Schroeder by Swanson v. Blue Cross & Blue Shield, United of Wisconsin, 89-0150

• Citation: 450 N.W.2d 470,153 Wis.2d 165
• Decision Date: 01 November 1989
• Docket Number: No. 89-0150,89-0150
• Parties: Michael J. SCHROEDER, Sr., by Paul G. SWANSON, his Guardian ad Litem, and Michael J. Schroeder, Jr., as Special Administrator of the Estate of Helen E. Schroeder, Plaintiffs-Appellants, v. BLUE CROSS & BLUE SHIELD, UNITED OF WISCONSIN, Defendant-Respondent. d ]
• Court: Court of Appeals of Wisconsin

Page 470

450 N.W.2d 470

153 Wis.2d 165

Michael J. SCHROEDER, Sr., by Paul G. SWANSON, his Guardian

ad Litem, and Michael J. Schroeder, Jr., as Special Administrator of the Estate of Helen E. Schroeder, Plaintiffs-Appellants, v. BLUE CROSS & BLUE SHIELD, UNITED OF WISCONSIN,

Defendant-Respondent. ^d]

No. 89-0150.

Court of Appeals of Wisconsin.

Argued Sept. 14, 1989.

Opinion Released Nov. 1, 1989.

Opinion Filed Nov. 1, 1989.

Mary R. Curtis of Steinhilber, Nesbitt, Swanson & Mares, on briefs, and George Curtis, Oshkosh, of counsel (argued), for plaintiffs-appellants.

Elizabeth Bartlett, Milwaukee, and Laurel Barnes, on briefs, and David Hanson of Michael, Best & Friedrich, Madison, of counsel (argued), for defendant-respondent.

Betsy J. Abramson, of counsel (argued), on brief, for State.

Before BROWN, P.J., SCOTT, J., and ROBERT J. PARINS, Reserve Judge.

BROWN, Presiding Judge.

In this insurance case, the trial court granted summary judgment to Blue Cross & Blue Shield (Blue Cross), holding that the Schroeders' expenses for home care treatment were not covered by their Medex-Plus Medicare supplement policies. We reverse, holding that the trial court improperly found that Blue Cross had reserved the right independently to determine the appropriateness of doctor-certified treatment.

Michael and Helen Schroeder were an elderly husband and wife, ¹ each covered by the federal Medicare program and by a Blue Cross insurance policy supplementing Medicare coverage, Medex-Plus. In the fall of 1985, Michael Schroeder carried diagnoses of Parkinson's disease, ischemic heart disease, anemia, and carpal tunnel syndrome. Helen Schroeder carried diagnoses of cerebrovascular disease, chronic dementia, hypothyroidism, chronic depression, and hypertension.

Dr. John R. Keegan, the Schroeders' treating physician, determined that his patients should remain in their home only if home health care services were established. Home care is covered medical care under the Schroeders' Medex-Plus policies. In consultation with the Schroeders' children Dr. Keegan and a home health agency formulated a treatment plan for the Schroeders that included 365 home visits per year, the maximum number allowed by the Medex-Plus policy.

In conformity with the terms of the policy, Dr. Keegan set out the plan on a Blue Cross Home Health Care Certification form. On the form, he certified that all of the conditions required by the limitations sections of the policy were met. These certifications were signed bimonthly by Dr. Keegan. Blue Cross paid all home care services through August 31, 1986.

In the summer of 1986, the Schroeders received a letter from Blue Cross informing them that the company had rising costs and expenses and that to ease financial strain changes in the policy were required, effective September 1, 1986. Blue Cross offered the Schroeders two options. They could maintain the same coverage, but their premium would increase by approximately fifty percent; or, they could maintain the same premium but the coverage provisions would change and they would be entitled to only forty home care visits each year. The changes were contained in an accompanying "Amendment." The company also enclosed a form on which the Schroeders were to indicate their choice. This document informed the Schroeders that if they chose the higher premium option, they could discard the amendment. The Schroeders chose to pay the higher premium in exchange for the same coverage.

Some months later, the Schroeders were notified that all home care expenses accruing after September 1, 1986 were denied because their treatment fell outside of the limitations sections of their policies. Their home care provider ceased providing services in April of 1987, and shortly thereafter the Schroeders entered a nursing home.

The Schroeders filed suit against Blue Cross, asserting the wrongful denial of home care benefits. Both sides moved for summary judgment. The Schroeders argued, among other things, that the limitations sections of their policies only permitted Blue Cross to deny coverage in the absence of a treating physician's certification of medical necessity. Blue Cross asserted that it could independently review the physician's determinations and certifications and that as a matter of law the Schroeders' treatment fell within the policy limitations on coverage. Blue Cross prevailed.

This case involves the interpretation of an insurance policy, which presents questions of law that we review without deference to the trial court's determination. Kaun v. Industrial Fire & Casualty Ins. Co., 148 Wis.2d 662, 667, 436 N.W.2d 321, 323 (1989). The issue is presented on a motion for summary judgment, which may be used to address issues of insurance policy coverage. State Farm Mut. Auto. Ins. Co. v. Kelly, 132 Wis.2d 187, 189, 389 N.W.2d 838, 839 (Ct.App.1986). For summary judgment to be granted, there must be no genuine issue of material fact and the movant must be entitled to judgment as a matter of law. Sec. 802.08(2), Stats.

The lead issue on appeal is whether Blue Cross has an inherent, statutory or contractual right to deny claims based on its independent determination that the doctor's certifications were unjustified. Besides addressing the issue on the merits, Blue Cross has asserted that the issue is raised for the first time on appeal and should not be addressed. We disagree.

The issue was raised by the plaintiffs' pleadings. In proceedings before the trial court, counsel for the Schroeders did at times concede that Blue Cross could review and independently decide whether the doctor's certifications that treatment was medically necessary were justified. However, in the same proceedings, counsel mounted arguments that Blue Cross could not deny claims on that basis. Just sentences after arguing to the trial court that "Plaintiff does not contend that the defendant has no review capability," counsel continued:

We contend that Blue Cross & Blue Shield cannot now amend Michael Schroeder's insurance contract by claiming they can summarily deny his home health care claims. There is no description in the contract which describes the appeal process or that any other documentation or evidence would be needed other than the treating physician's certificate. The home care provided to Michael Schroeder thorughout [sic] this six month period was as required in the policy supervision which [sic] registered nurses, it was certified and re-certified by the treating physician and home health care as carrying out the service [sic] that were prescribed by Doctor Keegan and the registered nurses in charge of the case. It is our position that the only definition of medically necessary that was available to the policy holder is what is contained in Exhibit A the insurance contract.

While counsel's arguments are inartful at best, and confusing at worst, we note that the Schroeders were making several arguments before the court in support of their motion for summary judgment and in opposition to the insurance company's cross-motion. Blue Cross extensively addressed the question of its right to review the certification of medical necessity in its trial briefs and the trial court addressed the argument in its ruling, stating "I would find that Blue Cross & Blue Shield in that review policy here did not violate the terms of the contract." We conclude that all parties understood plaintiffs to be raising alternative arguments in support of their position that Blue Cross' review process was improper. The issue was thus raised, addressed and resolved in the trial court and is properly before us on appeal.

Blue Cross takes the position that insurance companies have an inherent right to review claims for coverage and determine whether the claim is covered under the policy. We assume without deciding that such is the case. We conclude, however, that Blue Cross has by contract designated the doctor's certificate as conclusive proof of coverage and abdicated any role it might have reserved for itself as final arbiter of medical necessity.

Coverage refers to the sum of risks which an insurance policy covers. D'Angelo v. Cornell Paperboard Prods. Co., 59 Wis.2d 46, 51, 207 N.W.2d 846, 849 (1973). Assuming arguendo that Blue Cross has the inherent right to hold a claim for coverage against the policy and compare the claim with the covered risk, we are faced with a preliminary issue: the determination of what risks Blue Cross contracted to cover. This coverage question is one of contract interpretation and is reviewed by this court de novo. See American Mut. Liab. Ins. Co. v. Fisher, 58 Wis.2d 299, 304, 206 N.W.2d 152, 155 (1973).

We may not modify the unambiguous language of an insurance policy. Northwestern Nat'l Ins. Co. v. Nemetz, 135 Wis.2d 245, 254, 400 N.W.2d 33, 37 (Ct.App.1986). However, where an ambiguity exists, we must construe the policy against its drafter and in favor of the insured. Id. at 254-55, 400 N.W.2d at 37. An ambiguity exists when the policy is reasonably susceptible of more than one construction from the viewpoint of a reasonable person of ordinary intelligence in the position of the insured. Id. at 255, 400 N.W.2d at 37.

The Schroeders' policy includes two pages of definitions. Medical necessity is not defined.

Part VII of the policy, entitled "Limitations," states:

1. [Blue Cross] won't pay any benefits unless your physician certifies to us that the service or supply you received was medically necessary for your care. We can ask for this certification as often as we deem appropriate. [Emphasis in original.]

The home care section of the policy has its own limitations clauses, one of which states:

Benefits for home care are limited as follows:

....

2. Your physician must certify that:

a. You would have been in a hospital or extended care facility if you didn't receive home care.

b. Your immediate family or others living with you couldn't give you the care you...