Case Title: DAVIS v. GHS HEALTH MAINTENANCE ORGANIZATION, INC.

Citation: 

Docket Number: 94863

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2001-01-16T00:00:00Z

Document:
DAVIS v. GHS HEALTH MAINTENANCE ORGANIZATION, INC.  DAVIS v. GHS HEALTH MAINTENANCE ORGANIZATION, INC. 2001 OK 3 22 P.3d 1204 73 OBJ 156 Case Number: 94863 Decided: 01/16/2001 Mandate Issued: 05/03/2001 BILL J. DAVIS and ERIKA DAVIS, husband and wife, Appellants v. GHS HEALTH MAINTENANCE ORGANIZATION, INC., d/b/a BLUELINCS, INC., an Oklahoma Corporation, Appellee APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY Honorable Niles Jackson, District Judge ¶0 The appellants, Bill J. Davis and Erika Davis (Davis/insured), obtained medical insurance pursuant to the Oklahoma State Employees Benefits Act (Benefits Act), 74 O.S. Supp. 1992 §1361, et. seq. with coverage through BlueLincs HMO. Davis sued the appellee, GHS Health Maintenance Organization, Inc., d/b/a BlueLincs, Inc. (collectively, insurer/HMO), for fraud, constructive fraud and breach of the implied covenant of good faith and fair dealing in denying payment of medical expenses. The insurer filed a motion to dismiss for lack of subject matter jurisdiction because Davis had not exhausted the administrative procedures imposed by the HMO's internal grievance procedure and the Benefits Act. The trial judge, Honorable Niles Jackson, dismissed the cause on jurisdictional grounds. We hold that: 1) pursuant to 74 O.S. Supp. 1992 §1372 and OAC 87:1-5-10 (1994), the remedial authority of the Benefits Council is limited to matters involving the payment of claims; and 2) under the unique facts presented, the insured may file a bad faith action in district court. REVERSED AND REMANDED. Steven S. Mansell, Mark A. Engel, Steven S. Ashmore, Oklahoma City, Oklahoma for Appellants Harvey D. Ellis, Jr., Kevin D. Gordon, Tamela R. Hughlett, Oklahoma City, Oklahoma, for Appellee. KAUGER, J.: [22 P.3d 1205] ¶1 We retained this cause to determine whether pursuant to 74 O.S. Supp. 1997 §1366(B), FACTS ¶2 ¶3 As a result of a severe diabetes condition, Davis suffers from organic impotence. The insured asserts that he chose coverage with the HMO based on assurances that an inflatable penile implant procedure fell within his plan. Davis underwent surgery on August 19, 1997, believing that he had been approved for the surgery. ¶4 Although it appears that the HMO paid the surgeon and the anesthesiologist who performed the procedure, ¶5 On February 1, 1999, in his first amended petition, Davis filed suit in district court for fraud, constructive fraud and breach of the implied covenant of good faith and fair dealing. Alleging that Davis had not exhausted the administrative procedures imposed by the HMO's internal grievance procedure and the Benefits Act, the HMO moved for dismissal on March 15, 1999. Initially, the trial judge, Honorable Niles Jackson, overruled the motion. However, the HMO filed a motion to reconsider which was sustained on March 22, 2000, and the matter was dismissed on "jurisdictional grounds." [22 P.3d 1208] On July 5, 2000, we retained the cause, and the court ordered briefing cycle was completed on August 29, 2000. I. ¶6 TITLE 74 O.S. SUPP. 1992 §1372 AND OAC 87:1-5-10 (1994) LIMIT ADMINISTRATIVE REVIEW TO CLAIMS FOR BENEFITS. THE STATUTORY AUTHORITY OF THE BENEFITS COUNCIL DOES NOT EXTEND TO CLAIMS FOR BAD FAITH. ¶7 The insured contends that the grievance procedures contained in the Benefits Act are not exclusive and that they do not require exhaustion before instituting an action for bad faith breach of an insurance contract. Additionally, Davis maintains that the HMO has adopted grievance procedures which clearly do not require exhaustion before proceeding in district court. The HMO maintains that the Benefits Act contains comprehensive, mandatory and binding administrative procedures broad enough to encompass tort actions. ¶8 Recognizing the individual needs of state employees, "The Council shall interpret the plan and decide any matters arising thereunder and may adopt such rules and procedures as it deems necessary, desirable or appropriate in the administration of the plan subject to the Administrative Procedures Act. All rules and decisions of the Council shall be uniformly and consistently applied to all participants in similar circumstances and shall be conclusive and binding on all persons having an interest in the plan. When making any decision or determination, the Council shall be entitled to rely upon such information as may be furnished to it by a participant, a participating employer, legal counsel, third party administrator or the management of any individual benefit plan which is incorporated in the plan." [Emphasis supplied by the HMO.] The insurer contends that the Legislature's use of the term "any matters" is sufficiently broad to cover bad faith claims and that the statute mandates not only that the Council determine all issues relating to claims but that the Council's decisions "shall be conclusive." [22 P.3d 1209]¶10 We agree that the Legislature's use of the word "any" within a statute may be equivalent to the term "all."15 However, when ascertaining legislative intent, relevant provisions of a statutory scheme are considered together in an attempt to give force and effect to each provision.16 Further, when a special statute clearly includes the matter in controversy, the special statute controls over a statute of general applicability.17 Finally, legislative intent and purpose may be ascertained from the title of an enactment.18 "The Council shall be responsible for making all determinations as to the rights of any participant or any beneficiary of a participant to receive amounts under the plan except to the extent a benefit plan provides to the contrary. The Council may prescribe forms and procedures for making claims for benefits under the plan to the extent such forms or procedures are not prescribed by the terms of a benefit plan. Each person making a claim for benefits shall also furnish the Council with such documents, evidence, data or information in support of such claim as the Council considers necessary or desirable. If any claim for benefits under the plan is wholly or partially denied, the claimant shall be given notice in writing of such denial within a reasonable period of time . . ." [Emphasis suppled.] ¶12 The Council has also adopted a legislatively authorized rule ¶13 Section 1372 and OAC 87:1-5-10 (1994) are specific statutes governing the precise matter in controversy - the issues subject to the Benefit Council's administrative review. The specific directives of §1372 and OAC 87:1-5-10 (1994) govern over the general grant of power denominated in 74 O.S. Supp. 1997 §1366(B). Clearly, both the statute and the administrative rule, place claims for insurance benefits squarely within the province of the Benefits Council. However, neither the statute nor the rule authorize the Benefits Council to address bad faith claims or to award damages appropriate to tort actions. Administrative construction of a statute by an agency charged with its implementation and enforcement is given persuasive effect. [22 P.3d 1210] II. ¶14 UNDER THE UNIQUE FACTS OF THIS CAUSE, AN INSURED, WHO HAS NOT PURSUED ADMINISTRATIVE REMEDIES, MAY FILE A BAD FAITH ACTION IN DISTRICT COURT. ¶15 Our determination that the Benefits Council has no authority to determine actions in bad faith does not end the inquiry into the necessity of exhaustion of administrative remedies. The insured argues that because the Benefits Council cannot determine issues of bad faith or award damages associated with the tort, the general requirement of exhaustion of administrative remedies22 should be excused as futile.23 The HMO contends that without the Benefit Council's determination that the claim falls within its coverage, it cannot be held liable for bad faith. Because the issue of liability has not been established and because the claim remains unpaid, the insurer argues that Davis is precluded from proceeding in district court. ¶16 We agree with the HMO that a determination of liability under the contract is a prerequisite to a recovery for bad faith breach of an insurance contract.24 We also agree that, generally, when coverage has not been determined through the administrative process, an action in district court for bad faith breach of the insurance contract, would be precluded. Nevertheless, the unique facts of this cause militate against requiring the insured to exhaust either the HMO's internal grievance process or to proceed before the Benefits Council. ¶17 A. Pursuant to 74 O.S. Supp. 1992 §1372 and OAC 87:1-5-10 (1994), the nature of review before the Benefits Council differs between HMOs which have adopted an internal grievance procedure and those which have not. Nevertheless, once a claim is denied the HMO is required to give written notice of the right of review and information regarding the party with whom the request should be filed. ¶18 Both 74 O.S. Supp. 1992 §137225 and OAC 87:1-5-10 (1994),26 contemplate that HMOs may adopt their own grievance procedures providing that the Benefits Council shall be responsible for determining rights under the plan "except to the extent that a benefit plan provides to the contrary." Pursuant to the authority of the statute and the administrative rule, the HMO adopted a grievance process which is outlined in the Member Handbook (Handbook). ¶19 Insureds whose HMOs have adopted internal procedures similar to the one at issue here have two opportunities for review - first with the HMOs appeals body and second before the Benefits Council. In both instances, the insured is entitled to written notice from the HMO advising of the right of review and the party from whom relief should be sought.27 [22 P.3d 1211] ¶21 Nevertheless, all HMOs must notify their insureds of the denial of a claim within forty-five (45) days of the claim's filing. If the HMO has adopted an internal grievance procedure, 87:1-5-10 requires that the HMO advise the insured "with whom such request shall be filed", i.e. the internal review board. If the HMO has not adopted its own review processes, 74 O.S. Supp. 1992 §1372 requires that the denial contain "an explanation that a full and fair review by the Council of the decision denying the claim may be requested . . . with the Council." An HMO with an internal review process may be required to give notice to its insured twice - if the claim is denied initially, it must advise its insured of the right to appeal and the party with whom the request must be filed; if the claim is denied during the internal review, the HMO must give the insured written notice delineating the rights of appeal before the Benefits Council. ¶22 B. Although both 74 O.S. Supp. 1992 §1372 and OAC 87:1-5-10 (1994) require HMOs denying claims to advise insureds of the right of appeal and the name of the entity from whom review may be requested, the HMO did not inform the insured of review or appeal rights in its denial letter. ¶23 ¶21 Nevertheless, all HMOs must notify their insureds of the denial of a claim within forty-five (45) days of the claim's filing. If the HMO has adopted an internal grievance procedure, 87:1-5-10 requires that the HMO advise the insured "with whom such request shall be filed", i.e. the internal review board. If the HMO has not adopted its own review processes, 74 O.S. Supp. 1992 §1372 requires that the denial contain "an explanation that a full and fair review by the Council of the decision denying the claim may be requested . . . with the Council." An HMO with an internal review process may be required to give notice to its insured twice - if the claim is denied initially, it must advise its insured of the right to appeal and the party with whom the request must be filed; if the claim is denied during the internal review, the HMO must give the insured written notice delineating the rights of appeal before the Benefits Council. ¶22 B. Although both 74 O.S. Supp. 1992 §1372 and OAC 87:1-5-10 (1994) require HMOs denying claims to advise insureds of the right of appeal and the name of the entity from whom review may be requested, the HMO did not inform the insured of review or appeal rights in its denial letter. ¶23 ¶24 The statute and the rule direct33 the HMO to provide the insured written [22 P.3d 1212] information of the right of appeal. The rule goes further, specifically providing that the HMO shall advise the insured with whom the appeal must be lodged. The notice given Davis wholly fails the mandates of the statute and the rule. The insured was provided a form letter indicating that his claim had been denied. Although it contained telephone numbers to which further questions might be directed, it provided no information on the appeals process available either through the HMO or the Benefits Council.34 By engaging an attorney and proceeding in district court, the insured has incurred legal expenses. A finding that the HMO was under no duty to provide the mandated notice would not only contradict the language of 74 O.S. Supp. 1992 §1372 and OAC 87:1-5-10 (1994), it would prejudice the insured's right to proceed with his bad faith claim and ignore the fact that the lack of notice may have resulted in Davis' incurring unnecessary legal expenses. ¶25 Although the notice issue was not artfully argued, the question was raised in the trial court and on appeal.35Markwell v. Whinery's Real Estate, Inc., 1994 OK 24, 869 P.2d 840 [Rules of pleading both at the trial and the appellate levels have been liberalized to allow courts to focus attention on substantive merits of the dispute rather than upon procedural niceties.]. Nevertheless, when public law issues are presented, the Court may, on review, resolve them by application of legal theories not tendered below.36 We take judicial notice of public policy established through statutory enactments,37 and we are constrained to take into consideration rules promulgated pursuant to the Administrative Procedures Act.38Cox v. Dawson, 1996 OK 11, ¶18, 911 P.2d 272 ; Butler v. Oklahoma Horse Racing Comm'n, 1994 OK 50, ¶1, 874 P.2d 1278 ; Lone Star Helicopters, Inc. v. State, 1990 OK 111, ¶4, 800 P.2d 235 . Here, both 74 O.S. Supp. 1992 §1372 and OAC 87:1-5-10 (1994) mandate that an insured be given written notice of the right of appeal and of the entity who must be contacted to guarantee review. Failure to give the statutorily mandated and rule provided notice excuses the generally mandated exhaustion requirements. ¶26 Further, when public law issues are involved we have addressed matters dispositive of a cause sua sponte.39 The declared purpose of the Benefits Act is to provide state employees and their dependents with optional employee benefits, including health maintenance organization services.40 [ 22 P.3d 1213 ] The general policy concerns relating to HMO law as it has developed in the courts and in the state and national legislative bodies is outlined in Walker v. Group Health Services, Inc., 2000 OK 2, ¶¶ 7-11, ___ P.3d ___ also promulgated today. The cause presents an issue sufficiently infused with public concerns to merit review on the statutorily mandated and administratively required notice issue. ¶27 If in the course of post-remand proceedings the trial court should conclude that the controversy over the amount of benefits due the insured remains unsettled and be requested that the doctrine of primary jurisdiction be invoked to allow some issues in this case, which are within the agency's authority and expertise, to be resolved there, today's pronouncement would pose no barrier to the lower court's exercise of sound discretion in its ordered deference to an agency's determination of some issues that are within the limits of the latter's statutory powers. CONCLUSION ¶28 Clearly, both 74 O.S. Supp. 1992 §137241 and OAC 87:1-5-10 (1994),42 place claims for insurance benefits squarely within the province of the Benefits Council. However, neither the statute nor the rule authorize the Benefits Council to address bad faith claims or to award damages appropriate to tort actions. Therefore, we hold that bad faith claims do not fall within the province of the administrative review process encompassed by the Oklahoma State Employees Benefits Act (Benefits Act), 74 O.S. Supp. 1992 §1362, et. seq. Further, under the unique facts of this cause - where the insurer has failed to advise its insureds of the right of appeal and the name of the entity from whom review may be requested -, we determine that failure to exhaust administrative remedies does not bar an insured from filing a bad faith action in district court. ¶29 Our determination that exhaustion is excused in the instant cause is not intended to undermine the primary authority of the Benefits Council to address issues involving payment for medical expenses. Rather, it is limited to the facts presented. REVERSED AND REMANDED. ¶30 HARGRAVE, C.J., WATT, V.C.J., HODGES, LAVENDER, OPALA, KAUGER, BOUDREAU, WINCHESTER, JJ. concur. ¶31 SUMMERS, J. concurs in result. FOOT