Mr. Scott, through his attorney, sent a responsive letter to Travelers requesting that Travelers submit a list of three doctors, whom Mr. Scott indicated he would consider allowing to examine him, even though Travelers had not obtained a court order. Travelers did not send such a list, but, instead, renewed its request that Mr. Scott submit to the IME that it had scheduled.

Mr. Scott did not attend the scheduled IME and Travelers discontinued paying his outstanding medical bills. Mr. Scott then sued Travelers, alleging, among other things, that Travelers had breached its contract with him by imposing its IME requirement, which he contended conflicted with Section 1796(a) of the MVFRL, which requires a court order, based on a showing of good cause by an insurer paying first-party benefits, to compel an insured to submit to an IME.

A U.S. magistrate judge ruled in favor of Mr. Scott and the dispute reached the Third Circuit. It consolidated the Scott case with another case, and then asked the Supreme Court of Pennsylvania to decide:

Whether, under Pennsylvania law, a contractual provision in a motor vehicle insurance policy that requires an insured to submit to an independent medical examination by a physician selected by the insurer, when and as often as the insurer may reasonably require, as a condition precedent to the payment of first-party medical benefits under that policy, conflicts with the Motor Vehicle Financial Responsibility Law, 75 Pa.C.S. § 1796(a), and is therefore void as against public policy.

The Pennsylvania Supreme Court's Decision

The court held that the IME clauses in the insurers' policies conflicted with the requirements of Section 1796(a), and, as a result, were void as against public policy.

In its decision, the court decided that insurers must follow Section 1796(a) when seeking to compel an insured to submit to an IME, when the insured refused to voluntarily comply with such a request, and that any insurance policy that purported to set requirements by which an insurer could compel an insured to undergo an IME was "required to comport with that section."

Having concluded that Section 1796(a) imposed mandatory obligations on insurers, the court then found that the IME provisions in the insurance policies and the requirements of Section 1796(a) were in "irreconcilable conflict."

The court first pointed out that Section 1796(a) requires an insurer that wishes to compel a claimant for first-party medical benefits to undergo an IME to file a petition with a court of competent jurisdiction, and, also, to show good cause for the IME. In addition, any court order for an IME must give the insured "adequate notice of the time and date of the examination," as well as "state the manner, conditions and scope of the examination."

By contrast, the court continued, the policies' IME provisions did not require that the insurers file such a petition, or the need to establish good cause; rather, the policies allowed the insurers to "unilaterally, and at any time, require that the insured make himself or herself available for an IME at a time and place of the insurer[s'] choosing."

Therefore, the court reasoned, under the terms of the policies' IME provisions, the insured received "no suitable advance notice" of the request for an IME, the reasons for which it was being requested, or information about how the examination would be conducted. Moreover, the court emphasized, "critically," the insured did not have the opportunity to challenge the request before a neutral judicial decision-maker on the ground that it lacked good cause.

Next, the court observed, Section 1796(a) requires a judge to adjudicate the petition, but the IME policy provisions contained no such requirement and it was "the insurer alone" that decided when such a request was justified and if the insured had adequately complied.

The court next pointed out that, under Section 1796(a), if the judge granted an insurer's request for the IME, the judge selected the physician to perform the IME and, importantly, set "the manner, conditions, and scope of the examination." By contrast, the court noted, the IME policy provisions allowed the insurer "to unilaterally select the physicians who will perform the IME, and, of great significance, set no limits on the scope or conduct of the IME" – a process that impacted "insureds' significant privacy interests."

The court also observed that the IME policy provisions allowed the insurers to determine whether, as a result of the insured's alleged noncompliance with the conditions the insurers placed on the conduct of the IME, the insured's benefits should be terminated. The court noted that, by contrast, Section 1796(a) vested this authority "solely with the judge" who ordered the IME.

Finally, the court rejected the contention that, because the Pennsylvania Insurance Department had, by regulation, promulgated sample language for insurance policies governing medical claims for injuries caused by uninsured motorists that mirrored the language of the IME policy provisions, this constituted approval of the use of such policy language. The court declared that the Insurance Department could not, by regulation, legally approve an insurer's use of policy language that conflicted with the express requirements of the MVFRL.

Accordingly, the court concluded that the IME policy provisions were "void as against the public policy of this Commonwealth."

The case is Sayles v. Allstate Ins. Co., Nos. 58 MAP 2018, 59 MAP 2018 (Penn. Nov. 20, 2019).