Court Opinion

ID: 9532174
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:18:50.024428+00
Date Added: 2024-06-11T13:28:41.729961
License: Public Domain

MOSK, J.
I dissent to the conclusion reached in Part I of the majority’s opinion. In my view, the policy is ambiguous because, as the trial court found, it does not state that Blue Shield had the right, on the basis of a retrospective review, to disagree with the judgment of the treating physician to hospitalize Sarchett.
The majority admit that the diagnostic exclusion is ambiguous when read in the light of the medical necessity exclusion. However, because of an explanation offered by Blue Shield at oral argument, the majority fail to apply the usual rule of interpreting ambiguous language in favor of the insured. But the question of ambiguity cannot be determined from the 1lth-hour concession of an insurer before this court as to the meaning of the policy. It must be decided from the terms of the policy itself—terms which the majority concede are ambiguous.
The interpretation now advanced by Blue Shield, i.e., that the diagnostic . exclusion is a subset of the implied exclusion for unnecessary medical treatment, and that it would cover medically necessary hospitalization even if done for diagnostic purposes, is not evident from the policy or the subscriber’s brochure, which lists 16 categories of “Services Not Covered.” The first is the diagnostic exclusion, and the last the “medical necessity” exclusion. There is no indication in the policy that one has any relation to the other. In my view, therefore, the ambiguities in the policy recognized by the majority should be resolved against Blue Shield, in accordance with the usual rule.
Nor do I agree with the majority’s second reason for finding that the “medical necessity” exclusion is unambiguous. They conclude because the policy contains a provision that disputes relating to the “therapeutic justification” for services are to be resolved by a review committee, a subscriber is unambiguously notified that Blue Shield may second-guess the subscriber’s physician on the issue of medical necessity.
An exclusionary clause in a policy must be “conspicuous, plain and clear.” (State Farm Mut. Auto. Ins. Co. v. Jacober (1973) 10 Cal.3d 193, 202 [110 Cal.Rptr. 1, 514 P.2d 953].) The burden is on the insurer to “phrase exceptions and exclusions in clear and unmistakable language” *19(Harris v. Glens Falls Ins. Co. (1972) 6 Cal.3d 699, 701 [100 Cal. Rptr. 133, 493 P.2d 861]), and to “draft its policy to avoid any misinterpretation by the average layman” (Jacober, 10 Cal.3d at p. 207). These rules must be applied with special care in the present case, since the exclusion which Blue Shield seeks to invoke amounts to a “vast, additional exclusionary condition to coverage.” (Van Vactor v. Blue Cross Association (1977) 50 Ill.App.3d 709 [365 N.E.2d 638, 644].)
The provision relating to resolution of disputes does not meet the foregoing standard. It does not state that Blue Shield reserves the right to second-guess the judgment of the subscriber’s doctor as to medical necessity. At most, it allows the subscriber, if he ponders the subject at length, to draw an inference that because there exists a right to review of disputes concerning “therapeutic justification” for services, Blue Shield may challenge the judgment of his doctor. On the other hand, the provision relied on by the majority does not even appear on the same page in the subscriber’s brochure as the “medical necessity” exclusion. Thus I do not see how it can be said that the power which Blue Shield seeks to exercise is set forth in language clear and unmistakable to the average layman.
In addition, there is a significant incompatibility between the conclusions reached by the majority in Part I and Part II of the opinion. Part I holds that the provision relating to resolution of disputes unambiguously states that Blue Shield reserved the right to second-guess the judgment of Sarchett’s doctor as to medical necessity. In Part II the majority decide that Blue Shield was guilty of bad faith because it must have known that Sarchett was ignorant of that procedure and Blue Shield violated its duty to bring it to his attention.1 Nevertheless, they conclude the existence of the provision in the policy precludes Sarchett from successfully challenging Blue Shield’s failure to reserve the right to determine after the fact whether his hospitalization was medically necessary. My colleagues fail to explain how a policy provision of which Sarchett had neither actual nor constructive notice can serve as the basis for its holding in Part I.
Finally, I am unable to concur in the determination of the majority that Sarchett did not have a reasonable expectation of coverage. The opinion states a subscriber could not reasonably expect that Blue Shield would cover all treatment recommended by his physician “however unreasonable the recommendation.” A subscriber, unless he is knowledgeable in medical science, is unable to assess the reasonableness of his physician’s recommen*20dation, or hospitalization. Since in this sense he is controlled by the opinion of his doctor, it is not unreasonable for him to expect that his insurer would likewise be bound by his doctor’s judgment regarding the necessity for hospitalization, absent clear notification to the contrary.
The failure of Blue Shield to make clear its claimed right to decide after-the-fact that hospitalization was not a medical necessity deprives a subscriber of his opportunity to make a meaningful selection between various available types of health plans. If the policy and the brochure had made it known to Sarchett that Blue Shield claimed this right, he could have made a meaningful choice between the plan offered by Blue Shield and one with a limited choice of physicians but guaranteed payment. In my view, Sarchett should not be personally burdened with medical expenses which he could have avoided if Blue Shield had fulfilled its duty to make clear the important qualification of coverage which it belatedly advances in this case.
I would affirm the judgment.
Bird, C. J., and Reynoso, J., concurred.
Appellant’s petition for a rehearing was denied February 24, 1987, and the opinion was modified to read as printed above.

 I agree with the majority that Blue Shield violated the duty of good faith by its failure to advise Sarchett of his contractual right to arbitration, and that the trial court properly granted summary judgment to Sarchett on this ground. I disagree, however, with the majority’s doubt that the award of damages on this ground was justified.