Brown v. Snohomish County Physicians Corp.

Decision Date11 February 1993
Docket NumberNo. 59018-4,59018-4
Citation120 Wn.2d 747,845 P.2d 334
CourtWashington Supreme Court
Parties, 61 USLW 2523 Louann BROWN, individually and as Guardian for Raymond F. Brown, incompetent, and as their marital community, Petitioners, v. SNOHOMISH COUNTY PHYSICIANS CORPORATION, a Washington Corporation, Respondent. Deborah HOGSETT, Petitioner, v. SNOHOMISH COUNTY PHYSICIANS CORPORATION, a Washington Corporation, Respondent.

Oz Dire, Lynnwood, for petitioner Brown.

Levinson, Friedman, Vhugen, Duggan & Bland, Maria S. Diamond, Seattle, for petitioner Hogsett.

Anderson Hunter Law Firm, Robert B. Willoughby, Everett, for respondent.

Bryan P. Harnetiaux, Gary N. Bloom, Spokane, Robert K. Dawson, Seattle, for amici curiae Washington State Trial Lawyers Ass'n.

William C. Smart, Leonard B. Barson, Seattle, for amici curiae Health Care Contractors Amicus Group.

BRACHTENBACH, Justice.

At issue in these consolidated cases is whether public policy is violated by health care service contract provisions which exclude coverage to the extent that benefits are available to the patient through underinsured motorist (UIM) coverage. The Court of Appeals upheld the contract provisions. We reverse.

The facts of each case follow.

Brown

On August 21, 1988, Ray Brown was riding a bicycle and suffered serious injuries when he was struck by an automobile. He incurred resulting medical expenses in excess of $160,000. He also suffered lost wages and pain and suffering as a result of the accident. The driver of the automobile had liability insurance of $25,000 and no fault medical coverage of $10,000. Mr. Brown had underinsured motorist coverage of $50,000 and personal injury protection (PIP) coverage of $10,000. Public Employees Mutual Insurance Company (PEMCO), which insured both parties, paid the limits of each of these coverages.

At the time of the accident, Brown was covered under a health care service contract his employer had with Snohomish County Physicians' Corporation (SCPC). While the contract generally provided for medical and hospital expenses incurred by Brown, it contained the following provision:

Coverage will be excluded for expenses incurred or services rendered ... for ...

....

b. Any ... injury to the extent benefits are available to the patient under the terms of any automobile medical, automobile "no-fault," or similar contract or insurance, or are available under the terms of any uninsured motorist or underinsured motorist insurance coverage....

Clerk's Papers (Brown), at 56.

Based upon this provision, after SCPC learned of the PEMCO coverage it advised that it would pay covered medical expenses over and above $70,000 (the total of Mr. Brown's $50,000 UIM coverage, his $10,000 PIP coverage, and the driver's $10,000 no-fault medical coverage).

Mrs. Brown, on her own behalf, as guardian for Mr. Brown, and on behalf of the marital community (hereafter Brown) filed a declaratory judgment action requesting that the court find the provision relied upon by SCPC invalid and unenforceable. Brown moved for summary judgment. Brown argued, among other things, that the provision is unenforceable as against public policy. SCPC filed a cross motion for summary judgment.

The trial court granted SCPC's motion for summary judgment. Brown appealed. The case was consolidated on appeal with Hogsett v. Snohomish County Physicians' Corporation, discussed below. The Court of Appeals affirmed the trial court. Brown v. Snohomish Cy. Physicians Corp., 63 Wash.App. 788, 822 P.2d 336, review granted, 119 Wash.2d 1002, 832 P.2d 487 (1992). Brown then sought discretionary review by this court, which was granted.

Hogsett

On November 13, 1989, Ross Hogsett, the husband of petitioner Deborah Hogsett, died as a result of injuries sustained in an automobile accident. The driver of the other vehicle was uninsured. The Hogsetts had PIP coverage of $10,000, which the insurer, Viking Insurance, paid to cover the first $10,000 in medical bills. The Hogsetts also had uninsured motorist coverage of $25,000. Before his death, Mr. Hogsett incurred medical bills totaling $34,277.13.

Mr. Hogsett was covered under a health care service contract which his employer had with SCPC. Mrs. Hogsett submitted the remaining $24,277.13 in medical bills to SCPC. SCPC refused to pay this amount based upon the following provision:

Coverage will be excluded for expenses incurred or services rendered, including complications thereof, for the following:

....

b. Any ... injury to the extent benefits are available to the patient under the terms of any vehicle insurance policy pursuant to: (1) medical coverage, medical "no-fault" coverage, Personal Injury Protection coverage, or similar medical coverage contained in said policy; and/or (2) uninsured motorist or underinsured motorist coverage contained in said policy.... For the purposes of this exclusion, benefits shall be deemed to be "available" to the patient if the patient is a named insured, comes within the policy definition of insured, or is a third-party donee beneficiary under the terms of the policy.

Clerk's Papers (Hogsett), at 76-77.

Mrs. Hogsett filed suit against SCPC seeking a declaratory judgment that the provision is invalid, and sought injunctive relief and damages (including damages under the Consumer Protection Act). She moved for partial summary judgment on the validity of the provision. The trial court denied the motion. Pursuant to CR 54(b), final judgment was entered on this claim. Mrs. Hogsett appealed. The trial court dismissed her other claims without prejudice.

This case was consolidated with Brown v. Snohomish County Physicians' Corporation, discussed above. As noted, the Court of Appeals affirmed the trial court. Hogsett then sought discretionary review, which was granted.

Analysis

Brown's case concerns summary judgment granted in favor of SCPC. In reviewing a grant of summary judgment, the appellate court engages in the same inquiry as the trial court. Marincovich v. Tarabochia, 114 Wash.2d 271, 274, 787 P.2d 562 (1990). Summary judgment is appropriate 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." CR 56(c); Marincovich, at 274, 787 P.2d 562. There are no disputed material facts, and the question is whether as a matter of law SCPC was entitled to summary judgment.

In Hogsett's case, denial of Hogsett's motion of summary judgment was certified as a final judgment. Again, there are no disputed issues of material fact and the question is whether Hogsett was entitled to judgment as a matter of law.

Both Brown and Hogsett argue that the provisions "excluding" medical coverage to the extent benefits are available under UIM coverage violate public policy and therefore are invalid and unenforceable. 1

Both parties have relied upon general rules applicable to insurance policies. SCPC is a health care service contractor, which is defined as

[a]ny corporation, cooperative group, or association, which is sponsored by or otherwise intimately connected with a provider or group of providers, who or which not otherwise being engaged in the insurance business, accepts prepayment for health care services from or for the benefit of persons or groups of persons as consideration for providing such persons with any health care services.

RCW 48.44.010(3). There is some question about the extent to which insurance law applies to the contracts at issue here. Compare RCW 48.44.020(1) with, e.g., RCW 48.44.309.

For purposes of this case, however, we agree with the parties that general rules respecting insurance policies should be applied in resolving the public policy issue. Cf. Myers v. Kitsap Physicians Serv., Inc., 78 Wash.2d 286, 288, 474 P.2d 109 (1970) (holding that rules of interpretation generally applicable to insurance contracts apply to health care service contracts).

Turning to the merits of the issue, "limitations in insurance contracts which are contrary to public policy and statute will not be enforced, but otherwise insurers are permitted to limit their contractual liability." State Farm Gen. Ins. Co. v. Emerson, 102 Wash.2d 477, 481, 687 P.2d 1139 (1984); Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 210, 643 P.2d 441 (1982), aff'g on rehearing, 95 Wash.2d 373, 622 P.2d 1234 (1980). Washington courts have hesitated to "invoke public policy to limit or avoid express contract terms absent legislative action." Emerson, 102 Wash.2d at 481, 687 P.2d 1139; see Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wash.2d 869, 876 n. 1, 784 P.2d 507 (1990). Where appropriate, though, public policy has been invoked to invalidate insurance contract provisions.

Public policy is not a precisely defined term, and, in fact, may not be amenable to an exact definition. See generally Brachtenbach, Public Policy in Judicial Decisions, 21 Gonz.L.Rev. 1 (1985-1986). The court has said that generally a contract does not violate public policy where it is not " 'prohibited by statute, condemned by judicial decision, or contrary to the public morals....' " Emerson, 102 Wash.2d at 481, 687 P.2d 1139 (quoting 17 C.J.S. Contracts § 211, at 1024 (1963)). The court stated:

"The term 'public policy,' ... embraces all acts or contracts which tend clearly to injure the public health, the public morals the public confidence in the purity of the administration of the law, or to undermine that sense of security for individual rights, whether of personal liberty or of private property, which any citizen ought to feel."

Emerson, 102 Wash.2d at 483, 687 P.2d 1139 (quoting LaPoint v. Richards, 66 Wash.2d 585, 594-95, 403 P.2d 889 (1965)); see also Makinen v. George, 19 Wash.2d 340, 354, 142 P.2d 910 (1943) ("[p]ublic policy in its broad sense is that principle of law holding that no citizen can...

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