A recent decision by the Pennsylvania Supreme Court determined that courts are limited in their interpretation of laws regarding the recovery of attorneys’ fees, particularly under circumstances where it is not explicitly permitted. In Herd Chiropractic v. State Farm Automobile Insurance Company, No. 35 MAP 2012 (Pa. Feb. 20, 2012), the Court found that state law permits insurance companies to use a peer review organization (PRO) to determine the reasonableness and necessity of medical treatment, but does not subject them to the payment of the medical provider’s attorneys’ fees if the PRO’s determination is subsequently overturned. The Court’s decision reaffirmed Pennsylvania’s longstanding position, following the general American rule, that there can be no recovery of attorneys’ fees from an adverse party absent express authorization.

The issue in Herd Chiropractic involved whether a medical provider could collect attorneys’ fees from an insurer under the Pennsylvania Motor Vehicle Financial Responsibility Law after successfully challenging a PRO’s determination that the provider’s treatment was not reasonable and necessary. The medical provider successfully challenged the PRO’s decision and then sought attorneys’ fees from the insurer under the PRO statute, which included a provision referring to the payment of such costs.

While the lower courts agreed that the PRO statute permitted a fee award in this case, the Supreme Court reversed, finding that the plain language of the attorneys’ fee provision did not permit such an award. The Court found that the award only applies when an insurer has not challenged the reasonableness or necessity of treatment before a PRO. In its opinion, the Court recognized the medical provider’s concerns regarding the neutrality of PROs, which have contractual relationships with insurers. However, the Court stated that fee-shifting raises policy considerations best left to the state General Assembly and that courts must apply the plain language of statutes as written.

The Herd Chiropractic opinion reinforces two well established principles in Pennsylvania law: (1) when the words of a statute are clear, courts may not disregard them and (2) Pennsylvania prohibits the recovery of attorneys’ fees from an adverse party absent express statutory authorization, a clear agreement or other established exception. The Court’s reaffirmation of these principles may aid insurer defendants in class action and other litigation where the opposing party seeks to recover attorneys’ fees along with an alleged loss. However, with the Court’s recognition of the financial incentives in the PRO industry, it remains to be seen whether actions are brought challenging the PRO system and/or if there are attempts to change the law in this regard.