IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
KENNETH SLINEY, ) ) Plaintiff, ) ) C.A. No. N19C-05-061 FWW v. ) ) NEW CASTLE COUNTY and ) HIGHMARK BCBSD, INC., ) ) Defendants. )
Submitted: December 4, 2020 Decided: March 31, 2021
Upon Defendant Highmark BCBSD, Inc.’s Motion to Dismiss Amended Complaint GRANTED in part and DENIED in part.
Upon Defendant New Castle County’s Motion to Dismiss Amended Complaint DENIED.
OPINION AND ORDER
Francis J. Murphy, Esquire, Jonathan L. Parshall, Esquire, Murphy & Landon, 1011 Centre Road, #210, Wilmington, DE, 19805; Attorneys for Plaintiff, Kenneth Sliney. Benjamin Chappel, Esquire, Justin M. Forcier, Esquire, Reed Smith, LLP, 1201 N. Market Street, Suite 1500, Wilmington, DE 19801; Attorneys for Defendant Highmark BCBSD, Inc. Mary A. Jacobson, Esquire, Mengting Chen, Esquire, New Castle County Office of Law, New Castle County Government Center, 87 Reads Way, New Castle, DE 19720; Attorneys for Defendant New Castle County.
WHARTON, J. I. INTRODUCTION
Kenneth Sliney (“Sliney”) brought this action in May 2019 seeking damages
from his employer, New Castle County (“the County”), and Highmark BCBSD, Inc.
(“Highmark”) in connection for what he alleged was their wrongful refusal to cover
medically necessary treatment for his son at the Caron Treatment Center (“Caron”)
and Serenity Lodge (“Serenity”).1 The two count Complaint alleged breach of
contract and bad faith breach of contract against both Defendants.2 In August, both
Defendants moved to dismiss. Highmark’s motion was based on Sliney’s failure to
allege any contractual relationship between himself and Highmark, thus negating
both his breach of contact claim and his bad faith breach of contract claim.3 The
County premised its motion on the fact that an independent medical review
performed by Medwork Independent Review (“Medwork”) upheld Highmark’s
denial of benefits.4
The Court granted Highmark’s motion, granted the County’s motion in part,
denied it in part, and granted Sliney leave to amend the original complaint.5 Sliney
took advantage of this opportunity and provided a significantly more fulsome
1 Compl., D.I. 1. 2 Id. 3 Def. Highmark’s Mot to Dismiss, D.I. 9. 4 Def. New Castle County’s Mot. to Dismiss, D.I. 11. 5 Sliney v. New Castle County, 2019 WL 7163356 (Del. Super. Ct. Dec. 23, 2019). 2 explication of its allegations against Highmark and the County in his First Amended
Complaint. (“FAC”).6 The FAC now alleges breach of contract against Highmark in
Count I claiming Sliney was a third-party beneficiary of the contract between
Highmark and the County.7 In Count IV Sliney alleges that Highmark assumed the
County’s duty of assisting him in connection with various aspects of obtaining
medical care, thereby taking over primary control of coverage determinations under
the County’s health insurance plan.8 He further alleges that Highmark breached its
duty of good faith in a variety of ways with respect to the denial of coverage for
Sliney’s son at Caron, the external review process of that denial, and the failure to
provide accurate and timely information about treatment options.9 Finally, he alleges
that as a de facto joint venturer with the County, Highmark had a financial stake in
denying claims such as Sliney’s.10 Counts II and III allege breach of contract and
breach of the duty of good faith, respectively, against the County.11 Among other
things, Count III alleges that the County knew of Highmark’s claimed improprieties
set out in Count IV, and yet refused to honor its obligations under its contract with
6 FAC, D.I. 18. 7 Id. at 6-9. 8 Id. at 15, 19. 9 Id. at 15-18. 10 Id. at 18-19. 11 Id. at 9-14. 3 Sliney, while also having a similar financial motive as the County to deny his
claims.12
Both Highmark and the County move to dismiss, although the County moves
to dismiss only on the bad faith claim. In Highmark’s motion, for the first time the
Court is presented with an argument based on an Administrative Services Only
Agreement (ASOA”) between it and the County. That agreement purports to
preclude any intent by the parties to benefit a third party.13 Highmark also denies any
joint venture relationship with the County.14 The County seeks dismissal of the bad
faith claim because it believes that the submission of Highmark’s denial of coverage
to an independent review inoculates it from a bad faith claim.15
Under Delaware law a non-contracting third party may benefit from a contract
only if that third party benefit is intended by the contracting parties. The ASOA
makes it clear that the contracting parties – Highmark and the County - intended the
contract to confer no benefit on Sliney. Thus, as to Count I, Highmark’s Motion to
Dismiss is GRANTED. But, at this stage of the proceeding, drawing all reasonable
12 Id. at 10-15. 13 Def. Highmark’s Mot. to Dismiss FAC at 4, D.I. 21. (When it decided Highmark’s original motion to dismiss, the Court did not have the benefit of that contract. The ASOA is included now as an exhibit in Highmark’s current motion. Highmark’s motion to dismiss the original complaint argued, in part, that Sliney had not alleged any contractual relationship with Highmark but did not refer to the ASOA.) 14 Id. at 4-6. 15 Def. New Castle County’s Mot. to Dismiss FAC, D.I. 22. 4 factual inferences in favor of Sliney, it is conceivable that he could prevail if he is
able to prove the set of facts he has alleged on his bad faith claim against Highmark
in Count IV. It is conceivable that Sliney could establish that Highmark and the
County are de facto joint venturers and/or that Highmark acted sufficiently like an
insurer that a special relationship existed between it and Sliney such that Highmark
could be found liable for tortious bad faith. Thus, as to Count IV, Highmark’s Motion
to Dismiss is DENIED. It also is conceivable that Sliney could establish that the
County knew the Medwork appeal process was sufficiently flawed to overcome any
presumption that the County acted in good faith. Therefore, the County’s Motion to
Dismiss as to Count III is DENIED.
II. FACTS AND PROCEDURAL HISTORY
In June and July of 2017, Sliney’s minor son received inpatient medical
treatment at Caron and thereafter at Serenity.16 The County, Sliney’s employer,
supplied his health insurance, which Highmark administered.17 Sliney paid $48,150
for treatment at Caron and received a reimbursement of $4,432.18 Sliney also paid
$17,250 for his son to live at Serenity, a sober living facility, as part of his treatment
plan after leaving Caron.19 Highmark denied payment for part of the inpatient
16 FAC at 3,5. 17 Id. at 3. 18 Id. at 5. 19 Id. 5 treatment at Caron and for all of stay Serenity.20 After first unsuccessfully appealing
directly to Highmark, Sliney submitted the claim for independent review by
Medwork, as a part of Highmark’s appeal process.21 On April 18, 2018, Medwork
issued a decision upholding the denial of benefits.22
On May 8, 2019, Sliney brought this action against the County and Highmark,
alleging Breach of Contract (Count I) and Bad Faith Breach of contract (Count II).23
On August 14, 2019, Highmark moved to dismiss.24 Two days later, the County also
moved to dismiss or, in the alternative, for a more definite statement.25 Sliney
opposed both motions.26 The Court granted Highmark’s motion finding that: (1)
despite arguing that he was a third-party beneficiary of the contract between
Highmark and the County, Sliney had not alleged in the Complaint that he was a
third-party beneficiary of that contract for purposes of coverage determinations under
Count I; and (2) Sliney’s conclusory bad faith claim under Count II was undermined
by his factual allegation that a subsequent independent review affirmed Highmark’s
20 Id. 4-5. 21 Id. at 4. 22 Id. at ¶ 15. 23 Id. ¶¶ at 20-25. 24 Def. Highmark’s Mot. to Dismiss, D.I. 9. 25 Def.’s New Castle County’s Mot. to Dismiss, D.I. 11. 26 Pl.'s Resp. Def. Highmark’s Mot. to Dismiss, D.I. 14, Pl.’s Resp Def. New Castle County’s Mot. To Dismiss, D.I. 15. 6 denial of coverage.27 The Court denied the County’s motion to dismiss Count 1, but
granted it as to Count II for the same reason the claim failed against Highmark – the
conclusory allegation of bad faith was undermined by the factual allegation that the
denial was upheld by the independent review.28 However, the dismissals were
without prejudice and Sliney was granted leave to amend his complaint.29
On January 22, 2020, Sliney filed his FAC.30 In it he alleges Breach of
Contract against Highmark (Count I), Breach of Contract against New Castle County
(Count II), Breach of Good Faith against New Castle County (Count III), and Breach
of Good Faith against Highmark (Count IV).31
In Count I, Sliney alleges breach of contract for failure to pay his son’s
treatment expenses against Highmark together with other allegations. He alleges that
Highmark failed to provide “full, accurate, and timely information” to him about
treatment options for his son, which he claims it was obliged to do under its contract
with the County.32 He also alleges that Highmark failed to make “fair, honest, and
legally proper coverage determinations” for the treatment Sliney’s son received at
Caron.33 In Count II alleging breach of contract against the County, Sliney alleges
27 Sliney at 2-3. 28 Id. 29 Id. 30 FAC, D.I. 18. 31 Id. 32 Id. 33 Id. 7 that the County improperly failed to pay for his son’s treatment and essentially
repeats the allegations he makes against Highmark.34
Count III brings a claim of a breach of a duty of good faith against the County.
The gravamen of that allegation is that an implied covenant of good faith and fair
dealing was breached by the County when it engaged in arbitrary and unreasonable
conduct having the effect of preventing Sliney from receiving the benefits of his
health insurance coverage contract with the County.35 Specifically, Sliney alleges
that the County knew that Highmark was wrongfully denying coverage to his son at
Caron, as well as to other similarly situated people in need of addiction treatment;
that the County knew that the external review process conducted through Medwork
was not conducted in good faith, but instead was designed and intended to result in
decisions denying benefits; that the County knew that Highmark was failing to
provide full, accurate, and timely information to Sliney about treatment options for
his son; that the County and Highmark knew that his son’s medical treatment
providers had recommended treatment at Caron beyond the two weeks for which
partial payment was provided; that both the County and Highmark rejected those
recommendations in favor of “an unfair, unreasonable, and inadequate paper review
by [a doctor] located in Grand Rapids, Michigan who never interviewed or examined
34 Id. 35 Id. 8 [Sliney’s son];” and that the County had a financial motivation to deny claims like
those presented by Sliney and other insureds seeking treatment for drug
dependency.36 Sliney’s bad faith claim against Highmark in Count IV tracks its bad
faith claim against the County in Count III.37
III. THE PARTIES CONTENTIONS
Highmark argues in its motion that Sliney is not a third-party beneficiary of its
contract with the County because that contract is an Administrative Services Only
Agreement that specifically provides that it is for the exclusive benefit of the
contracting parties and does not confer any benefit upon any third party.38 Highmark
further argues that Sliney’s bad faith claim, which Highmark characterizes as
predicated in the FAC on a de facto joint venture theory, is unsustainable because
Highmark and the County were not in a joint venture.39
The County seeks dismissal of Count III only, the bad faith claim.40 It argues
that Sliney cannot sustain a bad faith claim in light of the submission of the denial of
benefits to an independent third party reviewer, Medwork, which upheld the denial.41
Further, the County argues that Sliney’s attacks on the external review process cannot
36 Id. 37 Id. 38 Def. Highmark’s Mot. To Dismiss FAC at 2-3, D.I. 21. 39 Id. at 5-6. 40 Def. New Castle County’s Mot. to Dismiss FAC, D.I. 22. 41 Id. at 4-6. 9 save the bad faith claim since the selection of the independent reviewing physician
was not within either Highmark’s or the County’s control, nor did either defendant
have a duty to independently test the review process.42
Sliney opposes both motions. With respect to Highmark’s motion, he argues
as to Count I that he now has alleged that he is a third-party beneficiary of the contract
between Highmark and the County.43 Additionally, he argues that the ASOA is not
dispositive because it is at best ambiguous and there are amendments to it and other
relevant documents that have not been produced.44 Those documents include a
member’s Benefit Booklet, Highmark’s policies, practices, and network rules, and
any amendments to the ASOA. Further, the provision of the ASOA denying any
intent to confer any benefit upon any third parties does not apply to him, because he
is not a merely a third-party beneficiary. Under the terms of the ASOA he is also a
contractholder, member and subscriber, and that contractholders and members are
not excluded by § 14.2. Rather § 11.1 of the ASOA “establishes that Highmark and
the County knew and intended that Members (and Providers) could sue them as third-
party beneficiaries.”45 Next, he maintains that the better jurisprudential view is that
a third-party administrator may be liable to policy holders as third-party beneficiaries
42 Id. 43 Pl.’s Opp. to Def. New Castle County’s Motion to Dismiss FAC at 1, D.I. 29. 44 Id. at 4-6. 45 Id. at 5-6. 10 for their acts of negligence and bad faith. Sliney further argues that Highmark is not
just a third-party claims administrator, but is a “joint venturer” with the County, and
that it has not limited itself to claims administration, but has assumed many of the
functions of an insurer.46 Finally, Sliney cites the County’s cross-claim against
Highmark, which he describes as being based upon Highmark’s breach of the ASOA
and Sliney’s status as a potential third-party beneficiary, as supporting his claim of
third-party beneficiary status against Highmark.47
With respect to Count IV, he asserts that the FAC alleges actions by
Highmark constituting bad faith that were not part of the independent review by
Medwork, and thus those allegations of bad faith were not undermined by Medwork’s
review upholding Highmark’s denial of coverage.48 Those allegations include a
claim that Highmark recklessly and with conscious indifference provided him
“inadequate, untimely, inaccurate, [and] wrong” information about his medical care
options, and that Highmark recklessly provided inadequate claims service.49 The
FAC also alleges that Hallmark was not justified in relying on the external review
because it and the County knew the physician who performed the review was
46 Id. at 6. 47 Id. at 4-5. 48 Id. at 2. 49 Id. 11 unqualified to do so.50 Finally, he contends that the record is sufficient to support his
claim that Highmark and the County are joint venturers.51
In his opposition to the County’s motion he reiterates his argument that
Medwork’s decision did not resolve all of his allegations of bad faith.52 Specifically,
Sliney alleges that his bad faith claims for improper claims handling service and full
payment of the first two weeks at Caron were not the subjects of Medwork’s external
review because that review only addressed whether inpatient care at Caron for weeks
three and four was medically necessary.53 He also reiterates his concerns about the
efficacy of the review.54 He disputes the County’s contention that it had no ability or
duty to assess the quality of either the review process or the reviewing physician.55
In fact, he alleges that the County knew the reviewer was unqualified and, therefore,
it was not legally required to deny benefits to a deserving patient where the decision
was inadequate on its face and the reviewer was unqualified.56 Thus, in Sliney’s view
the independent review cannot conclusively establish good faith on the part of either
Highmark or the County.57
50 Id. at 3-6. 51 Id. at 6. 52 Pl.’s Opp. to Def. New Castle County’s Mot. to Dismiss FAC at 3-4, D.I. 31. 53 Id. 54 Id. at 5-6. 55 Id. 56 Id. at 6. 57 Id. 12 III. STANDARD OF REVIEW
A motion to dismiss for failure to state a claim pursuant to Superior Court Rule
12(b)(6) will not be granted if the “plaintiff may recover under any reasonably
conceivable set of circumstances susceptible of proof under the complaint.”58 The
Court's review is limited to the well-pled allegations in the complaint.59 In ruling on
a motion under Rule 12(b)(6), the Court “must draw all reasonable factual inferences
in favor of the party opposing the motion.”60 Dismissal is appropriate “only if it
appears with reasonable certainty that the plaintiff could not prove any set of facts
that would entitle him to relief.”61 The pleading standards governing a motion to
dismiss in Delaware are minimal.62 Delaware is a notice-pleading jurisdiction, and a
complaint need only “give general notice as to the nature of the claim asserted against
the defendant in order to avoid dismissal for failure to state a claim.”63
IV. DISCUSSION
A. Highmark’s Motion to Dismiss.
58 Browne v. Robb, 583 A.2d 949, 950 (Del. 1990). 59 Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005). 60 Id. 61 Id. 62 See Central Mort. Co. v. Morgan Stanley Mort. Capital Holdings LLC, 27 A.3d 531, 536 (Del. 2011). 63 Nye v. Univ. of Del., 2003 WL 22176412, at *3 (Del. Super. Ct. Sept. 17, 2003); see also Super. Ct. Civ. R. 8(a)(1). 13 1. Count I – The Breach of Contract Claim
The Court turns first to Highmark’s 12(b)(6) Motion to Dismiss Count I –
Breach of Contract. A contract made for the benefit of a third party is enforceable
and the third party may sue to enforce a promise made for the third party’s benefit,
even as a stranger to the written agreement.64 Under general contract principles, in
order to be a third-party beneficiary, the parties to the contract must have intended to
confer a benefit on the third party.65 To state a claim for breach of contract, a party
must simply plead: (1) the existence of the contract; (2) a breach of the contract; and
(3) damages suffered because of the breach.66 A plaintiff need not plead specific facts
to state an actionable claim.67
Count I of the original complaint was dismissed, in part, because Sliney had
not alleged that he had any contractual relationship with Highmark. In the FAC, he
remedies that defect in spades, repeatedly claiming third-party beneficiary status. In
Delaware, whether the parties to a contract intend a third party to be a beneficiary of
that contract is determined by the language of the contract.68 Highmark maintains
64 Farmers Bank of State of Del. v. Howard, 276 A.2d 744, 745 (Del. Ch. 1971). 65 Delmar News, Inc. v. Jacobs Oil Co., 584 A.2d 531, 534 (Del. Super. Ct. 1990). 66 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). 67 Id. at 611. 68 Willis v. City of Rehoboth Beach, 2004 WL 2419143, at *2 n3 (Del. Super. Ct. Oct. 14, 2004) (The Court’s interpretation of an insurance policy is matter of law) (citations omitted). 14 that the ASOA answers that question in its favor. The Court agrees. Specifically,
§ 14.2 of the ASOA states, “This Agreement is for the sole and exclusive benefit of
the parties hereto and is not intended to, nor does it confer any benefit upon any third
party.”69 The Court does not find the contract, read as a whole, to be ambiguous.
The use of terms “contractholder, member, and subscriber” does not imply an
intention to confer third-party beneficiary status on those people in the face of the
clear language of the ASOA that it is intended for the “sole and exclusive benefit of
the parties hereto.” Plainly, Sliney and other contractholders, members and
subscribers are not parties to the ASOA. The ASOA specifically states that it is
between Highmark and the County and Highmark and the County were the only
parties to sign the agreement. Since Sliney and others like him who are
contractholders, members, or subscribers are neither Highmark, nor the County, they
are necessarily third parties.
Sliney’s argument that § 11.1 of the ASOA establishes that Highmark and the
County “knew and intended that Members (and Providers) could sue them as third-
party beneficiaries”70 is similarly unpersuasive. First, the term third-party beneficiary
does not appear in § 11.1. Second, the parties’ recognition that someone might sue
them (alleging liability under some third-party beneficiary theory) does not establish
69 Def. Highmark BCBSD, Inc.’s Mot. to Dismiss FAC at Ex. A, § 14.2, D.I. 21. 70 Id. at 6-7. 15 that such plaintiffs are either parties to the contract or third-party beneficiaries of it.
Thus, Highmark’s Motion to Dismiss is GRANTED as to Count 1.71
2. Count IV – The Breach of Duty of Good Faith Claim
The Court now turns to Highmark’s Motion to Dismiss Count IV – Breach of
Duty of Good Faith. Although it is clear from the ASOA that Sliney is not an
intended third-party beneficiary of the contract between Highmark and the County,
it is equally clear that Sliney and Highmark are not strangers to each other. Sliney
alleges extensive interactions between himself and Highmark, the particulars of
which are set out in detail in the FAC. He maintains that Highmark assumed the
County’s responsibilities under the County’s insurance plan to assist him in
“investigating, reviewing, evaluating, servicing, and paying claims, and providing
[him] with information needed to access proper and timely medical care.” 72 In
assuming those responsibilities he characterizes the relationship between Highmark
and the County in various ways. He alleges that Highmark was the agent in fact of
the County, or “the apparent and/or ostensible agent” of the County.73 He also
71 In its Order granting Highmark’s first motion to dismiss, the Court stated, “As an employee of the County, Sliney is clearly an intended beneficiary of the agreement between the County and Highmark for the purposes of the administration of benefits.” Sliney at 5. In retrospect, that phrasing was unfortunate and made without the benefit of the ASOA. The Court regrets any confusion that comment may have caused. 72 FAC at 15. 73 Id. at 3. 16 alleges, based on certain claimed financial understandings between Highmark and
the County as well as Highmark’s assumption of the County’s responsibilities as an
insurer, that they were de facto joint venturers.74 As de facto joint venturers,
Highmark shared the County’s duty to act in good faith in its dealings with Sliney.75
Support for the proposition that Highmark has a duty to act in good faith in its
dealings with Sliney despite his lack of third-party beneficiary status is found the
cases he cites – Wolf v. Prudential Ins. Co. of Am.;76 Carey v. United of Omaha Life
Ins. Co.;77 and Hunt v. Regence BlueShield of Idaho.78 In Wolf, the federal district
court granted summary judgment to Prudential because it concluded that Prudential’s
claims handling services did not provide a basis for a bad faith action because
Prudential was not a party to the insurance contract between Wolf and his employer
and was merely the insurer’s agent.79 In reversing, the 10th Circuit, interpreting
Oklahoma law, held, “the analysis should focus more on the factual question of
whether the administrator acts like an insurer such that there is a ‘special relationship’
between the administrator and the insured that could give rise to a duty of good
74 Id. at 19. 75 Id. 76 50 F3d. 793 (10th Cir. 1995). 77 68 P.3d 462, 464-66 (Colo. 2003). 78 2003 WL 22176010 (Idaho Dist.). 79 Wolf at 797. 17 faith.80 In Carey, the Colorado Supreme Court similarly relied on a “special
relationship” theory to reverse the decisions of the trial court and court of appeals
that a third party insurance administrator hired by Carey’s employer to run the health
insurance program had no duty of good faith and fair dealing to Carey because there
was no contractual relationship between the administrator and Carey.81 The Carey
Court acknowledged that an insurer had non-delegable duties, but
[T]he existence of this non-delegable duty does not mean that a third-party claims administrator never has an independent duty to investigate and process the insured’s claim in good faith. When the actions of a defendant are similar enough to those typically performed by an insurance company in claim administration and disposition, we have found the existence of a special relationship sufficient for the imposition of good faith and tort liability for its breach – even where there is no contractual privity between the defendant and the plaintiff.82
Finally, in Hunt, the Idaho First Judicial District Court followed Carey and Wolf
when it denied summary judgment to a third-party administrator on a bad faith claim
brought by an insured with whom it did not have a contractual relationship.83
80 Id. 81 Carey at 463. 82 Id. at 466. 83 Hunt at *8. 18 Substantial contrary authority exists, however. In De Dios v. Indemnity
Insurance Company of North America,84 a federal district court certified a question
of Iowa law in a bad faith action brought by an injured worker against a workers
compensation carrier and a third-party claims administrator.85 A divided Iowa
Supreme Court answered the question, holding that Iowa statutory law provided a
“workable bright line” delineating entities that act as insurers under its workers
compensation system without the need of allowing bad faith claims against entities
that act like insurers.86 Generally, those jurisdictions that prohibit bad faith claims
against third-party administrators do so based on the lack of contractual privity
between the insured and the third-party administrator.87
The parties have not directed the Court to any Delaware case law answering
the question whether a third-party administrator may be held liable to an insured with
whom it is not in privity for a claim of tortious bad faith in investigating and
processing the insured’s claim. Nor has the Court found any such authority.
Therefore, the Court will exercise its best judgment as to what the better answer to
84 927 N.W.2d 611 (Iowa 2019). 85 Id. at 613. 86 Id. at 624. 87 See Lodholtz v. York Risk Servs. Grp., Inc. 778 F.3d 635 (7th Cir. 2015) (interpreting Indiana law); The William Powell Co. v. Nat’l Indem. Co., 141 F. Supp. 3d 773 (S.D. Ohio 2015) (interpreting Ohio law); Charleston Dry Cleaners & Laundry, Inc. v. Zurich Am. Ins., 586 S.E.2d 586 (S.C. 2003); Natividad v. Alexsis, Inc., 875 S.W.2d 695 (Tex. 1994). 19 that question should be. The Court believes that such a claim ought to be permitted
to go forward to discovery. In the Court’s view, strict adherence to a privity
requirement ignores the current reality on the ground where insurers may essentially
delegate all or substantially all their responsibilities under their health insurance plans
to third-party administrators.88 Although the County was the insurer here, the FAC
alleges that the real party with whom Sliney delt and who made all the important
decisions was Highmark. In effect, the FAC alleges that Highmark acted like an
insurer. Thus, the Court finds that Sliney has alleged sufficient facts that, if proven,
would establish that there was a special relationship between Sliney and Highmark
such that Highmark owed Sliney a duty of good faith. The Court also finds that
Sliney has alleged sufficient facts that, if proven, would establish a de facto joint
venture financial relationship between Highmark and the County.
B. The County’s Motion to Dismiss.
The County has moved to dismiss only Count III – the bad faith claim. Sliney’s
original bad faith claim was dismissed because:
Despite its conclusory language of bad faith, that claim is undermined by the allegation that a subsequent independent review affirmed Highmark’s decision. Thus, Sliney actually alleges a reasonable justification for
At argument, the Court understood counsel for the County to concede as much, or 88
nearly as much. 20 Highmark’s refusal to pay the claim, thereby defeating his bad faith claim.89
In the FAC Sliney alleges that the County was aware that Highmark wrongfully
denied coverage for Sliney’s son and others similarly situated, and that the external
review process was not conducted in good faith and was designed to result in a
decision denying benefits.90 He also alleges that the County knew Highmark failed
to provide Sliney with full, accurate, and timely information about treatment
options.91 It further alleges that the County (and Highmark) “unreasonably and
unjustifiably” relied on “an unfair, unreasonable, and inadequate paper review by [a
doctor] located in Grand Rapids, Michigan, who never interviewed [Sliney’s son]”
rather than following the recommendations of the local doctors who actually treated
Sliney’s son.92 It alleges the Michigan doctor lacked the necessary “background,
training, and experience to provide a fair and reasonable opinion about [Sliney’s
son’s] need for further treatment at Caron” and that the doctor’s review was a “mere
pretext.”93 Finally, Sliney alleges in the FAC that the County had an improper
89 Sliney at *3. 90 FAC at 11. 91 Id. at 12. 92 Id. at 13-14. 93 Id. 21 financial motive to deny Sliney’s claim and other the claims of similarly situated
insureds.94
In this motion, the County maintains that the independent Medwork decision
insulates it from bad faith liability.95 The County argues that the independent review
decision establishes that there was a reasonable basis to deny coverage, and, thus,
the County did not act in bad faith. Finally, the County argues that the external
review process is controlled by the Delaware Department of Insurance, and neither
the County nor Highmark controls the licensing or selection of the independent
reviewers.96 Contrary to Sliney’s position that it should not have relied on
Medwork’s decision, it argues it was legally bound to do so.97
For his part, Sliney describes his bad faith claim as having three separate
aspects: 1) Highmark’s “reckless failure to provide contractually mandated claims
service” when urgently needed; 2) Highmark’s failure to pay the full cost for the first
two weeks care at Caron; and 3) both defendants’ unjustified failure to pay for the
third and fourth weeks at Caron.98 He maintains that the independent review did not
address his claims based on improper claims handling service and for full payment
94 Id. 95 Def. New Castle County’s Mot. to Dismiss at 4-6, D.I. 22. 96 Id. at 6. 97 Id. 98 Pl.’s Opp. to Def. New Castle County’s Mot. To Dismiss FAC at 3, D.I. 29. 22 of the first two weeks at Caron, and, thus, that review has no bearing on the first two
aspects of his bad faith claim.99 Further, while he acknowledges that the Insurance
Commissioner’s Office approves review organizations, that approval does not
guarantee that those organizations follow Delaware law in all external reviews.100
He argues that the County and Highmark knew that Delaware law was not followed
here in that the expert reviewer was unqualified under 18 Del. C. § 6417(c)(1)a.101
He also alleges that the reviewer was not provided with all of the necessary
documents and information required by law and that material information was
withheld from him.102 Finally, he argues that the statute upon which the County
relies for immunity from bad faith claims – 18 Del. C. § 6416(a) – only entitles it to
a rebuttable presumption in its favor because § 6416(b) provides for further litigation
in Superior Court after the appeal decision by the independent reviewer.103
As the County correctly points out, to maintain a bad faith claim, an insured
must allege that an insurer acted ‘“clearly without any reasonable justification’ in
denying benefits.”104 Indeed Sliney’s failure to do that, while citing the independent
99 Id. at 3-4. 100 Id. at 5. 101 Id. at 6. 102 Id. 103 Id. 104 Def. New Castle County’s Mot. to Dismiss FAC at 6, D.I. 22 (citing Tackett v. State Farm Fire and Cas. Ins. Co. 653 A.2d 254 (Del. 1995); Enrique v. State Farm Mut. Auto. Ins. Co. 142 A.3d 506, 511 (Del. 2016). 23 review decision led the Court to dismiss the original bad faith claim against the
County. The FAC remedies that deficiency. It does so in part by alleging improper
claims handling as well as a lack of reasonable justification for the denial of benefits,
both of which were not subject to the Medwork decision. It also alleges that the
defendants knew that the Medwork review was conducted in a manner incompatible
with Delaware law, both in terms of the qualifications of the reviewer and the
information provided to him. Finally, it has alleged an improper financial motive
for denying the claimed benefits. For these reasons, the Court finds that the
Medwork decision does not, as a matter of law, establish that the County (and
Highmark) acted in good faith. That determination awaits further development of
the facts.
VI. CONCLUSION
The Court is mindful of the present stage of the proceedings. Its function here
merely is to determine if, viewing the allegations in the FAC, together with all
reasonable factual inferences in Sliney’s favor, it is reasonably conceivable he could
prevail. The case is not at the summary judgment stage where the facts have been
developed. Accordingly, the Court finds Sliney’s allegations against Highmark
insufficient to state a claim as to Count I, but sufficient as to Count IV. The Court
further finds that Sliney’s allegations against the County as to Count III sufficient to
state a claim. 24 THEREFORE, Defendant Highmark BCBSD, Inc.’s Motion to Dismiss
Plaintiff’s Amended Complaint is GRANTED as to Count I - Breach of Contract
against Highmark and DENIED as to Count IV – Breach of Duty of Good Faith
against Highmark. Defendant New Castle County’s Motion to Dismiss Amended
Complaint is DENIED.
IT IS SO ORDERED.
/s/ Ferris W. Wharton Ferris W. Wharton, J.