Damages Archives - McKennon Law Group

Ninth Circuit Affirms $2.5 Million Punitive Damages Award Against Disability Insurer in Arizona Bad Faith Case

When insurance companies, including those offering disability, life, health or accidental death policies, engage in conduct that is sufficiently egregious, a court may award punitive damages against the insurance company. Under Arizona law, to support an award of punitive damages in an insurance bad faith case, the plaintiff must prove a willful and knowing failure to process or pay a claim known to be valid. Farr v. Transamerica Occidental Life Ins. Co. of California, 699 P.2d 376, 383 (1984). Recently, the Ninth Circuit grappled with a large punitive damages award issued by an Arizona jury in a long-term disability insurance case. In McClure v. Country Life Insurance Company, No. 18-16661 (February 27, 2020), the Ninth Circuit upheld a jury verdict awarding $2.5 million in punitive damages against defendant CC Services, Inc. (“CCSI”), the entity that administered the plaintiff’s claim.

After suffering a head injury in November 2012, Plaintiff Benjamin McClure developed severe depression and became unable to work. He filed a disability claim with his insurer, defendant Country Life Insurance Company (“Country Life”) and defendant CCSI undertook claims handling responsibilities. Defendants approved and paid McClure’s claim for thirteen months, but terminated his claim in April 2014. At trial, McClure contended that he was especially vulnerable and susceptible to emotional injury, and that the bad faith termination of benefits exacerbated his depression, resulting in extreme emotional distress and suicidal ideations for which he was hospitalized a number of times. McClure also contended that defendants terminated his claim without a reasonable basis and adequate investigation, ignored medical facts that supported the claim and misinterpreted medical facts to their advantage.

Following a jury trial, the jury returned a verdict in favor of McClure on his breach of contract and bad faith claims and found that the defendants were jointly liable for the conduct of the insurance adjusters handling the claim. The jury awarded $1.29 million in emotional distress damages and $2.5 million in punitive damages against each defendant. After the district court upheld the jury award and entered judgement in favor of McClure, the defendants appealed. The Ninth Circuit affirmed the judgement finding that the district court did not abuse its discretion in upholding the emotional distress and punitive damages award.

The Ninth Circuit first addressed defendants’ argument that there was insufficient evidence that Country Life and CCSI engaged in a joint venture. The Court determined that the jury’s conclusion that a joint venture existed was supported because Country Life had no employees of its own, all employees who made claim decisions were employed by CCSI and CCSI employees were compensated in part based on the profitability of Country Life. Therefore, a reasonable jury could infer that Country Life and CCSI shared in the control and management of the venture.

The Ninth Circuit then determined that the evidence supported the separate punitive damages award against CCSI. Of note, the defendants did not challenge the punitive damages award against Country Life. Under Arizona law, a business may be vicariously liable for punitive damages for acts of an employee that are committed in furtherance of the business and within the scope of employment. Hyatt Regency Phx. Hotel Co. v. Winston & Strawn, 907 P.2d 506, 515 (Ariz. Ct. App. 1995). The Court found that the CCSI employees’ actions were undertaken in furtherance of and within the scope of the employment and there was sufficient evidence of evil intent in terminating McClure’s benefits, justifying an award of punitive damages. For instance, evidence was presented that defendants’ claims adjuster knew that McClure suffered from major depressive disorder and panic attacks, that there was no basis to reject the opinions of McClure’s treating doctors who found that he suffered from disabling depression, that McClure had been hospitalized as suicidal and that terminating disability benefits could be devastating.

With regard to emotional distress damages, the Ninth Circuit found that the jury’s $1.29 million award was not “grossly excessive or monstrous” and that the jury could have reasonably inferred that the benefit termination aggravated McClure’s emotional distress. Defendants had argued that there was insufficient evidence that they caused McClure significant emotional distress and that the jury’s award was based on improper speculation. The district court concluded that McClure had offered sufficient evidence from which a jury could infer that defendants’ conduct resulted in McClure’s emotional distress. The jury had heard testimony from those close to McClure regarding his severe emotional pain brought on by financial hardship due to the denial of benefits. The Ninth Circuit agreed that McClure had presented sufficient evidence to justify the emotional distress award.

One final issue the Ninth Circuit addressed on appeal was defendants’ claim that the district court erred in limiting its expert’s testimony. At trial, after it was revealed that defendants’ bad faith expert witness’ definition of insurance bad faith was inconsistent with Arizona law, the district court ruled that defendants’ expert could not opine as to whether defendants’ conduct amounted to good faith or bad faith because any such opinion would have been unreliable. In finding that the district court did not abuse its discretion, the Ninth Circuit stated that the lower court “reasonably concluded that [the expert’s] testimony would have been an improper expert opinion on an ultimate issue of law.”

With the help of his attorneys, McClure was able to secure a victory against an insurance company who acted dishonestly every step of the way while putting its own profits ahead of the interests of its insured. If you believe you have been the victim of a bad faith insurance denial with regard to your disability, life, health or accidental death policy, please contact the McKennon Law Group PC. Having well-qualified, experienced attorneys on your side can make all the difference.

Does an Insurance Company Need to Deny a Claim to be Liable for Bad Faith Damages? You May Be Surprised to Learn the Answer is “No.”

Every insurance contract is accompanied by an implied covenant of good faith and fair dealing, meaning that the insurer cannot “unfairly frustrate” or unreasonably “deprive” the insured of the benefits of the insurance contract. This implied covenant applies to all types of insurance policies, including disability insurance, life insurance, health/medical insurance, long-term care insurance, accidental death and dismemberment insurance, and homeowners insurance. If the insurer unreasonably or without proper cause refuses to pay a benefit due under in insurance policy, the insurer may have acted in “bad faith.” This may allow an insured to collect extra-contractual damages, such as emotional distress damages, attorney’s fees and punitive damages. Typically, bad faith allegations follow a decision by the insurance company to deny a valid claim for benefits.

However, a recent Central District of California decision confirmed that a bad faith claim can be asserted even in the absence of a claim denial, if the insured can assert that any benefit of the policy was withheld by the insurance company. A bad faith claim does not necessarily only follow the denial of a claim. An insurer’s decision to unreasonably withhold anything of value regarding the insurance policy can be an act of bad faith.

That case, EFG Bank AG, Cayman Branch v. Transamerica Life Insurance Co., 2017 WL 3017596, 2017 U.S. Dist. LEXIS 109780 (C.D. Cal., July 6, 2017), involved a dispute between Transamerica and the owners and beneficiaries of 68 universal life insurance policies. Under the policies, premiums were deposited into an account for each policy, and each month, Transamerica withdrew a monthly deduction from each account and deposited a separate amount of interest. The amount in each policy’s account is known as the “Accumulation Value.” The plaintiffs alleged that Transamerica breached those insurance contracts, and did so in bad faith, by wrongfully increasing the monthly deduction rates (“MDR”) on the policies, and in doing so reduced the Accumulation Value of the policies.

Transamerica filed a motion to dismiss, claiming that its actions in calculating the MDR were proper and consistent with the plain language of the policies. The Court denied the motions to dismiss, in full, and in the process, confirmed that insurers can be liable for bad faith, even in the absence of a claim denial decision.

First, the court denied Transamerica’s motion to dismiss the breach of contract claim, finding that the policies did not give Transamerica “unfettered discretion” to set the MDR lower than the guaranteed maximum rate included in the policies.

Turning to the bad faith claim, the Court first ruled that it was not duplicative of the breach of contract claim because the plaintiffs alleged that Transamerica “exercised its discretion [in setting the MDR] in a way that was intentionally designed to unfairly frustrate the agreed purposes of the Policies.”

Next, the Court analyzed Transamerica’s argument that plaintiffs could not maintain a bad faith claim because they did not allege that Transamerica “withheld a benefit,” an allegation necessary to maintain a bad faith claim. See, e.g., Benavides v. State Farm General Insurance Co., 136 Cal. App. 4th 1241, 1250 (2006) (“[T]he essence of the tort of the implied covenant … is focused on the prompt payment of benefits under the insurance policy, there is no cause of action … when no benefits are due.”). The Court rejected Transamerica’s argument, explaining that if Transamerica improperly increased the MDR, that reduced plaintiffs’ Accumulation Value in the policies and forced them to pay increased premiums, and that impermissibly increasing premiums could constitute a breach of the implied covenant of good faith and fair dealing. See, e.g., Notrica v. State Comp. Ins. Fund, 70 Cal. App. 4th 911 (1999).

Typically, bad faith insurance claims are asserted only after an insurance company wrongfully denies a benefits claim. This case further confirms that an insurance company can be liable for bad faith damages for actions other than denying a claim. Basically, if the insurance company withholds anything of value under an insurance policy from an insured or causes the insured to unnecessarily pay increased premiums, they are potentially liable for bad faith damages.

In an Insurance Bad Faith Case, Attorneys’ Fees are “Compensatory Damages” That can Increase a Punitive Damages Award

In 2003, the United States Supreme Court decision State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003) that generally limited punitive damages suffered by a plaintiff. Since then, California courts have stated generally that a 10-1 ratio of punitive damages to compensatory damages may be the legal limit based on the due-process clause, although some California courts have allowed a higher ratio. Given that limitation, plaintiff’s attorneys and defense counsel have waged many battles regarding what constitutes compensatory damages and can be counted when calculating the maximum amount of punitive damages that can be awarded. In Nickerson v. Stonebridge Life Insurance Company, 203 Cal. Rptr. 3d 23 (2016), the California Supreme Court awarded a victory for plaintiffs by ruling that Brandt fees (that is, attorneys’ fees incurred by the policyholder in establishing coverage under the policy when there is also bad faith) determined after a jury verdict by stipulation or by the court are considered compensatory damages for purposes of calculating the ratio of punitive damages to compensatory damages.

The amount of Brandt fees due to a plaintiff following a determination that an insurer acted in bad faith can be set by a jury. However, due to the confusing nature of presenting the issue of attorneys’ fees to a jury, especially given that the facts are completely unrelated to underlying dispute, many parties agree to have issue of Brandt fees decided by the Court, or by stipulation, following the jury’s verdict. Unfortunately for plaintiffs who were able to prove that the insurance company acted in bad faith, that led to a situation where Brandt fees were not being counted when determining the maximum amount of punitive damages a plaintiff could receive.

In Nickerson, after the jury’s verdict, the parties stipulated to the amount of Brandt fees, but the defendant appealed the large punitive damages award. The Court of Appeal, in reducing the punitive damages award, ruled that Brandt fees awarded after the jury verdict must be excluded from the calculation in determining whether, and to what extent, the jury‘s punitive damages award exceeds constitutional limits. The California Supreme Court ruled that the Court of Appeal erred in excluding Brandt fees from that analysis and that “Brandt fees may be included in the calculation of the ratio of punitive to compensatory damages, regardless of whether the fees are awarded by the trier of fact as part of its verdict or are determined by the trial court after the verdict has been rendered.”

Thus, while the punitive damages award initially awarded by the jury was reduced in accordance with State Farm, Nickerson is a victory for plaintiffs as it adds another measure of damages that can be used to support a larger punitive damages award.

Mistreated by Your Insurer? Insurers May Not Be Able to Hide Behind ERISA Preemption to Defeat Claims for Intentional Infliction of Emotional Distress

Insureds obligingly pay premiums on their life, health and disability insurance policies and dutifully provide updated information upon request by their insurers, but often do not enjoy the same courtesy when they file an insurance claim. In extreme cases, antagonistic insurers engage in a host of tactics, including appointing claims examiners who refuse to return phone calls, conducting intrusive surveillance, accusing insureds of filing false claims or inundating the insured’s employer and treating doctors with document demands—only to deny the insured’s claim. Astonished by this treatment, many insureds wonder if they can sue them for emotional distress damages. The short answer is yes—but there are hurdles.

California law imposes in every insurance contract a covenant of good faith and fair dealing, and a wrongful denial may be in “bad faith.” The bad faith claim potentially allows the insured to seek emotional distress damages. However, there may be another approach: sue the insurer for intentional infliction of emotional distress. To succeed on such a claim, insureds must establish: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.

Policies governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) present additional hurdles. First, Section 514(a) provides that the ERISA federal statutes “supersede[s] any and all State laws insofar as they may … relate to any employee benefit plan.” Second, ERISA does not contain a comparable statutory recourse for bad faith by an insurer. Accordingly, insurers routinely defeat emotional distress claims and insurance bad faith claims by asserting that ERISA preempts these state law claims, as such claims directly relate to the insured’s denial of benefits. However, a relatively unsung line of cases show that in cases where the insurer’s actions are so far removed from the claims handling function, an insured may escape ERISA preemption and seek damages typically available under California, but not federal, law.

In his recent Order, United States District Judge William Alsup ruled that ERISA does not preempt (or, in other words, defeat) an insured’s claim for intentional infliction of emotional distress in certain cases, even though the insurance policy is otherwise governed by ERISA. Daie v. The Reed Grp., Ltd., No. C 15-03813 WHA, 2015 WL 6954915 (N.D. Cal. Nov. 10, 2015). After Aetna denied his claim for disability benefits and appeal under an employer-sponsored plan, Plaintiff filed suit asserting only one cause of action for intentional infliction of emotional distress. Plaintiff’s complaint alleged, among other things, that Defendants accused Plaintiff of lying about and exaggerating his condition, pressured him to take experimental medications and forced him to undergo rigorous medical examinations without considering the results.

Defendants moved to dismiss the claim based on federal preemption under ERISA. Judge Alsup denied the motion, explaining that ERISA completely preempts a state-law only if: (1) an individual at some point could have brought the claim under ERISA Section 502(a)(1)(B), which allows an ERISA “participant or beneficiary” to bring a civil action to recover benefits due, enforce his rights, or clarify his rights under the plan and (2) no other independent legal duty is implicated. Here, neither prong was satisfied. First, Plaintiff’s claim hinged on the Defendants’ harassing and oppressive conduct unrelated to the claims handling function. Second, Defendants had a duty not to engage in tortious conduct, which was independent of the Defendants’ duties under ERISA. Judge Alsup further noted that absent the denial of benefits, Daie would still have a claim for intentional infliction of emotional distress.

Other cases offer insight as to what type of actions by insurers may survive ERISA preemption. One example involves an insurance company who engaged in surveillance tactics, including falsely impersonating a bank lender to obtain personal information about a plaintiff (Dishman v. Unum Life Insurance Co. of America, 269 F.3d 974 (9th Cir. 2001)). Sarkisyan v. CIGNA Healthcare of California, Inc., 613 F. Supp. 2d 1199, 1208-09 (C.D. Cal. 2009) distinguishes what claims may, or may not be, preempted. In Sarkisyan, CIGNA denied authorization for a liver transplant for Plaintiff’s daughter, upheld the denial, and the girl passed away days later. The grief-stricken parents brought suit alleging several causes of action, including intentional infliction of emotional distress. CIGNA removed the case to federal court, then filed a motion to dismiss, contending Plaintiffs’ claims were expressly preempted by ERISA. The District Court ruled that Plaintiff’s state law claims for intentional infliction of emotional distress based on wrongful denial of coverage under their CIGNA health insurance plan related directly to CIGNA’s denial of benefits, and thus were preempted by ERISA. However, Plaintiffs’ state law claim for intentional infliction of emotional distress based on the verbal abuse, heckling, and “lewd hand gesture” by CIGNA employees was not preempted, because the claim was based on events occurring after the coverage decision, and thus did not directly relate to the claim decision.

These cases demonstrate that where a plaintiff’s allegations of intentional infliction of emotional distress clearly implicate an independent legal duty owed by the insurer, distinct from actions directly related to the claim for benefits, ERISA preemption does not defeat the claim. Indeed, these holdings are consistent with public policy concerns and serve as a disincentive to insurers who mistreat their insureds, or risk liability in the form of extra-contractual damages for intentional infliction of emotional distress.

California Court of Appeal Finds That a 10:1 Ratio Between Punitive Damages and Compensatory Damages Awards Satisfies Due Process

A 10-to-1 ratio of punitive damages to compensatory damages awards in an insurance bad faith case passes Constitutional muster. So says the California Court of Appeal in its decision in Nickerson v. Stonebridge Life Insurance Company, __ Cal. App. 4th ___, 2013 Cal. App. LEXIS 583 (2013). The decision is significant in that it affirms that punitive damages are not limited to a single-digit ratio and that a ratio of punitive to compensatory damages of 10-to-1, and perhaps higher, falls within the maximum permitted under due process. Additionally, the decision clarifies what damages may be included in fixing the ratio of compensatory to punitive damages.

The Nickerson case concerns a disabled veteran, Nickerson, who was covered under a policy providing coverage for hospital confinement, intensive care unit and emergency room visits issued by Stonebridge. After suffering an injury to his leg, Nickerson was hospitalized for over 100 days. However, Stonebridge contended that only a small portion of the time Nickerson stayed in the hospital was considered “Necessary Treatment” under his policy. On this basis, Stonebridge denied benefits for the rest of the time Nickerson was hospitalized.

Following the denial of his benefits under the policy, Nickerson filed a claim against Stonebridge for breach of the insurance contract and for breach of the implied covenant of good faith and fair dealing. The trial court found that Nickerson was entitled to $31, 500 in unpaid benefits for the breach of contract cause of action. The jury returned a special verdict finding Stonebridge’s failure to pay policy benefits was unreasonable and that Nickerson suffered $35,000 in damages for emotional distress. Finally, the jury awarded Nickerson $19 million in punitive damages, which constituted 5% of Stonebridge’s net worth. Stonebridge immediately moved for a motion for new trial seeking to reduce the punitive damages award. The trial court conditionally granted a new trial unless Nickerson agreed to accept a reduction of the punitive damage award to 10 to 1 in accordance with “recent California and federal authority.” In calculating the amount of punitive damages, the trial court only included the $35,000 in compensatory damages for bad faith and did not include damages for the insurer’s breach of contract or the $12, 500 in attorney’ fees awarded to Nickerson pursuant to Brandt v. Superior Court, 37 Cal. 3d 813, 817 (1985) (when the defendant insurer’s tortious conduct forces insured to retain counsel to obtain policy benefits, the insurer is liable for attorney’s fees). Thus, the trial court offered Nickerson a reduction of punitive damages to $350,000.

Nickerson rejected the trial court’s offer and appealed, arguing that the trial court erred (1) in concluding it was constrained by law to limit punitive damages to no more than 10 times the compensatory award; and (2) in excluding certain categories of compensatory damages.

The Court of Appeal began its analysis by reciting that a punitive damages award violates the due process clause of the Fourteenth Amendment if the award is “grossly excessive.” In determining whether the trial court’s remittance of the jury’s award of punitive damages to a 10-to-1 ratio with compensatory damages was constitutional, the court followed the three guideposts set out in BMW of North America, Incorporated v. Gore, 517 U.S. 559, 575 (1996): (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. As to the first guidepost, the court found that the degree of reprehensibility factor weighs in favor of Nickerson because, although Nickerson did not suffer physical harm, Stonebridge acted with indifference toward Nickerson’s health and safety, Nickerson was a financially vulnerable individual, Stonebridge’s conduct was intentionally deceitful and was not an isolated incident. The court did not consider the third guide post relating to comparable civil penalties because Nickerson conceded that this guide post was of “limited utility.” Turning to the second and most important guidepost, the court noted that the Supreme Court has consistently refused to establish a ratio beyond which a punitive damage award could not exceed, but that awards significantly exceeding a single-digit ratio between punitive and compensatory damages generally will not satisfy due process. The court then stated that the California Supreme Court has found that ratios significantly greater than 9 or 10-to-1 are suspect and may not pass constitutional muster absent “special justification.” Based on both federal and state case law, the court concluded that the message gleaned from these cases is that due process analysis is flexible and the constitutionality of any award must be based upon the particular facts and circumstances of the case.

Based on its analysis of the three guideposts, the circumstances of this case, the high level of reprehensibility of Stonebridge’s conduct, Stonebridge’s net worth and the small economic damage award justifies an outside constitutional limit of a 10-to-1 ratio of punitive to compensatory damages. As such, the Court of Appeal upheld the trial court’s decision to remit the jury’s award to a 10-to-1 ratio.

Additionally, it is important to note that the court also addressed what categories of compensatory damages are included in calculating the ratio of punitive to compensatory damages. Nickerson argued that “uncompensated potential harm” should be included into the calculation. However, the court rejected this argument because Nickerson was fully compensated for his emotional distress injuries. The court also refused to include the $31, 500 in policy benefits awarded to Nickerson because, citing Major v. Western Home Insurance Company, 169 Cal. App. 4th 1197, 1224 (2009), punitive damages are not authorized in contract actions. The court also refused to include attorney’s fees awarded pursuant to Brandt because they were awarded after the jury awarded punitive damages. However, it should be noted that if the jury had awarded attorney’s fees, they would have been considered in determining if the ratio of punitive damages to compensatory damages is excessive because Brandt fees “are considered extra contractual tort damages that compensate a plaintiff for an insurer’s bad faith refusal to pay policy benefits.” Id (emphasis in original).

The Nickerson decision is highly significant in that the Court of Appeal made it clear that punitive damages awards are not limited to a single-digit ratio and that there is no bright line maximum ratio of punitive damages to compensatory damages required by due process. Although the court strongly suggested that a punitive damage award significantly exceeding a 9 or 10-to-1 ratio could violate due process, the court refused set the 10 to 1 ratio as a maximum cap on all punitive damages awards. Indeed, given the highly flexible due process analysis adopted by the court, instances where insurers engage in significantly reprehensible acts of bad faith, as determined under the guidepost analysis, may well justify a punitive to compensatory damages ratio which exceeds the 10-to-1 ratio applied in Nickerson.

Court Approval is Not Needed to Assert a Punitive Damages Claim Against a Health Care Service Plan

In a victory for health insurance policy holders over health insurers/health care service plans, in Kaiser Foundation Health Plan, Inc, v. Superior Court (Rahm, et al, Real Parties), 2012 Cal. App. LEXIS 138 (Cal. App. 2d Dist. Feb. 15, 2012), the Court of Appeals ruled that a plaintiff does not need to obtain approval from the trial court before asserting a claim for punitive damages against a health care service plan. Specifically, the Court ruled that California Civil Procedure section 425.13 applies only to health care providers (such as doctors), but does not apply to health care service plans such as Kaiser Foundation Health Plan or Anthem/Blue Cross.

The Rahm family filed a lawsuit against Kaiser Foundation Health Plan and two Kaiser health care providers. The Rahms claimed that Kaiser improperly delayed before ordering an MRI for their daughter Anna, resulting in the eventual loss of Anna’s right leg and portions of her pelvis and spine. Specifically, despite numerous requests by Anna’s parents that Kaiser authorize an MRI for Anna, Kaiser refused. As a result, there was a considerable delay in discovering that Anna was suffering from a “high grade” osteosarcoma, one of the fastest growing types of osteosarcoma. The delay significantly contributed to Anna’s poor prognosis and the need for the amputations.

After the Rahms filed their lawsuit, the defendants filed a motion to strike the punitive damages allegations. The defendants asserted that the Rahms failed to comply with California Civil Procedure section 425.13, which requires a plaintiff to obtain a trial court order before a claim for punitive damages can be asserted against a health care provider for damages arising out of professional negligence. The Rahms eventually dismissed their punitive damages claims against the two Kaiser health care providers. Accordingly, the Court only reviewed whether California Civil Procedure section 425.13 applied to claims against health care service plans.

The Court of Appeals indicated that “the text of the statute is unclear as to whether section 425.13 is intended to apply only to claims against health care providers, or whether it is intended to apply to claims against any type of defendant—including claims against health care service plans,” and thus turned to the legislative history. After reviewing the legislative history, as well as Central Pathology Service Medical Clinic, Inc. v. Superior Court, 3 Cal. 4th 181 (1992) in which the California Supreme Court considered the scope of claims subject to section 425.13, the Court held that section 425.13 does not apply to claims against health care service plans. Specifically, the Court noted that:

Defendants’ argument that section 425.13 may be applied to claims against health care service plans, rather than health care providers, is also in conflict with other sections of California code. Civil Code section 3428, subdivision (c) states that “[h]ealth care service plans … are not health care providers under any provision of law, including, but not limited to … Section[] … 425.13 … of the Code of Civil Procedure.” Likewise, Health and Safety Code section 1367.01, subdivision (m) clarifies that a health care service plan’s role in determining the medical necessity of a requested procedure “shall [not] cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including … Section[] … 425.13 … of the Code of Civil Procedure.” The language of these statutes demonstrates a clear intent to exclude health care service plans from the procedures required under section 425.13.

Defendants have not cited a single decision that has applied section 425.13 to claims pleaded against a health care service plan or any other type of entity that was not a medical care provider.

In conclusion, the Court ruled that:

The legislative history of section 425.13 and various provisions in California code demonstrate that the procedural requirements described in the statute do not apply to claims against health care service plans. Because defendants admit that Kaiser Health Plan is a health care service plan, rather than a health care provider, the trial court did not err in refusing to strike the punitive damages allegations asserted against the Health Plan.

Based on this ruling, plaintiffs can assert punitive damage claims against health care service plan without first obtaining court approval and will therefore have an easier time holding entities such as Kaiser Foundation Health Plan or Anthem/Blue Cross liable for their actions.

Get the Answers and Assistance You Need