F I I:E IN CLIRIC8 OPPICI "
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IN THE SUPREME COURT OF THE STATE OF WASHINGTON
DOUGLAS L. MOORE, MARY CAMP, ) GAYLORD CASE, and a class of similarly ) situated individuals, ) ) Respondents, ) No. 89774-3 ) v. ) EnBanc ) HEALTH CARE AUTHORITY and ) STATE OF WASHINGTON, ) ) Filed _ _AU_G_2_1_2_0_14__ Petitioners. ) _____________________________)
OWENS, J. - In this class action lawsuit, the trial court found that the State
wrongfully denied health benefits to a number of its part-time employees. We must
now determine how to value the damages suffered by that group of employees when
they were denied health benefits. The State argues that the only damages to the
employees were immediate medical expenses paid by employees during the time they
were denied health benefits. But evidence shows that people denied health care
benefits suffer additional damage. They often avoid going to the doctor for preventive Moore v. Health Care Auth. No. 89774-3
care, and they defer care for medical problems. This results in increased long-term
medical costs and a lower quality of life. Based on this evidence, the trial court
correctly rejected the State's limited definition of damages because it would
significantly understate the damages suffered by the employees. We affirm.
FACTS
In 2006, this class action lawsuit was filed on behalf of part-time employees
who were improperly denied health benefits by the State of Washington. In a series of
partial summary judgment rulings, the trial court ruled that the State violated multiple
statutes when it failed to provide the health benefits. The legislature later codified the
rulings. LAWS OF 2009, ch. 537.
The parties simultaneously moved for summary judgment on the measure of
damages. The State argued that the only damages that it should pay are out-of-pocket
costs paid by class members for medical expenses or substitute health insurance
during the time they were denied health benefits. Furthermore, the State argued that
damages must be established through an individual claims process.
The employees argued that the State's method was inaccurate, contrary to the
evidence, and would lead to a windfall for the wrongdoer. Instead, the employees
proposed three alternative methods of measuring damages. First, the employees
argued that the health benefits were part of the employees' compensation, so the
damages should be based on the employees' lost wages (i.e., the amount the State
2 Moore v. Health Care Auth. No. 89774-3
should have paid to provide health benefits to those employees). Second, the
employees argued that the court could measure damages based on how much money
the State unlawfully retained by failing to provide health benefits to those employees.
Third, the employees argued that the court could measure damages as the amount that
the State would have paid in health care costs for the group of employees had they
been covered. The employees argue that the most accurate measure of this cost is to
use an actuarial method based on the average health care costs for a comparable group
of State employees with health benefits. They presented evidence that this method
would be more accurate than the one proposed by the State because it would take into
account the fact that people postpone medical care when they do not have health
msurance.
The trial court specifically rejected both parts of the State's proposed
approach-limiting damages to out-of-pocket costs and requiring that the damages be
shown through an individual claims process-ruling that it was "wrong as a matter of
common sense, public policy and general knowledge." Clerk's Papers (CP) at 591.
The court generally agreed with the employees that the failure to pay benefits was a
failure to pay wages and, alternatively, that the State may owe restitution because it
received a windfall when it failed to provide these benefits. The trial court
nonetheless concluded that issues of fact remained, including how many members of
3 Moore v. Health Care Auth. No. 89774-3
the class would likely have opted out of coverage altogether, so it denied both motions
for summary judgment.
The State moved for discretionary review of the trial court's order, which the
Court of Appeals commissioner granted. The employees moved to transfer review to
this court pursuant to RAP 4.4, which the acting commissioner granted.
ISSUES
1. Did the trial court err when it rejected the State's proposed method of
calculating damages, which took into account only out-of-pocket expenses assessed
through an individual claims process?
2. Did the trial court err when it expressed support for the employees'
proposed methods of calculating damages, which were equivalent to the amount the
State should have paid for the health benefits wrongfully denied to the employees?
STANDARD OF REVIEW
The parties dispute the standard of review. The employees characterize the
issue as the judge "choosing one of several lawful measures of damages," which
should be reviewed for abuse of discretion. Br. of Pl. Class/Resp 'ts at 12 (citing In re
Marriage ofFarmer, 172 Wn.2d 616, 631-32, 259 P.3d 256 (2011)). The State
characterizes the issue as the determination of the measure of damages, which is a
question of law and thus reviewed de novo. Br. of Appellants at 14 n.27 (citing
Shoemake v. Ferrer, 168 Wn.2d 193, 198, 225 P.3d 990 (2010)). There was a similar
4 Moore v. Health Care Auth. No. 89774-3
dispute over the standard of review in Farmer, and we concluded that "[i]n a sense
both parties are correct." 172 Wn.2d at 624. The trial judge's ultimate choice of
remedy is reviewed for abuse of discretion, but "a trial court necessarily abuses its
discretion if it awards damages based upon an improper method of measuring
damages." !d. at 625.
Thus, we essentially have two questions with two different standards. First, we
determine as a matter of law whether the measure of damages proposed by the State is
the only proper measure. If so, we must reverse the trial court's decision as a matter
of law. If multiple measures of damages are allowed by law, then we review the
judge's choice of measure for abuse of discretion.
ANALYSIS
1. Immediate Out-of-Pocket Costs Is Not the Only Permissible Measure of Damages
The State argues that the only proper measure of damages for the wrongfully
denied health benefits is the out-of-pocket costs incurred by employees for the
payment of covered medical expenses or the purchase of substitute health insurance.
We disagree. The State's measure relies on the assumption that the only damages
suffered by those denied health benefits are out-of-pocket expenses incurred during
the time period they were denied benefits-an assumption that is contradicted by both
common sense and the evidence in the record. The State also argues that its proposed
measure is the only one allowed by law based on non-health-insurance case law in
5 Moore v. Health Care Auth. No. 89774-3
Washington and certain out-of-state cases. Because the reasoning in those cases does
not apply to this case, we disagree with the State's conclusion. Finally, the State
argues that the employees must establish the damages to each class member through
an individual claims process. Because such a process would be counter to the goals
underlying a class action, including efficiency, deterrence, and access to justice, the
trial court was correct to reject this argument.
A. The Main Assumption Underlying the State's Proposal Is Incorrect
The main assumption underlying the State's argument is that individuals who
are improperly denied health benefits do not suffer damages unless they go to a doctor
and pay out of pocket or pay for substitute health insurance. This assumption is
fundamentally flawed, both because "[i]t is wrong as a matter of common sense,
public policy and general knowledge," as noted by the trial judge, CP at 591, and
because it is contrary to undisputed evidence in the record.
The primary flaw in this underlying assumption is that it refuses to
acknowledge that those who are wrongfully denied health benefits suffer damage even
if they do not incur direct out-of-pocket medical expenses during that particular time
period. In its ruling, the trial court pointed to studies showing that people who do not
have health insurance do not obtain routine preventive care, which results in deferred
medical problems. More significantly, studies show that those without health benefits
even put off necessary care for urgent medical issues. Based on these studies, the trial
6 Moore v. Health Care Auth. No. 89774-3
court concluded that the State's method of calculating damages would result in a
"great understatement" of the actual damages. Verbatim Report ofProceedings
(VRP) (Oct. 26, 2012) at 41.
The employees presented expert testimony supporting this conclusion. A
highly experienced actuary explained that the method proposed by the State would
"significantly underestimate the loss to the class here because it would fail to take into
account both the deferred costs due to delayed care and the economic loss in
foregoing a healthier and longer life." CP at 157. That expert pointed out that the
study cited by the State's expert as "'the best available evidence on the costs of being
uninsured in the United States"' actually concluded that '"the economic value of the
healthier and longer life that an uninsured child or adult forgoes because he or she
lacks health insurance ranges between $1,645 and $3,280 for each additional year
spent without coverage."' Id. at 156-57. The State's method refuses to acknowledge
any damage to a person who is wrongfully denied health benefits and does not have
immediate medical expenses, but it provided no evidence contradicting the
employees' expert testimony regarding the long-term damages. The trial court
properly held that the assumption underlying the State's method was wrong as a
matter of common sense and as demonstrated by the evidence before the court.
Finally, the State contends that the employees conceded that some members of
the class suffered no monetary damages because they stipulated to the fact that some
7 Moore v. Health Care Auth. No. 89774-3
members of the class did not incur out-of-pocket expenses during the time the State
improperly failed to provide them with health benefits. This leap of logic simply
repeats the same mistake described above. While some members of the class did not
(or could not) obtain health insurance and avoided or deferred direct health care
expenses at the time that they were uninsured, the undisputed evidence on the record
shows that such individuals still suffered long-term damages from the lack of health
benefits. 1
B. Due Process Does Not Require an Individual Claims Process in This Case
The State argues that under the Court of Appeals case Sitton v. State Farm
Mutual Automobile Insurance Co., 116 Wn. App. 245, 63 P.3d 198 (2003), due
process requires the trial court to establish an individual claims process where each
individual class member must demonstrate his or her out-of-pocket expenses during
the time the State improperly failed to provide health benefits. The State attempts to
argue that the trial court erred in its ruling because it "allows the Plaintiffs to 'skip
over' proving the fact of damages for each class member, contrary to Sitton." Br. of
Appellants at 16. This is incorrect. When liability has already been established, it is
1 The State argues that some members of the class may have had other access to health insurance and thus did not suffer this particular type of long-term damage. As discussed below, this possibility was explicitly recognized by the trial court. In fact, the trial court denied summary judgment because this factual issue remained unresolved, and indicated that this information would need to be developed and taken into account when ultimately calculating damages.
8 Moore v. Health Care Auth. No. 89774-3
not necessary for each plaintiff in a class action to prove the amount of damages on an
individualized basis.
Sitton involved a class action brought by people insured by State Farm who
claimed that State Farm acted in bad faith to deny coverage for their claims. 116 Wn.
App. at 248. The Court of Appeals vacated the trial plan because it did not require the
claimants to show causation and damages and it did not provide a mechanism for
State Farm to provide a defense for denying the individual claims. !d. at 258-59.
That plan would affect State Farm's right to due process because there were
potentially members of that class whose claims were not denied due to bad faith. But
as this court explained in a later case, Sitton was unique because "the trial court
accepted a bifurcated trial plan that ultimately resulted in damages being determined
before causation." Moeller v. Farmers Ins. Co. of Wash., 173 Wn.2d 264, 280, 267
P.3d 998 (2011). This case, like Moeller, is distinguishable from Sitton because the
State has already been found liable. The class membership can be determined with
certainty based on the State's employment records, and damages can be calculated
based on that class membership.
"[I]t is not unusual, and probably more likely in many types of cases, that
aggregate evidence of the defendant's liability is more accurate and precise than
would be so with individual proofs of loss." 3 ALBA CONTE & HERBERT B.
NEWBERG, NEWBERG ON CLASS ACTIONS§ 10:2, at 479 (4th ed. 2002). The facts of
9 Moore v. Health Care Auth. No. 89774-3
this case make it particularly suitable for using aggregate proof of damages. First, the
employees' expert explained that the number of total class members is large enough to
be able to statistically estimate their health care costs by comparing the group with
State employees who did receive health benefits (controlling for any demographic
differences). Second, the time period covered by the class action is from 2009 and
before, which means it will be very difficult for many class members to produce
records of medical expenses. They may have had no reason to retain medical records
from so long ago, particularly those with small expenses and those who did not know
that they were wrongfully denied health benefits. The employees' expert also
indicated that the employees may have difficulty obtaining such records from their
providers, who "may have moved, merged, gone out of business, had billing records
destroyed, or have difficulties in obtaining the old documentation." CP at 159.
Earlier, the State acknowledged that obtaining such information from a class of
thousands of people '"would be unmanageable and unduly burdensome."' !d. Class
members with small claims would be unlikely to pursue their claims, and of course,
absent class members would automatically be deemed to have no damages. These
results defeat the purpose of a class action, which is to provide relief for large groups
of people with the same claim, particularly when each individual claim may be too
small to pursue. See Scott v. Cingular Wireless, 160 Wn.2d 843, 851, 161 P.3d 1000
(2007) (class actions demonstrate "a state policy favoring aggregation of small claims
10 Moore v. Health Care Auth. No. 89774-3
for purposes of efficiency, deterrence, and access to justice"). Adopting the State's
method in this case would not only create an unreasonable burden on class members,
it would hinder our state policy underlying class action lawsuits. The trial court was
correct to reject it.
C. We Reject a One-Size-Fits-All Measure ofDamages Caused by the Failure To Provide Health Benefits
Other jurisdictions are split as to how to calculate damages from the failure to
provide health benefits. 2 The State argues that we should join the jurisdictions
holding that the only proper measure of damages is the actual medical costs incurred.
That argument fails because those cases rely on the same flawed assumption that the
only damages to those without health benefits are immediate medical costs. The
evidence presented in this case shows that assumption to be false. There is no
indication that those other courts had the benefit of similar evidence, particularly since
many are based on case law from 20 to 30 years ago, when such evidence may not
have been available. It does not make sense for us to adopt the strict holding of
2 Cases holding that damages from lack of insurance should be measured by immediate out-of-pocket medical costs include Galindo v. Stoody Co., 793 F .2d 1502, 1517 (9th Cir. 1986); Kossman v. Calumet County, 800 F.2d 697, 703-04 (7th Cir. 1986), overruled on other grounds by Coston v. Plitt Theatres, Inc., 860 F.2d 834, 836 (7th Cir. 1988); and Lubke v. City ofArlington, 455 F.3d 489, 499 (5th Cir. 2006). Cases holding that damages from lack of insurance can be measured by the premiums that should have been paid include Equal Employment Opportunity Commission v. Dial Corp., 469 F .3d 735, 744 (8th Cir. 2006), and Fariss v. Lynchburg Foundry, 769 F.2d 958, 965-66 (4th Cir. 1985).
11 Moore v. Health Care Auth. No. 89774-3
another court when that court's underlying reasoning is directly contradicted by the
evidence presented in this case.
As we discuss further below, the method proposed by the State is the least
accurate of all of the proposed methods in this case based on the evidence in the
record. As a result, the trial court properly rejected this method in this case.
However, that does not mean that such a method could never be used to value health
benefits. Instead, we defer to trial courts to determine the best measure of damages
depending on the facts of the case. For instance, consider a case involving an
individual who was unlawfully fired and purchased substitute health insurance but
was unable to obtain health insurance at as low a cost as the employer could have.
Under such circumstances, a trial court could reasonably find that the most accurate
measure of damages to that individual is the cost of purchasing substitute health
insurance. But such a one-size-fits-all measure is not appropriate for every situation.
Valuing health benefits, and particularly valuing the damage from denying health
benefits to a large group of people, is a complex matter that depends on facts of the
particular situation. As described below, measuring damages exclusively through out-
of-pocket expenses is highly inaccurate in this particular case, and thus we affirm the
trial court's decision to reject it. However, our opinion should not be interpreted as
prescribing this method as the only appropriate way to value health benefits. Instead,
12 Moore v. Health Care Auth. No. 89774-3
trial courts have discretion to select the most appropriate method for calculating
damages depending on the facts presented.
2. The Trial Court Did Not Err When It Expressed Support for the Lost Wages and Restitution Methods of Measuring Damages
The employees proposed three methods of measuring damages: (1) measuring
damages as the amount the State should have paid to provide the health benefits
because the failure to provide health benefits was a failure to pay wages, (2)
measuring damages as the amount the State unlawfully retained by failing to provide
health benefits to those employees, or (3) measuring damages as the amount that the
State would have paid in health care costs for the group of employees had they been
covered.
The trial court did not select a particular method of damages in its ruling;
however, it did generally support the first two methods proposed by the employees by
agreeing that a failure to provide health care benefits is a failure to pay wages and that
the State received a windfall by failing to provide the health benefits. Nonetheless,
the trial court found that "huge factual issues" remained, including how many class
members would likely have opted out of coverage and which level of coverage the
class members would likely have chosen. VRP (Oct. 26, 2012) at 46. Because factual
issues remained, the trial court concluded that summary judgment was inappropriate.
13 Moore v. Health Care Auth. No. 89774-3
A. The Methods Proposed by the Employees Are Allowed by Law
The State fails to directly address the damage calculation methods proposed by
the employees and supported by the trial court. That is probably because treating the
State's failure to pay health benefits as a failure to pay wages (and measuring
damages as the value of those lost wages) is well grounded in the law. In this case,
the State was found to have violated RCW 41.05.050(1) for failing to provide the
proper contributions for health benefits for this class of employees. In light of that, it
is reasonable to estimate the damages as the contributions the State should have paid
to provide health benefits for the employees. The trial court pointed to Cockle v.
Department ofLabor & Industries, 142 Wn.2d 801, 16 P.3d 583 (2001), for support,
where this court had faced an analogous situation in the workers' compensation
context:
[I]t is very clear to me that in Washington, if not in other places, that we view the right to health care benefits as a form of wages. I agree that Cockle is a workers compensation case, but I do not agree that Cockle is limited to wages in the workers compensation context. The Cockle Court looked very broadly at what wages are under Washington law, and the court expressly rejected any method that required a hypothetical calculation of market value. The Court in Cockle indicated that premiums actually paid by the employer to secure the benefit are going to be the best measurement for wages lost.
VRP (Oct. 26, 2012) at 43. The State points out that the parties in Cockle stipulated
that the amount paid by the employer for health benefits "fairly reflected the benefit's
value," 142 Wn.2d at 820 n.1 0, and thus Cockle does not stand for the proposition that
14 Moore v. Health Care Auth. No. 89774-3
health benefits must be valued as the amount the employer should have paid towards
providing the benefits. While the State is correct that Cockle does not stand for the
proposition that this method must be used to value health benefits, it does stand for the
proposition that such a measure can be used to value health benefits. As described
above, we are not providing a one-size-fits-all measure for valuing health benefits in
all circumstances; however, the "lost wages" method used in Cockle and generally
supported by the trial court in this case is one lawful method of measuring the damage
caused by the improper failure to provide health benefits. Therefore, the trial court
did not favor an unlawful method of damages when it expressed support for using the
lost wages method in this case.
B. The Trial Court Expressed Support for the Most Accurate Measures Available
As briefly described above, the employees presented expert testimony that
explained in detail why the methods proposed by the employees were more accurate
than the method proposed by the State. The State did not rebut the fact that the
employees' methods are more accurate. The State cited a study showing that those
without insurance have lower medical expenses than those with insurance but
strikingly failed to acknowledge that-as explained by the employees' expert-the
same study showed that "the lower present expenses are directly correlated to deferred
costs and lost health and longevity for the uninsured because the lower expenses are
due to the inability to access preventive services, timely care, and medical treatment."
15 Moore v. Health Care Auth. No. 89774-3
CP at 156 (emphasis added). The employees' expert went on to explain that the study
showed that "deferred care is often more expensive and less effective." !d. Yet, the
State argues that the court should deny the existence of this type of scientifically
demonstrated long-term damage and allow the class to recover only short-term
economic damages. The trial court properly rejected this argument, and we do as
well.
People without health benefits are less likely to seek and obtain medical
treatment, especially preventive care. This is true as a matter of common sense and as
shown by the evidence in the record. The State would use this fact as a reason to use
a lower estimate of the damage it caused to the employees to whom it improperly
denied health benefits. But those lower short-term medical costs have significant
long-term consequences, both medical and financial, to uninsured individuals. We see
no error in the trial court's decision to consider those long-term consequences in its
damages calculation.
In addition, the trial court recognized that issues of fact remained in order to
make an accurate estimate of the class-wide damages. The trial court refused to grant
summary judgment to either side because additional information was needed on the
likelihood that any members would have opted out of coverage (notably, a State
employee can opt out of health coverage only if they have comparable health
coverage from another source, WAC 182-12-128) and what level of coverage they
16 Moore v. Health Care Auth. No. 89774-3
likely would have chosen. As these additional facts are developed, the measure of
damages proposed by the employees will become even more accurate.
C. The Trial Court's Decision Avoids a Windfall for the Wrongdoer
Both sides argue that the other side's method for measuring damages would
result in a windfall for that side. The employees contend that the State's method
would result in a windfall for the State because it would retain a significant portion of
the money it should have paid to provide health benefits to the employees. The State
argues that the employees' method would result in a windfall for those employees that
did not incur medical expenses during the time they were wrongfully denied health
benefits.
First, since the methods proposed by the employees are the most accurate, they
are the most likely to avoid a windfall for any party. But more importantly,'" [t]he
most elementary conceptions of justice and public policy require that the wrongdoer
shall bear the risk of the uncertainty which his own wrong has created."' Wenzler &
Ward Plumbing & Heating Co. v. Sellen, 53 Wn.2d 96, 99, 330 P.2d 1068 (1958)
(quoting Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 265, 66 S. Ct. 574, 90 L.
Ed. 652 (1946)). Adopting the State's method would not only result in a less accurate
measure of damages, it would also result in the wrongdoer benefitting from its
wrongdoing. Thus, we agree with the trial court's decision to reject that method and
support one of the methods proposed by the employees instead. VRP (Oct. 26, 2012)
17 Moore v. Health Care Auth. No. 89774-3
at 46 (concluding "that the State received a windfall ... that it shouldn't have
received, by not paying for the folks that are in the class").
The State also argues that the methods proposed by the employees will result in
some employees being undercompensated (e.g., if they had a significant amount of
immediate medical expenses). But the State confuses the method of calculating the
aggregate damages class-wide with the method of distributing the damage award to
members. Using the methods proposed by the employees will result in an accurate
estimation of the class-wide damages; in contrast, the methods proposed by the State
will significantly underestimate the class-wide damages. Once the award is made, the
trial court will address how the award will be distributed. There are many
distribution methods available to the court, some of which provide a mechanism for
fairly compensating those with larger claims. But importantly, the trial court has not
yet ruled on a distribution plan, and thus there is no basis on which to claim that
certain class members will be undercompensated.
CONCLUSION
When people do not have health benefits, they often postpone needed health
care. In light of this fact, the trial court properly rejected the State's proposed method
of calculating damages to the group of employees wrongfully denied health benefits,
which failed to take into account the damage resulting from those delays in receiving
needed health care. In addition, the trial court did not err when it agreed with the
18 Moore v. Health Care Auth. No. 89774-3
methods proposed by the employees, which provided more accurate estimates of
damages and avoided any party benefitting from its wrongdoing. We affirm.
19 Moore v. Health Care Auth. No. 89774-3
WE CONCUR: