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Enloe Medical Center v. Principal Life Insurance Co

December 19, 2011



This matter is before the court on the motion for summary judgment filed by Principal Life Insurance Company ("Principal" or "defendant"). The motion relies on Federal Rule of Civil Procedure ("Rule") 56, or, in the alternative, seeks judgment under Rule 52. The court heard argument on July 27, 2011; Celim Huezo appeared for Enloe Medical Center ("Enloe" or "plaintiff"); Edna Bailey appeared for defendant. For the reasons set forth herein, defendant's motion is DENIED.


Enloe and Principal are parties to a preferred provider agreement whereby Enloe agrees to provide medical services to individuals insured by Principal insurance plans. Plaintiff's Statement of Undisputed Material Facts ("PUMF") ¶¶ 15, 16, ECF 26-1. Between February 23, 2007 and May 2, 2007, emergency responders rushed three individuals covered by defendant's insurance policies to Enloe for emergency trauma care. Id. ¶¶ 23, 39, 43. As a matter of course, when Enloe is notified that a trauma victim is en route, it immediately activates a trauma team to enable it to provide appropriate care in a timely fashion. Opp'n at 7, ECF 26. The present dispute revolves around whether Principal must pay Enloe for trauma activation costs under the preferred provider agreement, under a separate implied in fact contract between the parties, based on defendant's representations, or based on the requirements of California Health and Safety Code § 1371.4.

Plaintiff instituted this action in Butte County Superior Court on June 11, 2010, alleging breach of written contract, breach of implied in fact contract, negligent misrepresentation and violation of California Health and Safety Code § 1371.4. ECF 1. Defendant removed the action to this court based on diversity jurisdiction under 28 U.S.C. § 1332 and federal question jurisdiction under 28 U.S.C. § 1331. Plaintiff contests federal question jurisdiction, but not diversity jurisdiction. See PUMF ¶ 13.


On February 23, 2007, a train hit Patient 1's small truck when he drove across a train track. PUMF ¶ 39. On March 14, 2007, Patient 2 fell off of his horse while riding, hitting the saddle horn and then the ground. PUMF ¶ 23. On May 2, 2007, then-two year old Patient 3 fell out of a two story window. PUMF ¶ 43.*fn1 In each instance, emergency responders transported the covered patient to Enloe Medical Center to receive trauma care. Opp'n at 7; PUMF ¶¶ 23, 39, 43. The NorCal EMS Trauma Activation guidelines provide that when certain criteria are met, emergency responders must notify the nearest hospital they are en route. ECF 26-3 at 35-37. The hospital, in turn, activates a trauma team. Id. The 2008 guidelines direct hospitals to notify specified trauma specialists within three minutes of receiving the alert. Id. Advance notice enables the trauma team to provide care immediately upon the arrival of a trauma victim. Id. Enloe suggests it follows these guidelines in its trauma activation process.

Patient 1 and Patient 2 each were covered under the Rolling Hills Policy through their employment with the Rolling Hills Casino. PUMF ¶¶ 4, 5.*fn2 Two year old Patient 3 was covered by the Anderson Policy through his mother's employment with Anderson and Associates, Inc. Id. ¶ 7. Defendant claims that both policies are governed by the Employee Retirement Income Security Act of 1974 (ERISA). Id. ¶¶ 6, 8. Each of the covered patients assigned their health plan benefits to Enloe. Id. ¶¶ 24, 40, 44.

Patient 2 spent four days at plaintiff's hospital. Id. Sometime after he was admitted, plaintiff sought authorization for services rendered to Patient 2, including the four days in the hospital. Id. ¶¶ 25, 26. Defendant confirmed that Patient 2 was covered under the Rolling Hills policy and authorized four days in the hospital. Id. According to defendant, when plaintiff validated coverage for Patient 2, it received a disclosure that the authorization was not a promise to pay. Id.

¶ 26. However, the report from the authorization call merely provides a line where "Discl: 8" is listed and no further explanation is offered. ECF 27-14 at 36. Plaintiff billed defendant $89,437.18 for services rendered, of which $25,405.00 was attributable to the trauma activation. PUMF ¶ 28. Defendant denied payment for the trauma activation but paid the rest. Id. ¶ 29.

Plaintiff similarly billed defendant for trauma activation associated with the emergency care of Patient 1 and Patient 3. Id. ¶¶ 41, 45. These charges were also denied. Id. ¶¶ 42,

46. With respect to Patients 2 and 3, plaintiff appealed defendant's initial determination to Principal as the plan fiduciary. Id. ¶¶ 31-38, 47. With respect to Patient 1, plaintiff submitted an untimely appeal. Id. ¶ 42. In response to each appeal, defendant reiterated that trauma activation did not constitute a covered charge under the Rolling Hills health plan because "standby services" were explicitly excluded from coverage. Id. ¶¶ 31-38, 42, 47.

The Rolling Hills Policy and the Anderson Policy (together, the "policies") only reimburse "covered charges" and explicitly do not reimburse for "standby services" (Id. ¶ 21); however, "standby services" is not a defined term in the policies. Id. ¶¶ 30, 42, 47.Under the policies, a "covered charge" has the following definition:

A Treatment or Service is considered to be a Covered Charge if the treatment or service is: prescribed by a Physician and required for the screening, diagnosis or treatment of a medical condition; consistent with the diagnosis or symptoms; not excessive in scope, duration, intensity or quality; the most appropriate level of services or supplies that can safely be provided; and determined by the Principal to be Generally Accepted.

ECF 27-1 at 14; ECF 27-5 at 10. The policies also grant Principal discretion to determine eligibility for benefits:

The Principal has complete discretion to construct or interpret the provisions of this group insurance policy, to determine eligibility for benefits, if any, to be provided. The decisions of the Principal in such matters shall be controlling, binding and final ...

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