Tenet Healthsystem Desert v. Blue Cross of Cal. , 245 Cal. App. 4th 821 ( 2016 )

Filed 3/17/16
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
TENET HEALTHSYSTEM DESERT, INC., D069057
Plaintiff and Appellant,
v. (Super. Ct. No. INC1303739)
BLUE CROSS OF CALIFORNIA et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Riverside County, John G.
Evans, Judge. Reversed and remanded.
Helton Law Group, Carrie S. McLain, Kim M. Worobec, Teddy T. Davis and
Patrick S. Ludeman for Plaintiff and Appellant.
Morgan, Lewis & Bockius, Thomas M. Peterson, Molly M. Lane and Lisa R.
Veasman for Defendants and Respondents.
I
INTRODUCTION
Plaintiff Tenet Healthsystem Desert, Inc. (Hospital)1 appeals from a judgment
entered in favor of defendants Blue Cross of California, doing business as Anthem Blue
Cross (Blue Cross), Anthem Blue Cross Life and Health Insurance Company (BC Life),
and Anthem UM Services, Inc. (Anthem UM).2 Hospital sued Anthem, as well as
Eisenhower Medical Center (Eisenhower) and Keenan & Associates (Keenan), when the
defendants refused to pay approximately $1,996,265.50 for the cost of medical services
that Hospital provided to an insured patient following extensive communications with
Anthem over a period of approximately 50 days regarding "authorization" for the
services. The defendants ultimately denied coverage for the medical services based on an
exclusion in the patient's policy for injuries sustained as a result of having a blood alcohol
level over the legal limit. Hospital alleged that Anthem's continuing to "authorize"
medical services during the patient's stay at Hospital, even after Anthem was made aware
that the patient was admitted with a blood alcohol level far exceeding the legal limit,
constituted a misrepresentation as to coverage, on which Hospital relied in providing care
to the patient.
The trial court entered judgment for Anthem after sustaining, without leave to
amend, Anthem's demurrer to Hospital's third amended complaint (TAC) with respect to
1 Plaintiff does business as Desert Regional Medical Center.
2 We will refer to Blue Cross, BC Life and Anthem UM collectively as "Anthem."
2
the causes of action alleged against Anthem.3 The trial court determined that the TAC
lacked the necessary specificity to survive a demurrer.
We conclude that the trial court erred. The TAC alleges facts with sufficient
particularity to overcome a demurrer. We therefore reverse the judgment and remand the
matter to the trial court for further proceedings.
II
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background4
A patient (Patient X) was treated in Hospital's acute care facility after an
automobile accident that occurred in the days prior to May 7, 2012.5 Patient X had a
"member identification card," which "identifie[d] that the Patient has health care
coverage through a plan sponsored by Eisenhower." Patient X's "member identification
card identified BC Life and Keenan as Eisenhower's authorized agent[s] and
administrator[s] of Eisenhower's plan," and "further identified Blue Cross as
3 The trial court did grant Hospital 30 days to amend a single cause of action against
Anthem. Hospital elected to forego further amendment in favor of appealing the trial
court's ruling on the demurrer.
4 Because we are reviewing the trial court's ruling on a demurrer to an operative
pleading, our recitation of the factual background of this matter is derived from the
allegations set forth in that pleading.
5 The TAC does not state the exact date of Patient X's admission, but does allege
that "on or about May 7, 2012, at approximately 11:00 a.m., the Hospital's admissions
assistant Patricia West telephoned and spoke with Aileen A. at (800) 274-7767 to provide
notice of the Patient's admission for post-stabilization services in the Hospital's acute care
hospital and to request authorization for the Hospital to provide post-stabilization
services to the Patient."
3
Eisenhower's and BC Life's authorized agent and administrator who administers claims
under Eisenhower's plan on behalf of BC Life."
According to the allegations of the TAC, Anthem, Eisenhower and Keenan had an
agreement under which the Anthem entities and Keenan would act as Eisenhower's agent
in order to perform all of the administrative services on behalf of Eisenhower's "Health
Plan ERISA Trust," which "provides health care benefits for employees of Eisenhower
Medical Center and their family members," a group to which we infer, based on the
allegations of the TAC, Patient X belonged. These administrative services are alleged to
include "all communications and direct dealings with providers, such as the Hospital,
including but not limited to verification of eligibility, benefits and authorization of
services; negotiating with providers, such as the Hospital, concerning any matters
including the entering into and/or revisions to contracts; pricing claims in accordance
with the terms of the plan documents and Summary Plan Description; producing member
identification cards; conducting utilization review; processing authorizations of services
and responding to providers' requests for such authorizations; and coordination and
management of medical care through case management."
Hospital alleges that all of the defendants "had actual knowledge of the terms of
the Plan's coverage, including exclusions." Further, Hospital notes that it "does not and
could not possibly maintain information regarding all exclusions from coverage for the
tens (if not hundreds) of thousands of health insurance plans that cover the patients the
Hospital treats each year . . . ."
4
Hospital specifically alleges that there exists "a trade custom and usage that, to the
extent that a health plan and its administrators have information indicating that services
are not covered under the plan, the health plan and its administrators do not authorize
such services." According to the operative pleading, the trade usage and custom is "that
an authorization of services constitutes an affirmative representation that, based on all of
the information the health plan has been provided to date, the services are covered."
(Italics added.) Even more specifically, Hospital alleges that there had been a "course of
dealing between the Hospital and [all the defendants] such that, to the extent that [the
defendants] have information indicating that services are not covered under the plan, [the
defendants] do not authorize such services. Accordingly, at all times mentioned there has
existed a course of dealing between the Hospital and [the defendants] that an
authorization of services constitutes an affirmative representation that, based on all of the
information the health plan has been provided to date, the services are covered. This
course of dealing is, and at all times mentioned has been, certain and uniform, of general
continuity and well known to the Hospital and to [the defendants]."
The operative pleading alleges that a representative of Hospital called 800-274-
7767, which is the telephone number that was provided on Patient X's member
identification card "as the number to call for 'Pre-Authorization,' " and which is a number
that Hospital was informed and believes is answered "by individuals who are the agents
of Eisenhower and the employees and agents of [Anthem and] Keenan."
On the morning of May 7, 2012, a Hospital admissions assistant called the 800-
274-7767 number and spoke with "Aileen A." to provide notice that Patient X had been
5
admitted to the acute care hospital within Hospital for "post-stabilization services."
Aileen A. gave the Hospital admissions assistant "reference number 0225239133 and
requested that the Hospital fax a clinical review of the Patient's medical condition to
(888) 391-3134." Aileen A. possessed certain private information about Patient X, such
as his name and date of birth, that she and Anthem and Keenan "would not have had if
they were not . . . agents [of Eisenhower]." In addition, Hospital was informed and
believed that Anthem and Keenan hold out "fax number (888) 391-3134" as a number
they use "to communicate with providers regarding information necessary to authorize
care and make coverage determinations on behalf of Eisenhower."
That afternoon, a Hospital case manager faxed to the number Aileen A. had
provided "a clinical review of the Patient's medical condition as of the date of service
May 7, 2012." The clinical summary included information that Patient X had been
brought to the emergency room by ambulance after having been in a motor vehicle
accident in which he was an unrestrained driver, and that he had "tested positive for
cannabis and a blood alcohol level ('ETOH' for ethyl alcohol) of .235."
On the morning of May 8, Hospital's representatives attempted to verify Patient
X's benefit summary through a Web site maintained by Anthem, on behalf of
Eisenhower. The Web site did not disclose the existence of an exclusion for services for
injuries sustained as a result of a participant's driving with a blood alcohol level in excess
of the legal limit.
Anthem repeatedly requested clinical information pertaining to Patient X over the
course of a multi-week period. Between May 7 and June 11, 2012, Anthem authorized
6
Patient X's ICU treatment, in writing, on at least 11 occasions. Many of the authorization
letters included letterhead and documents containing the defendants' trademarks. For
example, on May 8, Hospital received a telephone call and a letter via fax from an
unnamed case manager employed by Anthem. The case manager "authoriz[ed]" Hospital
to admit Patient X and to provide medical services to him "at the ICU level of care." The
letter identified the case manager as an employee of Anthem, identified that the fax was
sent on Anthem's behalf, and included private information about the patient that an
individual would not have possessed if he or she were not an agent of Anthem. The letter
did not advise Hospital that Patient X's plan excluded coverage for services provided to
treat injuries sustained when a plan participant was driving with a blood alcohol level
over the legal limit, nor did the case manager inform Hospital of this fact over the
telephone.
On or about May 9, 2012, Hospital received a letter via fax from an unnamed case
manager for Anthem "authorizing" services for Patient X through May 10 in the ICU.
This letter "failed to identify that the plan had any exclusion from coverage applicable to
injuries caused by a motor vehicle accident in which the Patient was driving with a blood
alcohol level in excess of the legal limit."
On or about May 11, Hospital received a letter via fax from an unnamed case
manager for Anthem "authorizing" medical services for Patient X through May 12 in the
ICU. This correspondence did not identify a potentially applicable exclusion from
coverage for the services.
7
On or about May 14, 2012, Dionne Myers, a case manager for Anthem,
corresponded with Hospital's admissions assistant Patricia West. Myers requested
additional clinical information regarding Patient X's health status in order to determine
whether additional medical treatment would be authorized.
No later than May 15, Patient X's case was referred to a "discharge planner" for
Anthem, Nell Steele-Alvarez. Steele-Alvarez was to make arrangements for where
Patient X would go for rehabilitation after being discharged from the acute care hospital.
Steele-Alvarez was provided with clinical information regarding Patient X, which she
reviewed, and was aware that Patient X's injuries had resulted from a vehicle accident
that occurred while he was driving with a blood alcohol level in excess of the legal limit.
Steele-Alvarez informed Hospital's case manager Janet Sobleskie that she was
"investigating acute rehab facilities where the Patient would go when the Patient was
discharged from [Hospital's] acute care hospital."
Later that day, Hospital received another letter via fax from an unnamed case
manager for Anthem authorizing medical services for Patient X in the ICU through May
17. This correspondence did not inform Hospital of the coverage exclusion for injuries
sustained as a result of driving with an illegal blood alcohol level.
On May 16, Hospital documented that "it was not reviewing the Patient's account
for potential alternative health care coverage because the existence of Patient's insurance
coverage had been confirmed."
Hospital received additional faxed letters from representatives of Anthem on May
16, May 18, May 25, May 30, May 31, June 4, June 6 (two letters), and June 11,
8
"authorizing" medical care for Patient X in the ICU. None of these letters informed
Hospital of the relevant exclusion.
In the meantime, Anthem discharge planner Steele-Alvarez telephoned Hospital
from telephone number 818-234-6095 on May 17 and May 22 to discuss with Hospital's
case manager Sobleskie the plan for Patient X's rehabilitation care after his discharge
from the ICU.6 Steele-Alvarez discussed with Sobleskie Patient X's medical condition,
clinical information, and discharge planning. On June 12, Steele-Alvarez called Hospital
from the same telephone number and spoke with a nurse case manager regarding
facilities where Patient X could be sent pursuant to the terms of his coverage following
his discharge from the ICU. Steele-Alvarez discussed Patient X's medical condition, the
basis for his admission, the nature of his injuries, and discharge plans.
On June 15, Steele-Alvarez, again calling from 818-234-6095, spoke with
Hospital's rehabilitation case manager Robyn Angeli. Steele-Alvarez requested that
Patient X be admitted to Hospital's acute inpatient rehabilitation hospital upon his
discharge from the ICU, and authorized the admission. The operative pleading alleges
that in engaging in this communication with Angeli, Steele-Alvarez was acting as the
agent and employee of Anthem, and that she was acting as the agent of Eisenhower as
well.
On June 18, 2012, Hospital discharged Patient X from the acute care hospital and,
based on the representations by Steele-Alvarez regarding authorization for Patient X's
6 The operative pleading alleges not only the dates but the times that many of the
contacts between Hospital's representatives and representatives of Anthem occurred.
9
treatment in Hospital's acute rehabilitation facility, transferred and admitted Patient X as
an inpatient at its acute rehabilitation hospital.
On June 20, an unnamed case manager for Anthem sent Hospital a letter on
Anthem letterhead authorizing the provision of acute rehabilitation services to Patient X
through June 25. That same date, Dionne Myers spoke with a representative of Hospital
and verbally indicated that Hospital's provision of acute rehabilitation services to Patient
X was authorized under the terms of his plan until June 25.
The operative pleading alleges that Anthem and the other defendants made these
communications when they "knew or should have known the clinical information
previously provided by Hospital, which specifically indicated that the Patient was injured
while driving in an automobile accident with a blood alcohol level in excess of the legal
limit and positive for cannabis, and that they knew or should have known of the
exclusions from coverage, including for injuries caused by a motor vehicle accident in
which the patient was driving with a blood alcohol level in excess of the legal limit." As
a result of a contractual agreement between Eisenhower and Anthem, Anthem knew of
and was in possession of the terms of Patient X's plan, including the exclusions from
coverage.
In addition, the operative pleading alleges that all of the defendants "falsely
represented that the Hospital's acute rehabilitation hospital services it had provided, was
providing, and would provide to the Patient [were] covered under the Patient's plan and
that the Plan is financially responsible for paying for such services." The pleading further
alleges that the representations made by the defendants were false, and that at the time the
10
representations were made, the defendants had no reasonable ground for believing them
to be true. The operative pleading alleges that the defendants made these
misrepresentations that the services "were authorized and covered with the intent to
induce the Hospital to act in reliance on them . . . , or with the expectation that the
Hospital would so act."
Hospital alleges that it was ignorant of the falsity of the representations made by
the defendants, believed them to be true, and acted in reliance on them in admitting
Patient X to its acute rehabilitation facility and providing services to him there.
Hospital was not informed of the existence of the exclusion for coverage in Patient
X's plan for "injuries sustained while drinking and driving" until October 24, 2012.7
Hospital contends that, as a result, Hospital was denied payment for the more than 50
days of services that Hospital rendered to Patient X in its ICU and acute rehabilitation
facility. In addition, because Hospital was not informed of the coverage exclusion until
late October 2012, Hospital was unable to seek reimbursement via Medi-Cal because
claims for Medi-Cal must be submitted within 60 days from the date the services were
rendered.
B. Procedural background
Hospital filed a complaint against Anthem, Eisenhower, and Keenan alleging 14
causes of action in June 2013. After demurrers and amendments, Hospital filed a second
amended complaint (SAC) in November 2013.
7 The operative pleading does not allege who specifically informed Hospital of the
exclusion on October 24, 2012.
11
Anthem filed a demurrer to the SAC, in which Eisenhower and Keenan joined.
The trial court sustained this demurrer, as well, and granted Hospital 30 days leave to
amend. The trial court acknowledged that in the first, second and third causes of action,
Hospital had identified several people by name. However, the court faulted Hospital for
failing to "allege specifically who the persons with whom plaintiff spoke, work for or
were representing, to whom the phone numbers belonged or who assigned the claim
number."
Hospital filed the TAC in January 2014. The 276-page pleading outlines
Hospital's interaction with individuals, over a period of approximately 50 days, who held
themselves out as representing Anthem for purposes of reviewing and authorizing the
medical care provided to Patient X. The allegations in the TAC include dates, times, the
manner of communication, including correspondence, faxes and telephone calls, together
with telephone and fax numbers utilized, the names of individuals and their titles, if
known, the companies these individuals represented, and the factual basis for Hospital's
belief that an agency relationship existed. In the TAC, Hospital pled causes of action
against Anthem for negligent misrepresentation; fraud and deceit based on suppression of
facts; intentional fraud; and unfair business practices in violation of Business and
Professions Code section 17200.8
Anthem filed a demurrer to the TAC, and the trial court again ruled that Hospital
had failed to "plead fraud/misrepresentation with the requisite specificity," and failed to
8 The TAC alleged 19 causes of action in total against the various defendants.
12
"set forth a single actual specific misrepresentation that was made by [Anthem] that the
patient was covered." The court references pages 24 through 52 of the TAC in support of
its conclusion that the TAC lacked an allegation of a misrepresentation. The trial court
sustained Anthem's demurrer with respect to Hospital's causes of action for negligent
misrepresentation (causes of action 1 and 10), fraud based on suppression of facts (causes
of action 2 and 11), and intentional fraud (causes of action 3 and 12). This time, the court
denied leave to amend, except with regard to the unfair business practices cause of action
(cause of action 19), for which the court granted Hospital an additional 30 days in which
to amend to attempt to plead that cause of action.9
Hospital elected not to file another amended pleading with respect to the unfair
business practices cause of action, instead reserving its right to appeal the ruling on the
demurrer to the TAC. As a result, the trial court filed an order dismissing the action
against Anthem with prejudice, and entered judgment in favor of Anthem in April 2014.
Hospital filed a timely notice of appeal.
III
DISCUSSION
A. Legal standards on appeal from the sustaining of a demurrer without leave to
amend
We apply the following well-established law in reviewing a trial court's order
sustaining a demurrer without leave to amend: "We independently review the ruling on a
9 In this order, the trial court also denied Anthem's request for judicial notice of
letters it purportedly sent to Hospital while Patient was in the hospital. The court noted
that "[t]he contents of the letters are not the proper subject of judicial notice."
13
demurrer and determine de novo whether the complaint alleges facts sufficient to state a
cause of action. [Citation.] We assume the truth of the properly pleaded factual
allegations, facts that reasonably can be inferred from those expressly pleaded, and
matters of which judicial notice has been taken. [Citation.] We construe the pleading in
a reasonable manner and read the allegations in context." (Fremont Indemnity Co. v.
Fremont General Corp. (2007) 148 Cal. App. 4th 97, 111 (Fremont).)
When the trial court sustains a demurrer without leave to amend, "we decide
whether there is a reasonable possibility that the defect can be cured by amendment: if it
can be, the trial court has abused its discretion and we reverse; if not, there has been no
abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable
possibility is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal. 3d 311, 318
(Blank).)
B. Analysis
1. Anthem improperly relies on evidence not in the record throughout its
briefing
As an initial matter, we must address the impropriety of Anthem's reliance on
certain evidence, throughout its response brief, in attempting to demonstrate that the trial
court ruled correctly in sustaining its demurrer. Anthem repeatedly refers to the contents
of letters that it alleges are letters that it sent to Hospital with respect to Patient X's care.
Anthem asks this court to "look at what the writings actually stated when they conveyed
to Hospital the allegedly actionable misrepresentations," in an effort to demonstrate that
14
the writings referred to in the TAC "show[ ] something quite different from the
misimpression Hospital has created by its incomplete and vague pleading tactics[.]"
Anthem's request that this court "look at what the writings actually stated" is
inappropriate. Because a demurrer challenges defects on the face of the complaint, it can
refer to matters outside the pleading only if those matters are subject to judicial notice.
(Blank, supra, 39 Cal.3d at p. 318.)
The letters at issue were not incorporated into the operative pleading, and the trial
court declined to take judicial notice of the letters and thus did not consider them in
ruling on Anthem's demurrers.10 Anthem does not argue on appeal that the trial court
erred in denying Anthem's request for judicial notice. The letters are therefore not
properly before this court on the basis that the trial court judicially noticed them. Further,
Anthem does not properly request that this court take judicial notice of the documents
independently. Although Anthem argues in its briefing on appeal that the letters are
"relevant" to Hospital's claims and that this court "may evaluate" and/or
"properly/consider and judicially notice" them, an argument raised in a response brief is
insufficient to permit this court to take judicial of the evidence that is the subject of such
argument. (Formatting omitted.) If a party wants this court to take judicial notice of a
matter, that party must file a motion seeking judicial notice in this court, as required by
California Rules of Court, rule 8.252:
10 Again, the trial court concluded that "the letters are not the proper subject of
judicial notice."
15
"(1) To obtain judicial notice by a reviewing court under Evidence
Code section 459, a party must serve and file a separate motion with
a proposed order.
"(2) The motion must state:
"(A) Why the matter to be noticed is relevant to the appeal;
"(B) Whether the matter to be noticed was presented to the trial court
and, if so, whether judicial notice was taken by that court;
"(C) If judicial notice of the matter was not taken by the trial court,
why the matter is subject to judicial notice under Evidence Code
section 451, 452, or 453; and
"(D) Whether the matter to be noticed relates to proceedings
occurring after the order or judgment that is the subject of the
appeal."
Anthem has not filed a separate motion that complies with these requirements.
This, alone, would be a sufficient reason to reject Anthem's request that this court
consider the contents of the letters; however, even if Anthem had properly requested that
this court take judicial notice of the letters, we would have ruled in the same way that the
trial court did. The letters that Anthem seeks to introduce are not matters that are
properly subject to judicial notice.
" 'Judicial notice may not be taken of any matter unless authorized or required by
law.' (Evid. Code, § 450.) Matters that are subject to judicial notice are listed in
Evidence Code sections 451 and 452. A matter ordinarily is subject to judicial notice
only if the matter is reasonably beyond dispute." (Fremont, supra, 148 Cal.App.4th at
p. 113.) Neither the existence of the letters that Anthem is relying on, nor the content of
such letters, falls within any of the matters identified as those as to which judicial notice
16
must be taken pursuant to Evidence Code section 451,11 or matters identified as those as
to which judicial notice may be taken pursuant to section 452.12
11 Evidence Code section 451 provides:
"Judicial notice shall be taken of the following:
"(a) The decisional, constitutional, and public statutory law of this
state and of the United States and the provisions of any charter
described in Section 3, 4, or 5 of Article XI of the California
Constitution.
"(b) Any matter made a subject of judicial notice by Section
11343.6, 11344.6, or 18576 of the Government Code or by Section
1507 of Title 44 of the United States Code.
"(c) Rules of professional conduct for members of the bar adopted
pursuant to Section 6076 of the Business and Professions Code and
rules of practice and procedure for the courts of this state adopted by
the Judicial Council.
"(d) Rules of pleading, practice, and procedure prescribed by the
United States Supreme Court, such as the Rules of the United States
Supreme Court, the Federal Rules of Civil Procedure, the Federal
Rules of Criminal Procedure, the Admiralty Rules, the Rules of the
Court of Claims, the Rules of the Customs Court, and the General
Orders and Forms in Bankruptcy.
"(e) The true signification of all English words and phrases and of all
legal expressions.
"(f) Facts and propositions of generalized knowledge that are so
universally known that they cannot reasonably be the subject of
dispute."
12 Evidence Code section 452 provides:
"Judicial notice may be taken of the following matters to the extent
that they are not embraced within Section 451:
17
The only arguable "matter" identified in the relevant Evidence Code provisions
under which these letters could fall would be those matters identified in subdivision (h) of
Evidence Code section 452: "Facts and propositions that are not reasonably subject to
dispute and are capable of immediate and accurate determination by resort to sources of
reasonably indisputable accuracy." However, letters that were ostensibly created by a
party to the litigation regarding the subject of the litigation would appear to be the very
epitome of items "subject to dispute," as opposed to "not reasonably subject to dispute."
"(a) The decisional, constitutional, and statutory law of any state of
the United States and the resolutions and private acts of the Congress
of the United States and of the Legislature of this state.
"(b) Regulations and legislative enactments issued by or under the
authority of the United States or any public entity in the United
States.
"(c) Official acts of the legislative, executive, and judicial
departments of the United States and of any state of the United
States.
"(d) Records of (1) any court of this state or (2) any court of record
of the United States or of any state of the United States.
"(e) Rules of court of (1) any court of this state or (2) any court of
record of the United States or of any state of the United States.
"(f) The law of an organization of nations and of foreign nations and
public entities in foreign nations.
"(g) Facts and propositions that are of such common knowledge
within the territorial jurisdiction of the court that they cannot
reasonably be the subject of dispute.
"(h) Facts and propositions that are not reasonably subject to dispute
and are capable of immediate and accurate determination by resort to
sources of reasonably indisputable accuracy."
18
(Ibid., italics added.) Further, although the existence of a document, such as a document
recorded in the official records of a government body, may be judicially noticeable, the
truth of statements contained in the document and their proper interpretation are not
subject to judicial notice. (StorMedia Inc. v. Superior Court (1999) 20 Cal. 4th 449, 457,
fn. 9 ["In ruling on a demurrer, a court may consider facts of which it has taken judicial
notice. (Code Civ. Proc., § 430.30, subd. (a).) This includes the existence of a
document. When judicial notice is taken of a document, however, the truthfulness and
proper interpretation of the document are disputable."].) As a result, even if we were to
conclude that it would be proper to take judicial notice of the existence of the letters to
which Anthem repeatedly cites, the existence of the letters would offer Anthem no
assistance in supporting its position that Hospital's TAC fails to state any valid causes of
action, since Anthem's position is premised on its own interpretation of the meaning of
the letters.13
Because the evidence regarding the contents of these letters is not properly the
subject of judicial notice and, in fact, no judicial notice has been taken of these letters by
13 For example, Anthem claims that the letters "directly contradict Hospital's
allegations" in the TAC regarding the proper meaning of Anthem's "authorizations."
Anthem also asserts that an evaluation of these letters makes the "sham nature of
Hospital's allegations . . . immediately apparent." (Capitalization and boldface omitted.)
If anything, Anthem's argument demonstrates why such matters are not properly
considered on a demurrer, since the content of the letters can do no more than raise a
triable issue of fact with respect to whether Anthem made material misrepresentations or
concealed material facts. A demurrer is not the appropriate vehicle for challenging the
merits of a plaintiff's case.
19
either the trial court or this court, the letters are not properly before us.14 We will
therefore ignore any and all references to these letters in Anthem's briefing on appeal.
Such letters do not, and cannot, provide a basis for affirming the trial court's ruling with
respect to Anthem's demurrer.15
14 Anthem's reliance on Ingram v. Flippo (1999) 74 Cal. App. 4th 1280, 1285,
footnote 3 (Ingram), is misplaced. In Ingram, the appellate court took judicial notice of a
"letter and media release (which were substantially the same)" issued by a district
attorney's office regarding the results of an investigation into potential Brown Act
violations by public officials. (Id. at pp. 1284, 1285, fn. 3.) The documents had not been
attached to the operative complaint. However, unlike in this case, the complaint had
"excerpted quotes from the letter and summarized parts of it in some detail." (Id. at p.
1285, fn. 3.) Even more significantly, the appellant in Ingram had not opposed the court
taking judicial notice of the documents. (Id. at p. 1285, fn. 3.) The appellate court
appears to have accepted the appellant's concession that such material was properly the
subject of judicial notice without undertaking an independent analysis as to the propriety
of taking judicial notice. (Ibid.) We therefore do not consider Ingram to be useful
authority for purposes of this case.
15 At oral argument, counsel for Anthem suggested that the TAC is deficient because
Hospital failed to include the full text of the written communications alleged to have been
sent from Anthem to Hospital, or to attach a copy of the communications. Relying on
Holly Sugar Corp. v. Johnson (1941) 18 Cal. 2d 218, counsel's position at oral argument
was that when a fraud cause of action is predicated on a writing, the complaint must
include the full text of such a writing or attach a copy. We note that this position is
slightly different from the position taken in briefing, in which Anthem simply argued that
this court could consider the letters that Anthem contends are the writings containing
some of the alleged misrepresentations because "[a] cause of action predicated on a
writing―and here allegedly actionable misrepresentations are in writing―will ordinarily
plead what the writings state, or attach the writings to the complaint, or incorporate them
by reference." This is not an argument that Hospital's pleading is necessarily deficient
because it does not include the full text of the writings or attach a copy. Further, the
authority on which Anthem relies does not stand for the proposition that a pleading
alleging fraud is deficient if it does not include a copy of the writing in which an alleged
misrepresentation was made, either in the text of the complaint or by attaching a copy to
the complaint. Rather, the authority simply stands for the rule that a party may simply
quote from a document or attach a copy, rather than plead the legal effect of the
document: "It is well settled that a written instrument which is the foundation of a cause
20
2. Intentional fraud (causes of action 3 and 12)
" 'The elements of fraud, which give rise to the tort action for deceit, are (a)
misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of
falsity (or "scienter"); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance;
and (e) resulting damage.' " (Lazar v. Superior Court (1996) 12 Cal. 4th 631, 638
(Lazar).)
"In California, fraud must be pled specifically; general and conclusory allegations
do not suffice. [Citations.] 'Thus " 'the policy of liberal construction of the
pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any
material respect.' " [Citation.] [¶] This particularity requirement necessitates pleading
facts which "show how, when, where, to whom, and by what means the representations
were tendered." ' " (Lazar, supra, 12 Cal.4th at p. 645.) In addition, a plaintiff is held to
a higher standard in asserting a fraud claim against a corporate defendant. "In such a
case, the plaintiff must 'allege the names of the persons who made the allegedly
fraudulent representations, their authority to speak, to whom they spoke, what they said
or wrote, and when it was said or written.' " (Ibid.)
"The specificity requirement serves two purposes. The first is notice to the
defendant, to 'furnish the defendant with certain definite charges which can be
of action may be pleaded in haec verba, rather than according to its legal effect, either by
setting forth a copy in the body of the complaint or by attaching a copy as an exhibit and
incorporating it by proper reference." (Id. at p. 225, italics omitted.) Finally, even if
there existed a requirement that Hospital set forth in its complaint the full text of the
letters in which it contends the misrepresentations were made, such that this court could
consider the text of the letters as Anthem has requested it do, the letters do not, in and of
themselves, establish as a matter of law that there was no representation of coverage.
21
intelligently met.' [Citations.] The pleading of fraud, however, is also the last remaining
habitat of the common law notion that a complaint should be sufficiently specific that the
court can weed out nonmeritorious actions on the basis of the pleadings. Thus the
pleading should be sufficient ' "to enable the court to determine whether, on the facts
pleaded, there is any foundation, prima facie at least, for the charge of fraud." ' "
(Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197,
216-217 (Committee on Children's Television).)
There exist, however, "certain exceptions which mitigate the rigor of the rule
requiring specific pleading of fraud." (Committee on Children's Television, supra, 35
Cal.3d at p. 217.) For example, less specificity is required of a complaint when " 'it
appears from the nature of the allegations that the defendant must necessarily possess full
information concerning the facts of the controversy,' [citation]; '[e]ven under the strict
rules of common law pleading, one of the canons was that less particularity is required
when the facts lie more in the knowledge of the opposite party . . . .' " (Ibid., italics
added.)
Hospital has sufficiently met the pleading requirements for intentional fraud.
First, Hospital identifies multiple written and oral communications, made by the Anthem
entities and expressed to Hospital, in which Anthem authorized the services that Hospital
provided to Patient X. As to a large number of communications, Hospital alleges the
dates, times, and the names of the individuals who initiated these communications, which
occurred over a period of approximately 50 days. Moreover, Hospital identifies at least
one conversation between Anthem discharge planner Steele-Alvarez and a Hospital
22
representative in which Steele-Alvarez, alleged to be an employee and/or agent of one or
more of the Anthem defendants, not only authorized but specifically requested that
Hospital admit Patient X to its acute rehabilitation facility upon his discharge from
Hospital's ICU. Hospital has thus clearly pled facts that show how the statements were
made (directly to agents of Hospital through telephone calls and written letters faxed to
Hospital); when the statements were made (on the identified dates and the specified
times); where the statements were made (at Hospital, where its representatives received
the communications); to whom the statements were made (to identified Hospital
employees); and the means by which they were made (by way of telephone calls placed
and letters faxed from numbers that are alleged to belong to defendants). (See Lazar,
supra, 12 Cal.4th at p. 645 [pleading with particularity necessitates pleading that
" ' "show[s] how, when, where, to whom, and by what means the representations were
tendered" ' "].) Further, Hospital alleged the identities of certain individuals acting as the
agents of Anthem, and further provided the basis for the allegation that such individuals
had the authority to act on Anthem's behalf, including the fact that these individuals were
originally reached through Hospital's call to the number provided on Patient X's member
identification card, and that these individuals possessed private health and identifying
information about Patient X that they would not have been in possession of absent their
employment/agency relationship with Anthem.
Given the specificity of these numerous alleged communications, and given the
allegation that the provision of an "authorization" has a specific meaning in this context,
i.e., that an "authorization of services constitutes an affirmative representation that . . . the
23
services are covered," Hospital has sufficiently alleged the existence of multiple
affirmative misrepresentations that the care that Hospital rendered to Patient X would be
covered by his insurance plan.
In addition, the trial court failed to consider that a cause of action based in fraud
may arise from conduct that is designed to mislead, and not only from verbal or written
statements. (See Thrifty-Tel, Inc. v. Bezenek (1996) 46 Cal. App. 4th 1559, 1567 ["A
misrepresentation need not be oral; it may be implied by conduct."]; Universal By-
Products, Inc. v. City of Modesto (1974) 43 Cal. App. 3d 145, 151 ["A misrepresentation
need not be express but may be implied by or inferred from the circumstances."].)
Hospital has alleged repeated engagement by Anthem concerning the treatment of Patient
X, over a period of approximately 50 days, including the initiation of communications
with Hospital staff and requests for information that would imply that the services
authorized by Anthem and provided to Patient X by Hospital were not only medically
necessary, but were covered by Patient X's health insurance plan. If the services were
not covered, Anthem would have had no reason to continue to inquire about the medical
necessity of the services and, in fact, according to the allegations of the complaint, the
defendants would have been "legally barred from requesting information regarding the
Patient for health care services that [were] not covered." Thus, to the extent that the trial
court believed that Hospital had to allege that the defendants made an oral or written
statement informing Hospital that the services in question were "covered" by Patient X's
health insurance plan in order to sufficiently allege a cause of action for fraud, the trial
court was in error.
24
Anthem suggests that Hospital's TAC is insufficient because it does not identify
each individual and defendant entity who is alleged to have engaged in communications
with Hospital regarding Patient X's care. To the extent that Hospital may be relying on
the communications it received from unnamed case managers at Anthem, Hospital
provided sufficient information to permit Anthem, the party with superior knowledge of
who was responsible for preparing the documents in question, to identify the specific
individual or individuals; Hospital is relieved from having to plead that particular
information with specificity under such circumstances. (See West v. JPMorgan Chase
Bank, N.A. (2013) 214 Cal. App. 4th 780, 793 [plaintiff was not required to plead the
identity of the preparer of a letter from "the Chase Fulfillment Center" because that
information "was uniquely within Chase Bank's knowledge"]; see also Committee on
Children's Television, supra, 35 Cal.3d at p. 217 [less specificity is required in pleading
fraud when " 'it appears from the nature of the allegations that the defendant must
necessarily possess full information concerning the facts of the controversy,' " italics
added]; Boschma v. Home Loan Center, Inc. (2011) 198 Cal. App. 4th 230, 248 [" 'While
the precise identities of the employees responsible . . . are not specified in the loan
instrument, defendants possess the superior knowledge of who was responsible for
crafting these loan documents.' "].)
For this same reason, we reject Anthem's contentions that the allegations are not
sufficiently detailed as to which defendant entity employed "Aileen A." or any other
individual identified in the complaint, or which defendant entity maintained each
telephone number and fax number identified in the complaint. This information is
25
uniquely within the defendants' knowledge. Patient X's member identification card listed
a single telephone number for care providers to contact for purposes of obtaining " 'Pre-
Authorization' " for care. Hospital used the number that was provided on Patient X's card
to seek authorization for his care. The defendants are the entities who decided what
information to place on Patient X's member identification card. The defendants are also
the ones who have decided which entity is responsible for the different tasks that are
required to administer Eisenhower's health insurance plan. The mere fact that the nature
of defendants' relationships with each other and each entity's particular role in conducting
and administering the health insurance plan at issue are unclear, does not necessitate that
a court permit them to escape any responsibility at the pleading stage of a lawsuit.
Hospital has alleged a number of very specific facts that provide the defendant entities,
who possess superior knowledge of the relationships between and among them, to be able
to defend against the claims that Hospital asserts in its TAC. These specific factual
allegations, including the times that various communications occurred and the telephone
or fax numbers used, are also sufficient to demonstrate that there is a prima facie
foundation for Hospital's allegation of fraud. (See Committee on Children's Television,
supra, 35 Cal.3d at pp. 216-217.)
Anthem attempts to avoid the framing of the complaint by arguing that Hospital's
allegations that "Anthem authorized particular services for the patient" do not constitute
misrepresentations that the services would be covered, and not excluded. However,
Anthem's position is based on its argument, both in the trial court and on appeal, that it
26
"provides no coverage for Eisenhower plan benefits,"16 and that its "role was limited to
providing 'utilization management' and administrative services."17 However, according
to the allegations of the TAC, Anthem, Eisenhower and Keenan had an agreement under
which the Anthem entities and Keenan would act as Eisenhower's agents, performing all
of the administrative services on behalf of Eisenhower's "Health Plan ERISA Trust,"
which "provides health care benefits for employees of Eisenhower Medical Center and
their family members." These administrative services are alleged to include "all
communications and direct dealings with providers, such as the Hospital, including but
not limited to verification of eligibility, benefits and authorization of services; negotiating
with providers, such as the Hospital, concerning any matters including the entering into
and/or revisions to contracts; pricing claims in accordance with the terms of the plan
documents and Summary Plan Description; producing member identification cards;
conducting utilization review; processing authorizations of services and responding to
providers' requests for such authorizations; and coordination and management of medical
16 This assertion is not supported by a citation to the record.
17 Notably, Anthem does not explain what other services it is referencing when it
mentions "administrative services." In addition, Anthem spends three pages of its
appellate brief describing the process of "[u]tilization management or utilization
review"—which refers to "the process of determining whether services are medically
necessary"—under the heading "Utilization Review by Anthem On Behalf Of The Health
Plan." (Boldface omitted.) However, the question whether Anthem's role was or was not
limited to "utilization review" is not a question that can be answered on demurrer, unless
the allegations of the operative complaint or matters of which judicial notice may be
taken establish such a fact. As we explain, the TAC does not allege that Anthem's role
was so limited, and there are no facts as to which judicial notice has been taken.
Anthem's discussion regarding this issue is therefore wholly irrelevant.
27
care through case management." (Italics added.) Thus, the TAC alleges that Anthem's
role was, essentially, to administer Eisenhower's health plan on behalf of Eisenhower—
i.e., Anthem was to act as Eisenhower's agent in implementing all aspects of the health
plan, and to be the sole contact for entities such as Hospital. In addition, the TAC alleges
that Patient X's member identification card identified one of the Anthem entities, BC
Life, and Keenan, as Eisenhower's "authorized agent and administrator of Eisenhower's
plan." The card further identified another Anthem entity, Blue Cross, as the agent and
administrator for Eisenhower and BC Life who "administers claims" under Patient X's
plan. (Italics added.)
Beyond these allegations, the TAC alleges that "there has existed a trade custom
and usage that, to the extent that a health plan and its administrators have information
indicating that services are not covered under the plan, the health plan and its
administrators do not authorize such services." Thus, "there has existed a trade custom
and usage that an authorization of services constitutes an affirmative representation that,
based on all of the information the health plan has been provided to date, the services are
covered."18 (Italics added.)
Anthem's assertions as to the limitations of Anthem's role in administering
Eisenhower's health plan may or may not be true. However, these are factual questions
18 The TAC further alleges that this "custom and usage is, and at all times mentioned
has been, certain and uniform, of general continuity and notoriety, and acquiesced-in by
the whole of this industry," and, beyond this, "was well known to the Hospital and to
Blue Cross, BC Life, Anthem UM, Eisenhower, Keenan, and Does 1 through 25 at the
time of their communication of each of the authorizations."
28
that cannot be determined on a demurrer to a pleading that contains allegations that
conflict with Anthem's assertions in briefing in this court. Further, Anthem's attempts to
rely on evidence that it contends contradicts the allegations of the operative complaint
(i.e., the contents of letters that we have determined are not the proper subject of judicial
notice) is improper at this procedural juncture. Again, this matter was decided on a
demurrer, which exists as a procedural mechanism to determine whether, if the
allegations of the operative complaint are presumed to be true, the plaintiff has
sufficiently stated a cause of action. It is not the appropriate procedural vehicle to argue
the merits of the plaintiff's allegations.
Anthem's attempt to rely on Tenet Healthsystem Desert, Inc. v. Fortis, Ins. Co.
(C.D.Cal. 2007) 520 F. Supp. 2d 1184, 1192-1195 to argue that Hospital's allegations
regarding trade usage, custom, and course of dealing should be ignored, is misplaced. If
anything, Tenet supports this court's conclusion that this case was not appropriately
decided on demurrer. In Tenet, the federal court was considering a motion for summary
judgment; as a result, the district court's decision in Tenet was decided based on
uncontroverted evidence that had been presented to the trial court, including declarations
from representatives of both the plaintiff and defendant about the communications
between them regarding the patient's care, an admission by the plaintiff that it "knew of
no false, misleading, or untrue statements made by Defendant in connection with the calls
or at any other time" and that "Defendant did not fail to provide it with any information"
(id. at p. 1191), as well as "expert testimony regarding industry custom" (id. at p. 1192,
capitalization and boldface omitted), involving "emergency room admissions." (Id. at
29
p. 1193.) The conclusions reached by the trial court in Tenet on a motion for summary
judgment are simply of no assistance to Anthem with respect to the questions raised by
its demurrer to Hospital's complaint.
The TAC also sufficiently alleges facts to support the elements of defendants'
knowledge of the falsity of the alleged misrepresentations, their intent to induce
Hospital's reliance, as well as Hospital's justifiable reliance on the alleged
misrepresentations. The TAC alleges that knowledge of the plan's coverage, including
the exclusions, was, as between the parties, exclusively in the defendants' possession, and
that Hospital informed Anthem that Patient X was admitted to Hospital as a result of
being "injured while driving in an automobile accident with a blood alcohol level in
excess of the legal limit and positive for cannabis." The TAC alleges that Anthem knew
this information because Hospital provided it to Anthem on May 7, 2012, and that
Anthem continued to monitor, discuss, and authorize Patient X's treatment at Hospital on
multiple occasions after having been informed about his blood alcohol level and positive
test for cannabis. In addition, the TAC alleges that Anthem knew of the coverage
exclusions. As a result, any representations Anthem made that indicated to Hospital that
the services Hospital was providing to Patient X would be covered are alleged to have
been made with the knowledge that those representations were false.
In addition, the TAC alleges that the defendants made misrepresentations to
Hospital that the services "were authorized and covered with the intent to induce the
Hospital to act in reliance on them . . . or with the expectation that the Hospital would so
act." Further, the TAC includes allegations that Hospital "was ignorant of the falsity of
30
the representations [made by the defendants] and believed them to be true," and that
Hospital acted in reliance on the representations when it, for example, admitted Patient X
to its acute rehabilitation facility. The TAC also alleges that Hospital refrained from
seeking reimbursement from Medi-Cal for services provided to Patient X within Medi-
Cal's time limits because, as a result of the representations made by Anthem, Hospital
believed that the defendants would pay Hospital for the services provided. These
allegations sufficiently allege justifiable reliance.
In sum, the TAC provides a detailed set of allegations of fraud against Anthem.
Given the specificity of these numerous alleged communications, and given the allegation
that the provision of an "authorization" has a specific meaning in this context, i.e., that an
"authorization of services constitutes an affirmative representation that . . . the services
are covered," Hospital has sufficiently alleged the existence of multiple affirmative
misrepresentations that Patient X's care would be covered by his insurance plan.
3. Fraud based on suppression of facts (causes of action 2 and 11)
For similar reasons we conclude that the trial court erred in sustaining defendants'
demurrer to the TAC's causes of action for fraud based on the intentional suppression of
material facts. The tort of concealment is simply another species of fraud or deceit. (See
Civ. Code, § 1710, subd. (3) [fraud includes "[t]he suppression of a fact, by one who is
bound to disclose it, or who gives information of other facts which are likely to mislead
for want of communication of that fact"]; Lovejoy v. AT&T Corp. (2004) 119 Cal. App. 4th
151, 158.) "[T]he elements of an action for fraud and deceit based on concealment are:
(1) the defendant must have concealed or suppressed a material fact, (2) the defendant
31
must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must
have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff,
(4) the plaintiff must have been unaware of the fact and would not have acted as he did if
he had known of the concealed or suppressed fact, and (5) as a result of the concealment
or suppression of the fact, the plaintiff must have sustained damage." (Marketing West,
Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal. App. 4th 603, 612-613 (Marketing West).)
Thus, the elements of fraud and deceit based on concealment are the same as for
intentional fraud, with the additional requirement that the plaintiff allege that the
defendant concealed or suppressed a material fact in a situation in which the defendant
was under a duty to disclose that material fact.
" 'In transactions which do not involve fiduciary or confidential relations, a cause
of action for non-disclosure of material facts may arise in at least three instances: (1) the
defendant makes representations but does not disclose facts which materially qualify the
facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known
or accessible only to defendant, and defendant knows they are not known to or
reasonably discoverable by the plaintiff; [or] (3) the defendant actively conceals
discovery from the plaintiff.' (Fns. omitted.)" (Marketing West, supra, 6 Cal.App.4th at
p. 613, quoting Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal. 3d 285, 294.)
Although Hospital has not alleged the existence of a fiduciary or confidential
relationship, the allegations do set forth facts demonstrating that Anthem made
representations to Hospital but failed to disclose facts that rendered misleading the
disclosures that Anthem did make. Again, Hospital alleged that over a period of almost
32
two months, representatives of Anthem repeatedly "authorized" the medical services that
Hospital provided to Patient X, despite possessing knowledge that his care would not be
covered by the insurance policy because his injuries were sustained as a result of his
driving with a blood alcohol level in excess of the legal limit. Even if Hospital had not
alleged that by "authorizing" services defendants were also representing that the services
would be "covered" or paid for by insurance, Hospital sufficiently alleged that Anthem's
statements to Hospital concerning the authorization of services and Anthem's requests for
information, to which it would not be entitled if the services were not covered by
insurance, were misleading. In the absence of facts disclosing the exclusion from
coverage for Patient X's injuries, the nature and number of Anthem's communications
with Hospital over approximately 50 days would cause a reasonable person to believe
that the services would be paid for by Patient X's insurer.
4. Negligent misrepresentation (causes of action 1 and 10)
The tort of negligent misrepresentation is similar to fraud, except that it does not
require scienter or an intent to defraud. (Gagne v. Bertran (1954) 43 Cal. 2d 481, 487-
488.) Because the same elements of intentional fraud also comprise a cause of action for
negligent misrepresentation, with the exception that there is no requirement of intent to
induce reliance (Small v. Fritz Companies, Inc. (2003) 30 Cal. 4th 167, 173), Hospital's
complaint, which we have already determined sufficiently pleads the elements of
intentional fraud, also necessarily sufficiently pleads the elements of Hospital's
alternative claim that if intentional fraud cannot be established, then the facts are
sufficient to establish the existence of a cause of action for negligent misrepresentation.
33
We therefore conclude that the trial court erred in sustaining the demurrer with respect to
causes of action 1 and 10.
5. Unfair business practices (cause of action 19)
Our conclusion that the trial court erred in sustaining the demurrer to Hospital's
first, second, third, tenth, eleventh, and twelve causes of action has the further effect of
reviving Hospital's nineteenth cause of action, which sets forth a claim for unfair business
practices pursuant to Business and Professions Code section 17200. An unfair business
practice includes " ' "anything that can properly be called a business practice and that at
the same time is forbidden by law." ' " (Farmers Ins. Exchange v. Superior Court (1992)
2 Cal. 4th 377, 383.)
Hospital's cause of action for unfair business practices is based on a variety of
alleged conduct, including that defendants "engaged in misrepresentation [and] fraud" in
their business practices with Hospital based on the same conduct underlying the other
deceit-based causes of action. We therefore conclude that Hospital has sufficiently
alleged facts to state a claim for unfair business practices pursuant to Business and
Professions Code section 17200.
34
IV
DISPOSITION
The judgment of the trial court in favor of Anthem on causes of action 1, 2, 3, 10,
11, 12 and 19 is reversed and the matter is remanded. Hospital is entitled to costs on
appeal.
AARON, J.
WE CONCUR:
NARES, Acting P. J.
IRION, J.
35