Diaz v. Blue Cross & Blue Shield of Montana

• Decision Date: 21 December 2011
• Docket Number: No. DA 09–0682.,DA 09–0682.
• Citation: 363 Mont. 151,267 P.3d 756,2011 MT 322
• Parties: Jeannette DIAZ, Leah Hoffmann–Bernhardt, and Rachel Laudon, individually and on behalf of others similarly situated, Plaintiffs and Appellants, v. BLUE CROSS AND BLUE SHIELD OF MONTANA, New West Health Services, Montana Comprehensive Health Association, State of Montana, and John Does 1–100, Defendants and Appellees.
• Court: Montana Supreme Court

2011 MT 322

267 P.3d 756

363 Mont. 151

Jeannette DIAZ, Leah Hoffmann–Bernhardt, and Rachel Laudon, individually and on behalf of others similarly situated, Plaintiffs and Appellants,

v.BLUE CROSS AND BLUE SHIELD OF MONTANA, New West Health Services, Montana Comprehensive Health Association, State of Montana, and John Does 1–100, Defendants and Appellees.

No. DA 09–0682.

Supreme Court of Montana.

Argued Aug. 12, 2011.Submitted Aug. 30, 2011.Decided Dec. 21, 2011.

For Appellants: James G. Hunt (argued), Jonathan McDonald; Dix, Hunt & McDonald, Helena, Montana, Erik B. Thueson (argued), Thueson Law Office, Helena, Montana, Jory C. Ruggiero, J. Breting Engel; Western Justice Associates, PLLC, Bozeman, Montana.

For Appellees: Leo S. Ward, Kimberly A. Beatty, Daniel J. Auerbach (argued); Browning, Kaleczyc, Berry & Hoven; Helena, Montana (for New West Health Services) Robert C. Lukes (argued), Kevin A. Twidwell; Garlington, Lohn & Robinson, Missoula, Montana (for State of Montana) Michael F. McMahon, Stefan T. Wall (argued); McMahon Law Firm, PLLC, Helena, Montana (for Blue Cross and Blue Shield of Montana, Inc.).

Justice MICHAEL E. WHEAT delivered the Opinion of the Court.

[363 Mont. 152] ¶ 1 The First Judicial District Court, Lewis and Clark County, denied Jeannette Diaz (Diaz) and Leah Hoffmann–Bernhardt's (Hoffmann–Bernhardt) motion for class certification and concluded third-party administrators of the State of Montana's (State) employee healthcare benefit plan are not subject to made-whole laws established under §§ 2–18–901 to –902 and 33–30–1101 to –1102, MCA. Diaz and Hoffmann–Bernhardt appeal.¹

¶ 2 We affirm in part and reverse in part and remand this matter to the District Court for further proceedings consistent with this Opinion.

BACKGROUND

¶ 3 The State provides a self-funded employee healthcare benefit plan for its employees and their dependents. The State plan was established under Title 2, chapter 18, part 8, MCA, 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. Approximately 32,000 members are currently enrolled in the State plan. Funding for the State plan is derived from employee and employer contributions. Blue Cross and Blue Shield of Montana (BCBS) and New West Health Services (New West) (collectively “TPAs”) administer the State plan and receive a flat fee per member for their services. BCBS and New West also independently administer and operate their own healthcare policies for profit.

¶ 4 Diaz was injured in an automobile collision caused by an insured negligent tortfeasor. Diaz was insured for medical expenses through the State plan, which BCBS administered. The tortfeasor's insurer accepted liability and paid policy limits, which included payment of Diaz's medical expenses. Diaz alleges BCBS violated her made-whole rights when it refused to pay Diaz for her medical expenses that had already been paid by the tortfeasor's insurer.

¶ 5 Like Diaz, Hoffmann–Bernhardt was injured in an automobile collision caused by an insured negligent tortfeasor. The tortfeasor's insurer paid some of Hoffmann–Bernhardt's medical expenses directly to her medical providers. New West, the administrator of Hoffmann–Bernhardt's State plan, also paid Hoffmann–Bernhardt's medical providers for her medical expenses. Subsequently, the medical providers reimbursed New West for the medical expenses it had paid. Hoffmann–Bernhardt submitted a claim to New West, requesting that it pay her the money her medical providers reimbursed New West. Hoffmann–Bernhardt claims New West's failure to pay her the reimbursement violates her made-whole rights.

¶ 6 Diaz and Hoffmann–Bernhardt filed suit against the State, BCBS, and New West for allegedly violating their made-whole rights by failing to conduct a made-whole analysis before exercising subrogation rights. Diaz and Hoffmann–Bernhardt moved for class certification pursuant to M.R. Civ. P. 23, seeking to include in the lawsuit individuals who had their benefits reduced under the State plan, as well as individuals who had their benefits reduced under policies independently issued and administered by BCBS and New West. Diaz and Hoffmann–Bernhardt requested a declaratory ruling that the State's, BCBS's, and New West's practices violate Montana's made-whole laws; an injunction requiring the State, BCBS, and New West to calculate and pay amounts wrongfully withheld, plus interest; and an order enjoining the State, BCBS, and New West from continuing to violate the made-whole rights of their insureds. The District Court denied class certification. Diaz and Hoffmann–Bernhardt appealed to this Court.

¶ 7 In order to resolve the class certification issue, this Court remanded the matter to the District Court to determine whether Montana's made-whole laws apply to TPAs, such as BCBS and New West. The District Court concluded they did not. Diaz and Hoffmann–Bernhardt now challenge this ruling and appeal the following issues:

¶ 8 Issue One: Did the District Court err in determining the made-whole laws codified in §§ 2–18–901 to –902 and 33–30–1101 to –1102, MCA, do not apply to TPAs?

¶ 9 Issue Two: Did the District Court err in denying class certification?

STANDARDS OF REVIEW

¶ 10 This Court reviews a district court's conclusions of law for correctness. Shattuck v. Kalispell Regl. Med. Ctr., Inc., 2011 MT 229, ¶ 8, 362 Mont. 100, 261 P.3d 1021. We review a district court's ruling on a motion to certify a class for an abuse of discretion. Ferguson v. Safeco Ins. Co. of Am., 2008 MT 109, ¶ 10, 342 Mont. 380, 180 P.3d 1164. A district court commits an abuse of discretion when it “acts arbitrarily without conscientious judgment or exceeds the bounds of reason.” State v. Essig, 2009 MT 340, ¶ 14, 353 Mont. 99, 218 P.3d 838. In class certification cases, “[t]he judgment of the [district] court should be accorded the greatest respect because it is in the best position to consider the most fair and efficient procedure for conducting any given litigation.” Sieglock v. Burlington N. Santa Fe Ry. Co., 2003 MT 355, ¶ 8, 319 Mont. 8, 81 P.3d 495.

DISCUSSION

¶ 11 Issue One: Did the District Court err in determining the made-whole laws codified in §§ 2–18–901 to –902 and 33–30–1101 to –1102, MCA, do not apply to TPAs?

¶ 12 The made-whole laws applicable to this appeal are found in two separate locations in the MCA: Title 2, chapter 18, part 9, which concerns the State employee benefit plan, and Title 33, chapter 30, part 11, which addresses insurance in the context of “health service corporations.” The statutes are indistinguishable in terms of purpose, but are not identically written.

¶ 13 The District Court examined the contracts between the TPAs and the State and concluded the subrogation statutes did not apply to the TPAs because, in fulfilling their administrative duties under their respective contracts, they did not act as “insurers” or “health care corporations” within the meaning of the subrogation statutes. Specifically, the District Court determined the TPAs merely process claims for a flat fee; they pay claims with State funds; and the State, because it makes the final decision regarding claims, is the party ultimately liable to insureds. The District Court also rejected Diaz and Hoffmann–Bernhardt's argument that the TPAs are liable for violating made-whole laws under a third-party beneficiary theory. We address the subrogation statutes and third-party beneficiary argument in turn below.

Subrogation Statutes

¶ 14 “The role of the judge in statutory interpretation ‘is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted or to omit what has been inserted.’ ” Micone v. Dept. of Pub. Health & Human Servs., 2011 MT 178, ¶ 12, 361 Mont. 258, 258 P.3d 403 (quoting § 1–2–101, MCA). Where the plain language of the statute is clear and unambiguous, no further statutory interpretation is necessary. Micone, ¶ 12.

¶ 15 As an initial matter, we note Title 33 does not apply to the State employee healthcare benefit plan. Section 33–1–102(7), MCA (“This code does not apply to the state employee group insurance program established in Title 2, chapter 18, part 8....”). Accordingly, because the TPAs' administration of the State plan is at issue here, the subrogation provisions contained in § § 33 –30–1101 to –1102, MCA, are inapplicable.

¶ 16 Under § 2–18–902(4), MCA, any right of subrogation is the insurer's. Pursuant to § 2–18–901, MCA, the insurer, “to the extent necessary for reimbursement of benefits paid to ... the insured,” has a right of subrogation. (Emphasis added.) Thus, the party who pays the claim is the insurer who possesses the subrogation right. Granting a subrogation right to the party expending funds is consistent with the policy behind our subrogation statutes that “absent repayment of the insurer[,] the insured would be unjustly enriched by virtue of recovery from both the insurer and the wrongdoer, or in absence of such double recovery by the insured, the third party would go free despite his legal obligation in connection with loss.” Skauge v. Mt. Sts. Tel. & Telegraph Co., 172 Mont. 521, 524–25, 565 P.2d 628, 630 (1977).

¶ 17 The treatment of the term “insurer” in Title 2 and the factual circumstances present here, as evinced in the TPAs' contracts, clearly establish that the State is the insurer, not the TPAs. Under the BCBS contract, BCBS immediately pays claims from its personal account, but it is reimbursed by the State on a daily basis. Under the New West contract, New West draws directly from State funds to pay claims. The State is the party who provides the funds to pay claims and who ultimately accepts reimbursements from medical providers and/or does not pay medical providers who have already received payments from tortfeasors' insurance...