Judge Kerry Bensinger, Case Number: 23STCV13973, Date: 2024-01-24 Tentative Ruling

This action arises from an insurer’s delayed approval of a referral for medical treatment. On June 16, 2023, Plaintiff, Elena Jahnke, filed a Complaint against Defendants, Blue Cross of California dba Anthem Blue Cross (“Anthem”) and Preferred IPA of California (“Preferred IPA”), asserting causes of action for (1) Breach of the Implied Covenant of Good Faith and Fair Dealing, (2) Breach of Contract, (3) Violations of Business & Professions Code section 17200, and (4) Negligence. The First, Second, and Third Causes of Action are alleged against Anthem. A copy of the policy is attached to the Complaint.

The Complaint alleges that Plaintiff had health insurance with Anthem. Per an agreement between Anthem and its medical group, Preferred IPA, any referral requests were to be reviewed for approval or denial by Preferred IPA. On June 17, 2022, Plaintiff’s neurosurgeon determined Plaintiff needed prompt treatment to address arteriovenous malformations on her brain and submitted an urgent referral for an endovascular surgeon to Preferred IPA. However, Preferred IPA did not respond to the referral within 96 hours as required under the policy. Plaintiff’s request remained pending for six months. In that time, Plaintiff’s physical symptoms worsened. Defendants eventually approved the referral only after Plaintiff suffered a grand mal seizure.

On November 6, 2023, Anthem filed this demurrer to the First, Second, and Third Causes of Action of the Complaint, and concurrently filed a Motion to Strike punitive damages and attorney fees.

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.3rd 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.)

Anthem makes four arguments: (1) the demurrer should be sustained with respect to the entire Complaint because (a) the Complaint is vague and uncertain and (b) Anthem cannot be held vicariously liable for Preferred IPA’s delay in reviewing Plaintiff’s referral; (2) the First Cause of Action fails because there is no alleged breach and no alleged conduct rising to the level of bad faith; (3) the Second Cause of Action fails because there is no alleged breached; and (4) the Third Cause of Action fails because Plaintiff fails to allege facts sufficient to state an Unfair Competition Law (UCL) case of action.

“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.) “[D]emurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.”¿ (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 848, fn. 3.)

Anthem argues the Complaint is uncertain because there are no individualized allegations asserted against Anthem. Not so. The Complaint alleges, in relevant part, that Plaintiff contacted Anthem on more than one occasion to get Anthem to authorize her referral after being told her referral was still pending with Preferred IPA. (Complaint, ¶ 6 (Factual Background).) The Complaint further alleges in its First Cause of Action that Anthem unreasonably failed to adequately investigate the request for benefits and unreasonably failed to have policies, procedures, or guidelines to ensure that claims and requests for treatment are handled in good faith including the performance of full, fair, objective, and thorough investigations, among other claims. (Complaint, ¶¶ 17, 23, 30.)

Anthem further argues it cannot be held vicariously liable for Preferred IPA’s handling of Plaintiff’s referral. This argument lacks merit.

The Complaint does not seek to hold Anthem vicariously liable for Preferred IPA’s conduct.^{^[2]} Indeed, there are no allegations resembling vicarious liability. Rather, the allegations seek to hold Anthem directly liable for its failure to have policies or procedures in place to address situations where a referral is not timely approved or denied, thereby delaying medically necessary treatment. As alleged, Plaintiff contacted Anthem October 3, 2022, and December 1, 2022 to authorize her neurosurgeon’s referral request yet Anthem failed to authorize it. (Complaint, ¶¶ 5-6, 13-15, 24, 30.) Further, Anthem unreasonably failed to authorize the urgent request, (Id. at ¶ 4), that the referral request was to a specialist to provide medically necessary treatment (Id. at ¶¶ 3-4, 13), that the referral request was still pending with Preferred IPA (Id. ¶¶ 5-8), that Anthem was supposed to investigate why the referral had neither been denied nor issued (Id. ¶¶ 6 (Introduction), 15, 30), and that it was in breach of the “Timely access to care” provision in the policy. (See Complaint, Ex. A at p. 33; see also Complaint, ¶¶ 12-15, 23, 30.)

Moreover, Plaintiff argues once Anthem learned that Preferred IPA had not provided Plaintiff with a timely referral to a specialist, Anthem should have authorized it and/or assisted Plaintiff with obtaining the authorization. This too is not an allegation based upon vicarious liability, but direct liability.

In sum, the Complaint adequately alleges Anthem’s direct liability. The Complaint is not so incomprehensible that Anthem cannot respond. On these grounds, the demurrer is OVERRULED.

2. The First Cause of Action -- Breach of the Implied Covenant of Good Faith and Fair Dealing

To allege a cause of action for breach of the implied covenant of good faith and fair dealing, plaintiff must allege the following elements: (1) plaintiff and defendant entered into a contract; (2) plaintiff did all, or substantially all, of the significant things that the contract required him to do, or that he was excused from having to do those things; (3) all conditions required for defendant’s performance had occurred, or were excused; (4) defendant engaged in specified conduct that plaintiff claims prevented plaintiff from receiving the benefits under the contract; (5) that by doing so, defendant did not act fairly and in good faith; and (6) plaintiff was harmed by defendant’s conduct.¿ (CACI No. 325.)¿

Anthem argues the First Cause of Action fails because there is no alleged breach or conduct rising to the level of bad faith. The court disagrees.

As detailed above, the Complaint alleges that Plaintiff contacted Anthem directly about the status of her urgent referral. Under the terms of the policy, Plaintiff was entitled to a timely response to her urgent referral—to wit, within 96 hours after the request is made. However, Plaintiff’s referral stood pending for six months. Moreover, in addition to Plaintiff’s direct communication with Anthem, Plaintiff sufficiently alleges that Anthem knew of Preferred IPA’s failure to approve or deny the referral in the allotted time and did not act accordingly.

Moreover, the Complaint sufficiently alleges bad faith. Plaintiff submitted a referral which stood pending for six months. As alleged, Anthem did nothing to ensure Plaintiff received a timely decision on the referral nor did Anthem implement a policy or procedure to rectify Preferred IPA’s failure to timely act on the referral. As a result, Plaintiff’s necessary medical treatment was unnecessarily delayed. The court accepts these allegations as true at the pleading stage. (Mitchell, supra, 1 Cal.App.5th at p. 1007.

The essential elements of a breach of contract cause of action are: (1) the existence of a valid contract between a plaintiff and a defendant, (2) the plaintiff’s performance, (3) the defendant’s unjustified failure to perform, and (4) damages to the plaintiff caused by the defendant’s breach.¿ (See CACI No. 303.)

Anthem argues the breach of contract claim fails because there is no alleged breach. However, as discussed in the preceding section, the court finds the Complaint adequately pleads a breach.

Undeterred, Anthem argues in its Reply that the Complaint does not allege a breach because there are no allegations that Anthem was aware that the referral was urgent nor are there any allegations that Anthem had authority to approve or deny the referral request. The court is not persuaded. The allegations indicate Plaintiff’s referral was pending for six months. Six months exceeds any time frame for any treatment request, whether urgent or non-urgent. (See Complaint, Ex. A., pp. 33-34; see also Kotler v. PacifiCare of California (2005) 126 Cal.App.4th 950, 956 (finding the defendant health insurer’s failure to provide the plaintiff with a referral to a specialist sooner than six weeks was a breach of an implied-in-law obligation).) To Anthem’s point that the Complaint does not allege Anthem had authority to approve or deny the request, the point is not dispositive. The policy, attached to the Complaint, provided that its policyholders, including Plaintiff, were entitled to timely healthcare. Plaintiff entered into that policy with Anthem and sought Anthem’s intervention for the delay in the approval, or denial, of her referral. The court liberally construes from this allegation that Anthem had the authority to approve or deny her referral. Indeed, Plaintiff contact Anthem directly for approval.

The UCL is codified at Business and Professions Code, section 17200 et seq. Section 17204 of the UCL provides that a private person “who has suffered injury in fact and has lost money or property as a result of the unfair competition” may bring a 17200 action. (Bus. & Prof. Code, § 17204.) “To bring a UCL claim, a plaintiff must show either an (1) unlawful, unfair, or fraudulent business act or practice, or (2) unfair, deceptive, untrue or misleading advertising. [Citation.] Because the UCL is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent.” (Adhav v. Midway Rent A Car, Inc. (2019) 37 Cal.App.5th 954, 970, citations and quotations omitted.)

Anthem demurs to the UCL claim on three grounds: (a) Plaintiff does not have standing to bring a UCL claim because Complaint does not adequately allege a loss of money or property, (b) there are no alleged unlawful, fraudulent, or unfair acts, and (c) there are no remedies available. Given the court’s ruling, the court does not address the second and third arguments.

To have standing to bring a UCL claim, a person must have suffered injury in fact and have lost money or property as a result of the unfair competition. (Bus. & Prof. Code, § 17204.)
“There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.” (Kwikset Corp. v. Superior Ct. (2011) 51 Cal.4th 310, 323.)

Here, the Complaint alleges that Plaintiff lost money or property. (See Complaint, ¶ 32.) Anthem attacks this allegation as conclusory. The court agrees. There are no factual allegations describing the extent or nature of Plaintiff’s economic injury. The Complaint does not adequately allege Plaintiff’s standing to bring a UCL claim.

Anthem seeks an order striking allegations of punitive damages and attorney’s fees from the Complaint. Plaintiff concedes attorney’s fees should be stricken (see Opposition, p. 6:6-7.) As such, the court only addresses the sufficiency of the allegations as to punitive damages.

Punitive damages may be imposed where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code § 3294, subd. (a).) “Malice” is conduct intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on with a willful and conscious disregard of the rights or safety of others. (Civ. Code § 3294, subd. (c)(1).) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.’ [Citation.]” (Lackner v. North (2006) 135 Cal.App.4th 1188, 1210.) “As amended to include [despicable], the [Civil Code section 3294] plainly indicates that absent 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.) The statute’s reference to despicable conduct represents a “new substantive limitation on punitive damage awards.” (Id.) Despicable conduct is “conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people. Such conduct has been described as ‘having the character of outrage frequently associated with crime.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287.) Further, “[t]here must be evidence that defendant acted with knowledge of the probable dangerous consequences to plaintiff’s interests and deliberately failed to avoid these consequences.” (Flyer’s Body Shop Profit Sharing Plan v. Ticor Title Ins. Co. (1986) 185 Cal.App.3d 1149, 1155; see also Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1228 [“Conscious disregard for the safety of another may be sufficient where the defendant is aware of the probably dangerous consequences of his or her conduct and he or she willfully fails to avoid such consequences”].)

A motion to strike punitive damages is properly granted where a plaintiff does not state a prima facie claim for punitive damages, including allegations that defendant is guilty of oppression, fraud or malice. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) “Mere negligence, even gross negligence, is not sufficient to justify such an award” for punitive damages. (Kendall Yacht Corp. v. United California Bank (1975) 50 Cal.App.3d 949, 958.) The allegations supporting a request for punitive damages must be alleged with specificity; conclusory allegations without sufficient facts are not enough. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)

Here, the Complaint alleges that Anthem’s conduct was despicable and carried on with a willful and conscious disregard of Plaintiff’s rights and constituted malice, oppression, or fraud. (Complaint, ¶ 20.) Given the court’s finding that the Complaint adequately alleges Anthem’s bad faith breach of the health insurance policy, the court further finds punitive damages are adequately pleaded. Accordingly, the motion to strike punitive damages is DENIED.

The demurrer to the entirety of the Complaint is OVERRULED as is the demurrer to the First and Second Causes of Action. The demurrer to the Third Cause of Action is SUSTAINED. Leave to amend is granted.

The motion to strike attorney fees is granted. The motion to strike punitive damages is denied.

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

Defendant Blue Cross of California dba Anthem Blue Cross is ordered to serve and file its responsive pleading within 30 days of service of the amended pleading.

¿¿¿

¿ Kerry Bensinger¿¿

¿ Judge of the Superior Court¿

[1] Defense counsel complied with the meet and confer requirement. (See Declaration of Krystal N. Robles, ¶¶ 2-10.)

[2] Anthem’s reliance upon Section 1372.25 is inapposite because Plaintiff’s theory of the case is not vicarious liability.