Wolitarsky v. Blue Cross of California

• Decision Date: 05 March 1997
• Docket Number: No. B087835,B087835
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 1718, 97 Daily Journal D.A.R. 3145 Audrey K. WOLITARSKY et al., Plaintiffs and Respondents, v. BLUE CROSS OF CALIFORNIA et al., Defendants and Appellants.

Page 629

61 Cal.Rptr.2d 629

53 Cal.App.4th 338, 97 Cal. Daily Op. Serv. 1718,

97 Daily Journal D.A.R. 3145

Audrey K. WOLITARSKY et al., Plaintiffs and Respondents, v. BLUE CROSS OF CALIFORNIA et al., Defendants and Appellants.

No. B087835.

Court of Appeal, Second District, Division 4, California.

March 5, 1997.

Review Denied May 28, 1997.

Love & Bosserman, Gordon E. Bosserman and Beth A. Shenfeld, Los Angeles, for Defendants and Appellants.

Ivie, McNeill & Wyatt, Robert H. McNeill and Jay R. Taylor, Los Angeles, for Plaintiffs and Respondents.

EPSTEIN, Associate Justice.

The issue in this appeal is whether the trial court erred in denying a petition to compel arbitration. The underlying dispute concerned the legality of a health insurance policy provision imposing an additional $2,000 deductible for maternity benefits. The insureds argue that the provision constitutes illegal discrimination against women in violation of state and federal law. The insurer contends that the alleged illegality goes only to a portion of the contract. As a result, it argues, the entire dispute, including the issue of illegality, must be arbitrated. The insurer also argues that the arbitration clause was broad enough to encompass a claim for gender discrimination. We agree with these contentions and reverse.

FACTUAL AND PROCEDURAL SUMMARY

Blue Cross of California (Blue Cross) issued a comprehensive health insurance policy to Audrey and John Wolitarsky in July 1991. The policy excluded coverage for normal pregnancy and delivery. In November 1991, Blue Cross issued a revised policy which included benefits for "normal deliveries," subject to a maternity deductible of $2,000 in addition to the standard deductible.

In January 1993, Blue Cross was licensed by the Commissioner of Corporations as a health care service plan pursuant to the Knox-Keene Health Care Service Plan Act of 1975 (Health & Saf.Code, § 1340 et seq.). In connection with this change, Blue Cross issued the Wolitarskys a health care service plan, effective on February 5, 1993. The same day, Audrey Wolitarsky gave birth.

The plan provided: "Conformity with Law: Any provision of this Agreement which, on its effective date, is in conflict with any applicable statute, regulation or other law is hereby amended to conform with the minimum requirements of such law." On July 1, 1993, Blue Cross revised the plan with respect to pregnancies existing on the effective date of the policy, to add an additional $750 benefit for prenatal care.

Each of the insurance policies issued by Blue Cross to the Wolitarskys contained a provision for binding arbitration: "Any dispute between the Member and Blue Cross regarding the decision of Blue Cross must be submitted to binding arbitration if the amount in dispute exceeds the jurisdictional limits of the small claims court."

Following the birth of their son, the Wolitarskys claimed additional pregnancy and well baby care benefits from Blue Cross. The parties entered into negotiations, but a settlement was not achieved.

The Wolitarskys filed an action against Blue Cross, Californiacare Health Plans, and Wellpoint Health Network, Inc. The suit alleged fraud, breach of the covenant of good faith and fair dealing, and sought a declaration that Blue Cross discriminated against Audrey Wolitarsky on the basis of sex, in violation of the Unruh Civil Rights Act (Civ.Code, § 51 et seq.) and other statutes. The defendants filed a petition to compel arbitration and stay judicial proceedings pursuant to Code of Civil Procedure section 1281. The trial court denied the petition on the ground that the arbitration clause "does not cover the various causes of action that are alleged by the plaintiff...." Blue Cross appeals from that ruling. ¹

DISCUSSION

I Illegality

The issue is whether the trial court erred in denying Blue Cross' petition to compel arbitration. The Wolitarskys argue that the dispute may not be arbitrated because the insurance policy discriminates against women by imposing an additional $2,000 deductible for maternity care. They contend that this provision of the policy violates the Unruh Civil Rights Act (Civ.Code, § 51 et seq.), the Federal Pregnancy Discrimination Act (42 U.S.C. § 2000e et seq.), the California Fair Employment and Housing Act (Gov.Code, § 12900 et seq.), the Cartwright Act (Bus. & Prof.Code, § 16721.5), and Health and Safety Code section 1365.5. ² Blue Cross responds that the alleged illegality of a single contractual provision does not prohibit arbitration of the dispute. We agree.

The Supreme Court addressed this issue in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 Cal.Rptr.2d 183, 832 P.2d 899. The case involved a fee dispute between an attorney and his former firm. The attorney claimed that a fee-splitting agreement the firm sought to enforce was illegal, and raised that claim in a contractual arbitration. The Supreme Court held: "[W]hen ... the alleged illegality goes to only a portion of the contract (that does not include the arbitration agreement), the entire controversy, including the issue of illegality, remains arbitrable. [Citations.]" (Id. at p. 30, 10 Cal.Rptr.2d 183, 832 P.2d 899.) In Moncharsh, the attorney did not claim that the alleged illegality constituted grounds to revoke the entire employment contract and did not contend that the illegality voided the arbitration clause. The Supreme Court concluded that the legality of the fee-splitting provision was a question for the arbitrator in the first instance. (Ibid.)

The Wolitarskys do not ask us to declare the insurance policy void. Nor do they claim that the arbitration clause, or the entire contract, is illegal. Instead, they urge us to rule that " 'grounds exist for the Wolitarskys to revoke the contract' " based on the allegedly discriminatory maternity deductible. It is established that "partially illegal contracts may be upheld if the illegal portion is severable from the part which is legal." (Mailand v. Burckle (1978) 20 Cal.3d 367, 384, 143 Cal.Rptr. 1, 572 P.2d 1142; see also 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 431, pp. 387-388.)

The additional $2,000 deductible for maternity benefits is severable from the rest of the insurance policy. The alleged illegality of that provision is not a basis for revocation of the entire policy. Under Moncharsh, the dispute must be arbitrated, and it is for the arbitrator to determine whether the deductible is illegal.

The Wolitarskys cite Homestead Supplies, Inc. v. Executive Life Ins. Co. (1978) 81 Cal.App.3d 978, 147 Cal.Rptr. 22 for their position that the entire policy is revocable and therefore should not be arbitrated, because of the alleged illegality of the maternity deductible. In Homestead, the court ruled that the enforceability of an illegal contract "depends on the facts and circumstances of the particular case including the kind and degree of illegality involved, the public policy or policies to be served, whether those public policies will best be served by enforcing the agreement or denying enforcement and the relative culpability and equities of the parties." (Id. at p. 989, 147 Cal.Rptr. 22.) But this rule applies to contracts which are not severable and are entirely illegal. In Homestead, the court assumed for purposes of the decision that the entire contract modification agreement at issue was illegal because it violated statutory provisions. (Id. at p. 987, 147 Cal.Rptr. 22.) The Wolitarskys have cited no case in which the test set out in Homestead was applied to a contract in which the provision claimed to be illegal was severable, as it is in this case.

The Wolitarskys assert that their claim is not arbitrable because the maternity deductible violates the Cartwright Act (Bus. & Prof.Code, § 16700 et seq.), rendering the contract void. In Crown Homes, Inc. v. Landes (1994) 22 Cal.App.4th 1273, 27 Cal.Rptr.2d 827, the court held that Cartwright Act claims are subject to a contractual arbitration agreement. (Id. at p. 1283, 27 Cal.Rptr.2d 827.)

The Wolitarskys also argue that Blue Cross should be equitably estopped from challenging its contention that grounds exist to rescind the entire contract. They base this argument on the following language in the policy: "If, during the first two years of membership under this agreement, we discover any material facts that you or your eligible family members knew, but did not disclose on your application, we will rescind this agreement." They cite no authority in support of their argument.

We find no basis for equitable estoppel in the quoted provision. It merely reserves the right of the insurer to rescind coverage if material facts are not disclosed. A party asserting estoppel must establish the following elements: "(1) the party estopped must know the facts; (2) the party estopped must engage in conduct intended to be acted upon by the party asserting estoppel; (3) the party asserting estoppel must be ignorant of the true state of facts; and (4) injury must result from reliance on the other's conduct. [Citation.] 'It is the burden of the party asserting estoppel to prove all of its requisite elements, and the doctrine is strictly applied and must be substantiated in every particular.' [Citation.]" (Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 437-438, 38 Cal.Rptr.2d 521.) Here there is no showing that the Wolitarskys were ignorant of the true state of facts.

II

Scope of Clause

A. Unruh Civil Rights Act

The Wolitarskys also argue that the scope of the arbitration clause is not broad enough to encompass violations of the Unruh Civil Rights Act. (Civ.Code, § 51 et seq. "Act") They contend: "The California Legislature has expressly provided in the Unruh Civil Rights Act that aggrieved parties shall not only possess a private right of action for violations, but also that such relief under the Act will be 'independent of any remedy or procedure available.' (Civil Code § 52(e))" This...