When sued by its insured, the health insurer sought to compel arbitration as part of the procedures under its policy for contesting a denial of coverage. In an opinion authored by newly seated Judge Ginoza, the Hawaii Intermediate Court of Appeals affirmed denial of the motion to compel because the insured's lawsuit was based on tort, not coverage issues. See Yogi v. Hawaii Medical Service Assoc., No. 29145 (Haw. Ct. App. Aug. 27, 2010).
The insured sustained work injuries in 1997, requiring multiple surgeries between 1998 and 2003. The insured's doctor submitted a preauthorization request to HMSA for an intrathecal infusion pump to relieve the insured's pain. HMSA denied coverage, determining that the intrathecal infusion pump was not medically necessary. The insured appealed HMSA's denial under an internal appeal process set out in the policy. HMSA again denied coverage. Finally, an external review was sought before the Hawaii Insurance Commissioner, as provided by the policy. The Insurance Commissioner reversed HMSA's denial of coverage.
In 2008, the insured filed suit, alleging that HMSA acted unreasonably in denying the preauthorization request for the pump. The insured asserted claims for breach of contract, bad faith, and emotional distress, and sought damages. HMSA moved to compel arbitration. The trial court denied the motion, noting that no provision in the policy required arbitration for disputes involving bad faith or related claims.
The ICA affirmed. The policy did not establish an intent by the parties to have tort claims subjected to the arbitration provision. Arbitration or an independent review by the Insurance Commissioner were the policy's procedures for challenging or disputing HMSA coverage decisions. At a minimum, the policy created an ambiguity regarding the intent and meaning of the arbitration provision.
