Davenport v. Blue Cross of California

• Decision Date: 30 January 1997
• Docket Number: No. C022965,C022965
• Citation: 52 Cal.App.4th 435,60 Cal.Rptr.2d 641
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 752, 97 Daily Journal D.A.R. 1069 Dorothy H. DAVENPORT, Plaintiff and Respondent, v. BLUE CROSS OF CALIFORNIA, Defendant and Appellant.

Page 641

60 Cal.Rptr.2d 641

52 Cal.App.4th 435, 97 Cal. Daily Op. Serv. 752,

97 Daily Journal D.A.R. 1069

Dorothy H. DAVENPORT, Plaintiff and Respondent, v. BLUE CROSS OF CALIFORNIA, Defendant and Appellant.

No. C022965.

Court of Appeal, Third District, California.

Jan. 30, 1997.

James H. Fleming, San Francisco, and Robert R. Pohls, Portland, OR, for Defendant and Appellant.

Leibovic & Tysch and Gary L. Tysch, Sherman Oaks, for Plaintiff and Respondent.

SIMS, Acting Presiding Justice.

In this action alleging tortious breach of a health insurance contract, defendant Blue Cross of California (Blue Cross) appeals from an order granting a preliminary injunction in favor of plaintiff Dorothy H. Davenport, enjoining Blue Cross from refusing coverage for medical treatment for ovarian cancer pending arbitration. Blue Cross contends, among other things, that the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) precludes the granting of the preliminary injunction because plaintiff failed to justify the injunction as necessary to preserve the effectiveness of arbitration. We shall conclude that, under both the FAA and California law, the trial court may grant provisional relief pending contractual arbitration only where it is necessary to preserve the effectiveness of arbitration--a test which plaintiff failed to meet in this case. We shall therefore reverse.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff, a special education teacher in Calaveras County, is covered for major medical and health expenses through a plan provided by the Tuolomne Joint Powers Authority (JPA). The JPA plan is entirely self-funded. Blue Cross is compensated for administering and servicing the JPA plan. The JPA is solely responsible for funding the payment of claims under the JPA plan. Blue Cross has no financial obligation under the Plan and passes through 100 percent of the cost of any claims to the JPA.

In September 1994, plaintiff was diagnosed with ovarian cancer. Surgery was performed, and plaintiff was placed on a regimen of six rounds of standard chemotherapy. A "second look" surgery in May 1995 revealed that, although the initial regimen of chemotherapy was 99 percent effective, there was evidence of some remaining cancer. A second regimen of six rounds of chemotherapy was then administered. Plaintiff's cancer responded positively to this second regimen of chemotherapy, which was completed in November 1995. Her primary oncologist thereafter found no demonstrable evidence of disease.

Plaintiff consulted with doctors who recommended treatment combining high dose chemotherapy with autologous bone marrow transplant (HDCT with ABMT), to be provided at the Stanford University Medical Center, the goal of which was to prevent recurrence of the cancer. In HDCT with ABMT, bone marrow or peripheral stem cells are drawn from the patient and stored. HDCT is then administered, in a procedure designed to destroy the cancer cells. An unavoidable side effect of HDCT is destruction of the patient's bone marrow and suppression of the autoimmune system and clotting abilities. In an attempt to combat the side effects, the previously drawn bone marrow or peripheral cells are reinfused into the patient, with the goal of repopulating the patient's bone marrow. Up to five percent of the patients who have HDCT with ABMT die from the treatment itself, a percentage which one doctor characterized as low.

Plaintiff submitted a request to Blue Cross to obtain pre-certification under the JPA Plan for HDCT with ABMT. Blue Cross referred the request for review to Dr. George Au, an oncologist and medical consultant to Blue Cross. After review, Dr. Au concluded HDCT with ABMT, as a treatment for plaintiff's epithelial cell ovarian cancer, would be "investigational" within the meaning of the contract. The JPA Plan excludes coverage for "investigative procedures," which are defined under the policy as "those [procedures] that have progressed to limited use on humans, but which are not widely accepted as proven and effective procedures within the organized medical community." Dr. Au's conclusion was consistent with a May 1995 determination by Blue Cross's Medical Advisory Panel of 16 physicians, that HDCT with ABMT was generally accepted in the medical community as safe and effective for certain medical conditions, but not for the type of cancer (epithelial cell ovarian cancer) which afflicted plaintiff.

On December 5, 1995, Blue Cross informed plaintiff in writing that her request for pre-certification for HDCT with ABMT treatment for her ovarian cancer was denied. Blue Cross further informed plaintiff: "If you do not accept the decision, you must submit your dispute to binding arbitration according to your contract. You must ask for arbitration in writing."

The JPA Plan's arbitration clause provides:

"BINDING ARBITRATION"

"Any dispute between the Member and Blue Cross regarding the decision of Blue Cross must be submitted to binding arbitration if the amount in dispute exceeds the jurisdictional limits of the small claims court. This arbitration is begun by the Member making written demand on Blue Cross.

"This arbitration will be held before a designated neutral arbitrator appointed by the county medical association of the county in which the services were provided. If the county medical association declines or is unable to appoint an arbitrator, the arbitration will be conducted according to the rules of the American Arbitration Association.

"Any dispute regarding a claim for damages within the jurisdictional limits of the small claims court will be resolved in such court.

"THE ARBITRATION FINDINGS WILL BE FINAL AND BINDING."

Plaintiff did not take any action to pursue arbitration.

Instead, on December 28, 1995, plaintiff filed a complaint in Amador County Superior Court. The complaint was captioned: "TORTIOUS BREACH OF INSURANCE CONTRACT (Compensatory and Punitive Damages) [p] 1. Declaratory Relief [p] 2. Injunctive Relief [p] 3. Breach of Duty of Good Faith and Fair Dealing [p] 4. Breach of Contract [p] 5. Negligence." The matter was assigned to the court's fast-track calendar.

On January 17, 1996, plaintiff served the complaint on Blue Cross and applied to the trial court for a preliminary injunction pursuant to Code of Civil Procedure section 525 et seq. Plaintiff sought an injunction enjoining Blue Cross from denying coverage for the treatment, which carried an estimated cost of $150,000. Plaintiff submitted declarations Blue Cross filed an opposition to the application for a preliminary injunction and a petition to compel arbitration. Blue Cross argued plaintiff had failed to demand arbitration, as required by the health insurance contract. Blue Cross argued this case is governed by the Federal Arbitration Act (FAA), which preempts any conflicting state laws. Blue Cross also argued among other things that plaintiff had unconscionably delayed so as to present an appearance of urgency and had failed to show she had been unable to obtain a timely resolution through arbitration. Blue Cross also attacked plaintiff's medical evidence and declaration of indigency (issues we need not address in this appeal).

                from doctors urging the treatment. 1  Dr. Wendy Hu of Stanford stated in a declaration that plaintiff had a stage of cancer (stage IIIC) with a "relatively bleak prognosis," and she was "at extremely high-risk for recurrence."   Dr. Hu attested that without HDCT with ABMT, plaintiff's life expectancy over five years would be less than 20 percent.  Dr. Hu said:  "HDCT with ABMT offers DOROTHY DAVENPORT a greater possibility that her disease will respond to treatment and offers a small but hopeful chance that her cancer will be cured."   Dr. Hu's declaration said:  "The statistical odds are that within an extremely short time (several months), DOROTHY DAVENPORT will relapse....  [p] ... Current evidence demonstrates that administration of HDCT with ABMT now can lead to a longer period of disease free survival.  However, the window of opportunity that now exists for HDCT with ABMT can close if the tumor is given sufficient time to regrow." 2  Plaintiff filed a declaration attesting:  "I am unable to fund the costs of HDCT with ABMT.  Although I have some minimal savings, the amount is entirely inadequate to fund the cost of the potentially lifesaving procedure I require.  I have no assets, which could be used to fund the treatment."   Based on her assertions of indigency, plaintiff asked that she not be required to post bond for the preliminary injunction.  (Code Civ. Proc., §§ 529, 995.240.)
                

Plaintiff did not oppose Blue Cross's petition to compel arbitration but argued in her reply papers on the preliminary injunction (filed January 31, 1996) that she "cannot afford the time that would be consumed by an arbitration ..., which would entail selection of an arbitrator, scheduling of an arbitration, and the enforcement of an arbitration award." She argued: "Because the process of arbitration is a lengthy one and the ability to obtain immediate, emergent and equitable relief is unlikely and difficult, plaintiff has no resort but to request that this Court issue the injunction so that the position of the parties will remain undisturbed pending the finality of the arbitration." Plaintiff offered no explanation as to why she did not even begin the arbitration process at any time after the December 5, 1995, denial of coverage by Blue Cross.

On February 1, 1996, the trial court heard the application for injunction and petition to compel arbitration. On the same day, the "Pending the arbitration of this matter, this court orders that [Blue Cross] is prohibited from denying, refusing, excluding, limiting, or discontinuing coverage and benefits for performance of high-dose chemotherapy with autologous bone marrow rescue/peripheral stem cell reinfusion upon plaintiff DOROTHY DAVENPORT.

trial court issued a preliminary injunction and order compelling...