Dameron Hosp. Ass'n v. State Farm Mut. Auto. Ins. Co.

DAMERON HOSPITAL ASSOCIATION, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

No. 2:15-cv-01823-MCE-AC

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

March 22, 2018

MEMORANDUM AND ORDER

By way of this action, Plaintiff Dameron Hospital Association ("Plaintiff" or "Dameron") seeks an injunction, declaratory relief, and damages arising from Defendant State Farm Mutual Automobile Insurance Company's ("Defendant" or "State Farm") failure to pay Dameron benefits due under various patients' Uninsured Motorist Coverage ("UIM") and/or Medical Payments Coverage ("Med Pay") pursuant to the Assignment of Benefits ("AOB") contained in each patients' respective Conditions of Admission ("COA") paperwork.¹ Dameron asserts two causes of action: the first under California's Unfair Competition Law ("UCL"), Business and Professions Code § 17200, and the second for breach of contract, based on its argument that State Farm failed to honor patients' assignments of first party insurance benefits to Dameron, thereby breaching the respective insurance policies. In other words, Dameron asserts that by failing to pay Dameron directly, a right it claims to have gained by way of the AOB, State Farm breached the insurance policy rights that were assigned to Dameron by the insureds.² Dameron's UCL claim is premised on that breach, and on its theory that State Farm engaged in a scheme to violate the AOB to Dameron. State Farm has moved for summary judgment of both of Plaintiff's claims, ECF No. 16, and Dameron has cross-moved for summary adjudication of State Farm's liability under its breach of contract cause of action only, and asks the Court to leave the issues of medical necessity and the reasonable value thereof, as well as its UCL claim, for trial, ECF No. 18.³ For the reasons discussed below, both motions are DENIED.

BACKGROUND⁴

Dameron's claims are based on services it provided to eight patients who entered its emergency room on different dates after being injured in eight separate automobile accidents. It is undisputed that Dameron provided services to each of the patients, that each of the patients is covered under one of two State Farm policies, and that each has UIM and/or Med Pay coverage under those policies.⁵ Five of the insureds submitted a claim under their UIM coverage; seven submitted claims under their Med Pay coverage. It is also undisputed that Dameron's COA paperwork includes an AOB, which form was signed upon admission by each respective patient or a relative of the patient. That AOB covers the UIM and Med Pay benefits at issue in this action.

The parties further agree that in each of the eight instances at issue here, Dameron advised State Farm of its claim that the patient's insurance benefits had been assigned to Dameron via the AOB, and Dameron requested that State Farm make direct payments to Dameron of any benefits that were recoverable. In each case, State Farm elected to pay either the patient, the patient's legal guardian, the patient's attorney, and/or another provider. State Farm has made no payments directly to Dameron.

The parties additionally agree that both of the policies at issue here contain an explicit payment provision, providing that State Farm may pay the insured, the injured party, or the provider, at its option.⁶

STANDARD

The Federal Rules of Civil Procedure provide for summary judgment when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex, 477 U.S. at 325.

Rule 56 also allows a court to grant summary judgment on part of a claim or defense, known as partial summary judgment. See Fed. R. Civ. P. 56(a) ("A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought."); see also Allstate Ins. Co. v. Madan, 889 F. Supp. 374, 378-79 (C.D. Cal. 1995). The standard that applies to a motion for partial summary judgment is the same as that which applies to a motion for summary judgment. See Fed. R. Civ. P. 56(a); State of Cal. ex rel. Cal. Dep't of Toxic Substances Control v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998) (applying summary judgment standard to motion for summary adjudication).

In a summary judgment motion, the moving party always bears the initial responsibility of informing the court of the basis for the motion and identifying the portions in the record "which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323. If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968).

In attempting to establish the existence or non-existence of a genuine factual dispute, the party must support its assertion by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits[,] or declarations . . . or other materials; or showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52 (1986); Owens v. Local No. 169, Assoc. of W. Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1987). The opposing party must also demonstrate that the dispute about a material fact "is 'genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. In other words, the judge needs to answer the preliminary question before the evidence is left to the jury of "not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson, 477 U.S. at 251 (quoting Improvement Co. v. Munson, 81 U.S. 442, 448 (1871)) (emphasis in original). As the Supreme Court explained, "[w]hen the moving party has carried its burden under Rule [56(a)], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. Therefore, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Id. at 587.

In resolving a summary judgment motion, the evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).

ANALYSIS

A. Summary Judgment of Breach Of Contract Claim

In its Motion, and in its Opposition to Dameron's Motion, State Farm relies heavily on the fact that both of its policies at issue here expressly reserve the right to pay the insured, the injured person, or the medical provider. It follows that, even conceding that Dameron is an assignee, it has no greater rights than the assured/assignor, and therefore cannot require State Farm to pay anyone in particular, including Dameron. Put differently, even assuming the AOBs at issue here are valid, Dameron only gains rights pursuant to a contract that allows State Farm to pay its own insureds at its option. Dameron therefore cannot require State Farm to pay Dameron. Dameron, on the other hand, argues that State Farm's interpretation of its policies renders them unlawful.

According to Dameron, both statutory authority and case law has established that clauses that invalidate the assignment of money due or to become due are prohibited. And even though State Farm's policies do not contain explicit anti-assignment provisions, its interpretation of the payment provision cited above essentially renders it an anti-assignment provision. In other words, State Farm is attempting to circumvent the law by interpreting its payment provisions in a way that invalidates the patients' right to assign benefits (money due or to become due) to Dameron (or, presumably, to anyone else). By claiming it can pay those benefits to whomever it chooses, regardless of assignment, State Farm is effectively quashing the patients' attempts to assign payment to a third party.

California Insurance Code § 520 provides that "[a]n agreement not to transfer the claim of the insured against the insurer after a loss has happened, is void if made before the loss . . . ." Moreover, "after a loss has arisen liability is fastened upon the insurer and any right of the insured as a result of the loss may be assigned with or without the consent of the insurer." Fluor v. Super. Ct., 61 Cal. 4th 1175, 1212 (2015) (internal quotation marks and citations omitted).⁷ In other words, State Farm's policies cannot at the outset (before any loss) prevent the insured from assigning any future insurance claim to whomever it chooses, once that claim has accrued.⁸ By interpreting its payment provision in a way that voids the insured's assignment of benefits, State Farm's policies do just that.

Dameron has the better argument. Indeed, Dameron is not...