Lanham v. Blue Cross and Blue Shield

• Decision Date: 06 May 2002
• Docket Number: No. 25458.,25458.
• Court: South Carolina Supreme Court
• Parties: Melvin E. LANHAM, Respondent, v. BLUE CROSS AND BLUE SHIELD OF SOUTH CAROLINA, INC., Petitioner.

349 S.C. 356
563 S.E.2d 331

Melvin E. LANHAM, Respondent,
v.
BLUE CROSS AND BLUE SHIELD OF SOUTH CAROLINA, INC., Petitioner

No. 25458.

Supreme Court of South Carolina.

Heard March 5, 2002.

Decided May 6, 2002.

349 S.C. 359

Hoover C. Blanton and Ruskin C. Foster, of McCutchen, Blanton, Rhodes & Johnson, of Columbia, for petitioner

James B. Richardson, Jr. and J. Layne Birdsong, of Richardson and Birdsong, of Columbia, for respondent.

Justice WALLER:

We granted a writ of certiorari to review the Court of Appeals' opinion in Lanham v. Blue Cross and Blue Shield, 338 S.C. 343, 526 S.E.2d 253 (Ct.App.2000). We affirm as modified.

FACTS

We adopt the Court of Appeals' statement of facts, as follows:

On February 13, 1986, Melvin Lanham went to his doctor for an annual physical. The physical exam revealed Lanham's liver was swollen. Lanham subsequently received a letter indicating a blood test had revealed a slight elevation in liver function tests. In the letter, the doctor stated "I do not feel that any further treatment or investigation is indicated at this point in time. I do think that you need a periodic evaluation of your liver function studies and would suggest that we obtain a blood test on you in about six months." On September 11, 1986, Lanham returned for the follow-up blood test. The second test also indicated an elevated SGOT and SGPT level. Other values associated with liver function were normal. The doctor advised him to follow up with periodic blood tests.

On April 26, 1988, Lanham returned for another annual physical. The doctor's report from that visit states: "The patient was followed by Dr. Harold Miller for a number of years and has been told in the past that he has had a slight elevation of his hepatic enzymes. He underwent extensive studies in reference to this. The exact studies are unknown by the patient whether he had a hepatitis profile, etc." After more blood tests, Lanham received a letter from his

349 S.C. 360

doctor stating: "Your liver function studies have markedly improved since last year and almost are back to completely normal. Your kidney function is normal." The doctor told Lanham he "did not feel that he needed to have any further studies or tests done at that point in time."

On April 29, 1991, Lanham applied for health insurance coverage from Blue Cross. As part of his application, he completed an extensive questionnaire regarding his past medical history. On the questionnaire, Lanham checked yes beside the question regarding digestive system problems (including liver problems) and underlined gastritis, but did not provide additional information regarding his liver. On July 15, 1991, Blue Cross issued a policy to Lanham with a rider excluding coverage for a hip problem.

In November of 1991, Lanham had blood work done in connection with an unrelated application for life insurance. On November 6, 1991, he went back to his doctor and advised him that based on the lab work, he had been turned down for life insurance. The doctor repeated the blood work and discovered one of Lanham's enzymes had increased to a point requiring further investigation. He referred Lanham to a specialist and suggested Lanham consider having a liver biopsy.

In December of 1991, the specialist diagnosed Lanham with hepatitis C. In July of 1992, Blue Cross notified Lanham it had canceled his health insurance due to alleged fraudulent misrepresentations in his application. On November 4, 1992, Lanham filed suit asserting breach of contract and bad faith refusal to pay. Blue Cross answered and counterclaimed asserting it would not have issued the policy but for misrepresentations in the application. The suit was dismissed with leave to restore in 1994 and restored on March 2, 1995.

Blue Cross moved for summary judgment on January 21, 1997. On January 24, 1997, Lanham requested discovery of various items including Blue Cross's underwriting guidelines. Blue Cross moved to quash the discovery request asserting its underwriting standards are protected as trade secrets. On February 3, 1997, Lanham made a second motion to compel discovery.

349 S.C. 361

During the hearing on Blue Cross's motion for summary judgment, Blue Cross relied heavily on an unpublished opinion by this court. Blue Cross also presented an affidavit from an employee who stated the insurer would not have issued Lanham's policy had it known of Lanham's liver problems. Lanham argued he had not been allowed adequate discovery and the question of materiality was a jury issue. Lanham renewed his motion to compel discovery. Without ruling on Lanham's discovery motion, the court granted summary judgment in favor of Blue Cross.

338 S.C. at 345-346, 526 S.E.2d at 254-255. The Court of Appeals reversed the trial court's ruling, finding a genuine issue of material fact existed as to whether Lanham made a false statement with the actual intent to deceive; it also held that whether Lanham's application answers were material was a matter for the jury. Finally, the Court of Appeals remanded the issue of Lanham's motion to compel to the trial court.

ISSUES

1. Should the trial court have ruled on Lanham's motion to compel prior to ruling on Blue Cross' motion for summary judgment?

2. Did the Court of Appeals err in reversing the grant of summary judgment to Blue Cross?

STANDARD OF REVIEW

An appellate court reviews a grant of summary judgment under the same standard applied by the trial court pursuant to Rule 56, SCRCP. Baughman v. American...