Love v. Blue Cross and Blue Shield of Georgia

• Decision Date: 20 June 2006
• Docket Number: No. 05-C-549.,05-C-549.
• Citation: 439 F.Supp.2d 891
• Parties: Robert LOVE, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF GEORGIA, INC., Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

439 F.Supp.2d 891

Robert LOVE, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF GEORGIA, INC., Defendant.

No. 05-C-549.

United States District Court, E.D. Wisconsin.

June 20, 2006.

Michael J. Luebke, Gingras Cates & Luebke SC, Madison, WI, for Plaintiff.

Aaron H. Kastens, Michael Best & Friedrich LLP, Waukesha, WI, for Defendant.

Paul E. Benson, Michael Best & Friedrich LLP, Milwaukee, WI.

DECISION AND ORDER

GRIESBACH, District Judge.

Defendant Blue Cross and Blue Shield of Georgia has moved for partial summary judgment, presenting a choice of law question it deems of crucial importance. Specifically, it contends that this dispute— which involves the plaintiff's claim of bad faith—should be governed by Georgia law. In response, the plaintiff argues that Wisconsin law should apply. The result impacts the amount of damages potentially available should the plaintiff be successful: under Wisconsin law the plaintiff is entitled to all damages proximately caused by the bad faith, whereas under Georgia law the amount is capped at the amount of benefits that should have been paid plus the greater of $5,000 or 50% of the amount wrongly withheld.¹ The relevant facts are set forth below.

I. Background

In 2002, the plaintiffs wife, Joan Nicholls (now deceased), purchased a health insurance policy from Blue Cross and Blue Shield of Georgia. At the time, she was a permanent resident of Georgia. In February 2003, she was diagnosed with cancer and began receiving treatment in Georgia. In June 2003, she moved to Wisconsin and her treatment continued until her death in September 2004. Soon after, the plaintiff filed this lawsuit, alleging that Blue Cross's handling of certain bills Nicholls submitted for the treatment his wife received in Wisconsin was in bad faith.

II. Analysis

As noted initially, the only question presently before me is the choice between Wisconsin and Georgia law. "Federal courts sitting in diversity apply the choice-of-law rules of the forum state to determine the applicable substantive law." Hine v. Lime-O-Sol Co., 382 F.3d 716, 719 (7th Cir.2004). In Wisconsin, courts use two tests to determine which state's law should apply.² First, the court "must judge `whether the contacts of one state to the facts of the case are so obviously limited and minimal that application of that state's law constitutes officious intermeddling.' " Beloit Liquidating Trust v. Grade, 2004 WI 39, 270 Wis.2d 356, 677 N.W.2d 298, 307 (2004) (quoting American Standard Ins. Co. v. Cleveland, 124 Wis.2d 258, 369 N.W.2d 168 (1985)). By its terms, this is not a pure contacts-balancing test, but an approach that says merely minuscule contacts with another state will not justify the application of that state's law. In other words, it only constitutes "officious intermeddling" if the other state is truly of remote connection to the issues in the case.³ The second approach involves consideration of the following five factors: (1) predictability of results; (2) maintenance of interstate and international order; (3) simplification of the judicial task; (4) advancement of the forum's governmental interests; and (5) application of the better rule of law. Id.

Applying the threshold test, I am unable to conclude that it would be "officious intermeddling" to apply Georgia law to this case. Georgia's relationship to the plaintiff and the insured was not a matter of mere happenstance; instead, Nicholls applied for and was issued an insurance policy from Blue Cross and Blue Shield of Georgia. She lived in the state at the time, bought a policy that said Georgia law would apply, and could only expect that the state's insurance law might have some impact on any claim she might have against her insurer. In contrast, in Beloit Liquidating Trust, the Wisconsin Supreme Court noted that Delaware was only a potential source of state law because the corporation had been incorporated there. Apart from that distant connection to Delaware, there was no legitimate reason to apply Delaware law, especially considering the company had operated in Wisconsin for 140 years. Thus, the court concluded that the company's contacts with Delaware were "isolated." Id. Because Nicholls' contacts with Georgia were not so isolated, I cannot conclude that the application of Georgia law would result in officious intermeddling.

Turning to the second approach, I must consider the five factors Wisconsin courts apply. In contrast to Beloit Liquidating Trust, however, where the court's discussion of the five factors was colored by its earlier conclusion that Delaware had only a minimal connection to the facts, I begin with something of a blank slate because both Wisconsin and Georgia have significant and meaningful relationships with the insured and the insurance policy in question.

The first factor involves predictability of results. The plaintiff argues that Blue Cross is a corporation placed on notice by Wis. Stat. § 180.1704 that if it chooses to transact business in Wisconsin it will be subject to Wisconsin law. That statute, part of Wisconsin's corporate law, states that "this chapter applies to all foreign corporations transacting business in this state on or after January 1, 1991." Wis. Stat. § 180.1704. In Beloit Liquidating Trust, the court found that the statute meant that "Wisconsin law should be applied in determining whether the directors or offices breached their fiduciary duty to Beloit Corporation's creditors." 677 N.W.2d at 307. Yet the fact that Wisconsin's law of corporations should be applied to a foreign corporation on a matter of corporate law (breach of fiduciary duty) is far different from concluding that all of Wisconsin's laws automatically govern interstate disputes. Indeed, if that were true there would be no need for a choice-of-law analysis whenever a foreign corporation was involved. There is thus no basis for finding that § 180.1704 would apply to a bad faith insurance dispute like this one.

Moreover, the statute only applies to corporations "transacting business in Wisconsin," and there is little reason to conclude that Blue Cross and Blue Shield of Georgia transacted business here merely because Nicholls moved to the state and received treatment. Thus, it is not as though the defendant willingly availed itself of Wisconsin business and now seeks the protections of its home state law. Accordingly, I find little basis to conclude that application of Wis. Stat. § 180.1704 is warranted under these facts.

It is, in fact, doubtful that the result would become more predictable if the substantive law of insurance were dependent simply on where an insured chose to move. Of course no one expects ill insureds to move to a new state based on the damages the state offers in bad faith lawsuits against insurers, and the defendant does not suggest any hint of forum shopping. Yet leaving the applicable law so openended and contingent promotes confusion, not predictability, in the law. Thus, I conclude that predictability of results is fostered when a state's substantive law applies to a policy issued in that state by a state corporation to a resident of that state, especially when, as here, the policy in question explicitly states that Georgia law should apply.⁴

The Wisconsin Supreme Court would seem to agree with this approach. In a case involving a car accident in Canada, the court set forth its analysis as follows:

The first factor, predictability of results, deals with the parties' expectations. The question here is what legal consequence of the Manitoba accident comports with the predictions or expectations of the parties? The present case involves a dispute between Wisconsin residents and a Wisconsin insurance company about a policy issued in Wisconsin. It is reasonable to assume that the parties involved in the insurance transaction expected that Wisconsin law would be applicable to claims under the policy. Applying Wisconsin law to the type of damages recoverable in the present case promotes uniformity of interpretation of an insurance policy regardless of the jurisdiction in which the injury occurs. The parties will know at the time a policy is issued what benefits are available.

State Farm Mut. Auto. Ins. Co. v. Gillette, 2002 WI 31, 251 Wis.2d 561, 641 N.W.2d 662, 676 (2002) (italics added). Although the present dispute is one step removed from Gillette—because the deceased became a Wisconsin resident after the policy was issued—the same considerations still apply. In each case, the parties will know from the outset which state's law will govern their insurance claims. Although it is fanciful to believe the typical insured considers such things when purchasing insurance, insurance companies certainly may factor state law considerations into their policies and into the premiums they charge: a policy issued in Georgia to Georgia residents might well cost less because of the damage caps the state legislature has put in place. Moreover, in such circumstances plaintiffs are not without protection from arbitrariness: in the event the state of contracting was truly of limited relation to the insureds, a Wisconsin court might decline, citing "officious intermeddling," to apply that state's law. Other aspects of the five-part test may also apply. On balance, however, the first factor favors application of the law of the state in which the insured and insurer agreed on the policy.⁵

The second factor relates to the maintenance of international and interstate order. "This factor requires that a jurisdiction which is minimally concerned defer to a jurisdiction that is substantially concerned." Drinkwater, 714 N.W.2d at 577. As noted earlier, neither jurisdiction is "minimally concerned" here, so the factor is a wash. Application of one state's law over another's would not upset interstate order, and there is no indication of forum shopping. See id.

The third factor involves the simplification of the judicial task. Wisconsin courts have noted that...