Montague v. Dixie Nat'l Life Ins. Co.
| Decision Date | 08 June 2011 |
| Docket Number | C/A No.: 3:09-cv-687-JFA |
| Parties | Phyllis Gaither Montague, on behalf of herself and all others similarly situated, Plaintiffs v. Dixie National Life Insurance Company. and National Foundation Life Insurance Company, Defendants. |
| Court | U.S. District Court — District of South Carolina |
This matter is before the court on the parties' cross-motions for summary judgment with respect to the Plaintiffs' breach of contract, declaratory judgment, and injunction causes of action, as well as the Plaintiffs' motion for an award of damages. Dixie National Life Insurance Company has also moved the court for summary judgment, based on its belief that an implied novation precludes it from being liable under the policies at issue. After considering the parties' briefs, and welcoming oral argument, the court grants in part and denies in part the Plaintiffs' motion for summary judgment, it denies Dixie National Life Insurance Company's motion for summary judgment, and it awards Plaintiffs damages in an amount to be determined in a separate order.
In 1992, the named plaintiff Phyllis Gaither Montague contracted with Dixie National Life Insurance Company ("Dixie National") to purchase a supplemental cancer policy, which provided that Dixie National would pay her benefits equal to all of the"actual charges" of the covered cancer treatment she underwent.1 Dixie National paid "actual charges" based on the amount a medical provider billed for its services, usually as reflected in the medical provider's bill to its patients. This amount is usually greater than the amount actually received by medical providers as payment for their services because medical providers frequently enter into pre-negotiated agreements with insurance companies that issue primary insurance policies in which they agree to accept a discounted amount as payment-in-full for their services.
Effective December 31, 1993, National Foundation Life Insurance Company ("National Foundation") obtained from Dixie National the supplemental cancer policy it issued Ms. Montague, along with all other similar supplemental cancer policies issued by Dixie National, via an "assumption reinsurance agreement." National Foundation continued to pay Ms. Montague and the other policyholders the "actual charges" of their cancer treatment based on the amount a medical provider billed for his services until late 2001, when it changed its payment practice. Instead of continuing to base "actual charges" on the full list price of healthcare services, it began basing "actual charges" on the pre-negotiated, discounted amounts agreed to be paid by issuers of primary insurance policies. This change in payment practice galvanized policyholders to file suit against Dixie National and National Foundation, and the United States Court of Appeals for theFourth Circuit ultimately resolved the suit in favor of the policyholders in Ward v. Dixie National Life Insurance Company, 595 F.3d 164 (2010).
Because this class action suit arises out of the wake of the Ward litigation, it is helpful to briefly review the history of that litigation. As just discussed, certain policyholders of the supplemental cancer policy issued by the Defendants filed suit, claiming that the Defendants breached the terms of their supplemental cancer policies by failing to pay "actual charges" based on the amount a medical provider billed them for its services. Because the term "actual charges" was not defined in the policies and because the term, as used in the insurance policies, was patently ambiguous, the Fourth Circuit resolved the ambiguity in favor of the policyholders and directed this court to enter judgment as a matter of law with respect to their breach of contract claims. Ward v. Dixie Nat'l Life Ins. Co., 257 F. App'x 620, 625-27 (4th Cir. 2007). In response to this decision by the Fourth Circuit, and before this court could follow the Fourth Circuit's mandate, the South Carolina Legislature enacted South Carolina Code section 38-71-242 on June 4, 2008, which defined "actual charges" in the manner advocated by the Defendants, but rejected by the Fourth Circuit. The statute further stated that after its effective date, "an insurer . . . shall not pay any claim or benefits based upon an actual charge . . . in an amount in excess of the 'actual charge' . . . as defined in this section." S.C. Code § 38-71-242(C).
With this law on the books, the Defendants in Ward then moved for judgment on the pleadings, arguing that the statute prohibited them from paying "actual charges" as defined by the Fourth Circuit. This court rejected the Defendants' argument by findingthat the statute did not apply retroactively to the Ward plaintiffs' claims, and it entered judgment and an award of damages in favor of the plaintiffs. Ward v. Dixie Nat'l Life Ins. Co., No. 3:03-3239, 2008 U.S. Dist. LEXIS 119105 (D.S.C. November 12, 2008); Ward v. Dixie Nat'l Life Ins. Co., No. 3:03-3239, 2008 U.S. Dist. LEXIS 119107 (D.S.C. August 12, 2008). The Defendants again appealed this court's judgment to the Fourth Circuit Court of Appeals, and in its second opinion in the Ward litigation, the Fourth Circuit affirmed this court's finding that the newly enacted statute did not retroactively apply to the Ward case. In doing so, it held that the legislature had not overcome the presumption against statutory retroactivity and that applying the statute retroactively would raise constitutional separation of powers concerns. Ward v. Dixie Nat'l Life Ins. Co., 595 F.3d 164, 175-79 (4th Cir. 2010). The Fourth Circuit also upheld this court's award of damages, ending the case. Id. at 179-83.
Like the plaintiffs in Ward, the Plaintiffs in this suit claim that the Defendants also breached the terms of their supplemental cancer policies, which are identical to those in Ward, by failing to pay them the "actual charges" of their cancer treatment, as defined by the Fourth Circuit in Ward to be the amount billed a patient by a medical service provider. What distinguishes the class certified in this case from the one certified in Ward is the point in time that the policyholders filed a claim under their policies. Although all of the Plaintiffs in this suit entered into their contracts with the Defendants prior to the enactment of section 38-71-242, the claims at issue in this case were not filed by the Plaintiffs until after the statute's enactment on June 4, 2008, unlike the class members in Ward, who filed their claims with the Defendants prior to this date. Therefore, while thePlaintiffs ask the court to grant their motion for summary judgment based on the Fourth Circuit's holdings in Ward, the Defendants assert that S.C. Code section 38-71-242 makes the findings of Ward irrelevant and defeats the Plaintiffs' breach of contract claim. All of the parties have moved for summary judgment.
Rule 56(a) of the Federal Rules of Civil Procedure provides that summary judgment shall be rendered when a moving party has shown that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The court must determine whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). Summary judgment should be granted in those cases where it is perfectly clear that there remains no genuine dispute as to material fact and inquiry into the facts is unnecessary to clarify the application of the law. McKinney v. Bd. of Trustees of Maryland Community College, 955 F.2d 924, 928 (4th Cir. 1992). In deciding a motion for summary judgment, "the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.
The Plaintiffs move the court for an entry of judgment as a matter of law, which would find that the Defendants breached the terms of their supplemental cancer policies by failing to pay the Plaintiffs cash benefits equal to the amount billed by the healthcareprovider for certain treatments, rather than the pre-negotiated amounts accepted as payment for these treatments by the providers from the Plaintiffs' primary insurers or other third-party payor, such as Medicare. To support their motion, the Plaintiffs rely on both of the Fourth Circuit's holdings in the Ward litigation, as the Plaintiffs believe those rulings also control the question of liability in this case. Thus, they ask the court to find that the presumption against retroactivity and the doctrine of constitutional avoidance preclude the application of section 38-71-242 to their claims and that the Defendants were obligated to pay them the "actual charges" of their cancer treatments as determined by the Fourth Circuit in its first Ward decision. Alternatively, the Plaintiffs ask the court to declare that section 38-71-242 does not apply to their policies because it violates the Contract Clause of the United States and South Carolina Constitutions. In response, the Defendants also move the court for an entry of judgment as a matter of law in their favor, which would find that S.C. Code section 38-71-242 precludes them from being liable under the policies. Pertinent to this case, section 38-71-242 states:
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