Plavin v. Grp. Health Inc., No. 12

• Decision Date: 24 March 2020
• Docket Number: No. 12
• Citation: 124 N.Y.S.3d 5,35 N.Y.3d 1,146 N.E.3d 1164
• Parties: Steven PLAVIN, Appellant, v. GROUP HEALTH INCORPORATED, Respondent.
• Court: New York Court of Appeals Court of Appeals

35 N.Y.3d 1

146 N.E.3d 1164

124 N.Y.S.3d 5

Steven PLAVIN, Appellant,

v.GROUP HEALTH INCORPORATED, Respondent.

No. 12

Court of Appeals of New York.

March 24, 2020

Selendy & Gay PLLC, New York City (Caitlin Halligan and Margaret Larkin of counsel), and Susman Godfrey L.L.P., New York City (William Christopher Carmody, Arun Subramanian, Halley W. Josephs and Nicholas C. Carullo of counsel), for appellant.

Debevoise & Plimpton LLP, New York City (John Gleeson, Maura K. Monaghan and Jared I. Kagan of counsel), for respondent.

Stroock & Stroock & Lavan LLP, New York City (Alan M. Klinger and Dina Kolker of counsel), and Greenberg Burzichelli Greenberg P.C., Lake Success (Harry Greenburg of counsel), for New York City Municipal Labor Committee, amicus curiae.

Letitia James, Attorney General, New York City (Mark S. Grube, Barbara D. Underwood and Steven C. Wu of counsel), for New York State Office of the Attorney General, amicus curiae.

OPINION OF THE COURT

STEIN, J.

The United States Court of Appeals for the Third Circuit has asked us to decide, in essence, whether plaintiff has sufficiently alleged consumer-oriented conduct to assert claims under General Business Law §§ 349 and 350 for damages incurred due to an insurance company's alleged materially misleading representations made directly to the City of New York's employees and retirees about the terms of its insurance plan to induce them to select its plan from among the 11 health insurance plans made available to over 600,000 current and former City employees. Because the complaint sufficiently alleged consumer-oriented conduct, we answer in the affirmative.

I.

The City offers its employees and retirees their choice of health insurance plans as part of their compensation and retirement packages. Plaintiff is a retired New York City police officer, who received health insurance coverage through the health care plan of defendant Group Health Incorporated (GHI). GHI is a not-for-profit corporation, operating as an indemnity insurer, that offers City employees its "Comprehensive Benefits Plan," which provides in-network coverage and partial reimbursement for out-of-network services (the GHI Plan or Plan).

Plaintiff alleged that, at all relevant times, the GHI Plan was among 11 plans the City offered to approximately 600,000 employees and retirees on an annual or biannual basis.¹ The terms of these plans were negotiated between the City, the insurance vendors, and the New York City Municipal Labor Committee, which was comprised of various employee unions. Prior to an open enrollment period, the New York City Office of Labor Relations, on behalf of the City, assembled and distributed to employees and retirees a summary program description, which contained health plan descriptions prepared by each insurer. Plaintiff alleged that this document—the content of which was not reviewed by the City or Municipal Labor Committee—was the only one distributed to City employees and retirees regarding the GHI Plan before they were required to select a plan. In addition, as pertinent to plaintiff's claims, GHI created its own online summary of benefits and coverage, which was available on its website. If an employee or retiree selected the GHI Plan, the City sponsored and paid the entire cost of the premiums therefor.

As relevant here, the complaint alleges that the summary program description and online summary (collectively, the summary materials) represented the GHI Plan as furnishing its members with extensive out-of-network coverage subject to deductibles and coinsurance, and "the freedom to choose any provider worldwide." Further, the summary materials stated that the GHI Plan contained "additional Catastrophic Coverage" for "100% of the Catastrophic Allowed Charge as determined by GHI" if a member's out-of-network expenses for predominantly in-hospital care exceeded $1,500, and also represented that the Plan offered its members an optional rider, at an additional cost, that would provide enhanced coverage for certain services, increasing out-of-network reimbursements "on average, by 75%." Relatedly, GHI stated in the materials that the out-of-network reimbursement fee schedule was "originally based on 1983 procedure allowances," and that some of the rates would be updated "periodically."

As further alleged in the complaint, beginning in 1984, plaintiff annually selected the GHI Plan and optional rider as his family's health insurance plan, yet he was not provided with a certificate of insurance or a reimbursement schedule. From 2014 through 2015, plaintiff's wife received numerous medical services, which GHI determined were out-of-network. As a result, contrary to plaintiff's expectations based on the summary materials provided or available to him, GHI covered only a modicum of the medical claims, leaving plaintiff responsible for payment of the balance. For example, one medical provider billed $512.66 for services, for which GHI ultimately allowed reimbursement of $21.

Plaintiff commenced the underlying action in the United States District Court for the Middle District of Pennsylvania claiming, among other things, violations of General Business Law §§ 349 and 350 based on GHI's allegedly misleading representations to City employees and retirees about the terms of its Plan. Plaintiff alleged that GHI made misleading statements and omissions in its summary materials regarding the Plan's out-of-network reimbursement rates, how often the reimbursement rate schedule was updated, the catastrophic coverage reimbursement rate, and the breadth of coverage of the optional rider—in order to induce plaintiff, and others similarly situated, to select the GHI Plan.² Additionally, plaintiff averred that GHI was the sole creator of its summary materials, and that the role of the New York City Office of Labor Relations was limited to assembling and distributing the program description.

GHI filed a pre-answer motion to dismiss the complaint for failure to state a claim, pursuant to Federal Rules of Civil Procedure rule 12(b)(6). The District Court concluded that plaintiff had not adequately pleaded that, among other things, GHI's conduct was consumer-oriented (see 323 F. Supp. 3d 684, 695–698 [M.D. Pa. 2018] ).³ Initially, the court rejected plaintiff's argument that GHI's alleged misconduct was consumer-oriented simply because it affected numerous City employees and retirees, reasoning that "the fact that a large class of members is affected [did] not automatically transform the plan into something that has ‘a broader impact on consumers at large’ " ( id. at 696, quoting Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank , 85 N.Y.2d 20, 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 [1995] ). However, the court noted that, by virtue of the large number of City employees, the City was "a powerful party in negotiations with insurance companies such as [GHI]" ( id. ). The court then opined that "the alleged deception [arose] out of a private contract negotiated between" GHI and the City—"two sophisticated institutions" ( id. )—and, comparing this case to New York Univ. v. Continental Ins. Co. (NYU ), 87 N.Y.2d 308, 639 N.Y.S.2d 283, 662 N.E.2d 763 (1995) ), concluded that plaintiff was "not a mere consumer of the public" because the City had contracted with GHI on behalf of its employees and, therefore, "[t]he contract was aimed to benefit only a circumscribed class of individuals" ( id. ). Thus, the court held that

"[b]ecause there is no indication in the [c]omplaint that the plan would have been available to anyone who was not an employee of the City of New York, and because it is undisputed that [plaintiff's] receipt of benefits from [GHI] arises from a contractual policy, [plaintiff's General Business Law] claims fail to plead consumer-oriented conduct." ( id. at 698 ).

Upon plaintiff's appeal, the United States Court of Appeals for the Third Circuit determined that the dispositive issue was whether GHI had engaged in consumer-oriented conduct.⁴ Because, in its view, existing New York law did not clearly dictate the outcome of that issue, the Circuit Court certified the following questions:

"Where a contract of insurance is negotiated by sophisticated parties such as the City of New York and an insurance company, and where hundreds of thousands of City employees and retirees are third-party beneficiaries of that contract, and where the insurance company's policy created pursuant to the contract is one of several health insurance policies from which employees and retirees can select, has the insurance company engaged in ‘consumer-oriented conduct’ under the GBL when:

"(1) The insurance company drafts summary plan information that allegedly contains materially misleading misrepresentations and/or omissions about the coverage and benefits of the insurance policy and sends these summary materials to the City, and the City does not check or edit these materials before sending them on to the City employees and retirees; OR

"(2) The insurance company directs City employees and retirees to information on the insurance company's website that allegedly contains materially misleading misrepresentations and/or omissions about the coverage and benefits of the insurance policy?" ( 2019 WL 1965741, *3–4, 2019 U.S. App LEXIS 13573, *8–9 ).

We accepted these certified questions ( 33 N.Y.3d 998, 101 N.Y.S.3d 729, 125 N.E.3d 145 [2019] ), and now answer them in the affirmative.

II.

In 1970, the legislature enacted General Business Law § 349, which declared unlawful any "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state" ( GBL § 349[a] ). Similarly, General Business Law § 350, enacted in 1963, states that "[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state" shall be unlawful. These consumer protection laws were passed in response to an "urgent need for legislation striking...