Unanimous Hawaii Supreme Court Victory Against HMSA (An Independent Licensee of the Blue Cross and Blue Shield Association), for Cancer Patient and Widow
News Release from Damon Key Leong Kupchak Hastert, October 31, 2019
LINK: Supreme Court Ruling
HONOLULU, Hawaii, October 31, 2019 (Newswire.com) – A recent landmark decision by the Hawaii Supreme Court confirmed that insurance companies must treat their insureds with the utmost care and in good faith throughout the insurance company’s relationship with its insured. In Adams v. Hawaii Medical Service Association, (An Independent Licensee of the Blue Cross and Blue Shield Association) the unanimous Hawaii Supreme Court held that all insurance companies owe their insureds the highest duty of fair treatment at all times, and not only during the formal claims process. The Court ruled that, “HMSA’s duty of good faith and fair dealing arose as a consequence of the relationship established by the insurance contract entered into by Brent Adams and HMSA.” This case is important for all people who buy health insurance it makes the relationship between an insurance company and their insureds more balanced.
Brent Adams was diagnosed with a rare and aggressive cancer. His doctors told him that it was important to treat it immediately, and that his best chance was a series of stem cell transplants. Adams and his wife Patricia Adams turned to their insurance provider HMSA, informing HMSA that this two-part treatment was his best chance for survival. HMSA recommended that Adams travel to a California hospital that specializes in this procedure. They asked if HMSA needed any additional information about the treatment plan, but did not receive any further requests or instructions from HMSA. Adams’ doctors submitted to HMSA a precertification request for a stem cell transplant, which noted that his siblings would be tested to determine if they could serve as donors for the second-phase transplant. Adams underwent the first transplant.
Adams’ doctors then contacted HMSA regarding participation in a clinical trial for the additional stem cell transplant in preparation for the recommended second-phase. After consulting with doctors from three different institutions, the recommendation was that Adams undergo two separate and specific transplants. Over the next few months, the Adams and their doctors communicated numerous times with HMSA about their desire that Adams undertake the second-phase transplant, including telling HMSA that one of Adams’ siblings turned out to be a donor match. Patricia Adams told HMSA that they were “desperately trying to avoid any delays.”
But after Adams’ doctors submitted a precertification request for this second-phase transplant, they were shocked when HMSA informed them that Adams’ plan policy didn’t cover this type of procedure. Adams went ahead with repeating the first transplant in lieu of Adams’ doctors’ recommended second-phase transplant, despite Adams’ having the needed donor match.
Adams relapsed within a year and his doctors again recommended the second-phase transplant that HMSA had previously denied. This time the Adams appealed HMSA’s denial. The Jouxson-Meyers & del Castillo law firm took their appeal to the Insurance Division. The Insurance Division overruled HMSA, finding that the transplant was covered, and ordered HMSA to pay. HMSA complied and paid for the transplant, but appealed to the Circuit Court which affirmed the Insurance Division’s ruling. The Intermediate Court of Appeals reversed, finding the transplant was not covered under the HMSA plan. Meanwhile, Adams died while the lengthy appeal was pending.
Before he died, Brent and Patricia Adams initiated a separate action in which they sued HMSA, alleging that by not telling Adams that the second-phase transplant not covered by this plan as soon as HMSA received a request for the same from Adams and his doctors, it treated him unfairly and in bad faith. Had HMSA timely informed them that Adams’ plan did not cover the second-phase transplant, he would have undertaken a different treatment, entered a different clinical trial or raised money for the second-phase transplant. By the time HMSA did tell him, it was too late for an effective second-phase transplant.
In the second action, the Circuit Court sided with HMSA and concluded that HMSA’s only duty was to process his claim after the precertification request was submitted and that it did not matter what HMSA did before that. When Patricia Adams appealed, the Intermediate Court of Appeals affirmed. The appeals court reasoned that under bad faith claims handling, “the duties of good faith and fair dealing implied in every insurance contract arise after the insured complies with the claims procedure described in the insurance policy.”
Patricia Adams petitioned the Hawaii Supreme Court to review the case. The petition questioned the lower courts’ determination that an insurance company’s duty to treat its insureds in the utmost good faith only applies after an insured person submits a claim. Insurers should provide full information about coverage at all times, not just after a claim has been made, and Adams might have had a better chance of survival if HMSA had simply told him at the outset that his preferred course of treatment was not covered by his plan. “Despite the lower courts’ dismissal of claims, Patricia Adams was not about to give up,” noted her counsel, Rafael del Castillo.
The Supreme Court granted the petition, and in January 2019, heard the case. Tred Eyerly, head of Damon Key Leong Kupchak Hastert’s Insurance Law practice group, argued “promising to help Brent navigate his plan, but never informing him the second-phase transplant would not be covered was an act of bad faith” and, the trial court should have allowed Patricia Adams to present evidence of HMSA’s conduct and its failure to provide complete information to Adams and her.
On September 30, 2019, the court issued a unanimous opinion completely agreeing with Eyerly’s argument. The court held, “[t]o determine whether an insurer reasonably handled a claim, we consider the conduct of the parties to the contract before and after the formal submission of the claim.” The court of appeals erred when it “analyzed HMSA’s conduct without considering its conduct throughout the duration of its relationship with Brent, starting with the first communication.” The Supreme Court sent the case back to the lower courts to consider Patricia Adam’s evidence about HMSA’s pre-claim conduct.
This decision vindicating Patricia Adam’s claim sets a national precedent that benefits all consumers of insurance. It is the first case to expressly confirm that insurance providers have a duty to treat their insurers in good faith by providing them information about their coverage and treatment at all times, not just after a claim has been filed.