Schachner v. Blue Cross and Blue Shield of Ohio

Citation77 F.3d 889
Decision Date15 April 1996
Docket NumberNo. 94-4217,94-4217
PartiesPens. Plan Guide P 23923Y Chaim SCHACHNER, individually and as representative of all similarly situated persons, Plaintiff-Appellant, v. BLUE CROSS AND BLUE SHIELD OF OHIO and Mutual Health Services Company, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

On Appeal from the United States District Court for the Northern District of Ohio; Paul R. Matia, Judge.

Thomas L. Feher (argued and briefed), Kaufman & Cumberland, Cleveland, OH, for Chaim Schachner.

Patrick F. Haggerty (briefed), George F. Karch, Jr. (argued), Thompson, Hine & Flory, Cleveland, OH, for Blue Cross and Blue Shield of Ohio, Mut. Health Services Co.

Before BROWN, WELLFORD, and MILBURN, Circuit Judges.

BAILEY BROWN, Circuit Judge.

In this Employee Retirement Income Security Act (ERISA) case, 1 Chaim Schachner sued Blue Cross and Blue Shield of Ohio ("BCBSO") after it refused to pay for cardiac rehabilitation therapy ("cardiac rehab") he received after undergoing a coronary surgical procedure called angioplasty. Schachner contends that the costs of cardiac rehab are covered under the plain language of the insurance certificate BCBSO issued to him. BCBSO counters that the language of the certificate is ambiguous, and that extrinsic evidence proves the parties did not intend to cover cardiac rehab. The district court agreed with BCBSO and granted it summary judgment. Schachner appeals.

Schachner also appeals from the district court's several orders denying his attempts to establish himself as the representative of a class of several similarly situated BCBSO insureds. Additionally, Schachner appeals from the court's dismissal of his various state law claims as pre-empted by ERISA.

For the reasons set forth below, we REVERSE the court's grant of summary judgment on the ERISA claims, and VACATE the court's orders disposing of Schachner's attempts to have a class certified. We AFFIRM the district court's dismissal of Schachner's individual state law claims, but VACATE the dismissal of state law claims which could be maintained on behalf of potential class members whose insurance certificates are not controlled by ERISA. We REMAND this case to the district court for further proceedings consistent with this opinion.

I. FACTS

Schachner is a partner in and an employee of the Dallas Shoe Warehouse Co. ("the company"), a partnership specializing in retail shoe sales in Cleveland, Ohio. The company is a member of a group of Cleveland-area businesses called the Council of Small Enterprises ("COSE"). 2 The company offered its employees health insurance plans which COSE had negotiated with BCBSO.

In May of 1989, Schachner underwent a coronary surgical procedure called angioplasty. Afterward, Schachner's physician prescribed for him a standard cardiac rehab program. Schachner participated in thirty-three treatment sessions over a five-month period. His doctor described the sessions as "consist[ing] of supervised exercise training to strengthen the muscles of the heart and the function of the circulatory system, surveillance of risk factors, appropriate counselling, and monitoring of progressive exercise to return Mr. Schachner to his pre-symptomatic level of function." The nurse who supervised the treatments said that the "sessions consisted of supervised training and exercise to strengthen the cardiovascular system by improving the function of the circulatory system."

BCBSO paid Schachner's claims for the angioplasty procedure, but denied his claims for cardiac rehab on the ground that cardiac rehab is not a covered service under his insurance certificate ("the certificate"). Schachner subsequently filed this suit, asserting claims under ERISA 3 and on state law grounds, on his own behalf and as a representative of a putative class of BCBSO insureds who have been denied coverage for cardiac rehab under similar insurance certificates.

Schachner's certificate includes, in a section headed "Health Care Benefits," a subheading called "Therapy Services." According to the certificate, "Therapy Services" includes radiation therapy, chemotherapy, dialysis treatments, treatment by physical means, respiratory and pulmonary therapy, and inpatient speech and occupational therapy. The paragraph addressing treatment by physical means states:

Treatment by Physical Means--The treatment given to relieve pain, restore maximum function and prevent disability following disease, injury or loss of a body part. Such services include physical treatments, hydrotherapy, heat or similar modalities, physical agents, hyperbaric therapy, bio-mechanical and neurophysiological principles and devices.

While the certificate specifically lists several "Exclusions," cardiac rehab is not among them.

Schachner contends that his cardiac rehab sessions fit squarely within the definition of Treatment by Physical Means. He relied on the affidavit of his physician, in which the doctor states:

I have found cardiac rehabilitation services, such as those prescribed by me, to be an effective method of restoring function to the heart and circulatory system, combating heart disease, preventing future incidents of acute coronary distress, important adjunction therapy to help cardiac patients resume normal function as promptly as possible, and an effective method of improving of cardiac risk factors to help retard disease progression.

BCBSO, however, claims that it must pay for cardiac rehab only when it is separately listed as a covered service in the insurance certificate. It submitted to the district court copies of insurance certificates with separate listings for cardiac rehab.

II. ANALYSIS
A. The contract language at issue is not ambiguous.
1. The appropriate law to be applied

We review the district court's grant of summary judgment and denial of partial summary judgment de novo, applying the same test as the district court. E.g., Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 800 (6th Cir.1994). Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

We can resolve most of this appeal by determining whether the district court erred in concluding that the meaning of the term "Treatment by Physical Means" is ambiguous. We review a district court's conclusions regarding ambiguity in contract language de novo. Wulf v. Quantum Chem. Corp., 26 F.3d 1368, 1376 (6th Cir.) (citing Boyer v. Douglas Components Corp., 986 F.2d 999, 1003 (6th Cir.1993)), cert. denied, --- U.S. ----, 115 S.Ct. 667, 130 L.Ed.2d 601 (1994). Contract language is ambiguous if it is subject to two reasonable interpretations. Id. (citing Smith v. ABS Indus., 890 F.2d 841, 846-47 n. 1 (6th Cir.1989)). If a court determines that a contract provision is ambiguous, then it "may use traditional methods of contract interpretation to resolve the ambiguity, including drawing inferences and presumptions and introducing extrinsic evidence." Boyer, 986 F.2d at 1005.

Courts may not, however, use extrinsic evidence to create an ambiguity. Rather, the ambiguity must be patent; that is, apparent on the face of the contract. In Local 783, Allied Industrial Workers v. General Electric Co., 471 F.2d 751 (6th Cir.), cert. denied, 414 U.S. 822, 94 S.Ct. 120, 38 L.Ed.2d 55 (1973), we wrote that "[o]nly when the court has determined that the contract is ambiguous is a construction of the clause necessary. After a finding of ambiguity has been made, '[extrinsic evidence] is admissible to aid in its interpretation.' " Id. at 757 (quoting Tennessee Consol. Coal Co. v. United Mine Workers, 416 F.2d 1192, 1198 (6th Cir.1969), cert. denied, 397 U.S. 964, 90 S.Ct. 999, 25 L.Ed.2d 256 (1970)). Some have argued, based primarily on our opinion in International Union, United Automobile Workers v. Yard-Man, 716 F.2d 1476 (6th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1002, 79 L.Ed.2d 234 (1984), 4 that we have broadened our rule on the consideration of parol evidence since our opinion in General Electric. See Local 836, United Automobile Workers v. Echlin, Inc., 670 F.Supp. 697, 701 n. 1 (E.D.Mich.1986) ("The Yard-Man line has substantially eroded the General Electric principle, at least in the retiree benefits context."). In the 1986 case of Serrano v. Jones & Laughlin Steel Co., 790 F.2d 1279 (6th Cir.1986), however, we stated that " Yard-Man did not change the rule stated by this court in [ General Electric ]." Id. at 1288. Thus, in this circuit, before a district court can consider extrinsic evidence of the parties' intent, it must find an ambiguity on the face of the contract.

2. Applying the appropriate law to this case

The district court ultimately granted summary judgment to BCBSO after concluding (1) that the meaning of the phrase "Treatment by Physical Means" is ambiguous, and (2) that evidence presented by BCBSO eliminated any genuine issue of material fact as to whether the parties intended that phrase to include cardiac rehab.

In 1991, Schachner filed a motion to certify a class of BCBSO insureds who had been denied coverage for cardiac rehab despite the fact that their insurance certificates stated that "Treatment by Physical Means" was a covered service. The district court (Batchelder, J.) 5 denied the motion, stating: "This Court cannot say that in this case the common questions of law and fact predominate over questions affecting only individual members." Explaining itself, the court wrote:

The language in plaintiff's certificate describing "Treatment by Physical Means" includes the terms "physical treatments" and "physical agents," but does not define these phrases. This language is not only ambiguous; it...

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