                                                     FILED
                                             COURT Of APPEALS owl
                                              STATE OF WASHINGT014

                                              7OI8 AUG 27 AM 856




          IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON


FOLWEILER CHIROPRACTIC, PS,            )       No. 76448-9-1
a Washington professional services     )
corporation,                           )
                                       )
                    Appellant,         )          ,
                                       )       DIVISION ONE
                    v.                 )
                                       )
AMERICAN FAMILY INSURANCE              )
COMPANY,                               )       UNPUBLISHED OPINION
                                       )
                    Respondent.        )       FILED: August 27, 2018
                                       )

      MANN, A.C.J. — Folweiler Chiropractic, PS (Folweiler) filed a class action

complaint against American Family Insurance Company (American Family)for violating

Washington's Consumer Protection Act(CPA).1 Folweiler alleged that American

Family's practice of using a computer database to assess whether medical provider bills

were reasonable was an unfair practice under the CPA. Folweiler appeals the trial

court's decision dismissing its action under CR 12(b)(6). Because Folweiler's complaint




      I Chapter 19.86 RCW.
No. 76448-9-1/2


sufficiently alleged that American Family's conduct violated the CPA, we reverse and

remand for further proceedings.2

                                                FACTS

       Folweiler is a professional services corporation that provides chiropractic care

and massage therapy in King County. American Family is an insurance company that

sells and underwrites automobile insurance policies in Washington. Insurance policies

sold or underwritten by American Family included personal injury protection (PIP)

covering medical expenses incurred by a covered person arising from a covered

automobile accident.

       On July 8, 2016, Folweiler filed a class action complaint against American Family

on behalf of a class of at least 900 similarly situated medical providers. Folweiler's

complaint alleged:(1) between July 2012 and July 2016 Folweiler treated patients who

had PIP coverage under an automobile insurance policy issued or underwritten by

American Family,(2) American Family, as part of its general policy and practice in

Washington, directed Folweiler to bill American Family directly for treatment rather than

the patient,(3) American Family accepted Folweiler's bills as claims for payment of

reasonable and necessary medical expenses under the patient's PIP coverage,(4)

American Family had a policy and practice of relying on a computer database to

determine payment of all medical expense bills submitted by Washington providers,(5)

the computer database was created by Fair Health and was utilized to compare the

amount billed by the provider for each procedure with the amount represented by the



        2 Folweiler asked that we take judicial notice of certain documents outside of the pleadings. We
decline to do so and deny Folweiler's motion.
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No. 76448-9-1/3


80th percentile of charges in the Fair Health database for the same procedure in the

same zip code defined geographical area,(6) when the computer review found the

provider's bill amount was greater than the 80th percentile amount, the computer would

limit the "payment amount" to the 80th percentile and would show the reason for the

reduction as an explanatory code P0041,3(7) The computer created an Explanation of

Review(EOR)that set out the original "charged amount" and the reduced "payment

amount," and provided the following explanation for the reduction from the amount

charged:

        For Dates of Service 5/31/11 and prior, the amount allowed is based on
        benchmark data provided by Ingenix. For Dates of Service 6/1/11 and
        greater, the amount allowed was reviewed using the FH (Fair Health) RV
        Benchmark Database. Medical providers are asked to accept the
        reasonable amount as full payment for health care services and not bill the
        patient for additional charges. We require supporting documentation to
        reconsider charges for additional payment.

Folweiler alleged that based on the P0041 reduction, American Family paid Folweiler's

claims between July 2012 and July 2016 at the reduced payment amount.

        Folweiler's complaint alleged further that:(1) no one at American Family

determined that a provider's billed amount was a reasonable amount for that provider in

that provider's geographic area,(2) no one at American Family investigated or knew the

identity, background, credentials, experience or any personal characteristics of the

individual providers used as comparators in arriving at the 80th percentile amount,(3)

no one at American Family independently investigated whether the amount billed was a



          3 Folweiler's complaint alleged that American Family reduced charges to the "80th percentile," but
in its later pleadings to the trial court and in its briefs to this court FC represented that the reduction is to
the 85th percentile—not the "80th percentile." The difference is irrelevant to the resolution of this appeal.
We use the 80th percentile alleged in the complaint.
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No. 76448-9-1/4


reasonable amount for that provider to charge for that procedure in that provider's city,

and (4) no one at American Family knew whether the amount billed was a reasonable

amount for that provider to charge based on the provider's background, credentials,

usual and customary fee, the amount paid by other auto insurers, or any other

individualized characteristics or factors.

       Folweiler's complaint alleged that American Family's practice violated the PIP

statute, RCW 48.22.005(7) and RCW 48.22.095, and the regulations defining unfair

claims settlement practices in WAC 284-30-330. Folweiler also alleged that American

Family's claims settlement practice was an unfair practice that violated the CPA.

       American Family moved to dismiss Folweiler's complaint under CR 12(b)(6). It

argued that its practices complied with WAC 284-30-330 and chapter 48.22 RCW. The

trial court granted American Family's motion to dismiss. The trial court denied

Folweiler's motion for reconsideration. Folweiler appeals.

                                         ANALYSIS

       We review CR 12(b)(6) dismissals de novo. FutureSelect Portfolio Mgmt., Inc. v.

Tremont Grp. Holdings, Inc., 180 Wn.2d 954, 962, 331 P.3d 29 (2014). "A dismissal for

failure to state a claim under CR .12(b)(6) is appropriate only if "it appears beyond doubt

that the plaintiff can prove no set of facts, consistent with the complaint, which would

entitle the plaintiff to relief." Bravo v. Dolsen Cos., 125 Wn.2d 745, 750, 888 P.2d 147

(1995)(internal quotations omitted). "Therefore, a complaint survives a CR 12(b)(6)

motion if any set of facts could exist that would justify recovery." FutureSelect, 180

Wn.2d at 963. A CR 12(b)(6) motion should be granted only "sparingly and with care."

Bravo, 125 Wn.2d at 750 (citation and internal quotations omitted).

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No. 76448-9-1/5


      "Washington is a notice pleading state and merely requires a simple concise

statement of the claim and the relief sought." Pac. Nw. Shooting Park Ass'n v. City of

Sequim, 158 Wn.2d 342, 352, 144 P.3d 276 (2006); CR 8(a).

                                     Washington's CPA

       The CPA prohibits "[u]nfair methods of competition and unfair or deceptive acts

or practices in the conduct of any trade or commerce." RCW 19.86.020. The CPA

authorizes a private cause of action: lainy person who is injured in his or her business

or property' by a violation of the act may bring a civil suit for injunctive relief, damages,

attorney fees and costs, and treble damages." Panag v. Farmers Ins. Co. of

Washington, 166 Wn.2d 27, 37, 204 P.3d 885(2009)(alteration in original)(quoting

RCW 19.86.090). To prevail on a CPA claim, a plaintiff must show (1) an unfair or

deceptive act or practice,(2)that act or practice occurs in trade or commerce,(3) a

public interest impact,(4) injury to the plaintiff in his or her business or property, and (5)

a causal link between the unfair or deceptive act and the injury. Hangman Ridge

Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780, 719 P.2d 531

(1986).

       This appeal puts elements one and three at issue.

   A. Unfair or deceptive act

       American Family asserts that Folweiler's complaint failed to allege American

Family had engaged in an unfair or deceptive practice. We disagree.

       Whether a particular act is unfair or deceptive is a question of law. Panaci, 166

Wn.2d at 47. "A defendant's act or practice is per se unfair or deceptive if the plaintiff

shows that it violates a statute declaring the conduct to be an unfair or deceptive act or

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practice in trade or commerce." Rush v. Blackburn, 190 Wn. App. 945, 961-62, 361

P.3d 217(2015); Hangman Ridge, 105 Wn.2d at 786.

       While Folweiler's complaint alleged a per se CPA violation by claiming American

Family's claims settlement process violates RCW 48.22.005(7) and WAC 284-30-330,

this claim fails as a matter of law. It is well established that "only an insured may bring a

per se action" for violations of the CPA. Tank v. State Farms, 105 Wn.2d 381, 394, 715

P.2d 1133(1986); Pain Diagnostics & Rehabilitation Assocs. v. Brockman, 97 Wn. App.

691, 698, 988 P.2d 972(1999)(dismissing provider's per se CPA action for violation of

PIP statute). Because Folweiler was not an insured, it cannot assert a per se violation

of the CPA against American Family.

       Folweiler's complaint also alleged that American Family's claim settlement

process is an unfair practice that violated the CPA. "If a defendant's act is not per se

unfair or deceptive, then the plaintiff must show the conduct is "unfair" or "deceptive"

under a case-specific analysis of those terms." Rush, 190 Wn. App. at 962; Hangman

Ridge, 105 Wn.2d at 786. "Because 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." Saunders v. Lloyd's of London, 113 Wn.2d 259, 330, 344, 779

P.2d 249(1989)(quoting State v. Reader's Digest Ass'n, 81 Wn.2d 259, 275, 501 P.2d

290 (1972)).

       An act may be considered unfair and a violation of the CPA if the unfair act or

practice is "not regulated by statute but in violation of public interest." Klem v. Wash.

Mut. Bank, 176 Wn.2d 771, 787, 295 P.3d 1179 (2013). This can include considering



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No. 76448-9-1/7


       whether the practice, without necessarily having been previously
       considered unlawful, offends public policy as it has been established by
       statutes, the common law or otherwise—whether, in other words, it is
       within at least the penumbra of some common-law, statutory, or other
       established concept of unfairness.

Maciney v. Lincoln Mut. Say. Bank, 34 Wn. App. 45, 57, 659 P.2d 537(1983)(quoting

Fed. Trade Comm'n v. Sperry & Hutchinson Co., 405 U.S. 233, 244 n.5, 92 S. Ct. 898,

31 L. Ed. 2d 170 (1972)).

       Consequently, while Folweiler may not maintain a CPA action for a per se

violation of the PIP statute and trade practice regulations, the statute and regulations

may nonetheless guide our consideration of whether American Family's claim

settlement practice is unfair and violates the public interest.

       Folweiler's complaint alleged that American Family's practice of relying on the

Fair Health database and to reduce payment amounts to 80 percent of the geographic

region is an unfair act in violation of the public interest established by RCW 48.22.095

as defined by RCW 48.22.005(7). RCW 48.22.095 establishes minimum PIP coverage

limits for automobile insurers. Relevant here, RCW 48.22.095(1)(a) requires insurers to

offer automobile insurance policies that provide minimum PIP coverage of $10,000 for

"medical and hospital benefits." "Medical and hospital benefits" are defined by RCW

48.22.005(7) as:

       payments for all reasonable and necessary expenses incurred by or on
       behalf of the insured for injuries sustained as a result of an automobile
       accident for health care services provided by persons licensed under Title
       18 RCW,including pharmaceuticals, prosthetic devices and eyeglasses,
       and necessary ambulance, hospital, and professional nursing service.
       Medical and hospital benefits are payable for expenses incurred within
       three years from the date of the automobile accident.



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No. 76448-9-1/8


       On its face, RCW 48.22.095(1)(a) and RCW 48.22.005(7) require payment of "all

reasonable and necessary expenses incurred by or on behalf of the insured." 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. Folweiler's complaint

alleged American Family's claim settlement process violates the duty to conduct an

individualize assessment by failing to consider and independently evaluate the identity,

background, credentials, experience or any personal characteristic of the individual

provider or whether the amount charged was reasonable for the individual treatment

provided. The allegations in Folweiler's complaint are sufficient to establish an unfair

act in violation of the CPA based on a violation of the public interest embodied in RCW

48.22.095(1)(a) and RCW 48.22.005(7).

       Folweiler's complaint also alleged that American Family's claim settlement

process is an unfair and contrary to WAC 284-30-330. Chapter 284-30 WAC defines

"certain minimum standards which, if violated with such frequency as to indicate a

general business practice, will be deemed to constitute unfair claims settlement

practices." WAC 284-30-300. WAC 284-30-330 identifies specific unfair claims

settlement practices and includes: "[flailing to adopt and implement reasonable

standards for the prompt investigation of claims arising under insurance policies," and

"[defusing to pay claims without conducting a reasonable investigation." WAC 284-30-

330(3) and (4).



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No. 76448-9-1/9


       Consistent with the statutory duty discussed above, reading WAC 284-30-330(3)

and (4)together unequivocally establishes a duty to actually investigate and conduct a

reasonable investigation of claims. Again, this requires an individualized assessment

and not simply applying a geographic based formula to each claim regardless of the

individual circumstances. The allegations in Folweiler's complaint are sufficient to

establish an unfair act in violation of the CPA based on a violation of the public interest

embodied in WAC 284-30-300.

       2. Injury

       The injury element under the CPA is broadly defined. It is met "upon proof the

plaintiffs property interest or money is diminished because of the unlawful conduct even

if the expenses caused by the statutory violation are minimal." Panag, 166 Wn.2d at 57.

Out-of-pocket expenses and pecuniary losses "occasioned by inconvenience" are injury.

Panaq, 166 Wn.2d at 57. Monetary damages are not necessary to establish injury, a

mere delay in use of property or receiving payment is an injury under the CPA. Sorrel v.

Eagle Healthcare, Inc. 110 Wn. App. 290, 298, 38 P.3d 1024(2002)(injury exists where

the claimant's monetary refund was delayed two weeks).

       Folweiler pleaded that it suffered injury: Idiuring the period from July 8, 2012 to

July 8, 2016, Folweiler suffered injury and damage to its business as a direct and

proximate result of American Family's practice of making P0041 reductions to

Washington provider bills in the manner described above." The complaint further

alleged that class members "sustained injury to their business caused by American

Family's practice in the form of reduced payments, delay in payment of reasonable



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No. 76448-9-1/10


medical expenses, out of pocket administrative costs or added expenses, business

interruption or inconvenience." Folweiler sufficiently pleaded injury under the CPA.

       Because Folweiler sufficiently pleaded the required CPA elements, the trial court

erred in dismissing its case for failure to state a claim under CR 12(b)(6).

       We reverse and remand to the trial court for further proceedings.




WE CONCUR:




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