Judge: Joseph Lipner, Case: 22STCV31510, Date: 2023-10-31 Tentative Ruling

Case Number: 22STCV31510    Hearing Date: October 31, 2023    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Kaiser Foundation Health Plan, Inc. (“Kaiser”) moves the Court for an order requiring Plaintiff Danielle Saltzman (“Plaintiff”) to arbitrate her disputes with Kaiser and staying this action pending the outcome of arbitration.

Kaiser’s motion to compel arbitration is DENIED.

Background

          Plaintiff has health insurance with Kaiser through an HMO plan issued to her husband, Michael Saltzman (“Michael”). Both Plaintiff and Michael were enrolled in Kaiser’s health insurance through Gold Coast Joint Benefit Trust (“Gold Coast”). Gold Coast had an agreement (the “EOC”) with Kaiser under which Kaiser provided healthcare services for beneficiaries of Gold Coast and their eligible dependents, including Plaintiff. (Motion, Exhibit A (“EOC”).) Plaintiff was enrolled under the EOC by her husband,  Michael.

In 2020, Plaintiff was diagnosed with a tumor and sought out-of-network treatment at UCLA. Plaintiff alleges that Kaiser improperly refused to authorize Plaintiff’s request for treatment at UCLA, in breach of the insurance contract and in violation of the covenant of good faith and fair dealing. Plaintiff also alleges that Kaiser failed to meet its duty of care under Civil Code Section 3428 to arrange for the provision of medically necessary health care services.

Plaintiff filed this action against Kaiser on September 26, 2022, alleging (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) violation of Civil Code Section 3428.

          On September 21, 2023, Kaiser moved to compel arbitration.  Plaintiff opposed, arguing that Kaiser’s arbitration disclosure violates Health & Safety Code Section 1363.1 and is therefore unenforceable.  Kaiser filed a reply.   

Legal Standard

           Under both the Federal Arbitration Act and California law, arbitration agreements are valid, irrevocable, and enforceable, except on such grounds that exist at law or equity for voiding a contract. (Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

The party moving to compel arbitration must establish the existence of a written arbitration agreement between the parties. (Code of Civ. Proc., § 1281.2.) “With respect to the moving party's burden to provide evidence of the existence of an agreement to arbitrate, it is generally sufficient for that party to present a copy of the contract to the court. (See Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218 (Condee ); see also Cal. Rules of Court, rule 3.1330 [“A petition to compel arbitration or to stay proceedings pursuant to Code of Civil Procedure sections 1281.2 and 1281.4 must state, in addition to other required allegations, the provisions of the written agreement and the paragraph that provides for arbitration. The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference”].)

Once the party moving to compel arbitration presents proof of the existence of the arbitration agreement, the burden shifts to the party opposing the motion to compel.  The opposing party may present any challenges to the enforcement of the agreement and evidence in support of those challenges. [Citation].” (Baker v. Italian Maple Holdings, LLC (2017) 13 Cal.App.5th 1152, 1160.)

Discussion

          The Arbitration Agreement

          Kaiser attaches the EOC to its motion, including the EOC’s arbitration provision. (EOC at p. 74-76.)

          The EOC states, in relevant part:

          “Binding Arbitration

For all claims subject to this “Binding Arbitration” section, both Claimants and Respondents give up the right to a jury or court trial and accept the use of binding arbitration. . . .

Scope of arbitration

Any dispute shall be submitted to binding arbitration if all of the following requirements are met:

·       The claim arises from or is related to an alleged violation of any duty incident to or arising out of or relating to this EOC or a Member Party’s relationship to Kaiser Foundation Health Plan, Inc. (Health Plan), including any claim for medical or hospital malpractice (a claim that medical services were unnecessary or unauthorized or were improperly, negligently, or incompetently rendered), for premises liability, or relating to the coverage for, or delivery of, services or items, irrespective of the legal theories upon which the claim is asserted

·       The claim is asserted by one or more Member Parties against one or more Kaiser Permanente Parties or by one or more Kaiser Permanente Parties against one or more Member Parties

·       Governing law does not prevent the use of binding arbitration to resolve the claim

Members enrolled under this EOC thus give up their right to a court or jury trial, and instead accept the use of binding arbitration except that the following types of claims are not subject to binding arbitration:

….

·       Claims that cannot be subject to binding arbitration under governing law

As referred to in this “Binding Arbitration” section, “Member Parties” include:

·       A Member

·       A Member’s heir, relative, or personal representative

….

“Kaiser Permanente Parties” include:

·       Kaiser Foundation Health Plan, Inc.

·       Kaiser Foundation Hospitals

….

“Claimant” refers to a Member Party or a Kaiser Permanente Party who asserts a claim as described above. “Respondent” refers to a Member Party or a Kaiser Permanente Party against whom a claim is asserted.”

          (EOC at pp. 74-75.)

          On August 26, 2019, Michael enrolled in Kaiser’s health insurance under the EOC and signed a California Subscriber Enrollment/Change Form (“Enrollment Form”) which contains an arbitration agreement (the “Arbitration Agreement”). The Enrollment Form states, in relevant part:

“D. Signature (please sign at the bottom of this page in the box below for subscriber signature)

Kaiser Foundation Health Plan Arbitration Agreement. I understand that (except for Small Claims Court cases, claims subject to a Medicare appeals procedure or the ERISA claims procedure regulation, and any other claims that cannot be subject to binding arbitration under governing law) any dispute between myself, my heirs, relatives, or other associated parties on the one hand and Health Plan, its health care providers, or other associated parties on the other hand, for alleged violation of any duty arising out of or related to membership in KFHP, including any claim for medical or hospital malpractice (a claim that medical services were unnecessary or unauthorized or were improperly, negligently, or incompetently rendered), for premises liability, or relating to the coverage for or delivery of services or items, irrespective of legal theory, must be decided by binding arbitration under California law and not by lawsuit or resort to court process, except as applicable law provides for judicial review of arbitration proceedings. I agree to give up our right to a jury trial and accept the use of binding arbitration. I understand that the full arbitration provision is contained in the Evidence of Coverage.

Date (mm/dd/yyyy)

X

Subscriber signature”

(Motion, Exhibit C (“Enrollment Form”) at p. 1. [footnotes omitted].)

          By providing proof of this agreement, Kaiser has met its initial burden to show the existence of an agreement to arbitrate. The Court therefore turns to considering Plaintiff’s responsive arguments.

Health & Safety Code Section 1363.1

Health & Safety Code Section 1363.1 mandates that:

“Any health care service plan that includes terms that require binding arbitration to settle disputes and that restrict, or provide for a waiver of, the right to a jury trial shall include, in clear and understandable language, a disclosure that meets all of the following conditions: 

(a) The disclosure shall clearly state whether the plan uses binding arbitration to settle disputes, including specifically whether the plan uses binding arbitration to settle claims of medical malpractice. 

(b) The disclosure shall appear as a separate article in the agreement issued to the employer group or individual subscriber and shall be prominently displayed on the enrollment form signed by each subscriber or enrollee. 

(c) The disclosure shall clearly state whether the subscriber or enrollee is waiving his or her right to a jury trial for medical malpractice, other disputes relating to the delivery of service under the plan, or both, and shall be substantially expressed in the wording provided in subdivision (a) of Section 1295 of the Code of Civil Procedure. 

(d) In any contract or enrollment agreement for a health care service plan, the disclosure required by this section shall be displayed immediately before the signature line provided for the representative of the group contracting with a health care service plan and immediately before the signature line provided for the individual enrolling in the health care service plan.” 

(Health & Safety Code Section 1363.1)

The law requires strict compliance with section 1363.1 in order to enforce an agreement to arbitrate.  (Malek v. Blue Cross of California (2004) 121 Cal. App. 4th 44, 50.) “[T]echnical violations of the statute—such as the failure to prominently display an arbitration provision immediately above the signature line on the enrollment form—render [the] arbitration provision unenforceable regardless of whether the person enrolling in the health plan received some notice of the arbitration clause by reviewing the non-complying provision.” (Medeiros v. Superior Court (2007) 146 Cal.App.4th 1008, 1015 [internal quotations and citations omitted].)

          Whether the disclosure appears as a separate article

          Plaintiff argues that the Arbitration Agreement does not appear in a separate article, as required by Section 1363.1(b).

The Enrollment Form was divided up into five alphabetically labeled sections: (A) Company Information; (B) What are the changes requested?; (C) Subscriber/employee information; (D) Signature; and (E) Dependents. (Enrollment Form at pp. 1-2.)

Here, the Arbitration Agreement was not a separate article, but was a subset of the “Signature” article in the Enrollment Form. The “Kaiser Foundation Health Plan Arbitration Agreement” label is in a smaller font size than the “Signature” label immediately above it.

The requirement of Section 1363.1(d) that the arbitration notice appear directly above the signature line does not eliminate the requirements of Section 1363.1(b). As discussed above, arbitration agreements must strictly comply with Section 1361.1, and are disqualified by even technical violations of the statute. Although the “Signature” section of the enrollment form only contained an indication of where to sign and date the form in addition to the Arbitration Agreement, the Arbitration Agreement was nevertheless listed within the “Signature” article of the Enrollment Form, rather than as a separate article. The disclosure thus did not comply with the statute. The Court therefore finds that the Arbitration Agreement is not enforceable.

          Whether the disclosure is prominently displayed

Plaintiff argues that the Arbitration Agreement in the Enrollment Form is not prominently displayed because the Arbitration Agreement is in the same or smaller font as the rest of the Enrollment Form and is not bolded, underline, or italicized other than the words “Kaiser Foundation Health Plan Arbitration Agreement.”

Kaiser argues that the disclosure is prominently displayed because it is preceded by the boldface words “Kaiser Foundation Health Plan Arbitration Agreement”; it is in a separate paragraph; there is a thick horizontal black line immediately above the disclosure; there is separation between the Signature section and the “Subscriber/employee information” section above; the disclosure is the only text to be read on the page other than items to fill or boxes to check, and the font is plain and legible.

For purposes of Health & Safety Code § 1363.1(b), “prominent” or “prominently displayed” is defined as “standing out from its surroundings” (Burks v. Kaiser Foundation Health Plan, Inc. (2008) 160 Cal.App.4th at 1028-1029), or as “readily noticeable.” (Imbler v. PacifiCare of Cal. Inc. (2002) 103 Cal.App.4th 567, 579)

          Kaiser attaches as Exhibits A-C to its reply copies of the noncompliant enrollment forms in Burks v. Kaiser Foundation Health Plan, Inc. (2008) 160 Cal.App.4th 1021; Zembsch v. Superior Court (2006) 146 Cal.App.4th 153, 165; and Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419; three of the cases cited by Plaintiff. These exhibits show that those noncompliant disclosures used significantly smaller text than Kaiser’s. The Burks disclosure lacked any heading (Burks, supra, 160 Cal.App.4th at 1029, 1031), Robertson disclosure used the same font as the rest of the form and was separated from the signature line by other text (Robertson v. Health Net, supra, 132 Cal.App.4th at 1426-27), and the Zembsch disclosure was in the same section box as unrelated information (Zembsch, supra, 146 Cal.App.4th at 165). Kaiser correctly points out that its disclosure is significantly more readable than those in the Burks, Robertson, and Zembsch.

          However, more prominent arbitration agreements have been found deficient. In Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 51 n.2, 61, the arbitration disclosure constituted a separate numbered paragraph and began with the bolded and capitalized words “ARBITRATION AGREEMENT.”  The Court nevertheless found that the disclosure did not stand out and was not readily noticeable from other provisions because it was in the same type size and font as other provisions in the agreement. (Id. at p. 61.) The disclosure was also improperly separated from the signature line. (Id. at p. 62.)

          As discussed above, the Arbitration Agreement is within the “Signature” section of the document, and its boldface label is immediately below the “Signature” heading and in a smaller font size. The words “Kaiser Foundation Health Plan Arbitration Agreement” do not have their own line and are instead in-line with the rest of the Arbitration Agreement’s text. The remaining text of the arbitration agreement is in the same or smaller font size than the rest of the text in the agreement.

Although Kaiser is correct that there is a thick black line immediately above the disclosure, that black line is part of the beginning of the “Signature” section, similar to each of the other alphabetized sections. If anything, the larger-sized text reading “Signature” and the section-opening black line would make the disclosure less readily noticeable and more likely to blend into its surroundings – after all, most signature sections in documents do not contain additional major contract provisions.

Although the disclosure here, unlike in Malek, is not improperly separated from the signature line (a separate requirement from prominence), the other facts relating to its placement all render it more obscure.

For these reasons, the Court finds that the Arbitration Agreement did not comply with the prominence requirement.

          Whether the disclosure clearly states that the plan uses binding arbitration

Plaintiff argues that the Arbitration Agreement in the Enrollment Form did not clearly state that the plan uses binding arbitration because it included a footnote that certain Kaiser plans are not subject to binding arbitration, including (1) Preferred Provider Organization (PPO) and the Out-of-Network portion of the Point-of-Service (POS) plans; (2) Preferred Provider Organization (PPO) plans; and (3) Out-of-Area Indemnity (OOA) plans.

          This argument is unavailing. First, the Arbitration Agreement states that “any dispute between myself, … and Health Plan, its health care providers, or other associated parties … must be decided by binding arbitration under California law and not by lawsuit or resort to court process.” The disclosure is clear on the fact that the contract requires arbitration of disputes. The only ambiguity that Plaintiffs attempt to argue is as to which plans are covered. However, the contract similarly states with clarity which plans are and are not covered. Furthermore, Michael did in fact know that he was signing up for an HMO plan, which was not exempted. (Saltzman Decl., ¶¶ 3 & 4.) For these reasons, the Court finds that the disclosure clearly stated that the plan uses binding arbitration.

          Whether the jury waiver is adequately expressed in the disclosure

Subdivision (c) of Section 1363.1 requires that the waiver of the enrollee’s right to a jury trial “be substantially expressed in the wording provided in subdivision (a) of Section 1295 of the Code of Civil Procedure.”

Code of Civil Procedure Section 1295(a) provides that any such contract must include the following language: “Both parties to this contract, by entering into it, are giving up their constitutional right to have any such dispute decided in a court of law before a jury, and instead are accepting the use of arbitration.”

          Plaintiff argues that the Arbitration Agreement does not comply with the wording of Section 1295(a) because it says that “I agree to give up our right to a jury trial and accept the use of binding arbitration” (emphasis added) and is therefore ambiguous as to whether the jury waiver is unilateral. This argument seems to run counter to the plain language of the disclosure. Plaintiff’s argument would require the word “our” to refer only to the enrollee’s side of the agreement, rather than both parties – even though the disclosure previously states that any dispute between the parties must be arbitrated, and the same sentence uses the word “I,” rather than “we,” to refer to the enrollee. The Court therefore finds that the jury waiver is adequately expressed.

          The other deficiencies discussed above, however, render the arbitration agreement unenforceable.