IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-333

No. COA21-729

Filed 17 May 2022

Orange County, No. 21 CVS 007

KATHERINE BIRCHARD, Plaintiff,

v.

BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA, INC., THE NORTH 

CAROLINA STATE HEALTH PLAN a/k/a NORTH CAROLINA STATE HEALTH 

PLAN, a body politic and corporate, and THE BOARD OF TRUSTEES OF THE 

STATE HEALTH PLAN FOR TEACHERS AND STATE EMPLOYEES, Defendant.

Appeal by plaintiff from order entered 2 July 2021 by Judge Alyson Adams 

Grine in Orange County Superior Court. Heard in the Court of Appeals 26 April 

2022.

Barry Nakell for plaintiff-appellant.

Gallivan, White & Boyd, P.A., by Christopher M. Kelly and Kelsey N. Dorton, 

for defendant-appellee Blue Cross and Blue Shield of North Carolina, Inc.

TYSON, Judge.

¶ 1 Katherine Birchard (“Plaintiff”) appeals the trial court’s order dismissing her 

complaint for lack of subject matter jurisdiction and for failure to state a claim upon 

which relief can be granted in favor of Blue Cross and Blue Shield of North Carolina, 

the North Carolina State Health Plan, and the Board of Trustees for the State Health 

Plan for Teachers and State Employees (collectively “Defendants”). We affirm. 
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Opinion of the Court

I. Background

¶ 2 Plaintiff was a member of a medical insurance plan entitled “State Health Plan 

for Teachers and State Employees Enhanced 80/20 PPO Plan” (“Plan”). The Plan was 

made available to Plaintiff pursuant to N.C. Gen. Stat. §§ 135-48.1 et seq. and 135-

75.2 (2021), because of her employment at the University of North Carolina School of 

Medicine as a licensed physician and faculty member of the Radiology Department.

¶ 3 The Plan is administered under a state contract with Defendant, Blue Cross 

Blue Shield of North Carolina (“BCBSNC”). BCBSNC is a private North Carolina 

corporation and serves as the contract administrator of the Plan. BCBSNC also 

separately provides medical insurance to other subscribers and members in the State 

of North Carolina. The Plan requires a member to request “certification from the

Mental Health Case Manager” before accessing coverage and benefits for care in a 

“Psychiatric Residential Treatment Center.” The Plan specifically states there is no 

coverage for services “that are: Not medically necessary.”

¶ 4 Plaintiff requested certification from BCBSNC of coverage and benefits for her 

to be treated and monitored for severe depression and suicidal ideation in a 

“Psychiatric Residential Treatment Center.” Defendant denied Plaintiff’s request in 

December 2017 after finding the request was “Not medically necessary” in accordance 

with Beacon NMNC 1.101.02. These standards require: first, the patient shows 

“symptoms consistent with a DSM or corresponding ICD diagnosis”; second, the 
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“member’s psychiatric condition requires 24-hour medical/psychiatric and nursing 

services and of such intensity that needed services can only be provided in an acute 

psychiatric hospital”; third, “[i]npatient psychiatric services are expected to 

significantly improve the member’s psychiatric condition within a reasonable period 

of time so that acute, short-term 24-hour inpatient medical/psychiatric and nursing 

services will no longer be needed”; and, fourth, the “symptoms do not result from a 

medical condition that would be more appropriately treated on a medical/surgical 

unit.”

¶ 5 Plaintiff filed her original complaint in superior court in January 2021 alleging

breach of contract, in violation of N.C. Gen. Stat. § 59-3-220 (2021), and unfair and 

deceptive trade practices against only BCBSNC. BCBSNC filed motions to dismiss

for lack of subject matter jurisdiction and failure to assert a claim by law pursuant to 

North Carolina Rules of Civil Procedure 12(b)(1) and 12(b)(6).

¶ 6 Plaintiff filed her First Amended Complaint on 14 April 2021 and added 

Defendants, North Carolina State Health Plan, and the Board of Trustees of the State 

Health Plan for Teachers and State Employees, as parties. Plaintiff alleged breach 

of contract, violation of N.C. Gen. Stat. § 59-3-220, unfair and deceptive trade 

practices, and bad faith refusal to pay health or medical insurance benefits against 

Defendants. Plaintiff never asserted any claim before the Industrial Commission. 

Defendants filed a motion to dismiss Plaintiff’s First Amended Complaint for lack of 
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Opinion of the Court

subject matter jurisdiction and for failure to state a claim for which relief can be 

granted.

¶ 7 The trial court granted Defendants’ Rules 12(b)(1) and 12(b)(6) motions to 

dismiss. Plaintiff appeals.

II. Jurisdiction

¶ 8 Appellate review is proper pursuant to N.C. Gen. Stat. § 7A-27(b) (2021).

III. Issues

¶ 9 Plaintiff raises two issues of whether the trial court erred by: (1) dismissing 

her First Amended Complaint against Defendants under Rule 12(b)(l) of the North 

Carolina Rules of Civil Procedure for lack of subject matter jurisdiction in the 

superior court; and, (2) dismissing her First Amended Complaint against Defendants

under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. 

IV. Analysis

A. Standard of Review

¶ 10 A trial court’s order granting a motion to dismiss under Rule 12(b)(1) and 

under Rule 12(b)(6) is reviewed de novo on appeal. Corwin as Tr. for Beatrice Corwin 

Living Irrevocable Tr. v. Brit. Am. Tobacco PLC, 371 N.C. 605, 611, 821 S.E.2d 729, 

734 (2018).

B. Procedural Status

¶ 11 Plaintiff argues the superior court possessed jurisdiction to review BCBSNC’s
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decision to deny her certification. 

[Part 4. Health Benefit Plan External Review] applies to 

all insurers that offer a health benefit plan and that 

provide or perform utilization review pursuant to G.S. 58-

50-61, the State Health Plan for Teachers and State 

Employees, and any optional plans or programs operating 

under Part 2 of Article 3A of Chapter 135 of the General 

Statutes. 

N.C. Gen. Stat. § 58-50-75(b) (2021) (emphasis supplied). 

¶ 12 The statutes provide several definitions applicable here. The standard of 

external utilization review provides “a covered person” may file for review within 120 

days of notice and be assigned an independent review organization. N.C. Gen. Stat. 

§ 58-50-80 (2021). A “‘[u]tilization review organization’ [is] an entity that conducts 

utilization review under a managed care plan, but does not mean an insurer

performing utilization review for its own health benefit plan.” N.C. Gen. Stat. § 58-

50-61(a)(18) (2021). 

¶ 13 N.C. Gen. Stat. § 58-50-61(a)(12) provides,

“Medically necessary services or supplies” means those 

covered services or supplies that are:

a. Provided for the diagnosis, treatment, cure, or 

relief of a health condition, illness, injury, or disease.

b. Except as allowed under G.S. 58-3-255, not for 

experimental, investigational, or cosmetic purposes.

c. Necessary for and appropriate to the diagnosis, 

treatment, cure, or relief of a health condition, 

illness, injury, disease, or its symptoms.

d. Within generally accepted standards of medical 

care in the community.
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e. Not solely for the convenience of the insured, the 

insured’s family, or the provider.

For medically necessary services, nothing in this 

subdivision precludes an insurer from comparing the costeffectiveness of alternative services or supplies when 

determining which of the services or supplies will be 

covered.

N.C. Gen. Stat. § 58-50-61(a)(12) (2021).

¶ 14 Under the statute: “‘noncertification’ means a determination by an insurer or 

its designated utilization review organization that an admission, availability of care, 

continued stay, or other health care service has been reviewed and, based upon the 

information provided, does not meet the insurer’s requirements for medical 

necessity[.]” N.C. Gen. Stat. § 58-50-61(a)(13) (2021). 

¶ 15 BCBSNC is the Plan’s designated “utilization review organization” (“URO”) to 

which “a covered person” must seek review of all “medically necessary” care under 

the Plan. Id.

¶ 16 The General Assembly specifically determined the “utilization review” for 

coverage and benefits under the Plan is regulated by Chapter 58. See N.C. Gen. Stat. 

§ 58-50-75(b) (2021). The General Assembly created an avenue to review external 

“utilization review” claims under the State Health Plan before the Industrial 

Commission. See N.C. Gen. Stat. § 58-50-61;N.C. Gen. Stat. § 143-291(a) (2021). 

¶ 17 When this Court reviews a statute, “it is presumed the legislature acted with 

full knowledge of prior and existing law, and with care and deliberation. Every 
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statute is to be interpreted in light of the . . . laws as they were understood at the 

time of the enactment at issue.” Dare Cty. Bd. of Educ. v. Sakaria, 127 N.C. App. 585, 

588, 492 S.E.2d 369, 371 (1997) (citations and internal quotation marks omitted). 

¶ 18 The parties stipulated this dispute involves contract claims and not negligence 

claims. “The legislature has the power to define the circumstances under which a 

remedy is legally cognizable and those under which it is not.” Lamb v. Wedgewood 

South Corp., 308 N.C. 419, 444, 302 S.E.2d 868, 882 (1983). 

¶ 19 BCBSNC’s role as the Plan’s URO, conducted two rounds of internal reviews, 

Plaintiff then sought an appeal of those decisions via external review by an 

independent review organization, which was assigned pursuant to N.C. Gen. Stat. § 

58-50-80(b)(5). 

¶ 20 “An external review decision is binding on the insurer.” N.C. Gen. Stat. § 58-

50-84(a) (2021). “[A]n independent review organization . . . shall not be liable for 

damages to any person for any opinions rendered during or upon completion of an 

external review conducted under this Part, unless the opinion was rendered in bad 

faith or involved gross negligence.” N.C. Gen. Stat. § 58-50-89 (2021).

¶ 21 Plaintiff exhausted her remedies by seeking the external review by the 

independent review organization, and by failing to seek further review before the 

Industrial Commission. Plaintiff and BCBSNC are both bound by the decision to 

uphold the denial of coverage by the independent review organization. Plaintiff could 
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have sought review with the Industrial Commission, if she sought to challenge the 

external independent review organization’s decision. Plaintiff does not allege 

negligence or bad faith in the decision levied by the independent review organization. 

We are bound as is BCBSNC, and any asserted contract claim against BCBSNC is 

improper regarding the external review organization’s decision to deny coverage.

C. Meyer v. Walls

¶ 22 Plaintiff relies upon Meyer v. Walls, 347 N.C. 97, 489 S.E.2d 880 (1997), and 

argues the superior court possesses jurisdiction to adjudicate these claims. In Meyer, 

the plaintiff committed suicide while under the care of the county department of 

social services. Id. at 102, 489 S.E.2d at 883. Plaintiff therein filed negligence claims 

against the county and the individuals involved. Id. at 103, 489 S.E.2d at 883. The 

Court reasoned, “[a] plaintiff may maintain both a suit against a state agency in the 

Industrial Commission under the Tort Claims Act and a suit against the negligent 

agent or employee in the General Court of Justice for common-law negligence.” Id. at 

108, 489 S.E.2d at 886 (emphasis supplied). The court denied the defendants’ 12(b)(1) 

motion. Id. at 109, 489 S.E.2d at 887. 

¶ 23 The Court’s holding in Meyer does not support Plaintiff’s contract arguments 

here under the State Tort Claims Act: 

The North Carolina Industrial Commission is hereby 

constituted a court for the purpose of hearing and passing 

upon tort claims against the State Board of Education, the 
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Board of Transportation, and all other departments, 

institutions and agencies of the State. The Industrial 

Commission shall determine whether or not each 

individual claim arose as a result of the negligence of any 

officer, employee, involuntary servant or agent of the State 

while acting within the scope of his office, employment, 

service, agency or authority, under circumstances where 

the State of North Carolina, if a private person, would be 

liable to the claimant in accordance with the laws of North 

Carolina. If the Commission finds that there was 

negligence on the part of an officer, employee, involuntary 

servant or agent of the State while acting within the scope 

of his office, employment, service, agency or authority that 

was the proximate cause of the injury and that there was 

no contributory negligence on the part of the claimant or 

the person in whose behalf the claim is asserted, the 

Commission shall determine the amount of damages that 

the claimant is entitled to be paid, including medical and 

other expenses, and by appropriate order direct the 

payment of damages as provided in subsection (a1) of this 

section[.] 

N.C. Gen. Stat. § 143-291(a) (2021) (emphasis supplied).

¶ 24 Plaintiff’s amended complaint against BCBSNC alleges breach of contract and 

unfair and deceptive trade practices, not negligence. Meyer allows a negligence claim 

against an agent of the state in superior court that is separate from the state agency 

asserted before the Industrial Commission under the State Tort Claims Act. Meyer, 

347 N.C. at 108, 489 S.E.2d at 886. 

¶ 25 The holding in Meyer is inapplicable here. Plaintiff’s right to review the 

independent review organization’s decision lies by statute with the Industrial 

Commission. BCBSNC is bound by that decision. Plaintiff did not assert claims 
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against or join the independent review organization as a party, nor did they pursue 

review of their decision before the Industrial Commission.

¶ 26 The General Assembly is presumed to have “acted with full knowledge” when 

they opted to not further waive North Carolina’s sovereign immunity or choice of 

forum, and to create further liability for the taxpayers of the State and its agencies 

regarding contract coverage disputes over treatments and payments of Plan benefits. 

Sakaria, 127 N.C. App. at 588, 492 S.E.2d at 371. The superior court does not possess 

subject matter jurisdiction to review the decision made by the independent review 

organization or the State Health Plan and claims against BCBSNC are properly 

dismissed.

¶ 27 Even if Plaintiff was entitled to further review the denial of coverage, she did 

not initiate nor invoke the statutory “utilization review” process the General 

Assembly expressly provided before the Industrial Commission. N.C. Gen. Stat. § 58-

50-61 (2021). The trial court’s order specifically found and concluded “Plaintiff 

concedes jurisdiction for this case lies in the Industrial Commission rather than in 

the superior court[.]” Plaintiff’s arguments are overruled. In light of our holding on 

this issue, we need not reach Plaintiff’s remaining arguments. 

V. Conclusion

¶ 28 Plaintiff bears the burden on appeal of showing the superior court possessed 

subject matter jurisdiction over her claims review, or alternatively, she is entitled to 
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another review for her admittedly contractual and statutory claims. Plaintiff has 

failed to meet this burden. 

¶ 29 Plaintiff failed to utilize the statutory review process provided to her by 

Chapter 58. N.C. Gen. Stat. § 58-50-61. She is not entitled to further review in the 

superior court pursuant to our statutes. The trial court’s order is affirmed. It is so 

ordered.

AFFIRMED.

Judges WOOD and GRIFFIN concur.