Judge: Armen Tamzarian, Case: 23STCV18814, Date: 2023-12-13 Tentative Ruling
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Case Number: 23STCV18814 Hearing Date: December 13, 2023 Dept: 52
Defendant
Blue Cross of California’s Demurrer and Motion to Strike Portions of
Plaintiff’s Complaint
Demurrer
Defendant Blue
Cross of California dba Anthem Blue Cross (Anthem) demurs to plaintiff
Marcelino Diaz’s first through third causes of action.
Uncertainty
Anthem
demurs to the complaint for uncertainty.
“Demurrers for uncertainty are disfavored, and are granted only if the
pleading is so incomprehensible that a defendant cannot reasonably
respond.” (A.J. Fistes Corp. v. GDL
Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695, internal quotes and
alterations omitted.) The complaint must
sufficiently apprise defendants of the claims against them. (Ibid.)
Anthem argues the
complaint is uncertain because it lacks specific allegations about Anthem and
instead refers to the plural “defendants.”
Though the complaint makes some allegations about “defendants,” it also
makes numerous factual allegations about Anthem or both named defendants, “Anthem
and Accountable.” For example, plaintiff
alleges he “made repeated complaints to Anthem and Accountable about the
problem he was having in getting the silicon oil removed from his left eye.” (¶ 20.)
He further alleges, “Anthem’s failure to recognize and effectively
respond to Plaintiff’s various grievances is part of a systemic problem at
Anthem of failing to recognize, properly investigate, and resolve member
grievances.” (¶ 24.) “Anthem breached its contractual and
statutory duties by failing to provide an adequate network to provide for
Plaintiff’s health care needs, failing to arrange for services outside the
Plaintiff’s network when there were no available surgery centers to treat him,
failing to authorize continuity of care coverage, and failing to recognize,
investigate, and resolve Plaintiff’s grievances, as alleged herein.” (¶ 28.)
The complaint adequately apprises Anthem of the claims against it.
1. Breach of Contract
Plaintiff
alleges sufficient facts for breach of contract. Anthem argues that it cannot be liable for the
alleged breach of contract because it delegated referral functions to co-defendant
Accountable Health Care IPA. Generally, delegating
or assigning contractual obligations does not relieve the assignor of its
duties to other parties to the contract.
“The burden of an obligation may be transferred with the consent of the
party entitled to its benefit, but not otherwise.” (Civ. Code, § 1457.) By assigning obligations to an assignee, “the assignor is not at the
same time relieved of them. An assignor
remains bound under the contract absent the counter-party’s consent to the
assignment, but stands ‘in the nature of a surety for the [assignee] for the
performance of the obligation.’ ” (Hearn
Pacific Corp. v. Second Generation Roofing, Inc. (2016) 247 Cal.App.4th
117, 149.)
Anthem
relies on Health and Safety Code section 1371.25, which provides, “A [health]
plan, any entity contracting with a plan, and providers are each responsible
for their own acts or omissions, and are not liable for the acts or omissions
of, or the costs of defending, others.”
But while a health cannot be vicariously liable, it can be directly
liable for its own actions. “[D]elegation of the utilization review function to” another entity does not
bar” a plan member’s claims. (Martin
v. PacifiCare of California (2011) 198 Cal.App.4th 1390, 1406 (Martin) [Had the member “contacted [the
plan] and involved it in the utilization process,” she could have brought a
claim against the plan “because [its] own conduct would have been at issue”].)
Here, plaintiff alleges Anthem is liable because of its own acts or omissions. Specifically, plaintiff claims he contacted Anthem and involved it in the process of authorizing out-of-network
medical treatment.
The complaint alleges that after surgery
on his retina, plaintiff saw “physicians at Azul Vision about having surgery to
remove the silicon oil” used in the initial surgery. (Comp., ¶ 19.) “Plaintiff was advised that surgery could not
be performed because his ‘insurance is NOT accepted at the different surgery
centers.’ ” (Ibid.) He “made repeated complaints to Anthem and
Accountable about the problem he was having in getting the silicon oil removed
from his left eye.” (¶ 20.)
Plaintiff further alleges, “Instead
of acknowledging and solving the problem regarding the availability of in-network
surgery centers for Azul Vision surgeons to perform the surgery needed by
Plaintiff, Anthem and Accountable merely sent Plaintiff back to Azul Vision
where he received the same response that his insurance was not accepted at the
surgery centers where they performed surgeries.” (¶ 21.) “Anthem breached its contractual and
statutory duties by failing to provide an adequate network to provide for
Plaintiff’s health care needs, failing to arrange for services outside the
Plaintiff’s network when there were no available surgery centers to treat him,
failing to authorize continuity of care coverage, and failing to recognize,
investigate, and resolve Plaintiff’s grievances, as alleged herein.” (¶ 28.)
These allegations constitute Anthem’s own acts or omissions in breach of
its contractual obligations.
2.
Breach of Implied Covenant of Good Faith and Fair Dealing
Plaintiff alleges sufficient ultimate facts for this
cause of action. A cause of action for insurance
bad faith requires that “(1) benefits due under the policy must have been
withheld; and (2) the reason for withholding benefits must have been
unreasonable or without proper cause.” (Love
v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.) Plaintiff must
allege defendant’s conduct “demonstrates a failure or refusal to discharge
contractual responsibilities, prompted not by an honest mistake,
bad judgment or negligence but rather by a conscious and deliberate
act.” (Careau & Co. v. Security
Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.) “The ultimate test of bad faith liability …
is whether the” insurer’s denial or delay in coverage “was unreasonable.” (Chateau Chamberay Homeowners Ass'n v.
Associated Intern. Ins. Co. (2001) 90 Cal.App.4th 335, 346, internal quotes
and alterations omitted.) “[T]he
reasonableness of an insurer’s claims-handling conduct is ordinarily a question
of fact,” but “it becomes a question of law where … only one reasonable
inference can be drawn.” (Ibid.)
The complaint’s
allegations suffice to raise a question of fact, at this stage in the
proceedings, on whether defendant unreasonably delayed providing coverage to
plaintiff. As discussed above, plaintiff
alleges he complained to Anthem after provider Azul Vision said the necessary “surgery
could not be performed because his ‘insurance is NOT accepted at the different
surgery centers.’ ” (¶ 19.) Anthem “merely sent Plaintiff back to Azul
Vision where he received the received the same response that his insurance was
not accepted at the surgery centers where they performed surgeries.” (¶ 21.)
Azul Vision already told plaintiff it could not perform the surgery. A factfinder can infer that sending him back
to the same provider would do nothing to resolve the problem, and therefore
Anthem’s delay was unreasonable or conscious and deliberate.
The complaint also
alleges Anthem had “a systemic problem … of failing to properly recognize,
investigate, and resolve member grievances.”
(¶ 24.) It alleges Anthem failed
“to recognize, investigate, and resolve Plaintiff’s many grievances as part of
a pattern and practice of a broken grievance system.” (¶ 33(f).)
These allegations further support an inference that Anthem’s delay was
unreasonable or conscious and deliberate.
3. Violation of Civil Code § 3428
Plaintiff
alleges sufficient facts for this cause of action. “Civil Code section 3428 makes all health care
service plans liable for harm a subscriber suffers when the plan fails to
exercise ordinary care and denies, delays, or modifies health care services.” (Martin, supra, 198 Cal.App.4th at p.
1406.)
Plaintiff alleges facts constituting failure to exercise ordinary care
and denying or delaying health care services.
As discussed above, Anthem sent him back to the same healthcare provider
who already explained it could not treat him.
That allegation suffices to raise a question of fact as to whether
Anthem breached its duty of care.
Also, plaintiff alleges, “Anthem failed to arrange for a network of
providers under Plaintiff’s health plan that could promptly provide him with
necessary services for his condition.”
(¶ 39.) Anthem argues this is a
conclusory allegation. This allegation,
however, constitutes an ultimate fact—and is supported by the complaint’s other
allegations. When drawing reasonable
inferences in plaintiff’s favor, one can conclude that, if Anthem had
adequately arranged for a network of providers who could promptly provide the
necessary treatment, he would have gotten that treatment promptly. Instead, he alleges he encountered a
”merry-go-round of responsibility avoidance” that “went on for many more months.”
(¶ 22.)
Motion to Strike
Anthem
moves to strike four portions of plaintiff Marcelino Diaz’s complaint.
Punitive Damages
Defendants move to strike three portions of
the complaint regarding punitive damages.
Courts may strike such allegations
where the facts alleged “do not rise to the level of malice, oppression or
fraud necessary” to recover punitive damages under Civil Code section
3294. (Turman v. Turning Point of
Central California, Inc. (2010) 191 Cal.App.4th 53, 64.) “[A]bsent an intent to injure the plaintiff,
‘malice’ requires more than a ‘willful and conscious’ disregard of the
plaintiffs’ interests. The additional
component of ‘despicable conduct’ must be found.” (College Hospital Inc. v. Superior Court (1994)
8 Cal.4th 704, 725.) “Used in its
ordinary sense, the adjective ‘despicable’ is a powerful term that refers to
circumstances that are ‘base,’ ‘vile,’ or ‘contemptible.’ ” (Ibid.)
Plaintiffs allege
sufficient facts for malice or oppression.
“ ‘Malice’ means conduct which is intended by the defendant to cause
injury to the plaintiff or despicable conduct which is carried on by the
defendant with a willful and conscious disregard of the rights or safety of
others.” (Civ. Code, § 3294(c)(1).) “ ‘Oppression’ means despicable conduct that
subjects a person to cruel and unjust hardship in conscious disregard of that
person's rights.” (Civ. Code, § 3294(c)(2).)
“To support an award of punitive damages on the basis of conscious
disregard of the safety of others, a plaintiff ‘must establish that the
defendant was aware of the probable dangerous consequences of his conduct, and
that he willfully and deliberately failed to avoid those consequences.’ ” (Penner v. Falk (1984) 153
Cal.App.3d 858, 867.)
Plaintiff alleges
Anthem has “a long-standing practice of failing to recognize, properly
investigate, and resolve member grievances.”
(¶ 24.) “Despite Anthem’s history
of violations arising out of its grievance practices, and its payments of
millions of dollars in fines to the DMHC, Anthem has intentionally failed to
fix its grievance process as evidenced by its failure to effectively respond to
Plaintiff’s grievances.” (Ibid.)
The complaint
further alleges, “When Plaintiff repeatedly complained to Defendants that he
needed treatment for his left eye, they simply ignored the problem and left
Plaintiff to his own resources.” (¶ 1.) After “repeated complaints” (¶ 20), Anthem
“sent Plaintiff back to Azul Vision,” the same provider whose inability to
treat plaintiff led to the grievance process (¶ 21). Plaintiff alleges Anthem breached its duties
to him by “[f]ailing to recognize, investigate, and resolve Plaintiff’s many
grievances as part of a pattern and practice of a broken grievance system.” (¶ 33(f).)
Plaintiff informed Anthem that he needed treatment and that Azul Vision
would not treat him. Anthem’s conduct in
sending him to Azul Vision again and, for months, not finding someone who would
treat him can properly be characterized as willful and conscious disregard of
plaintiff’s rights or safety.
Plaintiff also
alleges sufficient facts to make Anthem, as a corporation, liable for punitive
damages. For a corporate employer to be
liable for punitive damages, “the advance knowledge and conscious disregard [of
an employee’s unfitness], authorization, ratification or act of oppression,
fraud, or malice must be on the part of an officer, director, or managing agent
of the corporation.” (Civ. Code, §
3294(b).) “[M]anaging agents are
employees who ‘exercise substantial independent authority and judgment in their
corporate decisionmaking so that their decisions ultimately determine corporate
policy.’ ” (Mazik v. Geico General
Ins. Co. (2019) 35 Cal.App.5th 455, 464.)
In determining
whether someone is a managing agent, “ ‘the critical inquiry is the degree of
discretion the employees possess in making decisions that will ultimately
determine corporate policy. When
employees dispose of insureds’ claims with little if any supervision, they
possess sufficient discretion for the law to impute their actions concerning
those claims to the corporation.’ ” (Major
v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1220–1221.) “[C]laims managers that exercise substantial
discretionary authority to pay or deny claims exercise ‘substantial
discretionary authority over decisions that ultimately determine corporate
policy.’ ” (Id. at p. 1221.)
Plaintiff alleges that,
“for its deficient complaint procedures,” the Department of Managed Health Care
(DMHC) required Anthem “to pay fines and make promises to correct its practices.” (¶ 24.)
The complaint further alleges, “In 2017, the DMHC filed an Accusation
against Anthem detailing its long-standing practice of failing to recognize,
properly investigate, and resolve member grievances. … In 2019,
Anthem agreed to resolve the Accusation by formally acknowledging the DMCH’s
allegations and paying a $2.8 million fine.
Despite Anthem’s history of violations arising out of its grievance
practices, and its payments of millions of dollars in fines to the DMHC, Anthem
has intentionally failed to fix its grievance process as evidenced by its
failure to effectively respond to Plaintiff’s grievances.” (Ibid.) Plaintiff
also alleges Anthem’s failure to investigate and resolve his grievances was “authorized,
performed, and ratified by officers and managing agents of Anthem as the acts,
as alleged herein, were part of an ongoing corporate practice by Anthem,
consented to and authorized by management employees and officers of Anthem.” (¶ 35.)
Plaintiff thus
alleges large-scale corporate policy or practice that necessarily involved
action by managing agents. And he
alleges that, because managing agents authorized or ratified a policy or practice
of not adequately dealing with member grievances, Anthem applied the practice
to him, resulting in serious injury.
Irrelevant
Allegations
Defendant moves to
strike paragraph 24 of the complaint as irrelevant. These allegations include that Anthem had “a
systemic problem” of “failing to recognize, properly investigate, and resolve
member grievances” and “history of violations arising out of its grievance
practices.” (¶ 24.) The allegations are relevant to show Anthem’s
actions were conscious and deliberate as required for the second cause of
action for breach of the implied covenant of good faith and fair dealing. They are also relevant to plaintiff’s claim
for punitive damages, both to show Anthem acted with conscious disregard of his
rights and to show its managing agents authorized or ratified that conduct.
Disposition
Defendant Blue Cross of California dba Anthem Blue Cross’s demurrer is overruled. Defendant’s motion to strike
portions of plaintiff Marcelino Diaz’s complaint is denied. Defendant Blue Cross of California dba Anthem Blue Cross shall answer within 20
days.