Fields v. Blue Shield of California

• Court: California Court of Appeals
• Writing for the Court: STANIFORTH; WIENER; BUTLER
• Citation: 209 Cal.Rptr. 781,163 Cal.App.3d 570
• Parties: Edward L. FIELDS, M.D., Plaintiff and Appellant, v. BLUE SHIELD OF CALIFORNIA, Defendant and Respondent. D000541. Civ. 26829.
• Decision Date: 11 January 1985

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209 Cal.Rptr. 781 163 Cal.App.3d 570 Edward L. FIELDS, M.D., Plaintiff and Appellant,
v.
BLUE SHIELD OF CALIFORNIA, Defendant and Respondent. D000541. Civ. 26829. Court of Appeal, Fourth District, Division 1, California. Jan. 11, 1985.
As Modified Feb. 8, 1985.

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[163 Cal.App.3d 574] Shernoff & Levine and Harvey R. Levine, San Diego, for plaintiff and appellant.

Hassard, Bonnington, Rogers & Huber, William B. Sturgeon and B. Thomas French, San Francisco, for defendant and respondent.

STANIFORTH, Acting Presiding Justice.

Physician-psychiatrist Edward L. Fields' (Dr. Fields) action seeks compensatory damages from group insurer Blue Shield of California (Blue Shield) by reason of Blue Shield's refusal to pay for medical treatment (psychoanalysis) received by Dr. Fields in 1978. Dr. Fields also seeks punitive damages for breach of the insurer's duty of good faith and fair dealing.

During the course of the jury trial Dr. Fields moved for a directed verdict for reimbursement of the compensatory damages, arguing that as a matter [163 Cal.App.3d 575] of law in the exclusion the 1976 plan was inoperative as to him. Dr. Fields asserted he did not receive notice of the modification as required by California law. The trial court refused to rule on the motion for directed

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verdict but rather submitted the question to the jury as an issue of fact. The jury by general verdict found for Blue Shield. Dr. Fields appeals, contending the exclusion relied upon by Blue Shield is invalid as a matter of law and as he is entitled to the benefits under the terms of the 1975 health plan unmodified. He also seeks a new trial on the issue relating to the breach of the insurer's implied covenant of good faith and fair dealing. FACTS

Commencing July 1974 both Dr. and Mrs. Fields worked at the Veterans Administration Hospital, San Diego. Mrs. Fields was a federal employee eligible for an Aetna Insurance Company (Aetna) group policy. She obtained health insurance coverage under the Federal Employees' Health Benefits Act (5 U.S.C.A., §§ 8901-8913) for herself as the employee and Dr. Fields as the dependent.

In October 1974 Dr. Fields began receiving a prescribed psychiatric treatment--psychoanalysis--from Dr. Douglas Orr who diagnosed Dr. Fields as suffering from a mental illness classified "obsessive compulsive anxiety neurosis."

A year before, Dr. Fields, a medical doctor, determined he wanted to become a psychyoanalyst. To attain such a career goal, he was required to complete 300 hours of personal psychoanalysis. This prescribed period was a training requirement requisite to becoming a psychoanalyst. Dr. Fields enrolled in San Diego Psychoanalytic Institute in September 1973 and decided to enter into psychoanalysis with Dr. Orr. ¹ This was commenced in October 1974. Dr. Fields did not begin his course work in the San Diego Analytic Institute until September 1975. He did however receive credit on the institute's training analysis requirement from the time his analysis began in 1974.

By the end of 1974 both Dr. and Mrs. Fields were employed at the Veterans Administration Hospital and were eligible for hospital and medical insurance under the Blue Cross and Blue Shield Federal Employee Program. In late December 1974, the Fields, after review of the Blue Shield group policy, switched coverage from Aetna and enrolled in the Blue Shield Service Benefit Plan for 1975. Their declared reasons were: The Blue Shield [163 Cal.App.3d 576] group policy covered 100 percent of certain hospital charges whereas Aetna covered only 80 percent. Secondly, the Aetna plan for 1975 reduced benefits available for psychoanalysis; Blue Shield did not. Premiums were deducted from Dr. Fields' paycheck for the Blue Shield policy commencing in 1975. Dr. Fields continued receiving treatment from Dr. Orr. After some delay Blue Shield paid Dr. Fields the full amount owing under the policy for the year 1975 and continued payments for Dr. Orr's services until April 1978 when it refused to pay for further psychoanalysis.

In 1976 Blue Shield expressly inquired of Dr. Orr whether the treatment with Dr. Orr was "credited towards earning a degree [or] furtherence [sic] of education." Dr. Orr's response to this question was "[T]he training requirement [300 hours] was met during the first week of January 1976." (Italics added.) This statement of the attending physician (Orr) was received by Blue Shield in June 1976 and Dr. Fields' claim was reviewed at least three times thereafter in that year. Blue Shield also reviewed the claim in 1977 and continued payment for the psychoanalysis treatment until 1978. Blue Shield again reviewed Dr. Fields' claim, then disallowed benefits for psychoanalysis in reliance upon the 1975 policy language as "clarified in the 1976 plan."

The Policy(s)

In June 1975 when Dr. Fields enrolled in the Blue Shield group health insurance plan (policy), the policy specifically provided under SUPPLEMENTAL BENEFITS (p.

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16) for psychotherapy "not exceeding a total of 2 hours per day" ² with a "lifetime maximum" benefit payable "for treatment of nervous and mental illness" of $50,000. (Italics added.) ³

There is no clear, plain or express exclusion found in the 1975 policy for psychiatric care or psychoanalysis if the treatment received was also used [163 Cal.App.3d 577] in furtherance of education or training of the subscriber. However, in the 1976 policy (p. 20) under the heading "SUPPLEMENTAL BENEFITS" this exclusion appeared: "Services not covered--... Psychoanalysis or psychotherapy, provided to a Subscriber or any family member, that is credited towards earning a degree or furtherance of the education or training of a Subscriber, regardless of diagnosis or symptoms that may be present."

A brochure was provided to the Fields each year to inform them of policy benefits. It advised them benefits may be modified or terminated. The following language appeared on page 2 of the 1975 plan brochure:

"The contract may be modified or terminated. However, no such modification or termination will affect adversely any benefit for a covered service rendered prior to such modification or termination."

Identical language appeared on page 2 of the 1976, 1977 and 1978 plan brochure. In the 1976 and 1977 plan booklets the following additional language appeared at the bottom of page 2:

"To the extent that benefits for a service or supply are eliminated or modified for a new contract year, benefits will not be provided for those services or supplies rendered after the effective date of the elimination or modification, even though benefits may have been provided for the same service or supply rendered before the effective date of the elimination or modification."

In late 1975 Dr. Fields obtained the 1976 brochure, ⁴ "Service Benefit Plan 1976." On page 31 of the 32-page 1976 benefit plan Blue Shield notified its insurers in bold type: "HOW PLAN CHANGES IN JANUARY 1976." Blue Shield warned the brochure had been reorganized and should be read in its entirety. The booklet then stated: "In addition to many clarifications, the following benefit changes are effective January 1, 1976." (Italics added.) Blue Shield then listed on this page 13 coverage changes effective January 1, 1976. Of the 13 specific changes listed, only 2 limited or lowered benefits. Furthermore, there is no significant benefit reduction found elsewhere in the entire 1976 brochure except on page 20 where the exclusion in issue was placed.

Significantly, page 31 notified the insureds of increased coverage for psychiatric care by reference to coverage for hypnosis and hypno-therapy which had not been covered under the 1975 benefit plan. However, none of the changes set forth at page 31 notified the insureds that psychoanalysis provided to the insured, regardless of symptoms or diagnosis, would

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be excluded from coverage if the insured concurrently received credit for psychoanalysis as part of an educational program.

[163 Cal.App.3d 578] Of legal significance also is the fact that pages 20-24 of the 1976 brochure, under the bold-type heading EXCLUSIONS, set forth 34 coverage exclusions from the insurance plan. There is no hint that psychoanalysis or psychotherapy received in conjunction with education or training of an insured is not covered.

However, at page 20 of the 1976 brochure under the bold type heading "SUPPLEMENTAL BENEFITS" and under the bold-type subheading "COVERED SERVICES AND SUPPLIES," Blue Shield placed at the end of a series of granted coverage in unremarkable type the following exclusion (called "Services not covered"): "Psychoanalysis or psychotherapy provided to a Subscriber or any family member, that is credited towards earning a degree of furtherance of the education or training of a Subscriber, regardless of diagnosis or symptoms that may be present." (Italics added.)

Dr. Fields testified he read the benefit booklet when first received in 1975. He read the 1976 booklet page entitled "HOW PLAN CHANGES" in January 1976. (P. 31.) Dr. Fields testified he had no actual notice of the reduction in benefits in the 1976 plan because he only read the page marked "changes," which advised him that although "clarifications" occurred throughout the plan, the entire plan should be read. Following were the specific changes represented to have been made. The deletion of benefits for psychoanalysis whether or not conjoined with furtherance of education or training of the subscriber--a significant reduction in benefits--was not listed among those specific changes or reductions of coverage. Dr. Fields further testified continued payments were made by Blue Shield from June 1976 through March 1978, after its having received Dr. Orr's response.

DISCUSSION I

It is a general rule a party is bound by contract provisions and cannot complain of unfamiliarity of the language of a contract. (Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699, 710, ...