Hughley v. Rocky Mountain Health Maintenance Organization, Inc.

• Decision Date: 23 February 1995
• Docket Number: No. 94CA0344,94CA0344
• Citation: 910 P.2d 30
• Parties: Janet HUGHLEY, Plaintiff-Appellee, v. ROCKY MOUNTAIN HEALTH MAINTENANCE ORGANIZATION, INCORPORATED, a Colorado nonprofit corporation, Defendant-Appellant. . I
• Court: Colorado Court of Appeals

Page 30

910 P.2d 30

Janet HUGHLEY, Plaintiff-Appellee, v. ROCKY MOUNTAIN HEALTH MAINTENANCE ORGANIZATION INCORPORATED, a Colorado nonprofit corporation Defendant-Appellant.

No. 94CA0344.

Colorado Court of Appeals Div. I.

Feb. 23, 1995.

As Modified on Denial of Rehearing

Aug. 31, 1995.

Certiorari Granted Feb. 12, 1996.

Wherry & Wherry, P.C., Burton I. Wherry, Edward P. Carlstead, Denver, for plaintiff-appellee.

Hoskin, Farina, Aldrich & Kampf, P.C., Gregory K. Hoskin, John T. Howe, Grand Junction, for defendant-appellant.

Opinion by Judge CRISWELL.

In this medical benefits coverage dispute, defendant, Rocky Mountain Health Maintenance Organization, Inc., a Colorado nonprofit corporation (RMHMO), appeals the Denver District Court's issuance of its preliminary injunction directing it to pay some $133,000 for chemotherapy treatment of plaintiff, Janet Hughley, which defendant considered not to be a benefit under the contract providing health care benefits to plaintiff. In entering such injunction and in refusing to dismiss plaintiff's complaint or to stay proceedings, the Denver District Court concluded that the arbitration provisions contained within the pertinent health care contract did not require plaintiff to submit her claim to arbitration. After the issuance of this injunction, venue in the cause was transferred to the Mesa County District Court. We disagree with the Denver District Court's interpretation of the governing contract provision. Hence, we vacate its prior order and remand the cause to the Mesa County District Court with directions to stay proceedings pending completion of the required arbitration proceedings.

The agreement between plaintiff and defendant, pursuant to which defendant agreed to provide medical benefits to plaintiff, contained the following pertinent provisions:

12. COMPLAINT PROCEDURE.

A. Governing Clause. Any disagreement or dispute regarding the denial of Benefits or other services to a Member ... shall be governed by the terms of this paragraph 12.

B. Filing of Complaint. Any Member who seeks to protest the denial of Benefits under this Contract ... shall ... give notice to RMHMO of such complaint. In the event such notice is not given within [the required] six-month period, the complaint shall conclusively be deemed waived. RMHMO shall have [60 days within] which to attempt an informal resolution to the satisfaction of the Member. In the event the complaint cannot be informally resolved, RMHMO or the Member may refer the complaint to the Grievance Committee for review....

C. Committee Review. Complaints concerning the denial of Benefits ... shall be reviewed by the Grievance Committee.... Following [an evidentiary] hearing, the Grievance Committee shall make its findings and issue a written decision. Unless appealed pursuant to subparagraph 12.D, such decision shall be final and binding on the parties hereto.

D. Arbitration. Either the Member or RMHMO shall have the right to appeal the decision of the Grievance Committee by submitting the same to binding arbitration under the Commercial Arbitration Rules then in effect adopted and applied with the American Arbitration Association, provided the appeal is initiated within thirty (30) days of the committee's ruling.... (emphasis supplied)

Plaintiff has breast cancer and her physicians recommended a medical treatment known as "high dose chemotherapy with autologous hematopoietic stem cell rescue" (HDC). Defendant denied that their agreement provided coverage for this procedure.

As a consequence of defendant's denial of coverage, plaintiff initially invoked the informal resolution procedures called for by paragraph 12.B. quoted above. When that was unsuccessful, she submitted the dispute to the grievance committee called for by paragraph 12.C. That committee determined that the HDC procedure was not covered by the benefits agreement. Plaintiff then filed a complaint in district court, asserting various tort and contract claims against defendant for denial of coverage, without requesting arbitration under paragraph 12.D. She also sought and obtained a preliminary injunction directing defendant to pay for the procedure.

Defendant moved to dismiss plaintiff's complaint or to stay the trial court proceedings, based on the arbitration clause in its policy. However, the trial court denied defendant's motion, concluding that the agreement's arbitration provisions did not unambiguously state that arbitration was mandatory.

I.

Defendant first contends that the trial court erred in finding the arbitration clause was ambiguous. We agree.

The public policy of this state encourages the resolution of disputes through arbitration. A valid and enforceable arbitration provision divests the court of jurisdiction over all disputes that are to be arbitrated, pending the conclusion of arbitration. Mountain Plains Constructors, Inc. v. Torrez, 785 P.2d 928 (Colo.1990).

Upon application for arbitration by a party, a court may refuse to compel arbitration only upon a showing that there is no agreement to arbitrate or that the issue sought to be arbitrated is clearly beyond the scope of the arbitration provision. Section 13-22-204(1), C.R.S. (1987 Repl.Vol. 6A); Eychner v. Van Vleet, 870 P.2d 486 (Colo.App.1993).

If the court decides that a dispute is subject to the arbitration provision, it is for the arbitrator, not for the court, to determine the merits of the parties' dispute. Jefferson County School District No. R-1 v. Shorey, 826 P.2d 830 (Colo.1992).

Arbitration is a matter of contract, and a party cannot be compelled to submit to arbitration any dispute which he or she has not agreed to submit. To determine the scope of an arbitration clause, a court must examine the wording of the provision and the terms of the contract in which the provision is included. A court must strive to give effect to the mutual intent of the parties and must consider the subject matter and purposes to be served by the agreement. Eychner v. Van Vleet, supra.

Here, the trial court did not indicate the basis for its conclusion that the arbitration provision contained in the parties' agreement was ambiguous. However, that conclusion appears to have been based on two phrases: First, the language in paragraph 12.B. that the insured "may" submit his or her dispute to the grievance committee and, second, the language in paragraph 12.D. that the insured "has the right" to appeal the decision of the grievance committee to binding arbitration.

Plaintiff argues that these phrases indicate that arbitration is permissive and that they do not foreclose the pursuit of litigation, rather than arbitration. We disagree.

First, the use of the word "may" here does not reveal any intent that parties are free to avoid the contract procedure in favor of judicial suit. The supreme court has interpreted the word "may" in an agreement governing grievance procedures as "simply a general grant of power" to resolve disputes through the contract procedure. Albertson's, Inc. v. Rhoads, 196 Colo. 159, 161, 582 P.2d 1049, 1050 (1978); Pueblo v. Pueblo Ass'n of Government Employees, 839 P.2d 503 (Colo.App.1992) (even if agreement uses word "may," arbitration provided for in that agreement is the exclusive remedy for any claimed violation); Block 175 Corp. v. Fairmont Hotel Management Co., 648 F.Supp. 450 (D.Colo.1986) (use of word "may" in arbitration clause merely...