State ex rel. Clark v. Blue Cross Blue Shield of West Virginia, Inc., 22711

• Decision Date: 17 November 1995
• Docket Number: No. 22711,22711
• Citation: 466 S.E.2d 388,195 W.Va. 537
• Court: West Virginia Supreme Court
• Parties: STATE of West Virginia ex rel. Hanley C. CLARK, Insurance Commissioner of the State of West Virginia, Plaintiff Below, Appellee, v. BLUE CROSS BLUE SHIELD OF WEST VIRGINIA, INC., Defendant Below, and West Virginia State Medical Association, West Virginia Hospital Association, Blue Cross Western Pennsylvania, Pennsylvania Blue Shield, International Union United Mine Workers and Joann Williams, et al., Intervenors Below, The Logan Medical Foundation, Intervenor Below, Appellant.

Page 388

466 S.E.2d 388

195 W.Va. 537

STATE of West Virginia ex rel. Hanley C. CLARK, Insurance Commissioner of the State of West Virginia Plaintiff Below, Appellee, v. BLUE CROSS BLUE SHIELD OF WEST VIRGINIA, INC., Defendant Below and West Virginia State Medical Association, West Virginia Hospital Association, Blue Cross Western Pennsylvania Pennsylvania Blue Shield, International Union United Mine Workers and Joann Williams, et al., Intervenors Below The Logan Medical Foundation, Intervenor Below, Appellant.

No. 22711.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 20, 1995.

Decided Nov. 17, 1995.

Syllabus by the Court

1. Strict adherence must be given to the express legislative procedures governing the liquidation of health service corporations found in West Virginia Code §§ 33-24-14 to -44 (1992 & Supp.1995). Therefore, pursuant to West Virginia Code § 33-24-36(f), where a proof of claim fails to comport with the requirements mandated by West Virginia Code § 33-24-25, and is not filed in the manner and within the time provided by statute, the claim shall not be entitled to filing or allowance, and no action may be maintained with regard to the claim.

2. Where a proof of claim complies with the statutory requirements of West Virginia Code § 33-24-25 (1992), but is filed after the claims bar date provided for by statute has elapsed, the proof of claim is properly classified as a Class VI late-filed claim as directed by West Virginia Code § 33-24-27(f) (1992).

WORKMAN, Justice:

This case arises out of the formal delinquency proceeding filed in the Circuit Court of Kanawha County by the Insurance Commissioner of the State of West Virginia (hereinafter "Appellee" or "Receiver") against Blue Cross/Blue Shield of West Virginia, Inc. (hereinafter "BCBS"). By order of Liquidation and Injunction (hereinafter "Liquidation Order") entered October 26, 1990, the circuit court found that BCBS was insolvent as of December 31, 1989, by almost thirty-three million dollars and had continued to incur operating losses of millions of dollars during 1990. Accordingly, the circuit court appointed the Insurance Commissioner as the Receiver of BCBS and directed him to liquidate BCBS' assets.

The case is now before the Court upon the appeal of Logan Medical Foundation (hereinafter "Appellant" or "Hospital") ¹ from the circuit court's entry of the April 19, 1994, final judgment order, where, as part of the liquidation process, the Appellant's claim against BCBS was classified as a Class VI ² late-filed claim, for which no distribution is expected due to the fact that the amount of claims properly submitted against BCBS far exceeded BCBS' available assets. The Appellant maintains that the circuit court erred in concluding that the March 5, 1991, letter it sent to the Receiver was not a proof of claim for the purpose of participating in the subject liquidation and distribution. ³ Upon a review of the record, the parties' briefs, and all other matters submitted before this Court, we find that the circuit court was correct in determining that the Appellant's proof of claim was not timely filed and failed to comply with the relevant statutory provisions. ⁴ Accordingly, we affirm the lower court's decision.

I.

In a notice dated January 29, 1991, ⁵ from the Receiver's special deputy, David A. Gates, to the Appellant, the Receiver listed the Hospital's claims that the Receiver had processed which were subject to the liquidation process. The deputy further advised the Appellant:

Enclosed is a listing of all claims processed by Blue Cross and Blue Shield of West Virginia, Inc., to date that are subject to the liquidation process. This is not a formal proof of claims. However, this listing may be used to reconcile your records in preparation for the submission of your formal proof of claims. You should recognize that we intend to provide information similar to this listing as support for your formal proof of claims. Any errors detected and/or adjustments necessary should be submitted for processing as usual.... Claims not included on this list that are subject to the liquidation process should be submitted to the attention [of]: Michelle Beihl [the Appellee's agent].

In response to this notice, by letter dated March 5, 1991, the Appellant mailed to Michelle Beihl, an agent of the Receiver, the Appellant's listing of all claims believed to be owed to it by BCBS. The listing included new claims in addition to those attached to the January 29, 1991, notice. Moreover, the Appellant's correspondence and listing of March 5, 1991, stated that the total claim for monies BCBS owed to it amounted to $409,391.64. ⁶

After the Hospital submitted its response to the Receiver, the circuit court, by order entered April 2, 1991, approved the Receiver's liquidation plan. That plan provided:

Persons seeking to receive distribution in the liquidation as claimants shall file with the Receiver a written Claim. The Claim must be made on the proof of claim Form ("Form") provided by the Receiver, with, at minimum, the following detail included or attached:

(i) the amount of the Claim or the basis upon which such amount can be ascertained;

(ii) the facts upon which the Claim is based;

(iii) the facts upon which a 'secured' or 'special deposit' Claim, as defined in W.Va.Code § 33-24-26 [ (1992) ], if any exists, is asserted;

(iv) the classification for 'priority of distribution,' as defined in W.Va.Code § 33-24-27 [ (1992) ], requested and the facts which support such request; and

(v) be verified by an unsworn declaration under penalty of perjury of the claimant, or someone authorized to act on his behalf and having knowledge of the facts; and,

(vi) be supported by such documents as may be material thereto.

Further, the April 2, 1991, order set April 8, 1991, as "the date upon which notice of the filing of a Proof of Claims will be given[,]" and established July 8, 1991, as the final date for filing a proof of claim.

In compliance with the April 2, 1991, order, the Receiver mailed two proof of claim forms to the Hospital on or about April 8, 1991. ⁷ Moreover, the circuit court found that notice was properly given of the requirement to file a prescribed proof of claim form, said notice being published in The Charleston Gazette. ⁸ Despite the Receiver having given the proper notice to the Appellant, according to the April 19, 1994, circuit court order, the Appellant admitted that it did not timely file a proof of claim on the prescribed form.

On June 22, 1992, the Receiver mistakenly sent a notice of determination to each claimant, advising the claimant of the Receiver's classification of the claims presented in compliance with an order entered June 16, 1992. The Appellant's notice of determination letter for its claim stated that the claim had been classified as a Class VI claim. ⁹ After the Appellant's counsel contacted the Receiver regarding the notice of determination letter, Robert Greer, the Assistant Deputy Receiver, by an undated letter, requested that the Appellant disregard the notice of determination because it had not filed a proof of claim. Additionally, the Deputy Receiver enclosed a proof of claim form for the Appellant to complete if it so desired with the following caveat: "However, if returned, your claim will not be considered a timely returned Proof of Claim." The Appellant's completed proof of claim form was submitted to the Receiver on July 28, 1992, but in a letter accompanying the form, the Appellant objected to the Receiver's determination regarding the Appellant's claim because "the information provided in the hospital's letter of March 5, 1991, should suffice to be considered a timely filing of the hospital's proof of claim."

By letter dated August 11, 1992, the Deputy Receiver informed the Appellant that it had received the proof of claim; however, "[o]ur records reflect that you have a late filed Proof of Claim. Late filed claims are in Priority Class VI.... Unfortunately, it is not anticipated that any distribution will be made to claims which were not timely filed."

The Appellant requested a hearing with regard to the Receiver's determination, and said hearing was conducted before a referee on September 23, 1993. The referee found that the Appellant first filed a proof of claim after the claims bar date. The circuit court upheld this finding and approved the Appellant's proof of claim in the amount of $409,391.64, assigning said claim Class VI priority. It is this ruling which forms the basis of the present appeal.

II.

The only issue before the Court is whether the Appellant's March 5, 1991, letter to the Receiver constituted a proof of claim for the purpose of participating in the subject liquidation and distribution. The Appellant maintains that the mere fact that the March 5, 1991, filing was not the "magical" form drawn up by the Receiver and approved by the circuit court should not render said filing invalid. Moreover, the Appellant maintains that the April 2, 1991, order which sets forth the procedure and deadline for filing a proof of claim is "wholly immaterial" to the resolution of this case. Further, the Appellant asserts that West Virginia Code § 33-24-25 (1992) requires that a proof of claim must be verified by the claimant's affidavit, and that while its letter did not contain any verified affidavit, neither did the proof of claim form sanctioned by the circuit court. Finally, the Appellant argues that the proof of claim it submitted to the Receiver on July 28, 1992, after the filing deadline, amended and cured any procedural defects found in the March 5, 1991, letter. In contrast, the Appellee contends that the Receiver followed claim procedures mandated both by statute and court order in the BCBS liquidation, but the Appellant did not. Additionally, contrary to the Appellant's assertion, the Receiver's proof of claim form meets all statutory requirements. Finally, the...