Insurance Law Hawaii

Bad Faith, Emotional Distress Claims Reinstated Against Health Insurer

    The Hawaii Intermediate Court of Appeals reversed the trial court's grant of summary judgment to the health insurer, reinstating the insured's claims for bad faith and emotional distress. Groeger v. Kaiser Foundation Health Plan, Inc., 2023 Haw. App. LEXIS 308 (Haw. Ct. App. Aug. 29, 2023). 

    In March 2012, Christian Groeger was diagnosed with Guillian-Barre Syndrome, an illness in which a person's immune system attacks part of the peripheral nervous system. Christian was in the hospital from April 2012 to February 2013 while insured under a medical plan with Kaiser Health Plan. Christian's mother and father, Knut and Peninska, spent time with Christian during his treatment at Kaiser Hospital. 

    The Groegers sued Kaiser for mishandling numerous requests for medically necessary services that Christian needed to overcome his serious condition after being admitted to the hospital. At one point, Kaiser lowered Christian's level of care to that of "nursing facility" and he was using up his sixty-day benefit. In February, 2013, doctors from Germany, where the family was from, visited the hospital and said they would have provided different treatment from that received from Kaiser. Christian was finally relocated and admitted to a German hospital, where he subsequently recovered. 

    The trial court granted summary judgment to Kaiser on plaintiffs' claims for bad faith, intentional infliction of emotional distress (IIED), and negligent infliction of emotional distress (NIED). In support of the motion, Kaiser submitted the Service Agreement, asserting that it set out the medical coverage to which Christian was entitled during his hospitalization. The court determined that no Kaiser physician prescribed or recommended the treatment at the German hospital and therefore, "as a matter of law, the requested treatment was not 'Medically Necessary' as defined by the Service Agreement." 

    On appeal, the Groegers contended that Kaiser never established that the Service Agreement was provided to the Groegers. Thus, the document should not have been applied to grant summary judgment. The Court of Appeals agreed that Kaiser failed to demonstrate that the Service Agreement submitted to the trial court was the agreement or plan that Peninska had reviewed and that she understood the applicable terms. This created genuine issues of material fact whether the terms of applicable medical coverage were met and whether the Groegers were properly informed of the coverage or agreement terms. 

    Further, Knut and Peninska submitted declarations stating they made numerous requests for specific treatment for Christian, and their requests were ignored and denied without much, if any, explanation. Peninska stated that a respiratory therapist told her he would do more for Christian but was not permitted to do so by those who were higher up. Given this record, there were genuine issues of material fact and summary judgment in favor of Kaiser on the bad faith claim was not warranted.

    Further, granting summary judgment Kaiser on the IIED and NIED claims was improper. The IIED and NIED claims were based on alleged delay and denial of coverage for medical services.

Hawaii Insurer Successfully Dismisses California Suit for Lack of Personal Jurisdiction

    Stanford Health Care's California lawsuit against Hawaii Medical Service Association (HMSA) was dismissed for lack of personal jurisdiction. Stanford Health Care v. Hawaii Med Service. Assoc., 2022 U.S. Dist. LEXIS 159192 (N.D. Cal. Sept 2, 2022). 

    Stanford and Anthem Blue Cross of California contracted for Stanford to provide medical services to Anthem Blue Cross plan members at negotiated rates. HMSA had a agreement with Anthem Blue Cross that allowed its plan members to also access Stanford's medical care at the negotiated rates. 

    Between August 2016 and Janaury 2020, Stanford provided medical care under the Stanford/Blue Cross Contract to eight patients with HMSA insurance. The price provided under the Stanford/BlueCross Contract was $2,329,184.40. However, HMSA paid only $355,674.46 and refused to pay the balance. 

    Stanford sued HMSA in federal district court in California for breach of implied contract and quantum merit. HMSA moved to dismiss for lack of personal jurisdiction. HMSA argued the court did not have general jurisdiction over it. General jurisdiction over a corporation was appropriate only when the corporation's contacts with the forum state were so constant and pervasive as to render it essentially at home in the state. HMSA was not regarded as "at home" in California because it was neither incorporated in or had its principle place of business in California. Stanford's allegations failed to indicate that HMSA's contacts with California were exceptional or so constant and pervasive as to render it essentially at home in the state.    

    HMSA also argued that the court did not have specific jurisdiction over it. The test was whether the defendant deliberately engaged in significant activities within the forum or created continuing obligations between itself and forum residents. The court concluded that Stanford did not make a prima facie showing that HMSA reached out beyond Hawaii to create continuing relationships and obligations with the citizens of California. Merely providing out-of-state health coverage to insureds did not subject an insurer to personal jurisdiction in every foreign state in which an insured happened to obtain medical services. 

    Viewing HMSA's contacts with California in their totality, the court found that Stanford did make a prima facie showing of purposeful availment by HMSA. The motion to dismiss dismiss for lack of specific personal jurisdiction was granted. The court noted it appeared the case could be brought in the District of Hawaii

Hawaii Supreme Court Finds Insurer's Actions Prior to Submission of Claim Can Constitute Bad Faith

     In an issue of first impression in Hawaii, the Hawaii Supreme Court ruled that an insurer's actions before an actual claim is submitted can be considered in determining whether the insurer acted in bad faith. Adams v. Hawaii Medical Service Ass'n, 2019 Haw. LEXIS 263 (Haw. Sept 30, 2019). Disclosure - our firm was co-counsel for the petitioner, Patricia Adams.

    Brent Adams was diagnosed with a rare cancer, stage III multiple myeloma, in August 2006. His doctors advised a tandem stem cell transplant, under which he would receive a transplant of his own stem cells (autologous or "allo" transplant) followed by a stem cell transplant from a matched sibling donor (allogenic or "allo" transplant). Brent informed his health insurance provider, Hawaii Medical Service Association ("HMSA") of his intent, on the advice of his doctors, to pursue the auto and allo transplants. 

    HMSA directed Brent to seek treatment at City of Hope in Duarte, California. HMSA's case manager maintained a log of communications to oversee Brent's care. The log demonstrated that Brent's wife, Patricia Adams, told HMSA that she and Brent and were leaving for City of Hope on December 11, 2005 for testing and consultation. Patricia's declaration stated that she told HMSA that Brent would seek the auto and allo transplants at City of Hope and asked HMSA if anything else was needed to inform HMSA of the treatment plan. HMSA did not provide any further instructions. 

    On December 15, 2005, Brent's doctor at City of Hope, Dr. Stein, submitted a precertification request for an auto transplant. The request noted that Brents' siblings would be tested to determine if they could serve as donors, in which case Brent would pursue an allo transplant following the auto transplant. HMSA approved the auto transplant. HMSA, however, informed Dr. Stein that it would only pay for the testing of potential donors for the sibling that provided a match. 

    Brent underwent the auto transplant in January 2006. Dr. Stein then contacted HMSA regarding Brent's participation in a clinical trial for stem cell transplants in preparation for the allo transplant. HMSA informed Dr. Stein he should contact the precertification division and recommend that he submit data supporting the efficacy of the clinical trial. In January and February 2006, Brent and Patricia communicated numerous times with HMSA about Brent's desire to do the allo transplant. On January 17, 2006, HMSA informed Patricia that Dr. Stein had not submitted a precertification request for the allo transplant. On February 22, 2006, Brent informed HMSA that one of his siblings appeared to be a match and he hoped to pursue the allo transplant. HMSA again noted that a precertification request had to be submitted and advised Brant that "in terms of the care plan, the goals remain appropriate and on target." Patricia informed HMSA a couple of weeks later that they were "desperately trying to avoid any delays." 

    On March 2, 2006, Dr. Stein submitted a precertification request for the allo transplant. Four days later, HMSA denied the procedure because it was "investigational." The Adams were taken by surprise, viewing the denial as an abrupt change by HMSA, especially when Brent had a matched sibling donor. After an appeal to the circuit court, HMSA finally covered the allo transplant in 2007, but Brent died approximately one year later. 

    Before Brent died, he and Patricia filed suit for breach of contract, bad faith and additional claims. The circuit court granted HMSA's motion for summary judgment on all claims. The Intermediate Court of Appeals ("ICA") affirmed on the breach of contract claim, but vacated the circuit court's grant of summary judgment on the bad faith claim. The ICA held it could not conclude, as a matter of law, that HMSA reasonably handled Brent's claim for the allo transplant.  

    On remand, HMSA argued it denied coverage two days after the precertification request was submitted, so its handling of the claim was objectively reasonable. The circuit court agreed and again granted summary judgment on the bad faith claim to HMSA. The ICA affirmed, determining that no genuine issues of material fact existed as to whether HMSA mishandled the claim. HMSA denied the precertification request within the time period required under HMSA's Plan. Until a request was submitted, there was no claim for HMSA to process. The ICA noted that "the duties of good faith and fair dealing implied in every insurance contract arise after the insured complies with the claims procedure described in the insurance policy."

    On appeal, the Supreme Court considered whether, viewing the evidence in the light most favorable to Patricia, the record contained evidence establishing that HMSA committed the tort of bad faith by unreasonably handling Brent's claim for an allo transplant. The Court considered the conduct of the parties before and after the formal submission of the claim to determine whether the insurer acted reasonably. The covenant of good faith and fair dealing required HMSA to act in good faith before and after the formal submission of the claim. The record contained facts that suggested HMSA had unreasonably handled Brent's claim. This included the fact that HMSA was aware that Brent was considering the allo transplant on December 15, 2005, but did not inform him that the allo transplant would not be covered until after a formal request was submitted on March 2, 2006. Further, HMSA was aware that Brent was testing his five siblings to seek a match for the allo transplant, but did not tell Brent the procedure was not covered. 

    Accordingly, HMSA's duty of good faith and fair dealing arose based upon the insurance contract entered with Brent. Evidence of HMSA's conduct during its relationship with Brent raised genuine issues of material fact as to whether HMSA unreasonably handled Brant's claim for an allo transplant. The ICA's judgment on appeal was vacated, as was the circuit court's order granting summary judgment to HMSA on the bad faith claim. The case was remanded to the circuit court. 

    

   

Bad Faith Claim Fails as Health Insurer Timely Denies Coverage

    Handling the third appeal of the matter, the  Hawaii Intermediate Court of Appeals rejected the insured's claim for bad faith based upon an untimely denial of the claim. Adams v. Haw. Med. Serv. Ass'n, 2018 Haw. App. LEXIS 245 (Haw. Ct. App. June 8, 2018) (Disclaimer - our office is co-counsel for the Appellant).

    The decedent sought treatment for multiple myeloma. After a prior appeal, the ICA remanded the case for further proceedings on whether the Hawaii Medical Services Association (HMSA) had engaged in bad faith by mishandling a 2006 request for pre-authorization for an allogeneic stem-cell transplant (allo-transplant). Adams v. Haw. Med. Serv. Ass'n, 130 Haw. 351 (Haw. Ct. App 2013) (Adams II). The court noted in Adams II that due to the suspension of discovery, very little discovery had been conducted in the case. 

    On remand, after discovery, HMSA moved for summary judgment, arguing its response to the March 2, 2006 written request for pre-authorization for an allo-transplant was timely and reasonable. HMSA argued it did "keep silent" about the fact that the policy did not cover allo-transplants for multiple myeloma. Appellant responded that there were genuine issues of material fact regarding whether HMSA mishandled the request for pre-authorization. For example, if HMSA had merely told Appellant at an earlier date that the procedure would not be covered, her husband could have looked into other options for treatment, including clinical trials. Nevertheless, the circuit court granted HMSA's motion for summary judgment.

    On appeal, Appellant argued that HMSA violated Haw. Rev. Stat. Sec. 432-1:101.5 by neglecting on several successive occasions to respond to Appellant's documented requests for information with current, understandable, and timely responses regarding coverage and benefits. The ICA determined this argument was waived because it was not properly raised at the summary judgment stage. Nor was the violation alleged in the Second Amended Complaint filed after remand. Instead, appellant had relied upon a different statute, Haw. Rev. Stat. Sec. 432-10:237, to argue that HMSA was obligated to provide Appellant with a complete copy of the policy but had not done so.

    Although the policy required a written request for pre-authorization of a procedure, Appellant argued that telephone calls, beginning in December 2005, should have been deemed adequate as formal pre-authorization requests. The ICA rejected this argument. The duties of good faith and fair dealing arose after the insured complied with the claims procedures described in the policy.

    Chapter 5 of the policy directed that pre-authorization requests be made in writing or by fax. HMSA had reminded the provider, City of Hope (COH), by fax correspondence that it was awaiting a modified request for the allo-transplant on February 6, 2006 and February 27, 2006. Until HMSA received the written request, as required by the policy, there was no claim for it to process, nor would it know what the specific request would be. Once HMSA received the request on March 2, 2006, it called on March 6, 2006, COH to deny the request. HMSA followed with a formal letter of denial which was received by Appellant on March 8, 2006. 

    Thus, the circuit court did not err when it held there were no genuine issues of material fact and granted summary judgment in favor of HMSA based on its timely denial of Appellant's written request. 

 

 

 

 

.

 

 

   

Hawaii Health Insurer Has No Equitable Subrogation Against Third-Party Tortfeasor

    The Hawaii Supreme Court held that a health insurer did not have subrogation rights against third-party tortfeasors who caused injury to its insureds. Yukumoto v. Tawarahara, 2017 Haw. LEXIS 92 (Haw. May 26 2017).

    Gregory Yukumoto was injured while driving his moped and struck by Ruth Tawarahara, driving her SUV. Yukumoto sustained serious injuries. Yukumoto sued Tawarahara. Hawaii Medical Service Association (HMSA) filed a Notice of Claim of Lien, contending that HMSA had paid $325,824.33 for medical expenses associated with Yukumoto's injuries.

    Yukumoto filed a Petition for Determination of Validity of Claim of Lien pursuant to Haw. Rev. Stat. 663-10. According to the Petition, Yukumoto's wage loss and general damages claim was approximately $4,000,000. The Yukumotos contended that Tawarahara had only $1,100,000 in coverage through a State Farm policy, which State Farm agreed to pay "pursuant to a general damages only release." 

    The parties settled the lawsuit. Tawarahara did not admit fault. Coupled with a $50,000 "underinsured motorist claim" that Yukumoto submitted to GEICO, the Petition contended that Yukumoto's total recovery before payment of attorneys' fees and costs was $1,150,000. This left $2,850,000 in uncompensated damages. 

    Yukumoto sought a ruling that HMSA had no lien or subrogation rights in the personal injury settlement because HMSA could not satisfy the provisions of Haw. Rev. Stat. 663-10. Under the statute, Yukumoto argued that for a health insurer to receive any portion of a plaintiff's  recovery, the health insurer had the burden of proving that the settlement or recovery duplicated medical expenses that were paid by the health insurer. The circuit court eventually ruled that all settlement funds be released to Yukumoto's counsel and that HMSA was not entitled to a payment of the amount of its claimed lien. HMSA appealed. 

    The Supreme Court ruled that HMSA did not have equitable subrogation rights in the context of personal insurance. It was apparent that the legislature intended to limit a health insurer's right of subrogation under Haw. Rev. Stat. 663-10 and 431:13-103. Any contractual provision conflicting with Haw. Rev. Stat. 663-10 was invalid, and HMSA was not entitled to contractual subrogation rights. Consequently, the circuit court's judgment was affirmed.

    Hawaii courts recognized the difference between property/casualty insurance and personal insurance by allowing the insured to maintain subrogation rights in a property insurance context and limiting subrogation rights in personal insurance contexts. Tort recovery in personal insurance contexts often included payment by the tortfeasor for intangible losses such as life, death, health, pain and suffering, and physical well being, where it was difficult to ascertain exact measurements of loss. Therefore, recovery for medical insurance benefits and tort damages did not involve the principles which supported equitable subrogation in the property/casualty context. Such recovery did not necessarily produce a windfall or duplicative recovery for the insured. Accordingly, the insurer did not have equitable subrogation rights in personal insurance contexts.

    Further, the plain language of Haw. Rev. Stat. 663-10 demonstrated that the legislature limited the subrogation rights of health insurers. The statute provided that any judgment entered would include the amount due and owing to any holder of a valid lien, to be paid to the lienholder from "special damages recovered by the judgment or settlement." Thus, the legislature limited the type of damages from which a lienholder could be reimbursed. Moreover, Haw. Rev. Stat. 431:13-103 (a) (10) prohibited the insurer from refusing to provide or limiting coverage available to an individual because the individual may have a third-party claim for recovery of damages. The legislature did not provide that the lienholder could be reimbursed from an insured's recovery of general damages, which were difficult to determine. 

    Finally, HMSA argued that it had contractual subrogation rights because Yukumoto's agreement with HMSA's included a right of subrogation. The court was not convinced, however, because the statute took precedence, making the contractual provision invalid. HMSA was not entitled to contractual subrogation rights. 

    Therefore, the circuit court's judgment was affirmed. 

Florida Court Determines Ambiguity Cannot be Resolved By Extrinsic Evidence

   In addressing a certified question from the Eleventh Circuit, the Florida Supreme Court found that an insurer may not rely upon extrinsic evidence to salvage ambiguities in a policy. Wash. Nat'l Ins. Corp. v. Ruderman, 2013 Fla. LEXIS 1388 (Fla. July 3, 2013).

   The case arose as a class suit against Washington National Insurance Corporation concerning policies that provided for reimbursement of certain home health care expenses. The policies provided coverage through a maximum daily benefit. Coverage was limited by a "per Occurrence Maximum Benefit" for each illness and a "Lifetime Maximum Benefit" for all injuries and sicknesses during the life of the policy. 

   An annual increase in benefits was provided by the policy. The issue boiled down to how broadly the increase reached. The policy read:

     CERTIFICATE SCHEDULE

     HOME HEALTH CARE DAILY BENEFIT $180 / Day

     LIFETIME MAXIMUM BENEFIT AMOUNT $250,000

     PER OCCURRENCE MAXIMUM BENEFIT $150,000 / Illness

     AUTOMATIC BENEFIT

     INCREASE PERCENTAGE Benefits increase by 8% each year

  The parties disagreed on whether the automatic increase applied only to the daily benefit or whether it also applied to the lifetime maximum benefit amount and the per occurrence maximum benefit amount. The Eleventh Circuit found the policy ambiguous. Washington National, however, offered extrinsic evidence in the District Court to show that the insureds knew when the policy was purchased that only the daily benefit increased annually. The extrinsic evidence would resolve any ambiguity and would support Washington National's position that only the daily benefit increased annually.

   The Florida Supreme Court held, however, that extrinsic evidence could not be considered in determining whether an ambiguity existed. Because the policy was ambiguous, it had to be construed against the insurer and in favor of coverage without resort to consideration of extrinsic evidence. 

 

Coverage For Liver Surgery Of Questionable Benefit Denied

   The sad story of a woman who went ahead with liver surgery her insurer would not cover was considered by the Ninth Circuit in Conahan v. Sebelius, 2011 U.S. App. LEXIS 22071 (9th Cir. Nov. 1, 2011).

   By way of background, Medical Advantage beneficiaries receivemedical services within the network of providers established by their HMOs. Federal regulations, however, require Medicare Advantage plans to cover certain out-of-plan medical care, including emergency and "urgently needed services."

   Gaye Glaser of Hawaii was a member of Kaiser Permanente Senior Advantage plan. She was diagnosed with cancer of the liver. Kaiser's Tumor Board, a group of thirty physicians, from both within and outside of Kaiser, determined that complete removal of the tumor could leave too little liver for Ms. Glaser to survive, and that surgery would not eliminate the possibility of the cancer recurring. The Tumor Board therefore recommended chemotherapy to hopefully shrink the tumor.

   Not happy with the recommendation, Ms. Glaser went to another physician, unaffiliated with Kaiser, and had the liver surgery performed. Approximately 70% of her liver was removed and she was in the hospital for three weeks. Kaiser refused to reimburse her for the cost of the surgery, approximately $150,000.

   Ms. Glaser appealed to the Office of Medicare Hearing and Appeals. The ALJ concluded Kaiser failed to make its medical services available, accessible, and adequate, as required by federal regulation. Further, Kaiser was obligated to pay for the out-of-plan surgery because it was an "urgently needed service" under the regulations.

   Kaiser then appealed to the Medicare Appeals Council (MAC), which reversed the ALJ's decision. Next, Ms. Glaser appealed to the federal district court, where Judge Ezra affirmed the MAC. Ms. Glaser died while her appeal to the Ninth Circuit was pending, and her personal representative continued to pursue the appeal.

   The Ninth Circuit affirmed the MAC and the district court. First, the court considered whether care was "available and accessible." If the HMO's in-network specialty care was "unavailable or inadequate"to meet the enrollee's medical needs, it had to arrange out-of-network care. The MAC found that Kaiser denied a referral to an out-of-network provider, but it did not deny her medical care that was reasonably believed to be within the standard of appropriate medical care. The Ninth Circuit agreed that substantial evidence supported this conclusion.

   Next, the court considered whether the surgery was an "urgently needed service" which should be covered. The personal representative contended that Kaiser's refusal to perform the surgery rendered its network "unavailable or inaccessible," making the out-of-plan liver surgery an "urgently needed service." If this reasoning was accepted, the Ninth Circuit felt Medicare Advantage organizations would always be required to pay for out-of-plan procedures they refused to perform. Therefore, the court deferred to the agency's reasonable determination that the "urgently needed services" exception was not triggered by a denial of coverage. Accordingly, Kaiser was not required to pay for the surgery.

 

Oral Argument Heard in Ahn and Kim Cases

   We previously posted here and here on decisions by the Hawaii Intermediate Court of Appeal in Ahn v. Liberty Mutual Fire Ins. Co. and Kim v. Liberty Mutual Fire Ins. Co.  As you recall, the issue in the two cases was whether the insured could seek administrative review when the insurer denied coverage or was the right to seek review limited to the medical provider. 

   My blogging colleague, Rebecca Copeland, attended last week the oral argument in the two cases before the Hawaii Supreme Court.  Rebecca's recent post [here] gives us a flavor of how the oral argument went.  We will now wait for the Supreme Court's decision.

We Make Top 50 Health Insurance Blogs

   Thanks to the Health Express, a blog addressing health and medical information, for informing us we are among the Top 50 Health Insurance Blogs [post here].  The Health Express post states, "Hawaiian clients benefit from the expertise and diverse backgrounds of this Damon Key Leong Kupchak Hastert blog."

    Thanks for the notice and the compliment. 

Health Insurer Cannot Force Arbitration of Insured's Tort Claims

   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.