Hamm v. Blue Cross & Blue Shield of N.C., 2010 NCBC 14.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF DURHAM 05 CVS 5606
MACY M. HAMM, Individually and on behalf ) of All Others Similarly Situated, ) Plaintiff ) ) ORDER AND OPINION ON v. ) CROSS MOTIONS ) FOR SUMMARY JUDGMENT BLUE CROSS AND BLUE SHIELD OF ) NORTH CAROLINA, ) Defendant )
THIS CAUSE, designated exceptional and assigned to the undersigned by Order
of the Chief Justice of the North Carolina Supreme Court, pursuant to Rule 2.1 of the
General Rules of Practice for the Superior and District Courts, came before the court
upon Plaintiff's Motion for Partial Summary Judgment ("Plaintiff's Motion") and
Defendant's Motion for Summary Judgment ("Defendant's Motion") (collectively, the
"Motions"), pursuant to Rule 56, North Carolina Rules of Civil Procedure ("Rule(s)");
and 1
THE COURT, after considering the arguments, briefs, affidavits, other
submissions of counsel and appropriate matters of record, as discussed infra,
CONCLUDES that the Plaintiff's Motion should be GRANTED and the Defendant's
Motion should be GRANTED in part and DENIED in part.
Twiggs, Beskind, Strickland & Rabenau, PA by Donald H. Beskind, Esq.; Billet and Connor, PC by J. Martin Futrell, Esq. and David S. Senoff, Esq.; and Marcus, Auerbach & Zylstra, LLC by Jerome Marcus, Esq. and Jonathan Auerback, Esq. for Plaintiff.
1 In its Answer, Defendant moved to dismiss the Complaint under Rule 12(b)(6). This motion was never fully briefed and thus is deemed to have been abandoned. Brooks, Pierce, McLendon, Humphrey & Leonard, LLP by Jennifer K. Van Zant, Esq. and Charles F. Marshall, III, Esq. for Defendant.
Jolly, Judge. I.
PROCEDURAL BACKGROUND
[1] On November 3, 2005, Plaintiff Macy M. Hamm ("Hamm") filed a
Complaint in behalf of herself and all others similarly situated against Defendant Blue
Cross and Blue Shield of North Carolina Foundation (the "Foundation") and Defendant
Blue Cross and Blue Shield of North Carolina ("BCBSNC"). The Complaint alleges
claims for relief ("Claim(s)") in four counts: First Count – Breach of Contract; Second
Count – Breach of Good Faith; Third Count – Unfair and Deceptive Trade Practices and
Fourth Count – Declaratory Judgment.
[2] On January 30, 2006, Defendants filed their Answer to the Complaint.
The Answer raises ten affirmative defenses, including lack of standing on the part of
Plaintiff (Fourth Defense) and failure of Plaintiff to exhaust her available administrative
remedies prior to filing this civil action (Fifth Defense).
[3] On March 21, 2007, the court entered a Consent Order dismissing,
without prejudice, the Claims against the Foundation.
[4] On March 8, 2008, Hamm filed the Plaintiff's Motion, relative to her Claim
for declaratory judgment.
[5] On August 5, 2008, the court granted the Plaintiff's Motion for Class
Certification, pursuant to Rule 23.
[6] On October 10, 2008, BCBSNC filed the Defendant's Motion as to all
Claims, on the grounds that (a) the Plaintiff and class members (the "Class") lack standing to bring their claims and (b) there exist no genuine issues of material fact, and
that Defendant is entitled to judgment of dismissal as to all Claims.
[7] The court has heard oral argument on the Motions and they are ripe for
determination.
[8] Unless otherwise indicated herein, the material facts reflected in
paragraphs 9 through 21 of this Order exist, are undisputed 2 and are pertinent to the
issues raised by the Motions.
II.
FACTUAL BACKGROUND
[9] Hamm is a citizen and resident of Wake County, North Carolina.
[10] The Class includes any individual (a) who ever was a member of one of
BCBSNC's preferred provider organization health benefit plans ("PPO Plan(s)" or
"Plan(s)") between November 2002, and August 5, 2008, the date of the class
certification Order; (b) whose PPO Plan was not an Employee Retirement Income
Security Act ("ERISA") plan; (c) who in any benefit period reached their benefit
period maximum or who reached their lifetime maximum as those phrases are
defined under the terms of their PPO Plan contract and (d) who were charged by in-
network providers more than the allowed amount for covered services or supplies
after they reached their benefit period maximum or lifetime maximum.
2 It is not proper for a trial court to make findings of fact in determining a motion for summary judgment under Rule 56. However, it is appropriate for a Rule 56 order to reflect material facts that the court concludes exist and are not disputed, and which support the legal conclusions with regard to summary judgment. Hyde Ins. Agency v. Dixie Leasing, 26 N.C. App. 138, 142 (1975). [11] The contract between the Class and BCBSNC consists of a Summary of
Benefits, a benefit booklet (the "Booklet"), an application and an optional benefit
endorsement (collectively, the "Contract(s)"). 3
[12] As defined by the Booklet, 4
(a) A "member" ("Member") "is a subscriber or dependent, who is
currently enrolled in [a BCBSNC] health benefit plan and for whom premium is
paid." 5 According to the Booklet, "[M]embers are eligible to receive benefits as
long as they are under age 65 at the time they initially enroll, subject to
acceptance by BCBSNC." 6
(b) A "benefit period" is "the 12-month period of time as stated in the
'Summary Of Benefits' during which charges for covered services provided to a
[M]ember must be incurred in order to be eligible for payment by BCBSNC." 7
(c) A "benefit period maximum" is "the dollar amount that each covered
[M]ember can receive in paid benefits from BCBSNC for certain services." 8
(d) A "lifetime maximum" is "the maximum amount of covered services
that will be reimbursed for a [M]ember while he or she has coverage under [the]
health benefit plan." 9 It is also defined as the "dollar amount that each covered
[M]ember can receive in paid benefits from BCBSNC during a lifetime for certain
services." 10
3 Dunlap Aff., Ex. A BCBS003026 (hereinafter, references to this source will be to Ex. A 30**). 4 The court includes BCBSNC’s use of italics in the following definitions to identify other defined terms. 5 Dunlap Aff., Ex. A 3071. 6 Id. at 3054. 7 Id. at 3068. 8 Id. at 3038. 9 Id. at 3071. 10 Id. at 3038. (e) An "in-network provider" is "a hospital, doctor, other medical
practitioner or provider of medical services and supplies that has been
designated as a Blue Advantage provider by BCBSNC. 11 It is also defined as
one who participates in the Blue Advantage network. 12
(f) An "allowed amount" is "the charge that BCBSNC determines is
reasonable for covered services provided to a [M]ember." 13
(g) A "covered service" as "a service, drug, supply or equipment
specified in this benefit booklet for which [M]embers are entitled to benefits in
accordance with the terms and conditions of this health benefit plan." 14
[13] BCBSNC operates as a non-profit "medical services corporation" under
N.C. Gen. Stat. Ch. 58 (hereinafter, references to the North Carolina General Statutes
will be to "G.S.").
[14] BCBSNC has Members enrolled in PPO Plans, including but not limited to
plans with trade names Blue Advantage and Blue Options and plans governed by the
provisions of ERISA.
[15] BCBSNC contracts with health care providers to provide certain covered
services to Members who are enrolled in Blue Advantage.
[16] BCBSNC contracts with certain entities to offer group health plans.
[17] Hamm purchased Blue Advantage health insurance from BCBSNC in or
around 2003. Hamm renewed her Blue Advantage policy each year through the filing of
11 Id. at 3070. 12 Id. at 3017. 13 Id. at 3068. 14 Id. at 3068. her Complaint and has remained a Member of the plan at least until the date of the filing
of this action.
[18] On or about June 12, 2003, Hamm gave birth to a son. This son was a
Member of Hamm's Blue Advantage plan as of the date of the filing of this action.
[19] From June 12, 2003, through the date of filing, Hamm's son received
extensive medical treatment from in-network providers for cerebral palsy, including
extensive physical and speech therapies. He reached the benefit period maximums
under Hamm's PPO plan prior to the close of the benefit period.
[20] Subsequent to reaching the benefit period maximums, Hamm's son
continued to receive therapies from in-network providers although Hamm was
responsible for payment for the therapies. The in-network providers charged Hamm
their ordinary rates, which exceeded the allowed rates for those services that her son
received from in-network providers before he reached benefit period maximums.
[21] Similarly, after the Class Members' benefit period maximums were
reached, the in-network providers charged Class Members the providers' ordinary rates,
amounts which exceeded the allowed rates for those services Class Members received
from in-network providers before they reached benefit period maximums.
III.
PARTIES' CONTENTIONS
[22] The pivotal issue before the court is one of contractual construction of the
Booklet. More specifically, it is whether as a matter of law (a) as Defendant contends,
BCBSNC can adjudicate claims from in-network providers to allow them to charge PPO
Class Members amounts over the allowed amount once the Member reaches a benefit period maximum for covered services when the maximum is expressed in visits rather
than dollars; or (b) as Plaintiff contends, BCBSNC is contractually bound to a promise to
Class Members that if a Member received covered services from an in-network
provider, the Member would never be responsible for any amount of excess of the
discounted contract rate BCBSNC has negotiated with the in-network provider.
[23] The Plaintiff argues that (a) BCBSNC's exclusion of covered services as
such upon a Member's reaching a benefit period maximum expressed in visits
determines and limits BCBSNC's responsibility only as to the level of payments by a
Member, and does not act to establish whether a service is a covered service for other
purposes under the Contract, (b) the Contract expressly limits a Member's responsibility
for payment to the allowed amount unless services are provided by out-of-network
providers and (c) at best, the Contract language is ambiguous as a matter of law and
must be construed against BCBSNC.
[24] BCBSNC argues that (a) Class Members lack standing to bring the action
against BCBSNC because (i) they fail to allege a sufficient injury in fact; (ii) their alleged
injury is not fairly traceable to the acts of BCBSNC and (iii) their alleged injuries cannot
be redressed by a favorable decision against BCBSNC; (b) Class Members failed to
exhaust their administrative remedies and cannot proceed here and (c) the substantive
Claims of the Complaint fail as a matter of law pursuant to Rule 56. 15
15 The various other affirmative defenses raised by Defendant are not pivotal to the court’s determination of the Motions and need not be analyzed in this Order. IV.
APPLICABLE LAW
[25] Under Rule 56(c), summary judgment is to be rendered "forthwith" if the
pleadings, depositions, answers to interrogatories and admissions on file, together with
the affidavits, if any, show that upon the forecast of evidence there exists no genuine
issue as to any material fact and that any party is entitled to a judgment as a matter of
law. Grayson v. High Point Dev. Ltd. P'ship, 175 N.C. App. 786, 788 (2006). The court
views the evidence in the light most favorable to the nonmoving party. Bruce-Terminix
Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733 (1998).
V.
ANALYSIS
[26] The court first will consider Defendant's threshold procedural defenses
with regard to the issues of standing and exhaustion of administrative remedies.
A.
STANDING
[27] A party must have standing to assert a claim in order to invoke the subject
matter jurisdiction of this court. See Estate of Apple v. Commercial Courier Express,
Inc., 168 N.C. App. 175, 177, disc. rev. denied, 359 N.C. 632 (2005). The question of
standing is jurisdictional and may be raised at any time. Crouse v. Mineo, 189 N.C.
App. 232, 236 (2008).
[28] Standing requires (a) injury in fact, which is an invasion of a legally
protected interest that is concrete and particularized and actual or imminent, not
conjectural or hypothetical; (b) that the injury be fairly traceable to the challenged action of the defendant and (c) that it be likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision. See Neuse River Found., Inc. v.
Smithfield Foods, Inc., 155 N.C. App. 110, 114 (2002).
Injury in Fact
[29] A breach of contract, even if negligible, constitutes injury. 16 Here, the
Class Members have alleged and forecast evidence sufficient to establish such a
breach. Therefore, nothing else appearing, they satisfy this standing element.
[30] However, North Carolina courts have held that a claim which is "barred by
law," e.g., because of expiration of the applicable statute of limitations, does not satisfy
the injury in fact standing requirement. Estate of Apple, 168 N.C. App. at 177. Here,
BCBSNC argues that the statute of limitations has expired on some Class Claims and
that those Class Members do not have standing in this civil action.
[31] A claim for an alleged injury must be made within the applicable statue of
limitations. The statute of limitations for contracts is three years from the time of
accrual. G.S. 1-52(1). Accrual takes place "as soon as the right to institute and
maintain a suit arises." Penley v. Penley, 314 N.C. 1, 19-20 (1985).
[32] The Complaint in this action defines BCBSNC's alleged breach of contract
as the act, committed by both BCBSNC and in-network providers, of charging Class
Members amounts in excess of the allowed amount for medical services provided by
the in-network providers after they reach the benefit period maximum and/or lifetime
16 See Bowen v. Bank, 209 N.C. 140, 144 (1936); Kinnard v. Mecklenburg Fair, 46 N.C. App. 725, 730 (1980) (holding that once breach of contract is established, plaintiff is entitled to at least nominal damages because of injury to rights). See also Neuse River Found., 155 N.C. App. at 114.. maximum. 17 The breach is later described as BCBSNC's alleged improper adjudication
of the Class Members' claims. 18 A cause of action for such a contended breach of
contract would accrue when an in-network provider charged its ordinary rates to the
Class Member.
[33] Consequently, the statute of limitations would bar contract Claims against
BCBSNC by those Class Members who were charged ordinary rates by in-network
providers more than three years prior to the commencement of this action. However, it
would not bar contract Claims by those Class Members who were charged ordinary
rates by in-network providers less than three years prior to the commencement of this
action, or whose particular fact situation would cause a tolling of the statute of
limitations. Coe v. Highland Sch. Assocs. Ltd. P'ship, 125 N.C. App. 155, 157 (1997),
Johnson Neurological Clinic, Inc. v. Kirkman, 121 N.C. App. 326, 330-31 (1996).
b.
Fairly Traceable
[34] For an injury to be fairly traceable to the challenged action of the
defendant, it must not be the result of the independent action of a third party not before
the court. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). See also Frank
Krasner Enters. v. Montgomery County, 401 F.3d 230, 235 (4th Cir. Md. 2005); Friends
of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 162 (4th Cir. S.C.
2000).
17 Compl. ¶ 24. 18 Pl. Mem. Opp. Def. Mot. Summ. J. ¶ III (C). [35] In the case sub judice, the alleged breach of contract is itself the cause of
the injury. Therefore, the acts of independent third parties are of no moment, 19 and
Class Members satisfy this element.
c.
Redressability Requirement
[36] For an injury to be redressable, a favorable decision must not depend "on
the unfettered choices made by independent actors not before the courts and whose
exercise of broad and legitimate discretion the courts cannot presume either to control
or to predict." Wangberger v. Janus Capital Group (In re Mut. Funds Inv. Litig.), 529
F.3d 207, 217 (4th Cir. Md. 2008), citing ASARCO, Inc. v. Kadish, 490 U.S. 605, 615
(1989).
[37] In the case sub judice, a decision favorable to Class Members would
remedy their injuries by estopping Defendant from breaching its alleged contracts with
them, i.e., from continuing to allow in-network providers to charge standard rates to
Class Members once Class Members have exceeded visit maximums, and by obliging
Defendant to pay compensatory damages.
[38] The court concludes that Plaintiff and Class Members have standing, and
Defendant's Motion based on lack of standing should be DENIED.
EXHAUSTION OF ADMINISTRATIVE REMEDIES
[39] The court next considers BCBSNC's exhaustion of remedies argument.
19 Defendant’s argument that it is the provider’s decision actually to charge and collect rates in excess of the allowed amount, Werner Aff. ¶ 11, is attractive, though unconvincing. It is to be expected that a provider, if given a choice, would charge the higher rate. [40] Courts will enforce parties' contractual agreements to submit disputes to
administrative resolution before litigating an action. See, e.g., Adams v. Nelsen, 313
N.C. 442, 446 (1985); Summerville v. Local 77, 369 F. Supp. 2d 648, 657 (M.D.N.C.
2005); First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 768 (2d Cir. N.Y.
1994). See also Brooks v. Arlington Hosp., 850 F.2d 191, 196 (1988).
[41] At first blush, the grievance process at issue here seems to be completely
voluntary in nature. 20 However, the Limitation on Actions provision of the Booklet
makes it clear that a Member may not take action to recover benefits for sixty (60) days
after the Member gives BCBSNC a Notice of Claim and until the Member has
exhausted all administrative remedies, including the grievance process. 21
[42] However, neither the particular provision nor the contract defines an
"action to recover benefits." Moreover, neither equates the phrase "action to recover
benefits" with the term "grievance." Without more, the court must look to the plain
meaning of the words used. In doing so, the court is forced to conclude that an action
to recover benefits is not necessarily the same as an action regarding billing or claims
processing. As such, the phrase is ambiguous, and the court must view it in light of the
Class Members' reasonable interpretation to the effect that they were not subject to the
provision because they were not complaining about a denial of benefits, but rather
about billing and claims processing. 22
[43] The court concludes that Defendant's Motion based upon failure to
exhaust administrative remedies should be DENIED.
20 Ex. A 3059 (“The grievance process is voluntary . . . .”). 21 Id. at 3066. 22 See Def. Mot. Summ. J., Ex. 4 (Hamm Dep.) 167: 20-25. C.
FOURTH COUNT – DECLARATORY JUDGMENT
[44] The court now considers the Motions with respect to the Class Members'
action for declaratory judgment. 23 As to this Count, both Plaintiff and Defendant seek
judgment pursuant to Rule 56.
1.
Background
[45] Class Members seek a declaration by the court that they are not
responsible for payment of any amount above the "allowed amount," as the term is
defined by the Contracts, for services that they receive from in-network providers, 24
including those situations in which they have reached their benefit period maximums
and/or lifetime maximums under their PPO Plans.
[46] By way of their Motion, Class Members ask the court to conclude as a
matter of law that under the relevant Contracts, BCBSNC cannot adjudicate claims from
in-network providers to allow those providers to charge Class Members at rates over the
allowed amount once Class Members reach a benefit period maximum for covered
services when the maximum is expressed in visits rather than dollars. The Class
Members construe their Contracts with BCBSNC to include an express promise by
BCBSNC that Members who receive covered services from in-network providers will
never be responsible for any payment amount in excess of an allowed amount. The
Class Members distinguish the terms "exclusion" and "limitation," arguing that covered
23 The court determines it is preferable to consider the Plaintiff’s Fourth Count first. 24 Regardless of whether Class Members or BCBSNC are responsible for payment to the in-network provider. services are subject to limitations, but not exclusions and, as such, always remain
covered services.
[47] On the other hand, BCBSNC contends that a fair reading of the Contracts
supports its argument that the term "covered services" does not include those services
provided by in-network providers that exceed a visit benefit period maximum. BCBSNC
points out that the Class Members' contended construction effectively would prohibit in-
network providers from charging Members even the allowed amount because in-
network providers are not allowed to charge Members any fees for covered services
other than deductibles, coinsurance and copayments. 25 BCBSNC also argues that if a
service remained a covered service after a Member exceeded a visit maximum, then
BCBSNC would be required to pay benefits for those services indefinitely, thus
rendering ineffective the visit limitation.
[48] As discussed supra, a "covered service" is "a service, drug, supply or
equipment specified in this [] Booklet for which Members are entitled to benefits in
accordance with the terms and conditions of this health benefit plan." 26
[49] The central issue for resolution is whether the "terms and conditions"
referred to in the Contract's definition of "covered services" includes restrictions on
benefits provided after a Member has exceeded an applicable benefit period maximum
and/or lifetime maximum.
[50] The Contract documents do not define explicitly the applicable "terms and
conditions" and, as such, the court must look to the other Contract provisions to
25 Werner Aff. ¶ 7, Ex. B ¶ 10.13.2. 26 Ex. A 3068. determine the meaning of those words. See Wachovia Bank & Trust Co. v.
Westchester Fire Ins. Co., 276 N.C. 348, 355 (1970), supra.
2.
[51] The meaning of language in an insurance policy is a matter of law.
Wachovia, 276 N.C. at 354.
[52] If a term is defined in a policy, that definition is given to the term wherever
it appears in the policy, unless the context clearly requires otherwise. Id. See also
Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500, 505-06 (1978); Nationwide Mut. Ins.
Co. v. Mabe, 342 N.C. 482, 492 (1996) ("If a policy defines a term, then that meaning is
to be applied regardless of whether a broader or narrower meaning is customarily given
to the term, the parties being free, apart from statutory limitations, to make their contract
for themselves and to give words therein the meaning they see fit.") (internal citation
omitted).
[53] If a term is not defined in a policy, "nontechnical words are to be given a
meaning consistent with the sense in which they are used in ordinary speech, unless
the context clearly requires otherwise." Wachovia, 276 N.C. at 354. See also Woods,
295 N.C. at 506 (1978); North Carolina Farm Bureau Mut. Ins. Co. v. Mizell, 138 N.C.
App. 530, 532-33 (2000).
[54] If the immediate context in which a word is used in a policy does not
clearly indicate the intended meaning of a word, a court may look to other portions of
the policy and construe all its clauses to bring them into harmony. Wachovia, 276 at
355. See also Woods, 295 N.C. at 506 (1978); Pa. Nat'l Mut. Ins. Co. v. Strickland, 178 N.C. App. 547, 550 (2006) ("[E]ach provision of an insurance contract must be
interpreted in view of the whole contract and not in isolation."). Moreover, "[e]ach word
is deemed to have been put into the policy for a purpose and will be given effect, if that
can be done by any reasonable construction in accordance with the foregoing
principles." Id. (referencing Williams v. Ins. Co., 269 N.C. 235, 240 (1967)).
[55] An ambiguity exists when, in the court's opinion, "the language of the
policy is fairly and reasonably susceptible to either of the constructions for which the
parties contend." Wachovia, 276 N.C. at 354 (internal citation omitted). See also
Joyner v. Nationwide Ins., 46 N.C. App. 807, 809, disc. rev. denied, 301 N.C. 91 (1980)
("The test in deciding whether the language is plain or ambiguous is what a reasonable
person in the position of the insured would have understood it to mean, and not what
the insurer intended."); Strother v. N.C. Farm Bureau Mut. Ins. Co., 90 N.C. App. 734,
737 (1988) ("The determinative question is whether a reasonable person in the position
of the insured, from reading the policy, would believe the policy provided coverage.").
[56] Any ambiguity or uncertainty as to the meaning of words in an insurance
policy is resolved in favor of the policyholder, or the beneficiary, and against the
company because the company drafted the policy. Wachovia, 276 N.C. at 354. See
also Woods, 295 N.C. at 506 (1978).
[57] Exclusions upon and limitations of "undertakings by the [insurance]
company, otherwise contained in the policy, are to be construed strictly so as to provide
the coverage, which would otherwise be afforded by the policy." Wachovia, 276 N.C.
348 at 355). See also Southeast Airmotive Corp. v. United States Fire Ins. Co., 78 N.C.
App. 418, 420 (1985), disc. review denied, 316 N.C. 196 (1986) ("Exclusions from liability are not favored, and are to be strictly construed against the insurer. (citation
omitted). When the coverage provisions of a policy include a particular activity, but that
activity is later excluded, the policy is ambiguous, and the apparent conflict between
coverage and exclusion must be resolved in favor of the insured."); Washington Hous.
Auth. v. North Carolina Hous. Auths. Risk Retention Pool, 130 N.C. App. 279, 281
(1998), disc. review denied, 349 N.C. 530 (1998) ("In construing the provisions of an
insurance policy . . . wherever possible, the policy will be interpreted in a manner 'which
gives, but never takes away, coverage.'") (internal citation omitted).
3.
Other Contract Terms and Conditions
[58] The court now looks to other parts of the Contract policy to determine
what "terms and conditions" apply to covered services.
[59] The "Covered Services" section of the Booklet lists a number of covered
services. 27 This section also indicates that exclusions and limitations apply to a
Member's coverage. 28 First, the section refers to service-specific exclusions. 29 For
example, benefits for short-term rehabilitative therapies are limited to a combined in-
network and out-of-network benefit period maximum. 30 Second, the section refers to
exclusions that apply to many services. 31 Third, the section directs the Member to other
sections to understand what exclusions and limitations apply to each service. 32
27 Dunlap Aff. Ex. A. 3039-52. 28 Id. at 3039. 29 Id. 30 Id. at 3044. 31 Id. at 3039. 32 Id. [60] The preceding descriptions of exclusions and limitations refer only to
specific services or groups of services, not services as a whole. If there were such
exclusions or limitations, the Covered Services section does not indicate where an
explanation of such would be located. Moreover, the exclusions described in the "What
is Not Covered?" section of the Booklet are service-specific. 33 None of these
exclusions indicate that coverage ends for services, supplies, drugs or charges not
listed when visit or dollar maximums are exceeded. 34 As such, it is reasonable to
interpret these sections as suggesting that no exclusions or limitations apply to all
services.
[61] Defendant's interpretation of "covered services" is inconsistent with the
above interpretation because it suggests an exclusion that would apply to all services.
[62] The Booklet starkly contrasts in and out-of-network benefits. 35 Its
description of out-of-network benefits specifically states that if a Member receives
covered services from an out-of-network provider, that Member may be required to pay
the difference between the provider's actual charge and the BCBSNC allowed
amount. 36 There is no such limitation in the description of in-network benefits. 37
Rather, in the "Understanding Your Share of the Cost" section, the Booklet instructs
Members that if they receive covered services from in-network providers, then they are
not responsible for any charge over the allowed amount. There is no limitation on this
statement.
33 Id. at 3052. 34 Id. at 3052-53. 35 See, e.g., id. at 3039. 36 Id. at 3035. 37 See id. at 3034. [63] The "When Coverage Begins and Ends" section explains that Members
are eligible to receive benefits subject to an age restriction. 38 Termination of a
Member's coverage is predicted only when the Member reaches his or her lifetime
maximum, not a benefit period maximum. 39 As such, it is reasonable to construe the
language to mean that coverage continues despite visits to in-network providers that
exceed a benefit maximum.
[64] Moreover, the "Additional Terms Of Your Coverage" section explains that
benefits for services provided by in-network providers are "based on the lesser of the
allowed amount or the provider's charge." 40 The section reminds Members, however,
that Members are responsible for charges not covered by Blue Advantage, such as
amounts above the benefit maximums, and for the full cost of noncovered services. 41 In
contrast, the same section explains that benefits for services provided by out-of-network
providers are paid based on the allowed amount and that, in addition to the limitations
listed above, the Members are responsible for any amounts over the allowed amount. 42
[65] The court has attempted to construe the Contract documents in the
manner contended by Defendant in its Motion. The court has been unable to give the
Contract only the construction argued by Defendant. Rather, the court is forced to
conclude that the Contract documents' description of terms and conditions imposed
upon covered services is fairly and reasonably susceptible to either of the constructions
for which the respective parties have argued. As such, an ambiguity exists, and the
court is required to resolve the ambiguity in favor of the Class.
38 Id. at 3055. 39 Id. 40 Id. at 3063. 41 Id. 42 Id. at 3063-64. [66] Accordingly, the court concludes that the terms and conditions that limit
the definition of "covered service" do not include restrictions placed on benefits provided
by in-network providers after a Member has exceeded an applicable benefit period
maximum and/or lifetime maximum.
[67] Accordingly, with regard to Plaintiff's Fourth Count, the court
CONCLUDES that there exist no genuine issues of material fact, that Plaintiff's Motion
as to said Fourth Count should be GRANTED and that Defendant's Motion should be
DENIED.
D.
FIRST COUNT – BREACH OF CONTRACT
[68] Defendant's Motion seeks dismissal of Plaintiff's breach of contract Claim.
[69] The Complaint alleges that BCBSNC breached its Contract with Class
Members by charging them an amount in excess of the allowed amount for medical
services rendered by in-network providers after reaching applicable benefit period
maximums. BCBSNC responds correctly that it was the providers, not BCBSNC, who
charged the Class Members. The Complaint later defines the breach complained of as
the wrongful adjudication of claims processing. At the heart of both definitions is the
contention that BCBSNC broke its alleged promise to Class Members that they would
not be charged more than an allowed amount if they received covered services from in-
network providers. 43
[70] To determine whether or not there is evidence sufficient to support a
Claim that BCBSNC broke such a promise, the court considers the process by which
Class Members are charged more than the allowed amount for covered services. 43 Id. at 3037. [71] After receiving requests for reimbursement from in-network providers,
BCBSNC's procedure is to determine whether the services are covered. 44 BCBSNC
then provides the in-network provider with either a "Notification of Payment" or an
"Explanation of Payment." 45 These documents inform a provider whether and to what
extent it will be reimbursed for the services it provided to the Member. 46
[72] The provider will not be reimbursed by BCBSNC for non-covered
services. 47 An example of a non-covered service, as defined by BCBSNC, is a visit
exceeding the Member's visit maximum. 48 BCBSNC contends that the provider may
seek payment in excess of the allowed amount from Members for such non-covered
services. 49 The right to seek such payment may require the provider to obtain the
Member's written authorization prior to rendering the non-covered services. 50 The
provider may bill a Member for those amounts reflected in the Notification of Payment
as owed by the Member. 51
[73] As the court has concluded, supra, covered services remain covered
notwithstanding an exhausted benefit or lifetime maximum.
[74] As such, BCBSNC's labeling of a covered service as one that is not
covered may lead causally to Members being charged more than the allowed amount
44 Dunlap Aff. ¶ 8. 45 Id. ¶¶ 12-13. 46 These documents reflect the provider’s billed charges, the allowed amount and the Member’s liability. Id. 47 Id. ¶ 8. However, “BCBSNC may, in its discretion, process claims that exceed a benefit maximum at the provider’s full charge rather than at the discounted or contracted rate known as the ‘allowed amount.’ BCBSNC, however, may choose to continue to process the claim at an allowed amount.” Kreidt Aff. ¶ 4. Plaintiff contends that this use of discretion is itself a breach of BCBSNC’s Contract with the Class. 48 Dunlap Aff. ¶ 30. 49 Id. ¶ 10. See also Werner Aff., Ex. A ¶ 4.7. 50 See Werner Aff. Ex. A ¶¶ 4.7.6, 4.7.7. 51 Id. ¶ 4.7.3. The provider also may bill the Member if, prior to receipt of the notification, BCBSNC verified that the services received were not covered. Id. for covered services. Therefore, such labeling may constitute a breach of BCBSNC's
contract with its Members.
[75] The court concludes that Plaintiff has forecast evidence sufficient to
support the allegations of a breach of the Contract and that the Class Members have
suffered damages and the value thereof. See, e.g., Shalford v. Shelley's Jewelry, Inc.,
127 F. Supp. 2d 779, 789 (W.D.N.C. 2000). See also Standing, supra.
[76] Accordingly, with regard to Plaintiff's First Count, the court CONCLUDES
that there exist one or more genuine issues of material fact, and that BCBSNC's Motion
as to said First Count should be DENIED.
E.
SECOND COUNT – BREACH OF GOOD FAITH
[77] Defendant's Motion seeks dismissal of Plaintiff's Claim for breach of the
covenant of good faith.
[78] "In every contract there is an implied covenant of good faith and fair
dealing that neither party will do anything which injures the right of the other to receive
the benefits of the agreement." Sunset Beach Dev., LLC v. Amec, Inc., 2009 N.C. App.
LEXIS 454 **29-30 (N.C. Ct. App. 2009) (citing Bicycle Transit Auth., Inc. v. Bell, 314
N.C. 219, 228 (1985)).
[79] While an action for breach of covenant of good faith is "part and parcel" of
a claim for breach of contract, Shalford, 127 F. Supp. 2d at 787, a breach of a contract
does not, by itself, breach this implied covenant.
[80] Instead, a claim for breach of covenant of good faith suggests a party did
not act upon the principles of good faith or fair dealing to accomplish the purpose of an agreement. Maglione v. Aegis Family Health Ctrs., 168 N.C. App. 49, 56 (2005). It
requires the wrongful intent of a party to deprive another party of its contractual rights.
See, e.g., Dull v. Mutual of Omaha Ins. Co., 85 N.C. App. 310, 318 (1987).
[81] In the case sub judice, the court concludes that the forecast evidence is
not sufficient to create a genuine issue of fact as to BCBSNC's breach of a covenant of
good faith. Id. The record discloses no evidence that BCBSNC acted with the intent to
wrongfully deprive Class Members of the benefits to which they were entitled.
[82] Accordingly, with regard to Plaintiff's Second Count, the court
CONCLUDES that there exist no genuine issues of material fact, and that BCBSNC's
Motion as to said Second Count should be GRANTED.
F.
THIRD COUNT – UNFAIR AND DECEPTIVE TRADE PRACTICES
[83] Defendant's Motion seeks dismissal of Plaintiff's Claim for unfair and
deceptive trade practices.
[84] Unfair methods of competition in or affecting commerce, and unfair or
deceptive acts or practices in or affecting commerce, are unlawful. G.S. 75-1.1(a). To
establish a violation of G.S. 75-1.1, a party must show (a) an unfair or deceptive act or
practice, or an unfair method of competition, (b) in or affecting commerce and (c)
proximately causing actual injury to the party. Sunbelt Rentals, Inc. v. Head & Engquist
Equip., LLC, 2002 NCBC 4, ¶ 67 (N.C. Super. Ct. 2002).
[85] A trade practice is unfair when "it offends established public policy as well
as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially
injurious to consumers." Marshall v. Miller, 302 N.C. 539, 548 (1981). Conduct by an insurance company that manifests "an inequitable assertion of power or position" also
constitutes an unfair trade practice. Murray v. Nationwide Mut. Ins. Co., 123 N.C. App.
1, 9 (1996).
[86] A trade practice is deceptive if it "has the capacity or tendency to deceive."
Johnson v. Phoenix Mut. Life. Ins. Co., 300 N.C. 247, 266 (1980), overruled in part on
other grounds, Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 323 N.C. 559, 569
(1988). To prevail on a UDTP claim, plaintiffs must demonstrate that the act
"possessed the tendency or capacity to mislead, or created the likelihood of deception."
Overstreet v. Brookland, Inc., 52 N.C. App. 444, 453 (1981).
[87] An unfair or deceptive trade practice claim against an insurance company
can be based on violations of either G.S. 75-1.1 or G.S. 58-63-15. Here, Plaintiff bases
her Third Count upon G.S. 58-63-15, a violation of which has been held to constitute a
violation of G.S. 75-1.1. Country Club of Johnston County, Inc. v. United States Fid. &
Guar. Co., 150 N.C. App. 231, 244 (2002). Pearce v. Am. Defender Life Ins. Co., 316
N.C. 461, 470 (1986); Miller v. Nationwide Mut. Ins. Co., 112 N.C. App. 295, 302 (1993),
cert. denied, 335 N.C. 770 (1994); Murray v. Nationwide Mut. Ins. Co., 123 N.C. App. 1,
10 (1996).
[88] Courts may look to the types of conduct prohibited by G.S. 58-63-15 for
examples of conduct that would constitute an unfair and deceptive act or practice.
Country Club of Johnston County, 150 N.C. App. at 246 (specifically discussing G.S.
58-63-15(11)). The "[m]aking, issuing, circulating, or causing to be made, issued or
circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued . . . or the benefits or advantages promised thereby . . . " is one such
prohibited act. G.S. 58-63-15(1).
[89] To support a Chapter 75 claim based on violation of G.S. 58-63-15, a
plaintiff must demonstrate that the defendant's representation had the capacity or
tendency to deceive. Pearce, 316 N.C. at 470-71. Proof of actual deception, however,
is not necessary. Id. at 471. A truthful statement "may be deceptive if it has the
capacity or tendency to deceive. (citation omitted). 'In determining whether a
representation is deceptive, its effect on the average consumer is considered.'" Id.
(citing Johnson, 300 N.C. at 265-66). A plaintiff must also show that it suffered actual
injury as a proximate result of defendant's deceptive statement or misrepresentation.
Id. (citing Ellis v. Smith-Broadhurst, Inc., 48 N.C. App. 180, 184 (1980)).
[90] A breach of contract action is distinct from an action for unfair or deceptive
trade practices. Boyd v. Drum, 129 N.C. App. 586, 593 (1998). Indeed, an intentional
breach "is not sufficiently unfair or deceptive to sustain an action under N.C.G.S. §
75.1.1." Branch Banking and Trust Co. v. Thompson, 107 N.C. App. 53, 62, disc.
review denied, 332 N.C. 482 (1992). Rather, substantial aggravating circumstances
attendant to the breach must be shown to sustain such an action. Id. See also Griffith
v. Glen Wood Co., 184 N.C. App. 206, 217-18 (2007). However, neither good faith nor
lack of intent is a defense to an action for unfair and deceptive trade practices. Murray,
123 N.C. App. at 10.
[91] "The business of insurance is unquestionably 'in commerce' insofar as an
'exchange of value' occurs when a consumer purchases an insurance policy . . . ."
Pearce, 316 N.C. at 469. [92] Neither the statutory language of G.S. 58-63-15(1) nor that of G.S. 75-1.1
require actual reliance to show causation. Cullen v. Valley Forge Life Ins. Co., 161 N.C.
App. 570, 580 (2003). Whether there is a causal relation between the violation of the
statute and the injury complained of is an issue of fact for a jury. Ellis, 48 N.C. App. at
184 (citing Lewis v. Archbell, 199 N.C. 205, 206 (1930)); Mayton v. Hiatt's Used Cars,
45 N.C. App. 206, 211 (1980).
[93] Plaintiff alleges that BCBSNC violated G.S. 58-63-15 by issuing
statements through the Booklet and promotional materials for PPO Plans that PPO
Members would not be responsible for payment of medical services provided by an in-
network provider for any amount charged above the allowed amount.
[94] BCBSNC responds that (a) its policies and promotional materials do not
state that services in excess of a benefit maximum are covered services or that
Members are entitled only to pay the allowed amount for services in excess of a benefit
maximum; (b) the allegation that BCBSNC's promotional materials state that Members
are not responsible to pay in-network providers more than the allowed amount only
applies to covered services and (c) as such, whether services in excess of a benefit
maximum are covered services under the terms of the policies is a question of contract
interpretation.
[95] That contract language can be interpreted differently does not prove the
language has the capacity or tendency to deceive. Indeed, a court must differentiate
"between contract and deceptive trade practice claims, and relegate claims regarding
the existence of an agreement, the terms contained in an agreement, and the
interpretation of an agreement to the arena of contract law." N.C. Mut. Life Ins. Co. v. McKinley Fin. Servs., 2005 U.S. Dist. LEXIS 36308 *34 (M.D.N.C. Dec. 22, 2005) (citing
Broussard v. Meineke Disc. Muffler Shops, 155 F.3d 331, 347 (4th Cir. 1998) (holding
that given the contractual center of that dispute, plaintiffs' Chapter 75-1.1 claims were
out of place)). The arguments between the parties regarding the meaning of the
statements at issue suggest the crux of this case lies in contract interpretation, not
misleading statements constituting an unfair or deceptive trade practice.
[96] Plaintiff also argues that BCBSNC's contracts with in-network providers
are unfair, oppressive to PPO Members and injurious to PPO Members in violation of
G.S. 75-1.1. Hamm does not, however, allege facts that, if proven, would suggest such
contracts offend established public policy, are immoral, unethical, oppressive,
unscrupulous or substantially injurious to consumers or manifest an inequitable
assertion of power or position by BCBSNC.
[97] Plaintiff further argues that BCBSNC's PPO Plans and the terms of these
plans have the tendency and capacity to deceive and are in and affecting commerce in
violation of G.S. 75-1.1 because BCBSNC allows in-network providers to charge
amounts above the allowed amount to PPO Members when those Members reach their
benefit period maximums and/or lifetime maximums for medical services provided by
the in-network providers. Plaintiff has not, however, alleged facts that, if proven, would
suggest the PPO Plans and the terms thereof offend established public policy, are
immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers or
manifest an inequitable assertion of power or position by BCBSNC. Moreover, Plaintiff
has not alleged or forecast evidence that Class Members detrimentally relied upon any
of the claims adjudication documents at issue, e.g., Explanation of Benefits forms. Rather, the record reflects that Hamm actually had inquired and received advance
notice from BCBSNC that the claim would not be adjudicated at the allowed amount. 52
[98] In contrast to the Complaint, Class Members later argue the
misrepresentation at issue is BCBSNC's representation to plan Members and in-
network providers that covered services are noncovered services, directly tying this
representation to what Class Members define as a breach of contract. 53
[99] As discussed supra, a breach of contract does not by itself establish an
unfair or deceptive trade practice. Plaintiff has not forecast evidence supporting a
finding that the PPO Plans or the actions of BCBSNC were "immoral, unethical,
oppressive, unscrupulous, or substantially injurious to consumers" for purposes of
establishing a Chapter 75 claim, or other facts that manifest an inequitable assertion of
power or position by BCBSNC.
[100] Accordingly, with regard to Plaintiff's Third Count, the court CONCLUDES
that there exist no genuine issues of material fact, and that BCBSNC's Motion as to said
Third Count should be GRANTED.
NOW THEREFORE, based upon the foregoing CONCLUSIONS, it hereby is
ORDERED that:
[101] Plaintiff's Motion for Partial Summary Judgment as to the Fourth Count –
Declaratory Judgment is GRANTED; and it is DECLARED that Class Members are not
responsible for payment of any amount above the "allowed amount," as the term is
defined by the Contracts, for services that they receive from in-network providers,
52 Def. Opp. Pl. Mot. Class Cert., Ex. 1 (Hamm Dep. at 72-73). 53 Pl. Mem. Opp. 16. including those situations in which they have reached their benefit period maximums
[102] EXCEPTED from the Class shall be those putative Members whose
Claims are determined to have accrued more than three years prior to the
commencement of this civil action.
[103] Defendant's Motion for Summary Judgment as to the First Count – Breach
of Contract is DENIED.
[104] Defendant's Motion for Summary Judgment as to the Second Count –
Breach of Good Faith is GRANTED, and said Second Count is DISMISSED.
[105] Defendant's Motion for Summary Judgment as to the Third Count – Unfair
and Deceptive Trade Practices is GRANTED, and said Third Count is DISMISSED.
[106] The court CONCLUDES, pursuant to the provisions of Rule 54(b), that
there is no just reason for delay in the entry of this Order, and that the Order constitutes
a final judgment as to one or more, but fewer than all, of the Claims raised in this civil
action.
SO ORDERED, this the 27th day of August, 2010.