Lanham v. Blue Cross and Blue Shield

Decision Date06 May 2002
Docket NumberNo. 25458.,25458.
CourtSouth Carolina Supreme Court
PartiesMelvin E. LANHAM, Respondent, v. BLUE CROSS AND BLUE SHIELD OF SOUTH CAROLINA, INC., Petitioner.

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 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.
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 Tel. and Tel. Co., 306 S.C. 101, 410 S.E.2d 537 (1991). Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. Under Rule 56(c), the party seeking summary judgment has the initial burden of demonstrating the absence of a genuine issue of material fact. Baughman, 306 S.C. at 115,410 S.E.2d at 545. With respect to an issue upon which the nonmoving party has the burden of proof, this initial responsibility may be discharged by pointing out to the trial court that there is an absence of evidence to support the nonmoving party's case. Id. In determining whether any triable issues of fact exist, the evidence and all inferences which can be reasonably drawn therefrom must be viewed in the light most favorable to the nonmoving party. Summer v. Carpenter, 328 S.C. 36, 492 S.E.2d 55 (1997). Summary judgment is not appropriate where further inquiry into the facts of the case is desirable to clarify the application of the law. Brockbank v. Best Capital Corp., 341 S.C. 372, 534 S.E.2d 688 (2000). Summary judgment should not be granted even when there is no dispute as to evidentiary facts if there is disagreement concerning the conclusion to be drawn from those facts. Moriarty v. Garden Sanctuary Church of God, 341 S.C. 320, 534 S.E.2d 672 (2000). On appeal from an order granting summary judgment, the appellate court will review all ambiguities, conclusions, and inferences arising in and from the evidence in a light most favorable to the non-moving party below. Williams v. Chesterfield Lumber Co., 267 S.C. 607, 230 S.E.2d 447 (1976).

1. MOTION TO COMPEL DISCOVERY

Blue Cross moved for summary judgment on January 21, 1997. In support of its motion, it filed the affidavit of Sandra Laney, manager of underwriting for individual policies, to the effect that "[h]ad Blue Cross and Blue Shield ... known of the liver condition, coverage would not have been offered. This condition and the Plaintiffs deceitful statement materially affects the acceptance of the risk." In response to the motion for summary judgment, Lanham filed a notice of taking the deposition of Blue Cross, and requests for production. In these motions, Lanham specifically advised Blue Cross that he was seeking:

Defendant's underwriting standards, policies and procedures regarding the health disorders which the defendant contends would have precluded the issuance of plaintiffs health insurance policy.
All policies of the defendant regarding the part played by an applicant's medical history in the decision to issue a family or individual health insurance policy.
All policies of the defendant concerning the investigation and review of the medical records or an applicant for health insurance.
All underwriting standards, policies, and procedures of the defendant concerning health disorders which the defendant contends would have precluded the issuance of plaintiffs health insurance policy.

Blue Cross responded with a motion for protective order or to quash, contending its underwriting standards, policies, and procedures were trade secrets. Lanham moved to compel Blue Cross's deposition and production of documents. The summary judgment hearing was held on March 24, 1998. The court declined to rule on plaintiffs motion to compel and granted Blue Cross summary judgment from the bench.

Summary judgment is not appropriate where further inquiry into the facts of the case is desirable to clarify the application of the law. Brockbank v. Best Capital Corp., supra.

Summary judgment is a drastic remedy, which should be cautiously invoked so that no person will be improperly deprived of a trial of the disputed factual issues. Baughman v. American Tel. & Tel. Co., supra. This means, among other things, that summary judgment must not be granted until the...

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