Zuckerberg v. Blue Cross & Blue Shield of Greater New York

• Decision Date: 23 June 1983
• Citation: 464 N.Y.S.2d 678,119 Misc.2d 834
• Court: New York Supreme Court
• Parties: Harry J. ZUCKERBERG, Plaintiff, v. BLUE CROSS & BLUE SHIELD OF GREATER NEW YORK, Defendant.

Page 678

464 N.Y.S.2d 678

119 Misc.2d 834

Harry J. ZUCKERBERG, Plaintiff, v. BLUE CROSS & BLUE SHIELD OF GREATER NEW YORK, Defendant.

Supreme Court, Special Term,

Nassau County, Part V B.

June 23, 1983.

Bertram Herman, East Norwich, for plaintiff.

Jerrold I. Ehrlich, New York City, for defendant; John Colucci, New York City, of counsel.

MEMORANDUM

HOWARD E. LEVITT, Justice.

This is an action brought by Harry Zuckerberg, the insured, on a major medical policy issued by the defendant, Blue Cross and Blue Shield of Greater New York. Subsequent to the trial of this action Mr. Zuckerberg passed away. Upon the stipulation of both parties, Mrs. Zuckerberg, in her capacity as preliminary executrix of her husband's estate, was substituted as the plaintiff.

Plaintiff's deceased, at the time of the onset of his cancer, was insured by defendant under a community rated group of which Gadi Industries was the administrator. Johanna Zuckerberg, the plaintiff herein and the wife of the deceased since March 5, 1977, was also the administratrix of the Blue Cross group for Gadi Industries. Subsequent to her marriage to the deceased, she conducted business under her former name of Johanna Merson. Gadi Industries had first commenced basic group coverage with defendant, Blue Cross in the 1960's. On August 22, 1978, group coverage with defendant was enlarged to include major medical coverage. On September 12, 1978 plaintiff's deceased became a subscriber through that group.

In the early part of December of 1980, Mr. Zuckerberg became ill. He was subsequently diagnosed as having a type of cancer known as fourth stage Lymphoma. On February 4, 1981, Mr. Zuckerberg was admitted on an in-patient basis at Hospital La Gloria, S.A. Baja, California, Mexico, to start his initial cancer treatment in the form of a nutritional therapy known as the Gerson Therapy. His stay at Hospital La Gloria, S.A. lasted until March 18, 1981. Plaintiff seeks to recover for the expenses incurred by the decedent as a result of his hospitalization.

Defendant denied coverage on three grounds, to wit:

(1) That Hospital La Gloria, S.A. doesn't meet the requirements of the definition of "hospital" contained in the policy;

(2) That no benefits should be paid pursuant to a provision in the policy that excludes benefits for any part of a hospital stay during which services are rendered that are deemed "unnecessary" in the judgment of the defendant for proper medical care or treatment; and

(3) That no benefits should be paid under a policy exclusion for benefits for hospitalization during which "experimental" or "obsolete" procedures are employed.

In order to recover, plaintiff has the burden of proving compliance with all the provisions of the policies. (Whitlatch v. Fidelity & Cas. Co., 149 N.Y. 45, 43 N.E. 405).

At trial there was a question as to whether a brochure describing the benefits in broad terms with limited reference to exclusion constituted the contract for insurance between Mr. Zuckerberg and the defendant. The question became moot when plaintiff admitted at trial to having received a contract from defendant, which contains the aforementioned specific exclusions.

The first issue to be resolved is whether or not Hospital La Gloria, S.A. is a "hospital" as defined in the insurance policy. The relevant provision reads:

"This part of your contract covers services provided by licensed hospitals. A 'hospital' is an institution for both medical and surgical or obstetrical care, which provides 24-hour nursing service by registered graduate nurses who are present and on duty, and is supervised by a staff of physicians..."

Plaintiff contends that she has met her burden of proof of compliance with the policy definition in a twofold manner: First, that although Hospital La Gloria, S.A. concededly does not offer a full range of surgical and obstetrical care on its premises, it is under contractual agreement with Hospital Del Prado (a sister facility, with which it shares a common ownership, as is normally found between a nursing home and a hospital) for those services, thus substantially complying with the definition; and Second, that the use of the unmodified word "surgical" in the definition creates an ambiguity, in that it can include both major or minor operations.

Dr. Hesse, an owner, testified by way of deposition that Hospital La Gloria S.A. does perform some minor operations such as the suturing of minor wounds and deliveries. It would therefore substantially comply with the policy definition. There is a line of cases starting with McKinney v. American Security Life Ins. Co., 76 So.2d 630 (La., 1954) that holds that an institution can contract with another for facilities or services it lacks, so as to substantially meet the requirements of an insurance policy, thus enabling insured patients to recover on the policy. In Reserve Life Insurance v. Marr, 254 F.2d 289 (9th Cir., 1958); cert. denied, 358 U.S. 839, 79 S.Ct. 63, 3 L.Ed.2d 74), the court observed that the object of definitions, such as the one at bar, is to meet what the insurer determines will be a high standard of care ostensibly assuring the insured better treatment and an earlier discharge thereby minimizing the expenses to the company. The court then concluded that "if such be the object to be accomplished, what difference would it make to a recovery whether the named facilities were under one management so long as the care is expertly provided and readily at hand?" (supra at p. 291).

The substantial compliance rule was considered in Halper v. Aetna Life Ins. Co. of Hartford, Conn., 42 Misc.2d 184, 247 N.Y.S.2d 400; aff'd 44 Misc.2d 437, 254 N.Y.S.2d 57. There, plaintiff insured was denied recovery on a group accident and health policy because the institution had no resident physician and lacked an operating room, x-ray room and pharmaceutical facilities. It thus failed to meet the requirements of the definition of hospital in the policy. The court disallowed the use of substantial compliance because the policy was clear and definite in saying "the term 'hospital' means only an institution which meets fully every one of the following tests." (emphasis supplied) However, no mention was made therein of a contract between the institution and any other hospital for its deficiencies. This fact and the aforementioned specificity ("meets fully every one") of the policy distinguish Halper from the case at bar.

In the absence of convincing argument to the contrary, this court follows the precedent of McKinney v. American Security Life Ins. Co., 76 So.2d 630 (La.1954) by holding that an institution can, through contractual arrangements with a nearby hospital, comply sufficiently with otherwise missing elements in a policy definition of hospital. Halper v. Aetna Life Ins. Co., 42 Misc.2d 184, 247 N.Y.S.2d 400, has been sufficiently distinguished. The proof on trial showed that Hospital La Gloria S.A. is licensed as a medical clinic with hospitalization facilities, by the Mexican Department of Public Health. Lacking in facilities for major surgical and obstetrical care, it is under contract with Hospital Del Prado, an acute general hospital located six to eight miles away, for these missing services. This contract is by an oral agreement between Dr. Curtis Hesse (an owner and administrator) of Hospital La Gloria S.A. and Mrs. Riedel, an owner of Hospital Del Prado and also an owner of the physical plant that La Gloria leases out as its place of business. Rather than duplicating services offered at Hospital Del Prado, such as surgery, radiology, and laboratory work, these services were made available at Del Prado Hospital to La Gloria, S.A. patients because of the specific relationship between the two facilities. Dr. Rosas at one time headed a full acute surgery facility at Hospital La Gloria, S.A., that has since been dismantled. The common ownership, along with the oral agreement between the two facilities, suggest sufficient affiliation between the two hospitals to justify application of the substantial compliance rule.

Since this court finds that plaintiff has substantially complied with the definition of "hospital" in the policy, the plaintiff's contention that the word "surgical" is ambiguous need not be considered (but see Travelers Insurance Company v....