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Rulings Send Lawsuits Against State Farm, American Family Back to Court, Hagens Berman Sobol Shapiro Announces

DENVER, Sept. 24 /PRNewswire/ -- The Colorado Court of Appeals handed State Farm Mutual Automobile Insurance Company a defeat by reversing a trial-court ruling supporting the insurance giant's use of a computer database to determine reimbursements of medical costs.

The ruling, issued September 20, opens the door for a class-action lawsuit to move forward that would represent physicians and patients who had payments from State Farm unilaterally reduced after the insurance company processed the charges through Sloans Lake Auto Injury Management, a medical database that ostensibly compares physician charges against "same or like services" in a geographic region."

In October of 2001, Pauline Reyher was injured in an auto accident and was treated by La Junta, Col. physician Wallace Brucker, the area's only orthopedic surgeon. Under Reyher's State Farm no-fault insurance policy, State Farm was obligated to pay "all reasonable and necessary expenses for medical" care.

According to the original complaint filed February 10, 2003, Brucker treated Reyher and submitted the charges to State Farm. State Farm, in turn, processed the bills and reduced the payments by various amounts, claiming the database showed other physicians in the geographic area charged less for the similar services.

According to attorney Rob Carey of Hagens Berman Sobol Shapiro, there was a problem with State Farm's conclusion: Brucker is the only doctor in his area who performs the type of medical services Reyher required.

"We argued in that State Farm's review did not consider the specific circumstances that made his charges reasonable," Carey noted.

In a 3-0 decision, Judge Hawthorne remanded the case to the trial court that originally dismissed Reyher and Brucker's case and granted summary judgment to State Farm.

The Court's decisions found that Brucker's arguments that the computer database used to determine "reasonable" reimbursement of medical costs was flawed and could not accurately assess the reasonableness of his charges.

The recent ruling also calls into question whether State Farm further violated Colorado's No-Fault Act by relying exclusively on the database to determine whether medical expenses are reasonable.

The appellate court's ruling reverses the summary judgment against Reyher and Brucker and remands the case to the trial court for further proceedings.

The ruling against State Farm follows closely on another ruling in a similar case against American Family Mutual Insurance Company issued earlier this month. In that case, the Colorado Court of Appeals reversed the trial court's decision denying class certification for certain claims and sent the case back to the trial court for further proceedings.

That case involved the claims of Tania LaBerenz, who was injured in an accident in October of 2001, and her doctor J. Bradley Gibson.

According to the complaint filed in April of 2003, American Family paid only a portion of the physician's charges, claiming the reductions were recommended by the MDR National Fee Database of charges for similar procedures.

LaBerenz and Gibson sought to represent a class of insureds and medical providers whose bills had been reduced based on the review by the database, claiming that the database was flawed and did not accurately assess the reasonableness of the doctor's bills. The trial court denied class certification.

The Court of Appeals reversed the trial court's decision, finding that certain requirements for class certification were met and sent it back to the trial court with instructions to reconsider class certification of the provider's claims.

For more information about this case, visit

About Hagens Berman Sobol Shapiro

The law firm of Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Since the firm's founding in 1993, it has developed a nationally recognized practice in class-action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit


Rob Carey (602) 840-5900

Hagens Berman Sobol Shapiro

Mark Firmani (206) 443-9357

Firmani & Associates, Inc.

SOURCE Hagens Berman Sobol Shapiro
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