Harvey et al v. Centene Corporation et al, No. 2:2018cv00012 - Document 61 (E.D. Wash. 2018)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART 50 DEFENDANT'S MOTION TO DISMISS SECOND AMENDED COMPLAINT. Signed by Judge Salvador Mendoza, Jr. (AY, Case Administrator)
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Harvey et al v. Centene Corporation et al Doc. 61 1 FI LED I N THE U.S. DI STRI CT COURT EASTERN DI STRI CT OF WASHI NGTON 2 Nov 21, 2018 UNITED STATES DISTRICT COURT SEAN F. M AVOY, CLERK EASTERN DISTRICT OF WASHINGTON C 3 4 5 CYNTHIA HARVEY, individually and on behalf of all others similarly situated, 6 Plaintiff, 7 v. No. 2:18-CV-00012-SMJ ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT 8 9 10 11 CENTENE MANAGEMENT COMPANY LLC and COORDINATED CARE CORPORATION, Defendants. 12 Before the Court is Defendants Centene Management Company LLC and 13 Coordinated Care Corporation’s Motion to Dismiss Second Amended Complaint, 14 ECF No. 50. Defendants ask the Court to dismiss Plaintiff Cynthia Harvey’s class 15 action complaint alleging breach of contract and violation of the Consumer 16 Protection Act (“CPA”), chapter 19.86 of the Revised Code of Washington 17 (“RCW”). ECF No. 48. Harvey, a purchaser of Defendants’ Ambetter health 18 insurance policy, claims Defendants “misrepresented and made material omissions 19 regarding the coverage actually provided by [their] Ambetter policy, which did not 20 deliver the insurance services for which the [Washington State Office of the ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 1 Dockets.Justia.com 1 Insurance Commissioner] approved [the] filed rates.” Id. at 7. Defendants argue 2 Harvey fails to state a claim upon which relief can be granted. For the following 3 reasons, the Court grants the motion in part and denies it in part. 4 BACKGROUND 5 On August 29, 2018, Harvey filed a Second Amended Complaint on behalf 6 of herself and a putative class of Ambetter policyholders alleging Defendants 7 breached their contracts and violated the CPA by misrepresenting and making 8 material omissions regarding the coverage actually provided by their Ambetter 9 policy, which did not deliver the insurance services for which the Insurance 10 Commissioner approved the premiums. Id. 11 The complaint alleges Defendants “target low-income customers who qualify 12 for substantial government subsidies while simultaneously providing coverage well 13 below both what is required by law and what [they] represent[] to customers.” Id. 14 at 5. “[T]he provider network [Defendants] represented was available to Ambetter 15 policyholders was in material measure, if not largely, fictitious. Members have 16 difficulty finding – and in many cases cannot find – medical providers who will 17 accept Ambetter insurance.” Id. Defendants “misrepresent[] the number, location, 18 and existence of purported providers by listing physicians, medical groups, and 19 other providers – some of whom have specifically asked to be removed – as 20 participants in their network and by listing nurses and other non-physicians as ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 2 1 primary care providers.” Id. “Defendants have even copied entire physician 2 directories into their purported network lists for some areas, and have, in fact, listed 3 medical students as part of their primary care provider network.” Id. Defendants 4 “listed those providers as being part of their network even though those providers 5 were not actually part of the provider network for Ambetter.” Id. at 19. 6 The complaint alleges “Defendants fail to disclose the true limitations of the 7 coverage provided by its Ambetter policies.” Id. at 6. “Defendants’ sales materials 8 omit the fact that [they] do[] not adequately monitor their network of providers. The 9 Ambetter documentation also fails to disclose that [Defendants] do[] not 10 consistently provide access to ‘medically necessary care on a reasonable basis’ 11 without charging for out-of-network services.” Id. Additionally, “Defendants 12 routinely deny coverage for medical services, claiming that the provider did not 13 show sufficient diagnostic evidence that the care was necessary.” Id. at 20. “As a 14 result of [Defendants] failing to pay providers for legitimate claims, a large number 15 of medical providers reject Ambetter insurance, further reducing the provider 16 network available to Ambetter’s members.” Id. at 6. “Defendants’ provider network 17 was and is so limited that holders of Ambetter policies would have to travel long 18 distances to see a medical provider, if one legitimately within Defendants’ network 19 could be found at all.” Id. at 19. 20 Harvey purchased Defendants’ Ambetter policy in December 2016. Id. at 21. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 3 1 In doing so, Harvey relied in part on Defendants’ Ambetter plan brochure and plan 2 summary. See id. at 21–22. These documents represent that the healthcare providers 3 listed in Defendants’ online directory are in network. Id. The documents “also 4 purport to describe generally what services are covered and what are not, but are 5 misleading by failing to indicate how few in-network providers would be 6 available.” Id. at 22. “For example, they indicate that emergency room services 7 would be covered, although out-of-network charges might be incurred for out-of- 8 network providers working in an otherwise covered emergency room. They fail to 9 disclose, however, that in the Spokane area, during 2017, they had zero emergency 10 room physicians who were in-network.” Id. “Because Defendants failed to disclose 11 that the limitations of the network coverage actually provided by the Ambetter 12 policy fell far short of what they represented, Plaintiff . . . was forced to incur a 13 charge of $1,544 for treatment received from an emergency room doctor.” Id. 14 Defendants also failed to cover individual elements of Harvey’s healthcare 15 visits because they were out of network. Id. “For example, Plaintiff . . . received 16 services from a covered doctor on March 17, 2017, but then received a bill from the 17 lab used by that doctor. Similarly, Plaintiff . . . , who has been identified as high 18 risk for colorectal cancer, was advised by Coordinated Care to get a colonoscopy. 19 Colonoscopies are within the preventive services required by the [Patient Protection 20 and Affordable Care Act] to be included in coverage and are identified as covered ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 4 1 in [Defendants’] Preventive Care brochure.” Id. at 22. “When she got the 2 colonoscopy from a covered doctor, however, her claims for two of the technicians 3 involved in the procedure were denied.” Id. at 22–23. 4 Harvey used Defendants’ grievance and appeal process for each denial of 5 coverage. Id. at 23. “In many cases, her appeal was ultimately successful, indicating 6 that the initial denial of her claims was invalid. However, she was forced to 7 complete the process of appeal, while providers were sending her bills and deeming 8 her a credit risk.” Id. 9 Putative class members “have had similar experiences, as admitted by 10 Defendants in their May 17, 2018 letter to policyholders.” Id. One putative class 11 member “attempted to schedule an appointment with someone listed as a primary 12 care physician on the provider network, only to find out that the person was a nurse 13 practitioner” while “[a]nother person listed as a physician provider was a medical 14 student.” Id. at 23–24. Another putative class member “is a 60-year-old widow with 15 medical issues” who “has consistently encountered difficulties with finding a 16 medical provider willing to accept the Ambetter plan,” which means “[s]he has to 17 drive extraordinary distances to find a provider within Ambetter’s network, an 18 ordeal which can be insurmountable given her medical condition.” Id. at 24. 19 The complaint alleges that, on December 12, 2017, the Insurance 20 Commissioner ordered Coordinated Care to stop selling the 2018 Ambetter policy, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 5 1 finding “sufficient evidence to indicate that the Company failed to monitor its 2 network of providers, failed to report its inadequate network to the Insurance 3 Commissioner, and failed to file a timely alternative access delivery request to 4 ensure that consumers receive access to healthcare providers.” Id. at 7–8. “The 5 Insurance Commissioner intervened after receiving over 100 consumer complaints 6 regarding a lack of doctors in the Ambetter policy network and other deficiencies 7 and after doing its own investigation.” Id. at 7. The Insurance Commissioner 8 declared “Coordinated Care is legally required to provide access to ‘medically 9 necessary care on a reasonable basis’ without charging for out-of-network 10 services.” Id. at 8. And the Insurance Commissioner ordered Coordinated Care to 11 “no longer send customers ‘surprise’ bills, including charges for out-of-network 12 care.” Id. 13 Harvey alleges Defendants breached their insurance contracts by “failing to 14 provide accurate information regarding their provider networks, failing to provide 15 a sufficient network of providers, denying valid claims, failing to pay providers for 16 valid claims, and collecting premiums while failing to provide an adequate network 17 of providers that included emergency room physicians, labs used by in network 18 providers and the like.” Id. at 30; see also id. at 29. Harvey alleges she and the 19 putative class “suffered damages as a direct and proximate result of Defendants’ 20 breach of contract, consisting of all of the amount of the premiums they paid as well ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 6 1 as the amounts they paid pursuant to improper billings by Defendants and expenses 2 incurred in seeking or obtaining medical services.” Id. at 30. 3 Harvey alleges Defendants engaged in unfair or deceptive acts or practices in 4 conducting its insurance business by “failing to have sufficient providers within the 5 Ambetter network as represented, . . . failing to pay legitimate medical claims on 6 behalf of their insured, . . . failing to provide the benefits and coverage represented 7 by Defendants to be within the plan, . . . failing to address Plaintiff’s . . . complaints, 8 . . . violating [applicable statutes and regulations], and . . . omitting material facts 9 regarding the benefits and coverage of Ambetter policies.” Id. at 32. Harvey alleges 10 “[a]s a direct and proximate result of Defendants’ unfair acts or practices, Plaintiff 11 and Class members suffered injury in fact by paying insurance premiums but failing 12 to receive benefits, paying out-of-pocket costs for services covered but not provided 13 by the Ambetter plan, and spending time and money locating and traveling to 14 providers willing to accept the Ambetter plan.” Id. at 33. 15 For each claim, Harvey seeks compensatory or actual damages equal to 16 i. 17 18 ii. 19 iii. 20 Benefit of the Bargain: a refund of the entire premium for the purchase of insurance that was not as represented and contracted for in order to restore Plaintiff and the Class to their position prior to purchasing the Ambetter policy; and/or Partial Refund: the difference in value between the value of the policy as represented and contracted for and the value of the policy as actually accepted and delivered; and/or Out-Of-Pocket Expenses: damages incurred as a result of having to pay for services that should have been covered by the Ambetter policy. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 7 1 Id. at 33–34; accord id. at 31. 2 Harvey disavows any perceived challenge to the reasonableness of health 3 insurance premiums approved by the Insurance Commissioner: “To be clear, 4 Plaintiff . . . [is] not challenging the reasonableness of the rates filed with the 5 Insurance Commissioner. Had [Defendants] actually delivered the insurance 6 services for which its filed rates were approved by the [Insurance Commissioner], 7 Plaintiff . . . would not assert a claim.” Id. at 6–7. 8 The complaint alleges both Centene Management and Coordinated Care are 9 wholly-owned subsidiaries of Centene Corporation, which is not a defendant to this 10 civil action. ECF No. 48 at 2–4. Under a management services agreement between 11 them, Centene Management “effectuates, controls and handles the operations” of 12 Coordinated Care. Id. at 3. Specifically, Centene Management “provides the 13 services necessary to manage the business operations” of Coordinated Care and 14 “assumes responsibility for program planning and development, management 15 information systems, financial systems and services, claims administration, 16 provider and enrollee services and records, case management, care coordination, 17 utilization and peer review, and quality assurance/quality improvement.” Id. “To all 18 intents and purposes the activities of Coordinated Care have been abdicated to 19 Centene [Management] . . . which entirely controls the activities of Coordinated 20 Care.” Id. Thus, Coordinated Care is “a shell and alter ego” of Centene ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 8 1 Management, and the two “operate so in concert and together in a common 2 enterprise and through related activities so that the actions of one may be imputed 3 to the other.” Id. 4 Defendants moved to dismiss Harvey’s complaint on September 12, 2018. 5 ECF No. 50. Harvey responded in opposition to the motion and Defendants replied 6 in support of it. ECF Nos. 56, 58. The Court held a hearing regarding the motion on 7 November 20, 2018. LEGAL STANDARD 8 9 A. Federal Rule of Civil Procedure 12(b)(6) 10 A complaint must contain “a short and plain statement of the claim showing 11 that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Under Federal Rule of 12 Civil Procedure 12(b)(6), the Court must dismiss the complaint if it “fail[s] to state 13 a claim upon which relief can be granted.” 14 In deciding a Rule 12(b)(6) motion, the Court construes the complaint in the 15 light most favorable to the plaintiff and draws all reasonable inferences in the 16 plaintiff’s favor. Ass’n for L.A. Deputy Sheriffs v. County of Los Angeles, 648 F.3d 17 986, 991 (9th Cir. 2011). Thus, the Court must accept as true all factual allegations 18 contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). But the 19 Court may disregard legal conclusions couched as factual allegations. See id. 20 To survive a Rule 12(b)(6) motion, the complaint must contain “some viable ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 9 1 legal theory” and provide “fair notice of what the claim is and the grounds upon 2 which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 562 (2007) (internal 3 quotation marks and ellipsis omitted). Thus, the complaint must contain “sufficient 4 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 5 face.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Facial 6 plausibility exists where the complaint pleads facts permitting a reasonable 7 inference that the defendant is liable to the plaintiff for the misconduct alleged. Id. 8 Plausibility does not require probability but demands more than a mere possibility 9 of liability. Id. While the complaint need not contain detailed factual allegations, 10 threadbare recitals of a cause of action’s elements, supported only by conclusory 11 statements, do not suffice. Id. Whether the complaint states a facially plausible 12 claim for relief is a context-specific inquiry requiring the Court to draw from its 13 judicial experience and common sense. Id. at 679. 14 B. Breach-of-contract claim 15 “A breach of contract is actionable only if the contract imposes a duty, the 16 duty is breached, and the breach proximately causes damage to the claimant.” Nw. 17 Indep. Forest Mfrs. v. Dep’t of Labor & Indus., 899 P.2d 6, 9 (Wash. Ct. App. 1995). 18 An insurance contract includes a “duty to act in good faith,” which requires that “an 19 insurer must deal fairly with an insured, giving equal consideration in all matters to 20 the insured’s interests. Tank v. State Farm Fire & Cas. Co., 715 P.2d 1133, 1136 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 10 1 (Wash. 1986). “The general rule regarding damages for an insurer’s breach of 2 contract is that the insured must be put in as good a position as he or she would have 3 been had the contract not been breached.” Kirk v. Mt. Airy Ins. Co., 951 P.2d 1124, 4 1126 (Wash. 1998). This is a benefit-of-the-bargain theory of damages. See Benefit- 5 of-the-Bargain Rule, Black’s Law Dictionary (10th ed. 2014). “[B]ecause an 6 insurance contract is typically an agreement to pay money . . . recovery of damages 7 is limited to the amount due under the contract plus interest.” Kirk, 951 P.2d at 1126. 8 Recoverable damages for breach of an insurance contract include the out-of-pocket 9 expenses and other liabilities incurred as a result of the breach, provided the policy 10 covers those amounts. See id. 11 C. CPA claim 12 “The business of insurance is one affected by the public interest, requiring 13 that all persons be actuated by good faith, abstain from deception, and practice 14 honesty and equity in all insurance matters.” RCW 48.01.030. “Upon the insurer, 15 the insured, their providers, and their representatives rests the duty of preserving 16 inviolate the integrity of insurance.” Id. Thus, “[i]nsureds may bring a private action 17 against their insurers for breach of the duty of good faith under the [CPA].” 18 Leingang v. Pierce Cty. Med. Bureau, Inc., 930 P.2d 288, 296 (Wash. 1997). 19 The CPA prohibits “unfair or deceptive acts or practices in the conduct of 20 any trade or commerce,” RCW 19.86.020, and provides remedies for “[a]ny person ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 11 1 who is injured in his or her business or property by a violation of [this rule],” RCW 2 19.86.090. To prevail in a private CPA claim, the plaintiff must prove “(1) the 3 defendant has engaged in an unfair or deceptive act or practice, (2) in trade or 4 commerce, (3) that impacts the public interest, (4) the plaintiff has suffered injury 5 in his or her business or property, and (5) a causal link exists between the unfair or 6 deceptive act and the injury suffered.” Leingang, 930 P.2d at 296. 7 Remedies available under the CPA include injunctive relief, actual damages, 8 attorney fees and costs, and, in the trial court’s discretion, treble damages up to 9 $25,000. RCW 19.86.090. “Damages, for purposes of the [CPA], must be broadly 10 construed.” St. Paul Fire & Marine Ins. Co. v. Updegrave, 656 P.2d 1130, 1133 11 (Wash. Ct. App. 1983); see also Univ. of Wash. v. Gov’t Emps. Ins. Co., 404 P.3d 12 559, 571 (Wash. Ct. App. 2017). “Even minimal injury is sufficient to meet the 13 damages element of a CPA claim.” Univ. of Wash., 404 P.3d at 571 (citing Mason 14 v. Mortg. Am., Inc., 792 P.2d 142, 148 (Wash. 1990)). Damages are established “if 15 the consumer’s property interest or money is diminished because of the unlawful 16 conduct even if the expenses . . . are minimal.” Mason, 792 P.2d at 148. Even 17 “nonquantifiable injuries” such as “loss of use of property” will suffice. Id. 18 DISCUSSION 19 Initially, the Court confines its analysis to the complaint and excludes the 20 extraneous documents submitted because they are unnecessary to assess the ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 12 1 complaint’s sufficiency and the parties have not articulated adequate reasons for 2 considering them at the pleading stage. See generally Khoja v. Orexigen 3 Therapeutics, Inc., 899 F.3d 988, 998–99, 1002–03 (9th Cir. 2018) (discussing 4 judicial notice and incorporation by reference at the Rule 12(b)(6) stage). 5 A. The filed rate doctrine does not preclude Harvey’s claims. 6 Harvey claims Defendants are liable for damages caused by their contract 7 breaches and CPA violations. ECF No. 48. Defendants argue the filed rate doctrine 8 precludes Harvey’s claims because awarding the damages she seeks would require 9 the Court to reevaluate health insurance premiums that the Insurance Commissioner 10 approved. ECF No. 50 at 8–15. The Court explores the filed rate doctrine before 11 applying it to Harvey’s claims. 1. 13 The filed rate doctrine does not apply to claims that are merely incidental to and do not directly attack Insurance Commissionerapproved health insurance premiums. 14 In Washington state, health insurance premiums must be approved by the 15 Insurance Commissioner. McCarthy Fin., Inc. v. Premera, 347 P.3d 872, 873, 875 16 (Wash. 2015). Under the filed rate doctrine, “once an agency approves a rate, such 17 as a health insurance premium, courts will not reevaluate that rate because doing so 18 would inappropriately usurp the agency’s role.” 1 Id. at 873. “However, courts may 12 19 1 20 “The ‘filed rate’ doctrine . . . is a court-created rule to bar suits against regulated utilities involving allegations concerning the reasonableness of the filed rates.” McCarthy Fin., Inc., 347 P.3d at 875 (quoting Tenore v. AT & T Wireless Servs., ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 13 1 consider claims that are related to rates approved by an agency but do not require 2 the courts to reevaluate such rates.” Id. “In most cases, . . . courts must consider . . . 3 CPA . . . claims alleging general damages merely related to agency-approved rates.” 4 Id. But a court should dismiss claims for “specific damages the award of which 5 would require a court to reevaluate the reasonableness of health insurance premiums 6 approved by the [Insurance Commissioner].” Id. The issue is whether Harvey’s 7 claims fall within the scope of the filed rate doctrine. 8 In McCarthy Finance, the Washington State Supreme Court affirmed 9 dismissal of a class action complaint alleging the defendants violated the CPA by 10 “collud[ing] and ma[king] false and misleading representations to the plaintiffs that 11 induced the plaintiffs to purchase health insurance policies under false pretenses.” 12 Id. at 873–74. The plaintiffs alleged that the defendants’ CPA violations caused 13 them to pay “excessive, unnecessary, unfair and deceptive overcharges for health 14 insurance,” which enabled the defendants to obtain millions of dollars in profits and 15 amass a surplus of approximately $1 billion. Id. at 874. The plaintiffs sought “only 16 two specific forms of damages.” Id. First, “for the ‘unfair business practices and 17 excessive overcharges for premiums,’ the plaintiffs request[ed] ‘the sum of the 18 19 20 962 P.2d 104, 108 (Wash. 1998)). “This doctrine provides, in essence, that any ‘filed rate’—a rate filed with and approved by the governing regulatory agency— is per se reasonable and cannot be the subject of legal action against the private entity that filed it.” Id. (quoting Tenore, 962 P.2d at 108). ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 14 1 excess premiums paid to the defendants,’ in other words, a ‘refund[] of the gross 2 and excessive overcharges in premium payments.’” Id. (second alteration in 3 original). Second, “‘[i]f the surplus [wa]s excessive and unreasonable,’ the plaintiffs 4 assert[ed] that ‘the amount of the excess surplus should be refunded to the 5 subscribers who have paid the high premiums causing the excess.’” Id. (first 6 alteration in original). 7 The court held the filed rate doctrine barred the plaintiffs’ CPA claims 8 because awarding the two specific forms of damages they sought—a refund of 9 either the gross and excessive overcharges in premium payments or the amount of 10 the excess surplus—would require a judicial determination of “what health 11 insurance premiums would have been reasonable for the[m] to pay as a baseline for 12 calculating the amount of damages,” which would be inappropriate because the 13 Insurance Commissioner had already determined that the premiums they paid were 14 reasonable. Id. at 876. In short, “awarding the specific damages requested by the 15 plaintiffs would require a court to inappropriately substitute its judgment for that of 16 the [Insurance Commissioner].” Id. at 873. 17 In so holding, the court distinguished between claims that “are merely 18 incidental to agency-approved rates” and those that “would necessarily require 19 courts to reevaluate agency-approved rates.” Id. at 875. The court specified that the 20 filed rate doctrine precludes only the latter type of claim. Id. As the court reasoned, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 15 1 “[t]he mere fact that a claim is related to an agency-approved rate is no bar.” Id. 2 The court suggested the filed rate doctrine does not preclude claims “requesting 3 general damages or seeking any damages that do not directly attack agency- 4 approved rates.” Id. at 875–76. 5 Further, the court noted the legislative mandate to construe the CPA liberally. 6 Id. Thus, the court concluded, “[i]n most cases, courts must consider CPA claims 7 even when the requested damages are related to agency approved rates.” Id. As the 8 court reasoned, “to the extent that claimants can prove damages without attacking 9 agency-approved rates, the benefits gained from courts’ considering CPA claims 10 outweigh any benefit that would be derived from applying the filed rate doctrine to 11 bar the claims.” Id. 12 Upon reviewing McCarthy Finance, the Court concludes Washington state 13 law is clear: the filed rate doctrine does not apply to claims that are merely 14 incidental to and do not directly attack Insurance Commissioner-approved health 15 insurance premiums. Thus, the Court denies the parties’ request to certify a question 16 to the Washington State Supreme Court. ECF No. 56 at 17; ECF No. 58 at 9. 17 2. Harvey’s claims are merely incidental to and do not directly attack Insurance Commissioner-approved health insurance premiums. 18 Harvey disavows any perceived challenge to the reasonableness of health 19 insurance premiums approved by the Insurance Commissioner: “To be clear, 20 Plaintiff . . . [is] not challenging the reasonableness of the rates filed with the ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 16 1 Insurance Commissioner. Had [Defendants] actually delivered the insurance 2 services for which its filed rates were approved by the [Insurance Commissioner], 3 Plaintiff . . . would not assert a claim.” ECF No. 48 at 6–7. Defendants argue this 4 disclaimer is belied by the damages Harvey seeks. ECF No. 50 at 8–15. 5 Harvey seeks compensatory or actual damages equal to either (1) the “Benefit 6 of the Bargain,” meaning “a refund of the entire premium for the purchase of 7 insurance that was not as represented and contracted for in order to restore Plaintiff 8 and the Class to their position prior to purchasing the Ambetter policy;” (2) a 9 “Partial Refund,” meaning “the difference in value between the value of the policy 10 as represented and contracted for and the value of the policy as actually accepted 11 and delivered;” or (3) all “Out-Of-Pocket Expenses,” meaning “damages incurred 12 as a result of having to pay for services that should have been covered by the 13 Ambetter policy.” ECF No. 48 at 33–34; accord id. at 31. 14 While Harvey’s claims are certainly related to health insurance premiums 15 approved by the Insurance Commissioner, they do not require the Court to 16 reevaluate the reasonableness of such premiums. Instead, Harvey assumes the 17 reasonableness of the premiums and uses them as a proper baseline for calculating 18 the amount of damages. Harvey does not allege the premiums were too high but 19 instead alleges Defendants misrepresented and made material omissions regarding 20 the coverage actually provided by their Ambetter policy, which did not deliver the ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 17 1 insurance services for which the Insurance Commissioner approved the premiums. 2 Id. at 7. Awarding the damages Harvey seeks would not require the Court to 3 determine what premiums would have been reasonable. In short, awarding the 4 damages Harvey requests would not require the Court to inappropriately substitute 5 its judgment for that of the Insurance Commissioner. 6 Harvey’s claims are unlike those in McCarthy Finance. That case turned on 7 the plaintiffs’ allegations that the premiums they paid the defendants were too high 8 compared to the services they received. “A very different case is presented by a 9 class of plaintiffs that is perfectly happy to pay the rate set by the [Insurance 10 Commissioner] provided that the regulated entity lives up to its contractual and 11 legal obligations under that rate schedule.” Kaleigh Powell, “A Nuanced 12 Approach”: How Washington Courts Should Apply the Filed Rate Doctrine, 92 13 Wash. L. Rev. 481, 513–14 (2017). In this alternative type of case, the plaintiffs do 14 not allege their premiums are too high but rather allege either that they did not 15 receive the services the defendants promised them or that the defendants committed 16 some sort of consumer protection violation. Id. at 514. Here, Harvey’s claims fit 17 more closely with this alternative type of case than with McCarthy Finance. 18 Considering all, the Court concludes that Harvey’s claims are merely 19 incidental to and do not directly attack Insurance Commissioner-approved health 20 insurance premiums. But even if the Court were “skeptical that these damages can ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 18 1 be measured in a way that does not violate the filed-rate doctrine,” the Court 2 acknowledges “the better practice is to address this issue at summary judgment or 3 trial, rather than at the pleading stage.” In re Premera Blue Cross Customer Data 4 Sec. Breach Litig., 198 F. Supp. 3d 1183, 1204 (D. Or. 2016) (declining, at the Rule 5 12(b)(6) stage, to apply the filed rate doctrine to dismiss a class action complaint 6 based on a data security breach of the defendants’ computer network where the 7 plaintiffs alleged they suffered “actual damages in an amount equal to the difference 8 in the free-market value of the secure healthcare insurance for which they paid and 9 the insecure healthcare insurance they received”). 10 B. Harvey states an adequate CPA claim against Centene Management but she fails to state an adequate breach-of-contract claim against it. 11 Centene Management argues Harvey cannot pierce the corporate veil to hold 12 it liable because she does not adequately plead that it is Coordinated Care’s alter 13 ego. ECF No. 50 at 19–23. Harvey sues both Centene Management and Coordinated 14 Care directly, alleging they are each responsible for their individual and joint 15 actions. Id. at 3. 16 Certainly, Centene Management is responsible for its own actions to the 17 extent it “participate[d] in the wrongful conduct, or with knowledge approve[d] of 18 the conduct.” State v. Ralph Williams’ N.W. Chrysler Plymouth, Inc., 553 P.2d 423, 19 439 (Wash. 1976). Harvey adequately pleads that Centene Management did so here. 20 But that fact only establishes liability for the alleged CPA violations because ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 19 1 Centene Management could not breach a contract to which it was not a party. 2 See 2 generally Havens v. C & D Plastics, Inc., 842 P.2d 975, 984 (Wash. Ct. App. 1992) 3 (“[A]n agent acting within the scope of . . . authority and in contractual matters is 4 not individually liable.”), rev’d in part on other grounds, 876 P.2d 435 (Wash. 5 1994); In re Excel Innovations, Inc., 502 F.3d 1086, 1097 (9th Cir. 2007) (“An agent 6 is always liable for breaching an independent obligation that the agent owes to the 7 injured party, in spite of the fact that the agent may have acted in accordance with 8 a principal’s instructions.”). At oral argument, Harvey conceded the Court should 9 dismiss Centene Management as a breach-of-contract defendant. Therefore, the 10 Court does not reach Centene Management’s alter ego argument. 11 The Court concludes Harvey states a facially plausible CPA claim against 12 Centene Management but she fails to state a facially plausible breach-of-contract 13 claim against it. While the Court dismisses Harvey’s breach-of-contract claim 14 against Centene Management, it does so without prejudice because Harvey requests 15 leave to amend the complaint and expects discovery to reveal more details regarding 16 “the ways in which the two corporate entities interacted, comingled, or disregarded 17 the corporate form.” ECF No. 56 at 25–26. 18 19 20 2 While the complaint alleges Harvey had a “valid and binding written contract[] with Defendants for the purchase of Ambetter insurance policies,” ECF No. 48 at 29 (emphasis added), it elsewhere clarifies that she purchased this policy from Coordinated Care only, id. at 2. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 20 1 C. Harvey states an adequate breach-of-contract claim against Coordinated Care. 2 Coordinated Care argues Harvey’s allegations do not establish a breach 3 because the contract contains a grievance and appeal process for resolving coverage 4 disputes. ECF No. 50 at 16–17. Similarly, Coordinated Care argues Harvey’s 5 allegations do not establish a breach because the contract contains a caveat that the 6 insurer may bill the insured for services rendered by an out-of-network healthcare 7 provider working within an in-network emergency department. Id. at 17. 8 “[I]t would be premature at the motion to dismiss stage for the Court to delve 9 into contractual interpretation . . . checking each term of the contract against each 10 factual allegation in the complaint.” Seitz v. Rheem Mfg. Co., 544 F. Supp. 2d 901, 11 910 (D. Ariz. 2008). “At the motion to dismiss stage the Court does not engage in 12 debating the terms of the applicable contract. Rather, the Court is only concerned 13 with whether the Complaint alleges facts that, if proven, are sufficient to state a claim 14 for relief.” Gordon v. Impulse Mktg. Grp., Inc., No. CV-04-5125-FVS, 2006 WL 15 624838, at *4 (E.D. Wash. Mar. 9, 2006). Harvey’s allegations that Coordinated 16 Care breached the contract and caused damages are sufficient to allow her to offer 17 evidence in support of her claim. See Seitz, 544 F. Supp. 2d at 910; Hart v. CF Arcis 18 VII LLC, No. C17-1932RSM, 2018 WL 3656300, at *6 (W.D. Wash. Aug. 2, 2018); 19 Carnahan v. Alpha Epsilon Pi Fraternity, Inc., No. C17-86RSL, 2017 WL 5629502, 20 at *3 (W.D. Wash. Nov. 22, 2017). ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 21 1 Coordinated Care argues it lacks notice of how it allegedly breached the 2 contract because Harvey does not articulate how the healthcare provider network 3 was inadequate. ECF No. 50 at 16. But Harvey described the alleged deficiencies 4 with sufficient detail to give Coordinated Care fair notice of what her claim is and 5 what grounds her claim rests upon. See ECF No. 48 at 5–8, 16–24, 29–30. 6 Coordinated Care identifies two reasons why it believes Harvey has not 7 alleged viable theories of damages for breach of contract. ECF No. 50 at 18. First, 8 Coordinated Care argues Harvey is not entitled to a full refund of the premiums she 9 paid because she received at least some valuable services in exchange. Id. Indeed, 10 Harvey misconceives the benefit of the bargain as “a refund of the entire premium 11 for the purchase of insurance that failed to provide the contracted for benefits in 12 order to restore Plaintiff and the Class to their position prior to purchasing the 13 Ambetter policy.” ECF No. 48 at 31. For breach of contract, the goal of 14 compensatory damages is “not a mere restoration to a former position, as in tort, 15 but the awarding of a sum which is the equivalent of performance of the bargain— 16 the attempt to place the plaintiff in the position he would be in if the contract had 17 been fulfilled.” Rathke v. Roberts, 207 P.2d 716, 720 (Wash. 1949) (emphasis 18 omitted); accord Oberto v. Platypus Marine, Inc., No. 3:16-CV-05320-BHS, 2018 19 WL 1022704, at *7 (W.D. Wash. Feb. 22, 2018). Thus, the injured party is “not 20 entitled to be placed in a better position than he would have been in if the contract ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 22 1 had not been broken.” Rathke, 207 P.2d at 721; accord Oberto, 2018 WL 1022704, 2 at *7. 3 While a full refund of health insurance premiums could constitute a windfall, 4 it is also possible Coordinated Care’s alleged breach of contract caused putative class 5 members to either incur unjustified out-of-pocket expenses exceeding all premiums 6 paid or forego healthcare entirely because none was reasonably available in network 7 even after all premiums were paid. Thus, regardless of labels, a full refund of health 8 insurance premiums could be a proper measure of damages to the extent it is less 9 than or equal to the contract expectancy. But Harvey has not alleged such facts here. 10 Therefore, the Court concludes that, for Harvey’s breach-of-contract claim, the 11 proper measure of compensatory damages based on the benefit-of-the-bargain rule 12 is a sum equivalent to performance of the contract that places Harvey and the 13 putative class in the position they would occupy if Coordinated Care had fulfilled 14 the contract rather than breached it. Harvey shall amend the complaint to make this 15 correction no later than November 30, 2018. 16 Second, Coordinated Care argues it lacks notice of what damages it allegedly 17 caused because Harvey’s theories of damages leave “undefined” exactly what 18 premiums were paid and what out-of-pocket expenses were incurred. ECF No. 50 at 19 18. Coordinated Care is incorrect. Construing the complaint in the light most 20 favorable to Harvey and drawing all reasonable inferences in her favor, the Court ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 23 1 concludes she alleges a facially plausible breach-of-contract claim. Moreover, the 2 Court concludes Harvey bases this claim on viable theories of damages that are 3 familiar under Washington state law—compensatory damages equal to the benefit 4 of the bargain had the contract not been breached, the difference between the 5 contract price and the reduced value of the services received, or the out-of-pocket 6 expenses incurred as a result of the breach. Harvey need not allege precise figures 7 of premiums paid and out-of-pocket expenses incurred for Coordinated Care to 8 receive fair notice of what damages it allegedly caused. 9 10 Considering all, the Court concludes Harvey states an adequate breach-ofcontract claim against Coordinated Care. 11 Accordingly, IT IS HEREBY ORDERED: 12 1. Defendants’ Motion to Dismiss Second Amended Complaint, ECF 13 No. 50, is GRANTED IN PART and DENIED IN PART. 14 A. Company LLC is DISMISSED WITHOUT PREJUDICE. 15 16 The breach-of-contract claim against Centene Management B. For the breach-of-contract claim against Coordinated Care 17 Corporation, the proper measure of compensatory damages 18 based on the benefit-of-the-bargain rule is a sum equivalent to 19 performance of the contract that places the injured party in the 20 position he or she would occupy if the contract had been fulfilled ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 24 1 rather than breached. Plaintiff shall AMEND the complaint to 2 make this correction no later than November 30, 2018. 3 4 5 6 C. All other claims may PROCEED as alleged. IT IS SO ORDERED. The Clerk’s Office is directed to enter this Order and provide copies to all counsel. DATED this 21st day of November 2018. 7 8 SALVADOR MENDOZA, JR. United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT - 25
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