Sere v. Group Hospitalization, Inc., 79-720.

• Decision Date: 18 March 1982
• Docket Number: No. 79-720.,No. 79-738.,79-720.,79-738.
• Citation: 443 A.2d 33
• Parties: Virginia SERE, et al., Appellants, v. GROUP HOSPITALIZATION, INC., et al., Appellees. GROUP HOSPITALIZATION, INC., et al., Appellants, v. Virginia SERE, et al., Appellees.
• Court: D.C. Court of Appeals

443 A.2d 33

Virginia SERE, et al., Appellants, v. GROUP HOSPITALIZATION, INC., et al., Appellees.

GROUP HOSPITALIZATION, INC., et al., Appellants, v. Virginia SERE, et al., Appellees.

No. 79-720.

No. 79-738.

District of Columbia Court of Appeals.

Argued December 2, 1980.

Decided March 18, 1982.

James E. Joyner, Washington, D. C., for Virginia Sere et al.

Charles J. Steele, Washington, D. C., with whom James Edward Ablard and Michaela Mudre Twomey, Washington, D. C., were on the briefs, for Group Hospitalization, Inc.

Before HARRIS^* and MACK, Associate

Judges, and GALLAGHER,^** Associate Judge, Retired.

GALLAGHER, Associate Judge, Retired:

On May 6, 1977, Joseph and Virginia Sere filed suit in the Superior Court against the Blue Cross and Blue Shield Associations and their respective member plans, Group Hospitalization, Inc. (GHI) and Medical Service of the District of Columbia (MSDC). Mr. Sere, an employee of the Department of Labor, had been covered under the defendants' medical plan for federal employees. The complaint alleged that the defendants had breached the contract of insurance by wrongfully refusing claims totaling $1,399.85; and that this breach and certain of its foreseeable consequences were malicious and so outrageous as to amount to a tort, for which an additional $250,000 in tort damages and $500,000 in punitive damages were prayed. By way of response, defendants filed two motions to dismiss, which were denied, and then an answer. After presentation of the evidence at trial, the court granted the defendants' motion for a directed verdict on the tort and punitive damages issues. The jury returned a verdict for the plaintiffs in the amount of $1,399.85, the full amount of the denied insurance claims. From the judgment on that verdict, both parties appealed, the plaintiffs attacking the court's refusal to let the tort and punitive damages questions go to the jury and the defendants, on the other hand, urging that the statute of limitations had run on the denied insurance claims. We affirm the trial court's granting of a directed verdict on the tort and punitive damages issues, and remand for further proceedings on the statute of limitations question.

I

Joseph Sere began employment with the Department of Labor in 1965, and exercised his option to obtain health insurance for himself and his family through the government's Blue Cross/Blue Shield plan (hereinafter the Federal Employee Program or the plan). Virginia Sere, appellant's wife since 1965, has had a long history of ill-health. Sometime in 1970, she began experiencing severe stomach pains, general weakness, and kidney and urinary tract problems. Over the next six years, Mrs. Sere tried, without apparent success, to secure diagnosis and treatment of her maladies. These efforts involved over a dozen separate admissions to hospitals in various parts of the country and numerous outpatient visits, with the attendant physician, laboratory, x-ray and other costs. GHI paid in excess of $20,000 worth of "basic benefits"¹ for Mrs. Sere during this period, while denying claims totalling $974.85 in connection with two periods of hospitalization in February and May, 1972. MSDC paid over $12,500 in "supplemental benefit" claims, see note 1 supra, while denying a total of $425 in claims, of which $135 was for services incidental to the second 1972 hospitalization.

The 1972 Blue Cross/Blue Shield Federal Employee Program provided that basic benefits would not be provided for

Hospital services (except x-ray and laboratory services) and in-hospital medical care when the hospital admission is primarily for diagnostic x-rays, laboratory and clinical tests, when the procedures could have been performed on an out-patient basis without prejudicing the patient's physical condition or adversely affecting the quality of medical care rendered. [Government-Wide Service Benefit Plan 1972, at 13 (Plaintiff's Exhibit No. 5), hereinafter cited as 1972 Plan.]

The plan further provided that neither basic nor supplemental benefits would be provided for "[s]ervices and supplies . . . [n]ot medically necessary for the diagnosis or treatment of illness, injury, or bodily malfunction. . . ." Id. at 12.

The first hospitalization of Mrs. Sere for which GHI denied basic coverage was a February 29, 1972, admission to Henrotin Hospital in Chicago, Illinois. The claim for $608.45 in hospital charges was denied on June 9, 1972, on the ground that the primary purpose of the hospital stay was for diagnosis, and that all of the diagnostic procedures undergone by Mrs. Sere could have been (and routinely are) performed on an outpatient basis or in a doctor's office. The $75 charge of the attending physician was paid by MSDC, however, since these services themselves were not covered by any of the plan exclusions. The decision to deny basic coverage for the hospitalization was made only after the relevant records were reviewed by a GHI "medical advisor." On August 29, 1972, Mr. Sere was informed that while basic coverage was not available for the hospital charges, he could apply for supplemental benefits to cover 80 percent of the hospital bill. Mr. Sere refused to submit such a claim, however, because (in his words), "For me to fill out that supplemental claim form would be the same as saying, `My wife could have been treated on an out-patient basis at Henrotin . . . without seriously prejudicing her condition.'"

The second hospitalization for which benefits were denied occurred between May 3 and May 16, 1972, at Circuit Terrace Hospital in Alexandria, Virginia. GHI provided basic coverage for the period of May 3-May 10, but denied $366.40 in coverage for the final five days of the stay, once again on the ground that records indicated that hospitalization was not required for the diagnostic tests which were performed during that period. Certain doctors' bills totalling $135 also were denied. Mr. Sere again was notified that all claims denied were eligible for 80 per cent coverage, but he again refused to apply for supplemental coverage.

Mr. Sere appealed the denial of both the Henrotin and Circuit Terrace claims to the Civil Service Commission (now the Office of Personnel Management). In a letter dated March 9, 1973, the Chairman of the Commission related that upon review at the Commission's request, the Director of the Blue Cross/Blue Shield Federal Employee Program had affirmed the denial of these claims, and that the Commission's Medical Director concurred with that affirmance. The letter stated that hospital records showed that all of the extensive diagnostic tests which Mrs. Sere received during the two periods in question could have been administered on an out-patient basis, and that nothing in the records showed a need for the hospitalization. Mrs. Sere was ambulatory and on a regular diet, and received no treatments other than a routine oral antibiotic at Henrotin and a sleeping aid and tranquilizer at Circle Terrace. The Commission concluded that these periods of hospitalization were within the ambit of the exclusion for "[h]ospital services . . . when the . . . admission is primarily for diagnostic . . . tests, when the procedures could have been performed on an outpatient basis. . . ."

In addition to the claims connected with the Henrotin and Circle Terrace hospitalizations, MSDC denied miscellaneous claims totaling $290. A $56 charge for certain physician services rendered during a hospitalization in the summer of 1977 at the McLeod Infirmary in Columbia, South Carolina, was denied on June 28, 1973, on the ground that this physician care was concurrent with other physicians' services and not medically necessary. A supplemental benefits claim of $156 for in-home nursing care administered to Mrs. Sere between March 18 and May 23, 1974, was filed on December 26, 1975, and denied on November 11, 1976, after requested additional information failed to establish that the services were medically necessary. An unitemized bill for physician services rendered in July 1973 did not reach MSDC until September 1975; it went unpaid when Mr. Sere failed to resubmit it in itemized form. Finally, a $15 claim for physician services rendered on March 7, 1974, was incomplete, and Mr. Sere again failed to provide MSDC with the necessary information.

II

Because GHI and MSDC do not appeal the jury's finding that all of the above claims were covered by the plan and should have been paid, we venture no opinion on that particular question. We hold, however, that the Seres' claim that these benefit denials justified an award of punitive damages or amounted to the tort of intentional infliction of severe emotional distress is baseless.

It is well-recognized that punitive damages are not favored in the law. Price v. Griffin, D.C.App., 359 A.2d 582, 589 (1976); Brown v. Coates, 102 U.S.App.D.C. 300, 303, 253 F.2d 36, 39 (1968). The most appropriate field for their application is the realm of tort actions generally, C. McCormick, Handbook on the Law of Damages § 81, at 286 (1935); J. Stein, Damages and Recovery: Personal Injury and Death Actions § 185, at 366 (1972); but even there, they are available only in cases which present circumstances of extreme aggravation. Minick v. Associates Investment Co., 71 App.D.C. 367, 368, 110 F.2d 267, 268 (1940); see Price v. Griffin, supra at 589. The defendant's tortious conduct must have been outrageous, characterized by malice, wantonness, gross fraud, recklessness, or willful disregard of the plaintiff's rights. Riggs National Bank v. Price, D.C.App., 359 A.2d 25, 28 (1976). See also Spar v. Obwoya, D.C.App., 369 A.2d 173, 180 (1977); Harris v. Wagshal, D.C.App., 343 A.2d 283, 288 (1975); Franklin Investment Co. v. Homburg, D.C.App., 252 A.2d 95, 98 (1969); Washington Garage Co. v. Klare, D.C.App., 248 A.2d 681, 684 (1968).

Where the basis of a complaint is, as here, a breach of contract, punitive damages will not lie, even if it is proved that the...