when the Delaware Unfair Trade Practices Act does not create a private right of
action. 18 Del. C. § 2301, et seq. “Under the Act, only the Insurance Commissioner has
authority to examine and investigate alleged bad faith acts and file claims against ‘any such
person [who] has been engag[ed] . . . in any unfair or deceptive act or practice, whether or
not defined in § 2304.’” Davidson v. Travelers Home and Marine Ins. Co., 2011 WL
7063521, at *2 (Del. Super. Ct. Dec. 30, 2011) (citing 18 Del. C. § 2307(a)). This outcome
is supported by Johnson v. Gov’t Emps. Ins. Co., a case where the plaintiff brought a breach
of contract claim against GEICO on a theory that the policy incorporated Section 2304.
2014 WL 2708300, at *1 (D. Del. June 16, 2014). The plaintiff argued that because the
policy incorporated Delaware law, including Section 2304, and because GEICO’s use of
claims processing rules violated Section 2304, GEICO was in breach of its contract. Id.,
at *4. In holding that the contract did not incorporate Section 2304, the court reasoned:
        [T]he Plaintiff is attempting to reform the contract via the implied covenant
        of good faith and fair dealing, to include the requirements of 18 Del. C. §
        2304. For the Court to read into the insurance contract the requirements of
        § 2304 would require the Court to find that the parties would have agreed to
        such a term had the parties thought to have negotiated with respect to the
        matter. Here, as § 2304 contains no private right of action, the Court will not
                                              18
Policy conflicts with those supposed duties since the Policy is silent on how GEICO

will determine what is reasonable and necessary. In the absence of a conflict, the

Policy cannot be reformed to require anything more than the duty to pay reasonable

and necessary medical expenses.

      Focusing on the only relevant contractual obligation in the Policy—GEICO

obligation to pay reasonable and necessary medical expenses—GEICO is entitled to

judgment as a matter of law. To succeed on their breach of contract claim, which

requires breach of a contractual obligation, the Claimants bear the burden to show

that GEICO breached that obligation by failing to pay reasonable and necessary

medical expenses. Inherent in making that showing is the need to first prove that the

Claimants submitted medical expenses are reasonable and necessary. Claimants

disavowed proving that their submitted medical expenses were reasonable and

necessary.   As such, they cannot show that GEICO breached its contractual

obligation to pay reasonable and necessary medical expenses. Accordingly, their

breach of contract claim necessarily fails.

      For the reasons stated above, we affirm the Superior Court order granting

judgment in favor of GEICO on the contract claims.

      read the requirements into the contract without compelling evidence that the
      parties would have agreed to include the clause if they had negotiated the
      issue. Id.
                                          19
             2.     The Rules do not constitute a “sublimit, cap, percentage reduction,
                    [o]r similar reduction” in violation of Delaware Insurance
                    Regulation 603

      The Claimants also contend that the use of the Rules breaches the PIP Policy

by violating Regulation 603. The argument goes like this. The Rules operate as a

sublimit, cap, percentage reduction, or similar reduction. Regulation 603 requires

that the parties agree in a signed writing to any such sublimit, cap, or reduction, but

the parties did not agree to any such sublimit, cap, or reduction. Thus, the Rules

violate Regulation 603. Because GEICO is not in compliance with Regulation 603,

it cannot permissibly use the Rules to deny PIP benefits. As such, under the

Claimants’ theory, those claims denied by the use of the Rules are deemed

reasonable and necessary, and GEICO has breached the Policy by not paying those

claims.80

      GEICO argues that the Rules are not sublimits because they are not limitations

in an insurance policy on the amount of coverage and that the Rules are not

percentage reductions because they reduce bills by a dollar amount instead of by a

percentage.81 While the Superior Court agreed with GEICO’s conclusion, it held

that the Rules are not sublimits, caps, or percentage reductions because they “are not

applied in the same way to each of the GEICO Policies.”82 We agree with the

80
   Claimants Opening Br. 49-51.
81
   GEICO Answering Br. 35-36.
82
   SJ Op. 25.
                                          20
Superior Court. Regulation 603, which is entitled the “Delaware Motorists

Protection Act,” was adopted by the Insurance Commissioner pursuant to 21 Del. C.

§ 2118.83 Section 6.3 of Regulation 603 specifically concerns PIP insurance and

states that

              [a]ny insurer, in accordance with filings made with the
              Insurance Department, may provide for certain
              deductibles, waiting periods, sublimits, percentage
              reductions, excess provisions or similar reductions at the
              election of the owner of a motor vehicle . . . . The owner’s
              election of any reduced benefits described in this section
              must be made in writing and signed by that owner.84

       According to the Claimants, the Rules are sublimits or percentage reductions

subject to Regulation 603 because they “automatically cap and deny payments.”85

That conclusion is necessary to their success on this claim. We cannot, however,

reach this conclusion because the GRR and PMR do not operate as sublimits or

percentage requirements as to each GEICO Policy across the board. For example,

imagine A and B both get into car accidents and incur medical expenses for treatment

X as a result of those accidents. Both A and B have PIP insurance coverage through

GEICO. A’s medical provider submits a claim to GEICO that charges $300 for

treatment X. B’s medical provider submits a claim to GEICO that reflects a $280

charge for treatment X. In the geographic region for A’s medical provider, the

83
   Del. Ins. Reg. 603.
84
   Id. at 6.3.
85
   Claimants Opening Br. 50.
                                          21
eightieth percentile for treatment X is $330. As such, the GRR determines that A’s

claim of $300 is reasonable because it is below the region’s eightieth percentile

figure. A’s provider receives full payment. In the geographic region for B’s medical

provider, however, the eightieth percentile for treatment X is $250. Thus, the GRR

determines that B’s claim of $280 is not reasonable and B’s provider receives only

$250. While B’s provider did not receive the full payment, as it relates to A’s

provider, the GRR has not acted as a limit because GEICO paid A’s medical expense

claim in full. Stated differently, in most instances the Rules will not limit payment

at all. Thus, we cannot conclude that the Rules operate as a “sublimit, cap,

percentage reduction, [o]r similar reduction” when that is not true in every case. As

a result, Claimants have failed to show that the Rules are “sublimit[s], cap[s],

percentage reduction[s], [o]r similar reduction[s]” that are subject to Regulation 603.

         Like the Superior Court, we believe the Rules should be disclosed because

they “are basically incorporated into the GEICO Policies under GEICO’s

interpretation of reasonableness” and in some instances appear to “operate like

sublimits or similar reduction.”86 But we also “find[] fault with [Claimants’] breach

of contract theory under Delaware Insurance Regulation 603.”87 Thus, we affirm the

86
     SJ Op. 25.
87
     Id. at 26.
                                          22
Superior Court’s holding that the Claimants’ breach of contract theory under

Regulation 603 fails.

      B.     GEICO’s Use of the Rules Does Not Amount to Bad Faith Breach of
             Contract

      The Claimants allege that GEICO has engaged in bad faith breach of contract

by relying on the Rules to arbitrarily deny PIP claims.88 According to the Claimants,

GEICO knows that the GRR is not a reasonable method of denying claims because

the Rules do not consider factors such as time, skill level of the provider, or the cost

of operating the provider’s practice.89 The Claimants also allege that GEICO knows

the PMR is not an adequate determinant of the necessity of a treatment because

treatises it relies on warn that passive modalities may be necessary after eight weeks

and because “GEICO knows from its own medical experts that before denying a

claim, it would need to study the entire file and examine the insured.”90 The

Claimants contend GEICO is acting in bad faith by denying claims through the use

of fully automated rules that either only consider three factors of reasonableness or

do not take the claimant’s individual circumstance into account.91

      GEICO responds, and the Superior Court agreed, that GEICO’s use of the

Rules does not amount to bad faith breach of contract because the Claimants failed

88
   Claimants Opening Br. 54-59.
89
   Id. at 56.
90
   Id. at 57.
91
   Id. at 56-58.
                                          23
to show that GEICO’s use of the Rules was without any reasonable justification.92

We agree.

      Delaware law recognizes that “bad faith[] is actionable where the insured can

show that the insurer’s denial of benefits was ‘clearly without any reasonable

justification.’”93 These claims for bad faith nonpayment are “cognizable under

Delaware law as a breach of contractual obligations.”94 “In order to establish ‘bad-

faith’ the plaintiff must show that the insurer’s refusal to honor its contractual

obligation was clearly without any reasonable justification.”95 In other words, an

insurer’s actions only give rise to a bad faith breach of contract claim if the insurer’s

actions first breach the contract. Then, the question relevant to whether the insurer’s

denial was reasonable becomes “whether at the time the insurer denied liability,

there existed a set of facts or circumstances known to the insurer which created a

bona fide dispute and therefore a meritorious defense to the insurer’s liability.”96

Thus, in order for the Claimants to prevail on this claim, they must first prove that

92
   GEICO Answering Br. 38-41; SJ Op. 30 (“The Court finds that Plaintiffs have not carried
their burden on bad faith. [T]he Court cannot find that GEICO’s use of the Rules was
without any reasonable justification.”).
93
   Tackett v. State Farm Fire and Cas. Ins. Co., 653 A.2d 254, 264 (Del. 1995) (quoting
Casson v. Nationwide Ins. Co., 455 A.2d 361, 369 (Del. Super. Ct. 1982)).
94
   Id. at 256.
95
   Casson, 455 A.2d at 369 (emphasis added).
96
   Id.
                                           24
there was a breach of the contract and next that the breach was “clearly without any

reasonable justification.”97 The Claimants have not carried this burden.

      As an initial matter, Claimants did not show that there was a breach of

contract. Without a showing of an underlying breach, there can be no claim for bad

faith breach of contract.

      Even if the Claimants could show a breach of contract, they cannot show that

GEICO’s reliance on the Rules was clearly without any reasonable justification.

Section 2118 requires insurers to pay reasonable and necessary medical expenses,

but Section 2118 does not dictate how insurers must determine the reasonableness

and necessity of claims.98      At the time GEICO used the Rules to process the

Claimants’ claims, no Delaware court had ruled on the lawfulness of GEICO’s

current PIP claims process. Further, it is undisputed that GEICO’s current process

considers the cost of treatment by other members of the profession in the same

geographic location.99 Delaware case law has articulated that the ordinary and

reasonable charges usually made by similarly situated providers should be

considered when determining the reasonableness of a charge.100 Moreover, not only

97
   Id.
98
   21 Del. C. § 2118(a)(2).
99
   See Section I.C.1.
100
    Anticaglia v. Lynch, 1992 WL 138983, at *1 (Del. Super. Ct. Mar. 16, 1992); Watson
v. Metro. Prop. & Cas. Ins. Co., 2003 WL 22290906, at *1 (Del. Super. Ct. Oct. 2, 2003).
In Anticaglia and Watson, the Superior Court articulated the following factors that it uses
to determine the reasonableness of medical expenses: ordinary and reasonable charges
                                            25
did GEICO rely on medical studies supporting its implementation of the PMR,101 but

its adjusters also review a claimant’s medical records and other relevant facts upon

a request for re-evaluation.102 And while the Claimants argue that GEICO’s current

process does not consider enough factors to actually determine the reasonableness

and necessity of a claim, it cannot be said that GEICO’s current process is so devoid

of any justification as to give rise to a claim of bad faith breach of contract.

       As a result, we affirm the Superior Court’s ruling that GEICO did not commit

bad faith breach of contract.

       C.     The Superior Court Erred in Issuing a Declaratory Judgment that the
              Rules Violate §§ 2118 and 2118B

       GEICO challenges the Superior Court’s issuance of a declaratory judgment

that GEICO’s use of the Rules violates 21 Del. C. §§ 2118 and 2118B on two

grounds: (1) the judiciary lacks the authority to issue such a declaration;103 and (2)

the Claimants failed to present evidence that their medical expenses were reasonable

and necessary.104       We disagree that the judiciary lacks authority to issue a

made by similarly situated providers; the nature and difficulty of the treatment; the time
devoted to the treatment; the number of treatments rendered; the number of office visits;
the inconvenience and expense borne by the provider; the nature of the provider’s
geographic location, the provider’s education level, training, and reputation; and the ability
of the insured to pay.
101
    GEICO Opening Br. 12; A861-77, 913-21.
102
    A915.
103
    GEICO Opening Br. 17.
104
    Id. at 24-25. GEICO also argues that the Superior Court erred for the following
additional four reasons: (1) the Superior Court improperly shifted the burden of proof to
GEICO; (2) the Superior Court erred in ruling, sua sponte, that GEICO violated Section
                                             26
declaratory judgment. We agree, however, that the Claimants were required to first

show that their medical expenses were reasonable and necessary.

             1.     The judiciary has the authority to issue the claimants’ requested
                    declaratory relief

      GEICO first attacks the court’s authority to issue a declaratory judgment as to

Section 2118.105 According to GEICO, the judiciary does not have the authority to

issue such a declaration because Clark held that resolution of “a similar request for

declaratory relief involving § 2118B . . . is exclusively within the province of the

Insurance Commissioner, not the Judiciary.”106 As such, GEICO contends that the

Superior Court was required to grant its motion for summary judgment.107

      The Claimants respond, and the Superior Court held, that Clark does not act

as a bar to judicial enforcement of insurance law because Clark addressed the narrow

issue of whether the Court could substitute Section 2118B’s statutory remedy for an

insurer’s failure to pay PIP benefits within the thirty-day timeframe with a

declaratory judgment compelling payment within thirty days.108 In our view, Clark

does not foreclose review by the courts.

2118B; (3) the Superior Court improperly injected an investigation requirement into
Section 2118B; and (4) there are genuine disputes of material fact that preclude the entry
of summary judgment. GEICO Opening Br. 24-32, 35-37. Given our reversal of the
Superior Court’s declaratory judgment, we need not reach these issues.
105
    GEICO Opening Br. at 17-22.
106
    131 A.3d 806; GEICO Opening Br. 17.
107
    Id. at 17-22.
108
    Claimants Opening Br. 24-25; Dismiss Op. 19-20 (“GEICO overstates the holding in
Clark. The Clark court addressed the very narrow issue of whether declaratory judgment
                                           27
      In Clark, the plaintiffs, Clark and Smith, had PIP insurance coverage through

State Farm.109 After receiving claims under the policy, State Farm began making

payments to both plaintiffs.110 The last of the payments, however, was made more

than thirty days after the plaintiffs submitted their claims. 111 Despite being paid

Section 2118B’s statutorily required interest, the plaintiffs sued State Farm, alleging

that State Farm deducted the statutorily required interest amounts from the PIP

coverage limits it owed to them.112 When that allegation proved to be false, the

plaintiffs requested leave to amend their complaint to allege that State Farm’s

delayed payments violated § 2118B.113 The plaintiffs thus requested declaratory

judgment that “State Farm’s failure to pay claims within thirty days of its receipt of

written requests violated § 2118B(c).”114 State Farm opposed the motion to amend

and filed a motion for summary judgment.115 After the Superior Court denied the

plaintiffs’ request and granted State Farm’s motion for summary judgment, the

plaintiffs appealed to this Court.116

concerning [sic] the appropriate remedy for violations of Section 2118B(c) when the
legislature had clearly enumerated the available remedies for violation [sic] of Section
2118B(c).”).
109
    131 A.3d at 809.
110
    Id.
111
    Id.
112
    Id.
113
    Id. at 809-10.
114
    Id. at 810.
115
    Id.
116
    Id. at 810, 812.
                                          28
       In affirming the Superior Court’s decision to deny the plaintiffs’ motion for

leave to amend, the Court determined that granting the motion would ultimately be

futile because the issuance of the plaintiffs’ requested remedy would be improper.117

The Court reached this conclusion for two reasons. First, the statute expressly

permits insurers to pay claims outside of the thirty-day window.118 But doing so

triggers interest payments, which State Farm had already paid.119         The Court

reasoned that because the statute permitted the complained of behavior, providing

its own consequence for that behavior, and because State Farm already paid the

statutory interest, “there was no further relief that could be fashioned for Clark and

Smith.”120

       Second, and rooted in the Court’s first reason, the Court determined that

because the statute already provided its own remedy for not paying PIP claims within

thirty days, thus allowing for that situation, issuing the plaintiffs’ requested

declaratory judgment would provide what the statute does not: a rigid deadline

requiring payment within thirty days.121 Additionally, the Court noted that such an

action would replace the legislative remedy with a judicial remedy, causing the

117
    Id. at 812-13.
118
    Id. at 813.
119
    Id.
120
    Id.
121
    Id.
                                         29
judiciary to “act like an administrative agency and craft regulation[].”122 The Court

concluded that, given the circumstances, this form of judicial regulation would be

impermissible.123

         Here, in arguing that Clark held that the judiciary does not have the authority

to decide “whether GEICO’s use of the Rules is prohibited by [Section] 2118”

because such a decision is “exclusively within the province of the Insurance

Commissioner,” GEICO both mischaracterizes and hyperfocuses on the Court’s

secondary reasoning regarding impermissible judicial regulation.124 While GEICO

is correct that the Court cautions against judicial regulation, that secondary reason is

firmly planted in the ground of the Court’s first and primary reason, which is that

the statute permits the complained of behavior. In other words, before the Court

addresses the topic of judicial regulation, it first acknowledges that the statute allows

State Farm’s behavior. And therein lies the distinction between Clark and the instant

case. Unlike in Clark, where the statute at issue expressly allowed for the payment

of PIP claims thirty days after claims are submitted, here, the statute is silent on the

use of tools such as the Rules. As such, a declaration regarding whether GEICO can

lawfully use the Rules would not amount to judicial regulation as it would have in

Clark.

122
    Id.
123
    Id.
124
    GEICO Opening Br. 17.
                                            30
             2.     The Claimants must present evidence that their medical expenses
                    are reasonable and necessary

      According to GEICO, the “Plaintiffs spelled out the exact declaratory relief

sought in Count III: ‘Plaintiffs . . . respectfully request that this [c]ourt enter

judgment, as a matter of law, that” GEICO violated Section 2118 and that “GEICO

may not lawfully use the [Rules].”125 GEICO argues that Claimants could not prove

that the Rules violated Section 2118 without first showing that GEICO denied or

reduced medical expenses that were reasonable and necessary.126 And because the

Claimants disavowed proving the reasonableness and necessity of their medical

expenses, summary judgment should have been granted in GEICO’s favor.127

      Claimants respond that it need not prove the reasonableness and necessity of

its expenses because it is challenging GEICO’s Rules in the abstract as “amount[ing]

to an illegitimate, unreasonable sham.”128 The Superior Court agreed.129 Citing State

Farm Mutual Automobile Insurance Co. v. Spine Care Delaware, the Superior Court

held that this Court indicated that a plaintiff could challenge an insurer’s use of

computerized rules in the abstract without first proving that its own medical

expenses are reasonable and necessary.130

125
    Id. at 24.
126
    Id. at 24-25.
127
    Id.
128
    Plaintiffs Opening Br. 28-29.
129
    SJ Op. 32-33.
130
    SJ Op. 32-33 (citing 238 A.3d 850 (Del. 2020)).
                                           31
      In State Farm, the plaintiff, an ambulatory surgery center, submitted PIP

claims to State Farm for medical expense reimbursement for minimally invasive

spinal injections.131 These injections were both bilateral and multilevel, requiring

“injections on two sides of the spine or on multiple vertebral levels, respectively.”132

As to multilevel spinal injections, State Farm followed a rule, referred to as a

multiple payment reduction (“MPR”), of paying the first injection at one hundred

percent and the second injection at fifty percent of the first injection.133 As such,

when State Farm received the plaintiff’s charges for multi-injection procedures, it

unilaterally applied the MPR to those charges, resulting in the plaintiff’s second

injection being paid at only fifty percent.134 The plaintiff filed suit, alleging that

State Farm’s use of the MPR to reduce its charges violated Section 2118 because its

charges for multi-injection procedures were reasonable and necessary.135

      The Court held that the plaintiff had the burden of showing that State Farm

was not entitled to apply the MPR to its charges and that the plaintiff must

“demonstrate that its charges for the second and subsequent injections are

reasonable.”136 When the plaintiff argued that State Farm needed to prove the

131
    238 A.3d at 852.
132
    Id.
133
    Id. at 852-53.
134
    Id.
135
    Id. at 853.
136
    Id.
                                          32
reasonableness of the MPR because the case had always related to the propriety of

the rule, this Court found that argument unpersuasive because the plaintiff “w[as]

not contesting State Farm’s MPR in the abstract.                Rather, according to the

Stipulation, the live, ‘ongoing controversy between [the plaintiff] and State Farm’

was with respect to whether State Farm could apply its MPRs to [the plaintiff’s]

fees.”137 Thus, State Farm left open the question that we answer today: whether a

PIP claimant may challenge an insurer’s PIP claims process in the abstract without

first proving that its medical expenses were reasonable and necessary. We hold that

it may not.

       Section 2118(a)(2) only requires insurers to “[c]ompensat[e] [] injured

persons for reasonable and necessary expenses” for medical services.138 In other

words, the insurer’s obligation under the statute is the payment of reasonable and

necessary medical expenses.139         Thus, to show a violation of the statute, the

Claimants must prove that GEICO did not fulfill its statutory obligation. That

showing, however, requires Claimants to prove that their medical expenses are

reasonable and necessary. Stated differently, the validity of a PIP claim alleging an

137
    Id. at 861-62.
138
    21 Del. C. § 2118(a)(2)a.
139
    See Ramsey v. State Farm Mut. Ins. Co., 2005 WL 528846, at *1 (Del. 2005) (“The PIP
statute provides recovery only for ‘reasonable and necessary’ expenses. In order to satisfy
that requirement, Ramsey had to establish that her lost wages were unavoidable. Since she
offered no evidence on that point, she failed to establish her entitlement to PIP benefits.”).
                                             33
insurer’s violation of Section 2118(a)(2) hinges on whether the expenses at issue are

reasonable and necessary and, absent such a showing, that plaintiff cannot prevail.

      Here, because Claimants disavowed proof of the reasonableness and necessity

of their medical expenses, their claim fails. If Claimants prove that their expenses

are reasonable and necessary, GEICO’s nonpayment of those expenses would be a

statutory violation, and Claimants would be entitled to payment without reduction

under the Rules.

      For this reason, we hold that the Superior Court’s issuance of the Claimants’

requested declaratory judgment was improper.

IV.   CONCLUSION

      For the foregoing reasons, the Court AFFIRMS in part and REVERSES in

part the Superior Court’s judgment.

                                         34