Commonwealth v. Anthem Insurance Companies Inc., 1998-CA-001016-MR

• Decision Date: 30 April 1999
• Docket Number: 1998-CA-001016-MR
• Citation: 8 S.W.3d 48
• Parties: COMMONWEALTH OF KENTUCKY, E REL., ATTORNEY GENERAL ALBERT B. CHANDLER III, APPELLANT v. ANTHEM INSURANCE COMPANIES, INC., SOUTHEASTERN GROUP, INC., AND SOUTHEASTERN UNITED MEDIGROUP, INC., APPELLEES
• Court: Kentucky Court of Appeals

[1]	8 S.W.3d 48
[2]	COMMONWEALTH OF KENTUCKY, EX REL., ATTORNEY GENERAL ALBERT B. CHANDLER III, APPELLANT; v.; ANTHEM INSURANCE COMPANIES, INC., SOUTHEASTERN GROUP, INC., AND SOUTHEASTERN UNITED MEDIGROUP, INC., APPELLEES
[3]	NO. 1998-CA-001016-MR
[4]	Kentucky Court of Appeals
[5]	APPEAL FROM FRANKLIN CIRCUIT COURT HONORABLE ROGER L. CRITTENDEN, JUDGE ACTION NO. 1997-CI-001566
[6]	April 30, 1999
[7]	Before: Knopf, Knox, And Schroder, Judges.
[8]	Briefs For Appellant: A.b. Chandler III Attorney General Scott White Assistant Deputy Attorney General Robert Bullock Kirk Ogrosky David S. Kaplan Assistant Attorneys General Frankfort, Kentucky Oral Argument For Appellant: David S. Kaplan Frankfort, Kentucky Brief For Appellee: K. Gregory Haynes Frank F. Chuppe Virginia H. Snell Jean W. Bird Wyatt, Tarrant & Combs Louisville, Kentucky Oral Argument For Appellee: K. Gregory Haynes Louisville, Kentucky
[9]	The opinion of the court was delivered by: Knopf, Judge
[10]	TO BE PUBLISHED
[11]	OPINION
[12]	AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
[13]	The Commonwealth, through its Attorney General, appeals from an April 6, 1998, order of the Franklin Circuit Court summarily dismissing a portion of the Commonwealth's consumer protection action against the appellees, Anthem Insurance Companies, Inc.; Southeastern Group, Inc., d/b/a Anthem Health Plans; and Southeastern United Medigroup, Inc., d/b/a Anthem Blue Cross and Blue Shield ("Anthem" or "the insurers"). Among other allegations, the Attorney General complained that Anthem and its corporate family had engaged in a fraudulent scheme to charge Kentucky consumers of health insurance inflated premium rates. Anthem moved to dismiss the complaint pursuant to CR 12(2)(f). The trial court ruled, without opinion, that this allegation fails to state a cause of action under the Consumer Protection Act, KRS 367.110 et seq. For the following reasons, we affirm in part, reverse in part, and remand for additional proceedings.
[14]	The allegations in this case are strikingly similar to those advanced in Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17 (2nd Cir. 1994), which the trial court there summarized as follows:
[15]	"The complaints allege that NYTel [New York Telephone Company] and NETel [New England Telephone Company] gave regulatory agencies and consumers misleading financial information to support the inflated rates they requested. More particularly, plaintiffs allege a scheme in which certain unregulated subsidiaries of NYNEX [the corporate entities collectively along with subsidiaries and individual directors and officers] sold products and services to NYTel and NETel at inflated prices. NYTel and NETel then used those prices to justify inflated rates, resulting in high profits to the NYNEX corporate family, which profited by extracting higher rates from ratepayers, but did not suffer from the higher "cost" of products and services because these extra costs inured to the benefit of members of the corporate family. The net effect, the complaints allege, was that the ratepayers and the regulatory agencies were misled into believing that certain higher rates were justifiable, and the NYNEX corporate family was able to enjoy inflated profits as a result of its misrepresentations." Wegoland Ltd. v. NYNEX Corp., supra, 27 F.3d at 18 (internal quotation marks omitted).
[16]	In this case, similarly, the Attorney General alleges that the 1993 merger of Anthem Insurance Companies, Inc., an Indiana-domiciled mutual insurance company, with Southeastern Mutual Insurance Company of Kentucky gave rise to a corporate family, Anthem, in part regulated, in part unregulated, like the NYNEX family in Wegoland. Much as was alleged in Wegoland, the Attorney General alleges that unregulated portions of the Anthem family charged portions regulated in Kentucky excessive fees for administrative and other services and that those excessive fees were then fraudulently passed on to Kentucky rate-payers. The excessive fees served not only to enhance the corporate family's overall profits, according to the Attorney General, but served as well to bolster the value of the unregulated portion of the family's stock, stock held primarily by Anthem. The Attorney General charges that Anthem obtained approval for the 1993 merger by misrepresenting the merger's purposes and potential benefits. The merger either advanced or made possible the scheme because, by giving rise to the corporate family, it provided the framework within which the scheme could operate. The Attorney General further charges that the insurance companies then carried out the scheme by basing fraudulent rate applications on the overstated intra-family service charges.
[17]	The trial court's order does not include the court's reasoning, but the appellees offer two (2) rationales for affirming the dismissal of the Attorney General's complaint. The so called "filed rate doctrine," they assert, renders any of their actions approved by the Insurance Commission (as were the merger and allegedly excessive rates) immune from suit under the Consumer Protection Act. Moreover, they insist, the dealings complained of by the Attorney General, the merger negotiations for example, are not cognizable under the Consumer Protection Act because they did not occur "in trade or commerce."
[18]	As the parties acknowledge, a dismissal pursuant to CR 12.02(f) for failure to state a claim is proper only if "it appears the pleading party would not be entitled to relief under any set of facts which could be proved in support of his claim." Pari-Mutuel Clerks' Union v. Ky. Jockey Club, Ky., 551 S.W.2d 801, 803 (1977) (citation omitted). In reviewing such a dismissal, this Court must presume that all the factual allegations in the complaint are true and must draw any reasonable inference in favor of the non-movant. "The issue is not whether a plaintiff will

...