Diaz ex rel. Situated v. State

• Decision Date: 17 September 2013
• Docket Number: No. DA 12–0432.,DA 12–0432.
• Citation: 308 P.3d 38,371 Mont. 214
• Parties: Jeanette DIAZ and Leah Hoffmann–Bernhardt, Individually and on Behalf of Others Similarly Situated, Plaintiffs/Appellants, v. STATE of Montana, Defendant/Appellee.
• Court: Montana Supreme Court

371 Mont. 214

308 P.3d 38

Jeanette DIAZ and Leah Hoffmann–Bernhardt, Individually and on Behalf of Others Similarly Situated, Plaintiffs/Appellants,

v.STATE of Montana, Defendant/Appellee.

No. DA 12–0432.

Supreme Court of Montana.

Submitted on Briefs May 28, 2013.

Decided Aug. 6, 2013.

Rehearing Denied Sept. 17, 2013.

For Appellants: James G. Hunt; Jonathan McDonald; Dix, Hunt & McDonald, Helena, MT, Erik B. Thueson; Scott Peterson; Thueson Law Office; Helena, MT.

For Appellee: Robert C. Lukes; Elena J. Zlatnik; Garlington, Lohn & Robinson, PLLP; Missoula, MT.

Justice BETH BAKER delivered the Opinion of the Court.

[371 Mont. 215]¶ 1 Class representatives Jeanette Diaz and Leah Hoffmann–Bernhardt appeal a class certification order entered by the First Judicial District Court, Lewis and Clark County, arguing that the court imposed arbitrary and unreasonable limits when defining the class. The class complaint alleged that the State, as well as third-party administrators of the State group health insurance plan, violated the insureds' statutory made-whole rights by exercising their subrogation interests without first conducting made-whole analyses of the insureds. The sole issue on appeal is whether the District Court abused its discretion by defining the class to include only those insureds who had timely filed claims for covered benefits, thus excluding from the class all “non-filing” insureds.

¶ 2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 This appeal from the District Court's certification order follows our remand in Diaz v. Blue Cross & Blue Shield of Mont., Inc. (Diaz I), 2011 MT 322, 363 Mont. 151, 267 P.3d 756. We summarize the relevant facts as established through the prior proceedings.

¶ 4 Defendants Blue Cross and Blue Shield of Montana (BCBS) and New West Health Services (New West) administered Montana's self-funded employee healthcare benefit plan. The State group insurance plan was created by statute in order to: “provide state employees with adequate group hospitalization, health, medical, disability, life, and other related group benefits in an efficient manner and at an affordable cost.” Section 2–18–808, MCA; Diaz I, ¶ 3.

¶ 5 Diaz and Hoffman–Bernhardt were insured through the State group insurance plan. In separate incidents, Diaz and Hoffman–Bernhardt sustained injuries through automobile collisions caused by insured tortfeasors, whose insurers accepted liability. The third-party insurers paid Diaz's and Hoffman–Bernhardt's medical providers. Diaz I, ¶¶ 4–5.

¶ 6 On both occasions, the State and third-party administrators of the State insurance plan—BCBS and New West—allegedly exercised their rights of subrogation without first confirming that the insured under the State plan had been made whole.¹ The plaintiffs stated that BCBS refused to pay Diaz for medical expenses that already had been paid to her medical provider by the tortfeasor's insurer, and that New West refused to pay Hoffman–Bernhardt the reimbursement it had received from her medical providers following payment by the tortfeasor's insurer to the medical providers. Diaz I, ¶¶ 4–5.

¶ 7 On October 23, 2008, Diaz and Hoffmann–Bernhardt filed a class complaint alleging that the State, BCBS and New West violated the insureds' statutory made-whole rights by failing to conduct made-whole analyses of the insureds before exercising their subrogation interests. The prospective class included individuals whose benefits had been reduced under the State plan, as well as individuals whose benefits had been reduced under policies independently issued and administered by BCBS and New West. They sought a declaratory ruling that the defendants' practices violate Montana's made-whole laws, an injunction requiring defendants to calculate and pay amounts wrongfully withheld plus interest, and an order enjoining the defendants from continuing to violate the made-whole rights of the insureds. Diaz I, ¶ 6.

¶ 8 On December 16, 2009, the District Court denied class certification on grounds that the determination whether class members had been made whole by a settlement with a tortfeasor's insurer would require individualized assessment. The court concluded that the class failed to meet the requirements of Rule 23.

¶ 9 Pursuant to M.R.App. P. 6(3)(d), the class representatives appealed to this Court, challenging the District Court's denial of certification. On October 13, 2010, we issued an order recognizing that the class representatives had raised “a threshold question” as to whether the made-whole doctrine applies to third-party administrators of self-funded employee benefit plans and other benefit plans. We remanded the case to the District Court “to determine whether the ‘made-whole’ laws codified in §§ 2–18–902 and 33–30–1102, MCA, apply to the various types of third-party administrators at issue in this litigation.” Or. at 3 (Oct. 13, 2010) (DA 09–0682). On remand, the District Court determined that the made whole laws did not apply to third-party administrators, including BCBS and New West. The case returned to this Court for further review.

¶ 10 In Diaz I, we agreed with the District Court's conclusion that the made whole laws did not apply to the third party administrators, Diaz I, ¶ 24, but reversed its decision denying class certification under Rule 23(b)(2), Diaz I, ¶¶ 48–50. We noted that the class representatives had described the prospective class as:

(1) insureds under health insurance plans and policies administered or operated by the State and the TPAs; (2) who were injured through the legal fault of persons who have legal obligations to compensate them for all damages sustained; and (3) who have not been made whole for their damages because the State and the TPAs have programmatically failed to pay benefits for their medical costs.

Diaz I, ¶ 28. We also noted that the State and third-party administrators had argued that “Diaz and Hoffmann–Bernhardt's class definition is amorphous and has evolved throughout this litigation and, therefore should be rejected.” At that time, we observed it was “clear the members of the class will be individuals insured under the State plan, just like Diaz and Hoffman–Bernhardt,” and that the proposed class was sufficiently defined pursuant to the 23(a) criteria that “any additional definition by the Court, at this time, is unnecessary.” Diaz I, ¶¶ 29–30. We then concluded that the Rule 23(a) and (b)(2) criteria had been met and remanded the case with instructions to certify the class.

¶ 11 On remand, BCBS and New West filed motions to dismiss them as defendants, based on our decision in Diaz I, which the court granted. Plaintiffs filed a Motion for Class Certification Against the State of Montana, requesting certification of the following class:

(1) Employees, Employee Dependents, Retirees and Retiree Dependents who participate or participated in the State of Montana's health insurance or health benefit plan(s), administered or operated by the State and/or the TPAs;

(2) who were injured through the legal fault of persons who have legal obligations to compensate them for all damages sustained; and

(3) who have not been made whole for their damages (or for whom the State and TPAs conducted no made whole analysis) because the State and the TPAs have programmatically failed to pay benefits for their covered medical costs.

¶ 12 On March 7, 2012, the State filed a Response Brief seeking to further define the class, as permitted by Rule 23(c)(1)(C), “so that any necessary modification to the class definition can take place before any notice is sent to the class members.” The State proposed several changes to the class definition, including two time limitations. First, the State argued that, under § 27–2–211, MCA, a two-year statute of limitations applies to claims for violations of the statutory made-whole laws and that the class therefore should be limited to those insureds who filed claims for benefits within two years of the filing of the complaint—specifically, those who filed after October 23, 2007. Second, pertinent to this appeal, the State argued that “the class should exclude any individuals who did not file their claims in a timely manner, as required by the State's Plan.” The State plan includes a claims filing deadline for receipt of benefits—“one year from the date expenses were first incurred”—and thus compensates plan members only for claims timely submitted. The State's final proposed class definition included both the two-year statute of limitations and the one-year filing deadline:

(1) members covered under health benefit plans and policies administered or operated by the State and the TPAs who timely submitted claims for covered benefits pursuant to the terms of the Plan, for health care services that took place no earlier than October 23, 2007;

(2) who were injured through the legal fault of persons who have legal obligations to compensate them for all damages sustained; and

(3) who have not been made whole for their damages because the State and the TPAs failed to pay benefits for their medical costs because of the application of the Coordination of Benefits Provision and who have not previously released such claims against the State.

(Emphasis added.)

¶ 13 The Plaintiffs argued that the court should consider modification of the class definition only “after Plaintiffs have had the opportunity to conduct discovery.” They contended that this Court had in Diaz I rejected the State's request to develop the class definition and argued that the court should not narrow the definition to incorporate the State's affirmative defenses. The Plaintiffs disagreed with both of the time limitations proposed by the State. They contended that the State's liability arose not from statute but from the State's insurance contract and thus, the eight-year statute of limitations governing contracts under § 27–2–202, MCA, should apply. Additionally, they argued that many of the non-filing insureds...