Court Opinion

ID: 4673565
Source: CourtListenerOpinion
Date Created: 2021-04-01 13:03:05.00092+00
Date Added: 2024-06-11T08:03:14.775450
License: Public Domain

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

KENNETH SLINEY,                            )
                                           )
      Plaintiff,                           )
                                           ) C.A. No. N19C-05-061 FWW
             v.                            )
                                           )
NEW CASTLE COUNTY and                      )
HIGHMARK BCBSD, INC.,                      )
                                           )
      Defendants.                          )

                          Submitted: December 4, 2020
                            Decided: March 31, 2021

Upon Defendant Highmark BCBSD, Inc.’s Motion to Dismiss Amended Complaint
                GRANTED in part and DENIED in part.

  Upon Defendant New Castle County’s Motion to Dismiss Amended Complaint
                               DENIED.

                            OPINION AND ORDER

Francis J. Murphy, Esquire, Jonathan L. Parshall, Esquire, Murphy & Landon, 1011
Centre Road, #210, Wilmington, DE, 19805; Attorneys for Plaintiff, Kenneth Sliney.
Benjamin Chappel, Esquire, Justin M. Forcier, Esquire, Reed Smith, LLP, 1201 N.
Market Street, Suite 1500, Wilmington, DE 19801; Attorneys for Defendant
Highmark BCBSD, Inc.
Mary A. Jacobson, Esquire, Mengting Chen, Esquire, New Castle County Office of
Law, New Castle County Government Center, 87 Reads Way, New Castle, DE
19720; Attorneys for Defendant New Castle County.

WHARTON, J.
                            I.     INTRODUCTION

      Kenneth Sliney (“Sliney”) brought this action in May 2019 seeking damages

from his employer, New Castle County (“the County”), and Highmark BCBSD, Inc.

(“Highmark”) in connection for what he alleged was their wrongful refusal to cover

medically necessary treatment for his son at the Caron Treatment Center (“Caron”)

and Serenity Lodge (“Serenity”).1 The two count Complaint alleged breach of

contract and bad faith breach of contract against both Defendants.2 In August, both

Defendants moved to dismiss. Highmark’s motion was based on Sliney’s failure to

allege any contractual relationship between himself and Highmark, thus negating

both his breach of contact claim and his bad faith breach of contract claim.3 The

County premised its motion on the fact that an independent medical review

performed by Medwork Independent Review (“Medwork”) upheld Highmark’s

denial of benefits.4

      The Court granted Highmark’s motion, granted the County’s motion in part,

denied it in part, and granted Sliney leave to amend the original complaint.5 Sliney

took advantage of this opportunity and provided a significantly more fulsome

1
  Compl., D.I. 1.
2
Id.
3
  Def. Highmark’s Mot to Dismiss, D.I. 9.
4
  Def. New Castle County’s Mot. to Dismiss, D.I. 11.
5
  Sliney v. New Castle County, 2019 WL 7163356 (Del. Super. Ct. Dec. 23, 2019).
                                         2
explication of its allegations against Highmark and the County in his First Amended

Complaint. (“FAC”).6 The FAC now alleges breach of contract against Highmark in

Count I claiming Sliney was a third-party beneficiary of the contract between

Highmark and the County.7 In Count IV Sliney alleges that Highmark assumed the

County’s duty of assisting him in connection with various aspects of obtaining

medical care, thereby taking over primary control of coverage determinations under

the County’s health insurance plan.8 He further alleges that Highmark breached its

duty of good faith in a variety of ways with respect to the denial of coverage for

Sliney’s son at Caron, the external review process of that denial, and the failure to

provide accurate and timely information about treatment options.9 Finally, he alleges

that as a de facto joint venturer with the County, Highmark had a financial stake in

denying claims such as Sliney’s.10 Counts II and III allege breach of contract and

breach of the duty of good faith, respectively, against the County.11 Among other

things, Count III alleges that the County knew of Highmark’s claimed improprieties

set out in Count IV, and yet refused to honor its obligations under its contract with

6
   FAC, D.I. 18.
7
Id. at 6-9.
8
 Id. at 15, 19.
9
 Id. at 15-18.
10
 Id. at 18-19.
11
 Id. at 9-14.
                                          3
Sliney, while also having a similar financial motive as the County to deny his

claims.12

      Both Highmark and the County move to dismiss, although the County moves

to dismiss only on the bad faith claim. In Highmark’s motion, for the first time the

Court is presented with an argument based on an Administrative Services Only

Agreement (ASOA”) between it and the County.            That agreement purports to

preclude any intent by the parties to benefit a third party.13 Highmark also denies any

joint venture relationship with the County.14 The County seeks dismissal of the bad

faith claim because it believes that the submission of Highmark’s denial of coverage

to an independent review inoculates it from a bad faith claim.15

      Under Delaware law a non-contracting third party may benefit from a contract

only if that third party benefit is intended by the contracting parties. The ASOA

makes it clear that the contracting parties – Highmark and the County - intended the

contract to confer no benefit on Sliney. Thus, as to Count I, Highmark’s Motion to

Dismiss is GRANTED. But, at this stage of the proceeding, drawing all reasonable

12
Id. at 10-15.
13
   Def. Highmark’s Mot. to Dismiss FAC at 4, D.I. 21. (When it decided Highmark’s
original motion to dismiss, the Court did not have the benefit of that contract. The
ASOA is included now as an exhibit in Highmark’s current motion. Highmark’s
motion to dismiss the original complaint argued, in part, that Sliney had not alleged
any contractual relationship with Highmark but did not refer to the ASOA.)
14
Id. at 4-6.
15
   Def. New Castle County’s Mot. to Dismiss FAC, D.I. 22.
                                          4
factual inferences in favor of Sliney, it is conceivable that he could prevail if he is

able to prove the set of facts he has alleged on his bad faith claim against Highmark

in Count IV. It is conceivable that Sliney could establish that Highmark and the

County are de facto joint venturers and/or that Highmark acted sufficiently like an

insurer that a special relationship existed between it and Sliney such that Highmark

could be found liable for tortious bad faith. Thus, as to Count IV, Highmark’s Motion

to Dismiss is DENIED. It also is conceivable that Sliney could establish that the

County knew the Medwork appeal process was sufficiently flawed to overcome any

presumption that the County acted in good faith. Therefore, the County’s Motion to

Dismiss as to Count III is DENIED.

                     II.    FACTS AND PROCEDURAL HISTORY

      In June and July of 2017, Sliney’s minor son received inpatient medical

treatment at Caron and thereafter at Serenity.16 The County, Sliney’s employer,

supplied his health insurance, which Highmark administered.17 Sliney paid $48,150

for treatment at Caron and received a reimbursement of $4,432.18 Sliney also paid

$17,250 for his son to live at Serenity, a sober living facility, as part of his treatment

plan after leaving Caron.19 Highmark denied payment for part of the inpatient

16
    FAC at 3,5.
17
Id. at 3.
18
 Id. at 5.
19
 Id.
                                            5
treatment at Caron and for all of stay Serenity.20 After first unsuccessfully appealing

directly to Highmark, Sliney submitted the claim for independent review by

Medwork, as a part of Highmark’s appeal process.21 On April 18, 2018, Medwork

issued a decision upholding the denial of benefits.22

      On May 8, 2019, Sliney brought this action against the County and Highmark,

alleging Breach of Contract (Count I) and Bad Faith Breach of contract (Count II).23

On August 14, 2019, Highmark moved to dismiss.24 Two days later, the County also

moved to dismiss or, in the alternative, for a more definite statement.25 Sliney

opposed both motions.26 The Court granted Highmark’s motion finding that: (1)

despite arguing that he was a third-party beneficiary of the contract between

Highmark and the County, Sliney had not alleged in the Complaint that he was a

third-party beneficiary of that contract for purposes of coverage determinations under

Count I; and (2) Sliney’s conclusory bad faith claim under Count II was undermined

by his factual allegation that a subsequent independent review affirmed Highmark’s

20
Id. 4-5.
21
 Id. at 4.
22
 Id. at ¶ 15.
23
 Id. ¶¶ at 20-25.
24
    Def. Highmark’s Mot. to Dismiss, D.I. 9.
25
    Def.’s New Castle County’s Mot. to Dismiss, D.I. 11.
26
    Pl.'s Resp. Def. Highmark’s Mot. to Dismiss, D.I. 14, Pl.’s Resp Def. New Castle
County’s Mot. To Dismiss, D.I. 15.
                                          6
denial of coverage.27 The Court denied the County’s motion to dismiss Count 1, but

granted it as to Count II for the same reason the claim failed against Highmark – the

conclusory allegation of bad faith was undermined by the factual allegation that the

denial was upheld by the independent review.28 However, the dismissals were

without prejudice and Sliney was granted leave to amend his complaint.29

       On January 22, 2020, Sliney filed his FAC.30 In it he alleges Breach of

Contract against Highmark (Count I), Breach of Contract against New Castle County

(Count II), Breach of Good Faith against New Castle County (Count III), and Breach

of Good Faith against Highmark (Count IV).31

       In Count I, Sliney alleges breach of contract for failure to pay his son’s

treatment expenses against Highmark together with other allegations. He alleges that

Highmark failed to provide “full, accurate, and timely information” to him about

treatment options for his son, which he claims it was obliged to do under its contract

with the County.32 He also alleges that Highmark failed to make “fair, honest, and

legally proper coverage determinations” for the treatment Sliney’s son received at

Caron.33 In Count II alleging breach of contract against the County, Sliney alleges

27
   Sliney at 2-3.
28
Id.
29
Id.
30
   FAC, D.I. 18.
31
Id.
32
Id.
33
Id.
                                          7
that the County improperly failed to pay for his son’s treatment and essentially

repeats the allegations he makes against Highmark.34

           Count III brings a claim of a breach of a duty of good faith against the County.

The gravamen of that allegation is that an implied covenant of good faith and fair

dealing was breached by the County when it engaged in arbitrary and unreasonable

conduct having the effect of preventing Sliney from receiving the benefits of his

health insurance coverage contract with the County.35 Specifically, Sliney alleges

that the County knew that Highmark was wrongfully denying coverage to his son at

Caron, as well as to other similarly situated people in need of addiction treatment;

that the County knew that the external review process conducted through Medwork

was not conducted in good faith, but instead was designed and intended to result in

decisions denying benefits; that the County knew that Highmark was failing to

provide full, accurate, and timely information to Sliney about treatment options for

his son; that the County and Highmark knew that his son’s medical treatment

providers had recommended treatment at Caron beyond the two weeks for which

partial payment was provided; that both the County and Highmark rejected those

recommendations in favor of “an unfair, unreasonable, and inadequate paper review

by [a doctor] located in Grand Rapids, Michigan who never interviewed or examined

34
Id.
35
Id.
                                               8
[Sliney’s son];” and that the County had a financial motivation to deny claims like

those presented by Sliney and other insureds seeking treatment for drug

dependency.36 Sliney’s bad faith claim against Highmark in Count IV tracks its bad

faith claim against the County in Count III.37

                         III.   THE PARTIES CONTENTIONS

      Highmark argues in its motion that Sliney is not a third-party beneficiary of its

contract with the County because that contract is an Administrative Services Only

Agreement that specifically provides that it is for the exclusive benefit of the

contracting parties and does not confer any benefit upon any third party.38 Highmark

further argues that Sliney’s bad faith claim, which Highmark characterizes as

predicated in the FAC on a de facto joint venture theory, is unsustainable because

Highmark and the County were not in a joint venture.39

      The County seeks dismissal of Count III only, the bad faith claim.40 It argues

that Sliney cannot sustain a bad faith claim in light of the submission of the denial of

benefits to an independent third party reviewer, Medwork, which upheld the denial.41

Further, the County argues that Sliney’s attacks on the external review process cannot

36
Id.
37
Id.
38
   Def. Highmark’s Mot. To Dismiss FAC at 2-3, D.I. 21.
39
Id. at 5-6.
40
   Def. New Castle County’s Mot. to Dismiss FAC, D.I. 22.
41
Id. at 4-6.
                                           9
save the bad faith claim since the selection of the independent reviewing physician

was not within either Highmark’s or the County’s control, nor did either defendant

have a duty to independently test the review process.42

      Sliney opposes both motions. With respect to Highmark’s motion, he argues

as to Count I that he now has alleged that he is a third-party beneficiary of the contract

between Highmark and the County.43 Additionally, he argues that the ASOA is not

dispositive because it is at best ambiguous and there are amendments to it and other

relevant documents that have not been produced.44 Those documents include a

member’s Benefit Booklet, Highmark’s policies, practices, and network rules, and

any amendments to the ASOA. Further, the provision of the ASOA denying any

intent to confer any benefit upon any third parties does not apply to him, because he

is not a merely a third-party beneficiary. Under the terms of the ASOA he is also a

contractholder, member and subscriber, and that contractholders and members are

not excluded by § 14.2. Rather § 11.1 of the ASOA “establishes that Highmark and

the County knew and intended that Members (and Providers) could sue them as third-

party beneficiaries.”45 Next, he maintains that the better jurisprudential view is that

a third-party administrator may be liable to policy holders as third-party beneficiaries

42
Id.
43
   Pl.’s Opp. to Def. New Castle County’s Motion to Dismiss FAC at 1, D.I. 29.
44
Id. at 4-6.
45
 Id. at 5-6.
                                           10
for their acts of negligence and bad faith. Sliney further argues that Highmark is not

just a third-party claims administrator, but is a “joint venturer” with the County, and

that it has not limited itself to claims administration, but has assumed many of the

functions of an insurer.46 Finally, Sliney cites the County’s cross-claim against

Highmark, which he describes as being based upon Highmark’s breach of the ASOA

and Sliney’s status as a potential third-party beneficiary, as supporting his claim of

third-party beneficiary status against Highmark.47

         With respect to Count IV, he asserts that the FAC alleges actions by

Highmark constituting bad faith that were not part of the independent review by

Medwork, and thus those allegations of bad faith were not undermined by Medwork’s

review upholding Highmark’s denial of coverage.48 Those allegations include a

claim that Highmark recklessly and with conscious indifference provided him

“inadequate, untimely, inaccurate, [and] wrong” information about his medical care

options, and that Highmark recklessly provided inadequate claims service.49 The

FAC also alleges that Hallmark was not justified in relying on the external review

because it and the County knew the physician who performed the review was

46
Id. at 6.
47
 Id. at 4-5.
48
 Id. at 2.
49
 Id.
                                          11
unqualified to do so.50 Finally, he contends that the record is sufficient to support his

claim that Highmark and the County are joint venturers.51

      In his opposition to the County’s motion he reiterates his argument that

Medwork’s decision did not resolve all of his allegations of bad faith.52 Specifically,

Sliney alleges that his bad faith claims for improper claims handling service and full

payment of the first two weeks at Caron were not the subjects of Medwork’s external

review because that review only addressed whether inpatient care at Caron for weeks

three and four was medically necessary.53 He also reiterates his concerns about the

efficacy of the review.54 He disputes the County’s contention that it had no ability or

duty to assess the quality of either the review process or the reviewing physician.55

In fact, he alleges that the County knew the reviewer was unqualified and, therefore,

it was not legally required to deny benefits to a deserving patient where the decision

was inadequate on its face and the reviewer was unqualified.56 Thus, in Sliney’s view

the independent review cannot conclusively establish good faith on the part of either

Highmark or the County.57

50
Id. at 3-6.
51
 Id. at 6.
52
   Pl.’s Opp. to Def. New Castle County’s Mot. to Dismiss FAC at 3-4, D.I. 31.
53
Id.
54
Id. at 5-6.
55
Id.
56
Id. at 6.
57
 Id.
                                           12
                              III.   STANDARD OF REVIEW

       A motion to dismiss for failure to state a claim pursuant to Superior Court Rule

 12(b)(6) will not be granted if the “plaintiff may recover under any reasonably

 conceivable set of circumstances susceptible of proof under the complaint.”58 The

 Court's review is limited to the well-pled allegations in the complaint.59 In ruling on

 a motion under Rule 12(b)(6), the Court “must draw all reasonable factual inferences

 in favor of the party opposing the motion.”60 Dismissal is appropriate “only if it

 appears with reasonable certainty that the plaintiff could not prove any set of facts

 that would entitle him to relief.”61 The pleading standards governing a motion to

 dismiss in Delaware are minimal.62 Delaware is a notice-pleading jurisdiction, and a

 complaint need only “give general notice as to the nature of the claim asserted against

 the defendant in order to avoid dismissal for failure to state a claim.”63

                                     IV.    DISCUSSION

A.    Highmark’s Motion to Dismiss.

 58
    Browne v. Robb, 583 A.2d 949, 950 (Del. 1990).
 59
    Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005).
 60
Id.
 61
 Id.
 62
    See Central Mort. Co. v. Morgan Stanley Mort. Capital Holdings LLC, 27 A.3d
531, 536 (Del. 2011).
 63
    Nye v. Univ. of Del., 2003 WL 22176412, at *3 (Del. Super. Ct. Sept. 17, 2003);
 see also Super. Ct. Civ. R. 8(a)(1).
                                            13
      1. Count I – The Breach of Contract Claim

      The Court turns first to Highmark’s 12(b)(6) Motion to Dismiss Count I –

Breach of Contract. A contract made for the benefit of a third party is enforceable

and the third party may sue to enforce a promise made for the third party’s benefit,

even as a stranger to the written agreement.64 Under general contract principles, in

order to be a third-party beneficiary, the parties to the contract must have intended to

confer a benefit on the third party.65 To state a claim for breach of contract, a party

must simply plead: (1) the existence of the contract; (2) a breach of the contract; and

(3) damages suffered because of the breach.66 A plaintiff need not plead specific facts

to state an actionable claim.67

      Count I of the original complaint was dismissed, in part, because Sliney had

not alleged that he had any contractual relationship with Highmark. In the FAC, he

remedies that defect in spades, repeatedly claiming third-party beneficiary status. In

Delaware, whether the parties to a contract intend a third party to be a beneficiary of

that contract is determined by the language of the contract.68 Highmark maintains

64
   Farmers Bank of State of Del. v. Howard, 276 A.2d 744, 745 (Del. Ch. 1971).
65
   Delmar News, Inc. v. Jacobs Oil Co., 584 A.2d 531, 534 (Del. Super. Ct. 1990).
66
   VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
67
Id. at 611.
68
   Willis v. City of Rehoboth Beach, 2004 WL 2419143, at *2 n3 (Del. Super. Ct. Oct.
14, 2004) (The Court’s interpretation of an insurance policy is matter of law)
(citations omitted).
                                          14
that the ASOA answers that question in its favor.      The Court agrees. Specifically,

§ 14.2 of the ASOA states, “This Agreement is for the sole and exclusive benefit of

the parties hereto and is not intended to, nor does it confer any benefit upon any third

party.”69 The Court does not find the contract, read as a whole, to be ambiguous.

The use of terms “contractholder, member, and subscriber” does not imply an

intention to confer third-party beneficiary status on those people in the face of the

clear language of the ASOA that it is intended for the “sole and exclusive benefit of

the parties hereto.”     Plainly, Sliney and other contractholders, members and

subscribers are not parties to the ASOA. The ASOA specifically states that it is

between Highmark and the County and Highmark and the County were the only

parties to sign the agreement.        Since Sliney and others like him who are

contractholders, members, or subscribers are neither Highmark, nor the County, they

are necessarily third parties.

         Sliney’s argument that § 11.1 of the ASOA establishes that Highmark and the

County “knew and intended that Members (and Providers) could sue them as third-

party beneficiaries”70 is similarly unpersuasive. First, the term third-party beneficiary

does not appear in § 11.1. Second, the parties’ recognition that someone might sue

them (alleging liability under some third-party beneficiary theory) does not establish

69
     Def. Highmark BCBSD, Inc.’s Mot. to Dismiss FAC at Ex. A, § 14.2, D.I. 21.
70
Id. at 6-7.
                                           15
that such plaintiffs are either parties to the contract or third-party beneficiaries of it.

Thus, Highmark’s Motion to Dismiss is GRANTED as to Count 1.71

      2. Count IV – The Breach of Duty of Good Faith Claim

      The Court now turns to Highmark’s Motion to Dismiss Count IV – Breach of

Duty of Good Faith. Although it is clear from the ASOA that Sliney is not an

intended third-party beneficiary of the contract between Highmark and the County,

it is equally clear that Sliney and Highmark are not strangers to each other. Sliney

alleges extensive interactions between himself and Highmark, the particulars of

which are set out in detail in the FAC. He maintains that Highmark assumed the

County’s responsibilities under the County’s insurance plan to assist him in

“investigating, reviewing, evaluating, servicing, and paying claims, and providing

[him] with information needed to access proper and timely medical care.” 72 In

assuming those responsibilities he characterizes the relationship between Highmark

and the County in various ways. He alleges that Highmark was the agent in fact of

the County, or “the apparent and/or ostensible agent” of the County.73 He also

71
   In its Order granting Highmark’s first motion to dismiss, the Court stated, “As an
employee of the County, Sliney is clearly an intended beneficiary of the agreement
between the County and Highmark for the purposes of the administration of benefits.”
Sliney at 5. In retrospect, that phrasing was unfortunate and made without the benefit
of the ASOA. The Court regrets any confusion that comment may have caused.
72
   FAC at 15.
73
Id. at 3.
                                            16
alleges, based on certain claimed financial understandings between Highmark and

the County as well as Highmark’s assumption of the County’s responsibilities as an

insurer, that they were de facto joint venturers.74 As de facto joint venturers,

Highmark shared the County’s duty to act in good faith in its dealings with Sliney.75

      Support for the proposition that Highmark has a duty to act in good faith in its

dealings with Sliney despite his lack of third-party beneficiary status is found the

cases he cites – Wolf v. Prudential Ins. Co. of Am.;76 Carey v. United of Omaha Life

Ins. Co.;77 and Hunt v. Regence BlueShield of Idaho.78 In Wolf, the federal district

court granted summary judgment to Prudential because it concluded that Prudential’s

claims handling services did not provide a basis for a bad faith action because

Prudential was not a party to the insurance contract between Wolf and his employer

and was merely the insurer’s agent.79 In reversing, the 10th Circuit, interpreting

Oklahoma law, held, “the analysis should focus more on the factual question of

whether the administrator acts like an insurer such that there is a ‘special relationship’

between the administrator and the insured that could give rise to a duty of good

74
Id. at 19.
75
Id.
76
   50 F3d. 793 (10th Cir. 1995).
77
   68 P.3d 462, 464-66 (Colo. 2003).
78
   2003 WL 22176010 (Idaho Dist.).
79
   Wolf at 797.
                                           17
faith.80   In Carey, the Colorado Supreme Court similarly relied on a “special

relationship” theory to reverse the decisions of the trial court and court of appeals

that a third party insurance administrator hired by Carey’s employer to run the health

insurance program had no duty of good faith and fair dealing to Carey because there

was no contractual relationship between the administrator and Carey.81 The Carey

Court acknowledged that an insurer had non-delegable duties, but

             [T]he existence of this non-delegable duty does not mean
             that a third-party claims administrator never has an
             independent duty to investigate and process the insured’s
             claim in good faith. When the actions of a defendant are
             similar enough to those typically performed by an
             insurance company in claim administration and
             disposition, we have found the existence of a special
             relationship sufficient for the imposition of good faith and
             tort liability for its breach – even where there is no
             contractual privity between the defendant and the
             plaintiff.82

 Finally, in Hunt, the Idaho First Judicial District Court followed Carey and Wolf

when it denied summary judgment to a third-party administrator on a bad faith claim

brought by an insured with whom it did not have a contractual relationship.83

80
Id.
81
   Carey at 463.
82
Id. at 466.
83
   Hunt at *8.
                                          18
      Substantial contrary authority exists, however. In De Dios v. Indemnity

Insurance Company of North America,84 a federal district court certified a question

of Iowa law in a bad faith action brought by an injured worker against a workers

compensation carrier and a third-party claims administrator.85 A divided Iowa

Supreme Court answered the question, holding that Iowa statutory law provided a

“workable bright line” delineating entities that act as insurers under its workers

compensation system without the need of allowing bad faith claims against entities

that act like insurers.86 Generally, those jurisdictions that prohibit bad faith claims

against third-party administrators do so based on the lack of contractual privity

between the insured and the third-party administrator.87

      The parties have not directed the Court to any Delaware case law answering

the question whether a third-party administrator may be held liable to an insured with

whom it is not in privity for a claim of tortious bad faith in investigating and

processing the insured’s claim.     Nor has the Court found any such authority.

Therefore, the Court will exercise its best judgment as to what the better answer to

84
   927 N.W.2d 611 (Iowa 2019).
85
Id. at 613.
86
 Id. at 624.
87
   See Lodholtz v. York Risk Servs. Grp., Inc. 778 F.3d 635 (7th Cir. 2015)
(interpreting Indiana law); The William Powell Co. v. Nat’l Indem. Co., 141 F.
Supp. 3d 773 (S.D. Ohio 2015) (interpreting Ohio law); Charleston Dry Cleaners &
Laundry, Inc. v. Zurich Am. Ins., 586 S.E.2d 586 (S.C. 2003); Natividad v. Alexsis,
Inc., 875 S.W.2d 695 (Tex. 1994).
                                          19
that question should be. The Court believes that such a claim ought to be permitted

to go forward to discovery. In the Court’s view, strict adherence to a privity

requirement ignores the current reality on the ground where insurers may essentially

delegate all or substantially all their responsibilities under their health insurance plans

to third-party administrators.88 Although the County was the insurer here, the FAC

alleges that the real party with whom Sliney delt and who made all the important

decisions was Highmark. In effect, the FAC alleges that Highmark acted like an

insurer. Thus, the Court finds that Sliney has alleged sufficient facts that, if proven,

would establish that there was a special relationship between Sliney and Highmark

such that Highmark owed Sliney a duty of good faith. The Court also finds that

Sliney has alleged sufficient facts that, if proven, would establish a de facto joint

venture financial relationship between Highmark and the County.

B.    The County’s Motion to Dismiss.

      The County has moved to dismiss only Count III – the bad faith claim. Sliney’s

original bad faith claim was dismissed because:

             Despite its conclusory language of bad faith, that claim is
             undermined by the allegation that a subsequent
             independent review affirmed Highmark’s decision. Thus,
             Sliney actually alleges a reasonable justification for

 At argument, the Court understood counsel for the County to concede as much, or
88

nearly as much.
                                            20
              Highmark’s refusal to pay the claim, thereby defeating his
              bad faith claim.89

 In the FAC Sliney alleges that the County was aware that Highmark wrongfully

denied coverage for Sliney’s son and others similarly situated, and that the external

review process was not conducted in good faith and was designed to result in a

decision denying benefits.90 He also alleges that the County knew Highmark failed

to provide Sliney with full, accurate, and timely information about treatment

options.91 It further alleges that the County (and Highmark) “unreasonably and

unjustifiably” relied on “an unfair, unreasonable, and inadequate paper review by [a

doctor] located in Grand Rapids, Michigan, who never interviewed [Sliney’s son]”

rather than following the recommendations of the local doctors who actually treated

Sliney’s son.92 It alleges the Michigan doctor lacked the necessary “background,

training, and experience to provide a fair and reasonable opinion about [Sliney’s

son’s] need for further treatment at Caron” and that the doctor’s review was a “mere

pretext.”93 Finally, Sliney alleges in the FAC that the County had an improper

89
   Sliney at *3.
90
   FAC at 11.
91
Id. at 12.
92
 Id. at 13-14.
93
 Id.
                                          21
financial motive to deny Sliney’s claim and other the claims of similarly situated

insureds.94

     In this motion, the County maintains that the independent Medwork decision

insulates it from bad faith liability.95 The County argues that the independent review

decision establishes that there was a reasonable basis to deny coverage, and, thus,

the County did not act in bad faith. Finally, the County argues that the external

review process is controlled by the Delaware Department of Insurance, and neither

the County nor Highmark controls the licensing or selection of the independent

reviewers.96   Contrary to Sliney’s position that it should not have relied on

Medwork’s decision, it argues it was legally bound to do so.97

       For his part, Sliney describes his bad faith claim as having three separate

aspects: 1) Highmark’s “reckless failure to provide contractually mandated claims

service” when urgently needed; 2) Highmark’s failure to pay the full cost for the first

two weeks care at Caron; and 3) both defendants’ unjustified failure to pay for the

third and fourth weeks at Caron.98 He maintains that the independent review did not

address his claims based on improper claims handling service and for full payment

94
Id.
95
   Def. New Castle County’s Mot. to Dismiss at 4-6, D.I. 22.
96
Id. at 6.
97
 Id.
98
   Pl.’s Opp. to Def. New Castle County’s Mot. To Dismiss FAC at 3, D.I. 29.
                                          22
of the first two weeks at Caron, and, thus, that review has no bearing on the first two

aspects of his bad faith claim.99 Further, while he acknowledges that the Insurance

Commissioner’s Office approves review organizations, that approval does not

guarantee that those organizations follow Delaware law in all external reviews.100

He argues that the County and Highmark knew that Delaware law was not followed

here in that the expert reviewer was unqualified under 18 Del. C. § 6417(c)(1)a.101

He also alleges that the reviewer was not provided with all of the necessary

documents and information required by law and that material information was

withheld from him.102 Finally, he argues that the statute upon which the County

relies for immunity from bad faith claims – 18 Del. C. § 6416(a) – only entitles it to

a rebuttable presumption in its favor because § 6416(b) provides for further litigation

in Superior Court after the appeal decision by the independent reviewer.103

      As the County correctly points out, to maintain a bad faith claim, an insured

must allege that an insurer acted ‘“clearly without any reasonable justification’ in

denying benefits.”104 Indeed Sliney’s failure to do that, while citing the independent

99
Id. at 3-4.
100
 Id. at 5.
101
 Id. at 6.
102
 Id.
103
 Id.
104
    Def. New Castle County’s Mot. to Dismiss FAC at 6, D.I. 22 (citing Tackett v.
State Farm Fire and Cas. Ins. Co. 653 A.2d 254 (Del. 1995); Enrique v. State Farm
Mut. Auto. Ins. Co. 142 A.3d 506, 511 (Del. 2016).
                                          23
review decision led the Court to dismiss the original bad faith claim against the

County. The FAC remedies that deficiency. It does so in part by alleging improper

claims handling as well as a lack of reasonable justification for the denial of benefits,

both of which were not subject to the Medwork decision. It also alleges that the

defendants knew that the Medwork review was conducted in a manner incompatible

with Delaware law, both in terms of the qualifications of the reviewer and the

information provided to him. Finally, it has alleged an improper financial motive

for denying the claimed benefits. For these reasons, the Court finds that the

Medwork decision does not, as a matter of law, establish that the County (and

Highmark) acted in good faith. That determination awaits further development of

the facts.

                                   VI.    CONCLUSION

       The Court is mindful of the present stage of the proceedings. Its function here

merely is to determine if, viewing the allegations in the FAC, together with all

reasonable factual inferences in Sliney’s favor, it is reasonably conceivable he could

prevail. The case is not at the summary judgment stage where the facts have been

developed. Accordingly, the Court finds Sliney’s allegations against Highmark

insufficient to state a claim as to Count I, but sufficient as to Count IV. The Court

further finds that Sliney’s allegations against the County as to Count III sufficient to

state a claim.
                                           24
     THEREFORE, Defendant Highmark BCBSD, Inc.’s Motion to Dismiss

Plaintiff’s Amended Complaint is GRANTED as to Count I - Breach of Contract

against Highmark and DENIED as to Count IV – Breach of Duty of Good Faith

against Highmark. Defendant New Castle County’s Motion to Dismiss Amended

Complaint is DENIED.

IT IS SO ORDERED.

                                         /s/ Ferris W. Wharton
                                          Ferris W. Wharton, J.

                                    25