Judge Kerry Bensinger, Case Number: 23STCV00096, Date: 2024-03-01 Tentative Ruling

MOVING PARTY: Defendants CBRE Inc. and Health Care Service Corporation dba Blue Cross Shield of Texas

California Spine and Neurosurgery Institute (“Plaintiff” or “California Spine”) provided care for a member and enrollee (“Patient”) of CBRE Group’s (“CBRE”) health insurance policy. Plaintiff called CBRE’s agent Blue Cross Blue Shield of Texas (“BCBS”), on behalf of Patient (CBRE and BCBS together will be referred to as “Defendants”) to inquire about payment for services. Plaintiff was informed about CBRE’s rate of pay for services. Plaintiff provided services to the patient and Defendants failed to pay. California Spine alleges Defendants made misrepresentations to Plaintiff regarding the manner in which CBRE pays for services. Believing Defendants would pay for Plaintiff’s patient’s treatment at a Usual, Customary, and Reasonable (UCR) rate rather than at a Medicare rate, Plaintiff provided medical services to Patient. Defendants paid zero dollars for the services.

California Spine initiated this action on January 4, 2023 and filed the operative Second Amended Complaint (SAC) on August 31, 2023. The SAC alleges causes of action for (1) Fraud and (2) Negligent Misrepresentation.

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.) “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law. We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed. [Citation.]” (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].) Allegations are to be liberally construed. (Code Civ. Proc., § 452.) In construing the allegations, the court is to give effect to specific factual allegations that may modify or limit inconsistent general or conclusory allegations. (Financial Corporation of America v. Wilburn (1987) 189 Cal.App.3d 764, 769.)

A demurrer may be brought if insufficient facts are stated to support the cause of action asserted. (Code Civ. Proc., § 430.10, subd. (e).) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Where the complaint contains substantial factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty will be overruled or plaintiff will be given leave to amend. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.) Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

Defendants request judicial notice of five documents. As the court does not rely on the documents to resolve this motion, the court declines to rule on Defendants’ request.

Defense counsel has complied with the meet and confer requirement. (See Declaration of Lavinia S. Osilesi, ¶ 3.)

The issues to be decided are (1) whether the First Cause of Action and Second Cause of Action sufficient state viable causes of action, and (2) whether the economic loss rule bars Plaintiff’s claims.

1. The First and Second Causes of Action Fail to Sufficiently Plead the Necessary Elements

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.)” (Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 837–838 (Tenet) (cleaned up).)

“In California, fraud must be pled specifically; general and conclusory allegations do not suffice. Thus the policy of liberal construction of the pleadings ... will not ordinarily be invoked to sustain a pleading defective in any material respect. This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered. In addition, a plaintiff is held to a higher standard in asserting a fraud claim against a corporate defendant. In such a case, the plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Ibid.) (Cleaned up.)

The elements of negligent misrepresentation are: “(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243; CACI No. 1903.)

25. On December 2, 2021 so as to determine whether or not to provide services, Medical Provider’s employee, Valerie Lopez, obtained representations from BCBS’s employee and DEFEDANT’s representative, Carl T., regarding the manner in which Defendant pays for services.

27. Medical Provider asked BCBS on behalf of Defendant: what is the Patient’s responsibility versus Defendant’s responsibility for paying for medical services?

28. BCBS on behalf of Defendant represented to Medical Provider that Patient’s deductible is and was $1,000.00 and Patient’s Max Out Of Pocket (“MOOP”) expense is and was $5,000.00 and that to date for that calendar year Patient had paid $3,988.85.

29. Medical Provider asked BCBS on behalf of Defendant: does Defendant pay based on UCR for a neurospine procedure?

30. BCBS on behalf of Defendant represented to Medical Provider that Defendant pays the UCR rate.

31. Medical Provider asked BCBS on behalf of Defendant: does Defendant pay based on a Medicare Fee Schedule for a neurospine procedure?

32. BCBS on behalf of Defendant represented to Medical Provider that payment is not based on a Medicare Fee Schedule.

33. All of the information obtained was documented by MEDICAL PROVIDER as part of MEDICAL PROVIDER’s office policy and practice.

34. At no time prior to the provision of services to Patient by MEDICAL PROVIDER was MEDICAL PROVIDER advised that Patient’s policy or certificate of insurance was subject to certain exclusions, limitations or qualifications, which might result in denial of coverage, limitation of payment or any other method of payment unrelated to the UCR rate.

35. BCBS on behalf of Defendant did not make reference to any other portion of Patient’s plan that would put MEDICAL PROVIDER on notice of any reduction in the originally stated payment percentage.

36. BCBS on behalf of Defendant honestly believed the representations it was making to MEDICAL PROVIDER were true. However, there were no reasonable grounds for BCBS or Defendant to have had that belief.

37. In the alternative, despite representing that payment would be made at the UCR rate, DEFENDANT and BCBS knew that they would not be paying Medical Provider at the UCR rate. BCBS on behalf of Defendant lied. And BCBS on behalf of Defendant intended by their representations to induce Medical Provider to provide the services. Despite representing that payment would not be made at a Medicare rate, DEFENDANT and BCBS knew that they would be paying Medical Provider at a Medicare rate. BCBS on behalf of Defendant lied.

38. In either case, MEDICAL PROVIDER was never provided with a copy of Patient’s plan by BCBS, Defendant or Patient. As a result, MEDICAL PROVIDER could not even make itself aware of any reduction of the payment amount.

39. Medical Provider relied and provided services solely based on BCBS on behalf of Defendant’s statements, promises and representations. Statements which had no relation to DEFENDANT and Patient’s plan document, as the statements may or may not have been based in the DEFENDANT or Patient’s plan documents, but that bore no consideration when Medical Provider agreed to provide medical services. Medical Provider took BCBS on behalf of DEFENDANT at their word and promises and provided services based solely on those promises and representations.

Plaintiff and Defendants spar over the application of two cases: Tenet, supra, and Aton Center, Inc. v. United HealthCare Insurance Company (2023) 93 Cal.App.5th 1214 (Aton). While both cases are helpful, neither are dispositive because the factual predicate here is different. Aton involved an appeal from summary judgment. The procedural posture is important. The Court of Appeal carefully reviewed the evidence presented and concluded Aton’s evidence was insufficient. (Aton, supra, at p. 1247 [“Aton cites no record evidence establishing that United intentionally misinformed or withheld information from its agents” and “Simply put, the cited testimony does not support Aton’s factual assertion”].) The present case is at the pleading stage.

Tenet is also distinguishable because the detailed evidence presented in Tenet demonstrated that Anthem authorized the patient’s treatment.

Here, the SAC sufficiently alleges the name of the representatives; the date of the representations; the call reference number; the Patient’s deductible and out of pocket expense. The details appear sufficient. The medical provider asked the operative questions – whether BCBS pay is based on UCR for a neurospine procedure and the representative answered in the affirmative – that the Defendant pays the UCR rate. The medical provider then asked whether Defendant paid based upon a Medicare Fee schedule for a neurospine procedure. The representative answered that it was not based upon a Medicare Fee schedule. The issue is teed up.

Unlike Tenet, however, the SAC does not allege that Defendants authorized the neurospine procedure or represented that the “services are covered.” (Tenet, supra, at p. 840.) In Tenet, the Court of Appeal emphasized that the “Hospital has sufficiently alleged the existence of multiple affirmative misrepresentations that the care at the Hospital rendered to Patient X would be covered by his insurance plan.” (Id.)(Emphasis added.) That allegation is missing here. Moreover, the rate of payment does not appear to be the issue because Defendants did not pay anything. The issue appears to be authorization of services. In Tenet, based upon the extensive interchange between the Hospital and Anthem, the Court of Appeal determined Anthem’s conduct “would imply that the services were authorized by Anthem and provided to Patient X by Hospital were not only medically necessary, but were covered by Patient X’s health insurance plan.” (Id. at p. 839, emphasis in original.) That is not this case.

Here, Plaintiff fails to plead the necessary first element: the misrepresentation. The representation that treatment was authorized is lacking. Plaintiff is left with a hypothetical – if the neurospine procedure were authorized, Plaintiff would be paid at the UCR rate and payment would not be based upon a Medicare Fee Schedule. Plaintiff does not plead that the procedure was authorized or conversely, that the representatives misrepresented that the procedure was authorized.[1]

Plaintiff is ordered to serve and file the Third Amended Complaint within 30 days of this order.

¿¿¿

¿ Kerry Bensinger¿¿

¿ Judge of the Superior Court¿

[1] Given the court’s ruling, the court does not address Defendants’ argument re: the economic loss rule. However, because Plaintiff does not allege a contract claim, Defendants will need to gather more arguments to persuade the court of the rule’s application.