Schiff v. Liberty Mut. Fire Ins. Co.

542 P.3d 1002

Stan SCHIFF, MD, PhD, on behalf of himself and a class of similarly situated providers, Respondent,

v.LIBERTY MUTUAL FIRE INSURANCE COMPANY and Liberty Mutual Insurance Company, foreign insurance companies, Petitioners.

No. 101576-3

Supreme Court of Washington, En Banc.

Argued September 26, 2023

Filed February 15, 2024

Appeal from King County Superior Court, Docket No:17-2-11676-9, Honorable John Ruhl, Judge

Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Ave. Sw, Third Floor Ste. C, Seattle, WA, 98126-2138, Marc Fuller, Vinson and Elkins, 2001 Ross Ave., Ste. 3700, Dallas, TX, 75201-2975, Sarah Eversole, Wilson Smith Cochran Dickerson, 1000 Second Avenue, Suite 2050, Seattle, WA, 98104-3629, for Petitioners.

David Elliot Breskin, Cynthia J. Heidelberg, Breskin Johnson & Townsend PLLC, 1000 2nd Ave. Ste. 3670, Seattle, WA, 98104-1053, for Respondent.

Molly A. Terwilliger, Andrew Steven Decarlow, Morgan, Lewis & Bockius LLP, 1301 2nd Ave. Ste. 3000, Seattle, WA, 98101-3800, for Amicus Curiae on behalf of Mitchell International, Inc.

Linda Blohm Clapham, Isaac Chandler Prevost, Christina M. Shin, Michael Barr King, Carney Badley Spellman, PS, 701 5th Ave. Ste. 3600, Seattle, WA, 98104-7010, for Amicus Curiae on behalf of American Property Casualty Insurance Association.

John Stanley Conniff, Attorney at Law, 3801 N. 27th St., Tacoma, WA, 98407-5812, for Amicus Curiae on behalf of Washington State Chiropractic Association.

Blythe H. Chandler, Terrell Marshall Law Group PLLC, 936 N. 34th St. Ste. 300, Seattle, WA, 98103-8869, for Amicus Curiae on behalf of Northwest Consumer Law Center.

Molly A. Terwilliger, Andrew Steven Decarlow, Morgan, Lewis & Bockius LLP, 1301 2nd Ave. Ste. 3000, Seattle, WA, 98101-3800, for Amicus Curiae on behalf of Mitchell International, Inc.

John Matthew Geyman, Benjamin Brysacz, Wash. Attorney General’s Office, 800 Fifth Ave. Ste. 2000, Seattle, WA, 98104-3188, Michael Bradley, Wash. Attorney General’s Office, P. O. Box 40124, 7141 Cleanwater Dr. Sw, Olympia, WA, 98504-0124, for Amicus Curiae on behalf of Attorney General for the State of Washington.

Anthony Todaro, Joseph Daniel Davison, DLA Piper LLP (US), 701 5th Ave. Ste. 6900, Seattle, WA, 98104-7029, for Amicus Curiae on behalf of Chamber of Commerce of the USA.

Justo Gonzalez, Bradford J. Axel, Valerie Ann Walker, Stokes Lawrence PS, 1420 5th Ave. Ste. 3000, Seattle, WA, 98101-2393, Siobhan Moran, Moran Karamouzis LLP, 265 Sunrise Highway, Suite 61, Rockville Centre, NY, 11570, for Amicus Curiae on behalf of Fair Health, Inc.

Daniel Edward Huntington, Richter-Wimberley PS, 422 W. Riverside Ave. Ste. 1300, Spokane, WA, 99201-0305, Valerie Davis McOmie, Attorney at Law, 4549 Nw Aspen St., Camas, WA, 98607-8302, for Amicus Curiae on behalf of Washington State Association for Justice Foundation.

JOHNSON, J.

¶1 This case looks at what an insurer must do to meet the "reasonable investigation" requirement and the requirement to pay "all reasonable and necessary" medical expenses under the personal injury protection (PIP) statutes, ch. 48.22 RCW; accompanying regulations; and the Washington Consumer Protection Act (CPA), ch. 19.86 RCW. WAC 284-30-330(3); RCW 48.22.005(7).

¶2 Dr. Stan Schiff brought a class action suit claiming the practice of reducing provider bills to an 80th percentile cap based on a computer-generated calculation violated the CPA. Schiff argues that the formulaic approach violates the PIP statutory requirement to pay "‘all reasonable and necessary’" medical expenses and is not a reasonable investigation, resulting in a violation of Washington’s CPA. Resp. of Resp’t Dr. Schiff to Liberty Mut.’s Pet. for Rev. at 1-2 (emphasis added). Liberty Mutual Fire Insurance Company and Liberty Mutual Insurance Company (collectively Liberty) contend that the statutory requirement to conduct a reasonable investigation into medical expenses is satisfied by determining the 80th percentile of charges for a treatment in the geographic area and is not an unfair practice under the CPA. The trial court denied both Schiff’s and Liberty’s summary judgment motions. The Court of Appeals reversed as to Schiff. Schiff v. Liberty Mut. Fire Ins. Co., 24 Wash. App. 2d 513, 520 P.3d 1085 (2022), review granted, 1 Wash.3d 1001, 526 P.3d 844 (2023). We reverse the Court of Appeals in part and hold that Liberty’s 80th percentile practice is not an unfair practice under Washington’s CPA.¹

FACTS AND PROCEDURAL HISTORY

¶3 Liberty provides PIP and MedPay (supplemental medical payment coverage) policies to insureds in Washington State. When Liberty receives a medical bill for a policyholder, Liberty uses a third-party database called FAIR Health to determine the reasonableness of the medical provider’s charges. FAIR Health is an independent, nonprofit, national medical claim database. FAIR Health allows insurers to compare providers’ charges for specific treatments in a geographical area and determine different percentiles of those charges. Under Liberty’s bill review practice, if a medical provider’s bill is below the 80th percentile for the area, Liberty pays the bill in full. If the provider’s charge exceeds the 80th percentile benchmark, the payment is reduced to that amount.

¶4 Over several years, Schiff submitted 20 treatment bills to Liberty. Based on Liberty’s bill review practice, 2 of Schiff’s bills were reduced to the 80th percentile. A 2015 bill was originally $380.00 and was reduced to $339.00. A 2016 bill was originally $945.00 and was reduced to $841.73. The total reduction was $144.27.

¶5 On May 8, 2017, Schiff sued individually and on behalf of similarly situated Washington health care providers, alleging that Liberty’s practice of reducing payments to medical providers was a violation of Washington’s PIP statutes, the WACs, and Washington’s CPA. Schiff sought class certification, damages, prejudgment interest, attorney fees, and litigation expenses. In an amended complaint, Schiff also requested that Liberty be enjoined from making reductions to providers’ bills and from not conducting a reasonable investigation of a bill before refusing to pay in full. Liberty asserted defenses that their conduct is protected by the CPA "‘safe harbor’" defense, set forth in RCW 19.86.170, and/or by the "‘good faith’" exception to CPA liability established under Washington case law. Clerk’s Papers at 4159.

¶6 Both parties filed for summary judgment as to whether Schiff had legal standing to bring the class action and individual claims alleged in his pleadings, or whether he was barred from asserting those claims based on the settlement agreement in an Oregon case, Froeber v. Liberty Mutual Insurance Co., 222 Or. App. 266, 193 P.3d 999 (2008). The trial court concluded that the class action settlement barred Schiff from asserting the class action claims, but did not bar him from pursuing his individual CPA claim for monetary damages based on the two bill reductions.²

¶7 Schiff then motioned for partial summary judgment on liability based on the Court of Appeals’ decision in Folweiler Chi- ropractic, PS v. American Family Insurance Co., 5 Wash. App. 2d 829, 429 P.3d 813 (2018), which the trial court denied. The court outlined the undisputed facts, including stipulations that (1) Liberty relied solely on its 80th percentile bill review methodology to review and reduce the payment on Schiff’s 2015 and 2016 bills and (2) Liberty did not do individualized investigations with respect to those bills. The trial court ultimately denied summary judgment because there were genuine issues of material fact as to whether Liberty’s conduct is protected by the CPA "safe harbor" defense or the "good faith" exception to CPA liability. Included in that factual dispute is whether the Office of the Insurance Commissioner (OIC) affirmatively approved Liberty’s methodology and whether Liberty acted in compliance with whatever approval the OIC gave. The trial court also denied both parties’ subsequent cross motions for summary judgment.

¶8 Both parties sought discretionary review of the trial court’s denial of summary judgment in the Court of Appeals, The Court of Appeals granted review. The trial court stayed the case pending the outcome of their motions for discretionary review. In a published opinion, the Court of Appeals reversed the trial court’s denial of Schiff’s motion for summary judgment and affirmed the trial court’s denial of Liberty’s motion for summary judgment. Schiff, 24 Wash. App. 3d at 547, 520 P.3d 1085. The court reasoned that under Folweiler, an insurer engages in an unfair practice by failing to conduct an individualized assessment of the reasonableness of a medical provider’s bill. Schiff, 24 Wash. App. 2d at 526, 520 P.3d 1085. The court noted that RCW 48.22.095(1)(a) and RCW 48.22.005(7) require "an individualized assessment rather than substituting a formulaic approach that pays only 80 percent of the average charge for a large geographic area." Folweiler, 5 Wash. App. 2d at 838, 429 P.3d 813. Liberty then sought this court’s review,³ which we granted.⁴

ISSUE

¶9 Whether Liberty’s use of the FAIR Health database and the 80th percentile practice to determine the reasonableness of medical providers’ bills violates the Washington CPA.⁵

ANALYSIS

[1–7] ¶10 This court reviews orders on summary judgment de novo. We engage in the same inquiry as the trial court. "‘Summary judgment is proper where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.’" Kut Suen Lui v. Essex Ins. Co., 185 Wash.2d 703, 710, 375 P.3d 596 (2016) (quoting Durland v. San Juan County, 182 Wash.2d 55, 69, 340 P.3d 191 (2014)); see CR 56(c). This case also concerns statutory interpretation, which is a question of law that is reviewed de novo. This court’s objective in determining statutory meaning is to carry out the legislature’s intent. We look at the act as a whole and give effect to all of the language. If ...