Carrao v. Health Care Service Corp.

Citation454 N.E.2d 781,73 Ill.Dec. 684,118 Ill.App.3d 417
Decision Date23 September 1983
Docket NumberNo. 82-1030,82-1030
Parties, 73 Ill.Dec. 684 Joseph CARRAO, et al., Plaintiffs-Appellees, v. HEALTH CARE SERVICE CORPORATION, an Illinois Not-for-Profit Corporation, doing business as Blue Cross-Blue Shield Health Services, Defendant-Appellant.
CourtUnited States Appellate Court of Illinois

Page 781

454 N.E.2d 781
118 Ill.App.3d 417, 73 Ill.Dec. 684
Joseph CARRAO, et al., Plaintiffs-Appellees,
Corporation, doing business as Blue Cross-Blue
Shield Health Services, Defendant-Appellant.
No. 82-1030.
Appellate Court of Illinois, First District, Fifth Division.
Sept. 23, 1983.

[118 Ill.App.3d 419]

Page 784

[73 Ill.Dec. 687] Karl F. Nygren, P.C., Donald J. Duffy, Howard J. Swibel and G. Christian Kronberg, Chicago (Kirkland & Ellis, Chicago, of counsel), for defendant-appellant.

William J. Harte, Ltd., Joyce & Kubasiak, P.C., Goldberg & Murphy, Ltd., Plotkin & Jacobs, Ltd., Schwartzberg, Barnett & Cohen, Chicago (William J. Harte, John G. Jacobs, Edward T. Joyce, Benjamin Cohen, Jerome F. Goldberg and Michael H. Moirano, Chicago, of counsel), for plaintiffs-appellees subscriber sub-class.

MEJDA, Justice:

Pursuant to Supreme Court Rule 308 (87 Ill.2d R. 308), the circuit court entered an order finding that certain previous interlocutory orders involve questions of law as to which there is substantial ground for difference of opinion, and that an immediate appeal would materially advance the ultimate termination of the litigation. We granted defendant's application for leave to appeal to consider the following questions certified by the trial court:

"1. In the circumstances of this case, where the relevant health care benefits contracts do not explicitly state that the insurer will not pay claims for services that the insurer determines are 'not medically necessary,' do the plaintiffs state a claim for relief based upon the insurer's denial of claims on the basis of its determination that the health care was 'not medically necessary?'

2. In the circumstances of this case, does the question stated above present common questions of law or fact which predominate over individual questions, and do the parties designated by the Court as representative parties adequately represent the interests of the class in conformance with the requirements of Illinois Civil Practice Act, Section 57.2(a)(3)?

3. Is the Illinois Department of Insurance a necessary party to this action?"

The trial court's orders answered the first two questions in the affirmative and the last question in the negative. For the reasons which follow, we affirm the orders of the trial court.

Plaintiffs are beneficiaries of health insurance policies issued by the defendant, Health Care Services Corporation (hereinafter referred to as "Blue Cross") and health care providers who rendered care to persons insured by Blue Cross. This suit was brought as a class action [118 Ill.App.3d 420] for damages, declaratory judgment, and injunctive relief. The gravamen of the consolidated complaint is that Blue Cross, in the absence of contractual or other legal authority, regularly refused to pay for medical and hospital care which Blue Cross independently determined was not medically necessary. Blue Cross moved under section 45 of the Civil Practice Act (Ill.Rev.Stat.1981, ch. 110, par. 45, now codified without change of substance at Ill.Rev.Stat.1981, ch. 110, par. 2-615) to dismiss the complaint on the ground that it was insufficient as a matter of law. Blue Cross also moved to join the Department of Insurance as a necessary party. On October 8, 1980, the trial court refused to dismiss three of the four counts of the consolidated complaint and ruled that the Department was not a necessary party. The trial court also determined that the cause could be tried as a class action and certified three sub-classes. As already indicated, the circuit court subsequently made the necessary findings to support an interlocutory appeal under Rule 308 and we granted the defendant's application for leave to appeal.


The first issue presented for review is whether plaintiffs state a claim for relief by alleging that Blue Cross denied their insurance claims based on Blue Cross' independent determination that the health care rendered was not "medically necessary" despite

Page 785

[73 Ill.Dec. 688] the failure of the relevant contracts to state explicitly that this determination may be made by the insurer and that it could form the basis for the noncoverage. In deciding whether the trial court properly denied Blue Cross' motion to dismiss, we need only determine whether the consolidated complaint alleges facts sufficient to constitute a cause of action. See Illinois Housing Development Authority v. Sjostrom & Sons, Inc. (1982), 105 Ill.App.3d 247, 253, 61 Ill.Dec. 22, 433 N.E.2d 1350.

Count I of the consolidated complaint alleged that various named plaintiffs were at all relevant times insured under group or nongroup contracts issued by Blue Cross and that they had regularly paid or caused to be paid premiums to the defendant in consideration of the insurance provided. Copies of the insurance agreements were attached to the complaint. The complaint further alleged that the terms and conditions of the contracts are substantially identical in all material respects and that none of the policies provides for independent review of a determination by an insured's physician as to when hospitalization is medically necessary or desirable, nor for denial of claims in the event that Blue Cross disagrees with the medical determination made by the insured's physician. The complaint also alleged that Blue [118 Ill.App.3d 421] Cross has engaged in a pattern of refusing to pay its insureds' legitimate claims for the costs of health care for the stated reason that Blue Cross determined that such care was not medically necessary despite authorization of the care by the insureds' physicians. The complaint concluded that this practice constituted a breach of contract. Count I also alleged that the cause was brought as a class action because the large size of the class (over 1,000 members) makes joinder of all class members impracticable, that questions of fact and law common to the class predominate over questions affecting only individual members, and that the named plaintiffs will fairly and adequately protect the interest of the class.

Count II sought recovery for common law fraud and Count III sought recovery for violation of the "Consumer Fraud and Deceptive Business Practices Act" (Ill.Rev.Stat.1981, ch. 121 1/2, par. 261-272). Count IV was stricken by the trial court. This appeal concerns only the sufficiency of Count I.

Count I adequately alleges the existence of a valid contract and breach thereof (see generally Steinberg v. Chicago Medical School (1977), 69 Ill.2d 320, 13 Ill.Dec. 699, 371 N.E.2d 634) and the defendant's brief does not actively dispute the sufficiency of these allegations.

Blue Cross contends, however, that the Non-Profit Health Care Service Plan Act (Ill.Rev.Stat.1981, ch. 32, pars. 551-562 (hereinafter referred to as "the Act")) under which Blue Cross is organized, authorizes it to review claims and deny those which it determines to be "medically unnecessary." Technically, this contention comprises "affirmative matter" which avoids the legal effect of the claim and therefore should have been raised by a motion under section 48 of the Civil Practice Act. (Ill.Rev.Stat.1981, ch. 110, par. 48(1)(i), now codified without change of substance as Ill.Rev.Stat.1981, ch. 110, par. 2-619(a)(9)). (See Illinois Housing Development Authority v. Sjostrom & Sons, Inc. (1982), 105 Ill.App.3d 247, 252, 61 Ill.Dec. 22, 433 N.E.2d 1350.) A court of review may, however, treat an improperly designated motion to dismiss as though brought under the proper section (see 105 Ill.App.3d 247, 253, 61 Ill.Dec. 22, 433 N.E.2d 1350), and we shall so treat the instant motion. Blue Cross relies on that part of section 5 of the Act which provides:

" § 5. Any corporation subject to the provisions of this Act may enter into contracts for the rendering of health care service to any of its subscribers and provide for payment for any such service.

"A health care service plan corporation shall impose no restrictions on the physician who treats a subscriber as to methods of [118 Ill.App.3d 422] diagnosis or treatment * * *.

"The rates charged by such corporation to the subscriber for health care service shall, at all times, be subject to the approval

Page 786

[73 Ill.Dec. 689] of the Director of Insurance of the State of Illinois.

"Rates to be charged to subscribers or subscriber groups shall be deemed unreasonable if the Director of Insurance finds that the health care service corporation has failed to make a vigorous, good-faith effort to contain rates of reimbursement to hospitals and other participating health care providers as well as to promote cost-effective alternative forms of health care.

* * * "

(Ill.Rev.Stat.1982 Supp., ch. 32, par. 555 (emphasis added).)

While we agree with Blue Cross that one of the goals of the Act is health care cost control, we cannot agree that the cited portion of the Act mandates the particular, after-the-fact, form of cost control advocated by Blue Cross. The statute is couched in general terms and, contrary to Blue Cross' interpretation, does not purport to require any particular method of cost control.

Moreover, Blue Cross' argument relies on an isolated part of the statute taken out of context. " 'It is a cardinal rule of statutory construction that significance and effect should, if possible, without destroying the sense or effect of the law, be accorded every paragraph, sentence, phrase and word. [Citation.] A statute should be so construed, if possible, that no word, clause or sentence is rendered meaningless or superfluous. [Citations.]' (People ex rel. Barrett v. Barrett (1964), 31 Ill.2d 360, 364-65 [201 N.E.2d 849].)" (People v. Lutz (1978), 73 Ill.2d 204, 212, 22 Ill.Dec. 695, 383 N.E.2d 171.) The rest of section 5 of the Act states:

"All rates or basis of payments to health care providers made by [Corporations organized under the Act] pursuant to the...

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