53 Cal.App.5th 171
Cal. Ct. App.2020Background
- A.G., born 2009, diagnosed with autism; received comprehensive ABA therapy under Blue Shield, administered by Magellan/Human Affairs/CARD.
- Before age 7 Blue Shield authorized ~157 hours/month of ABA; after A.G. turned seven Magellan reduced authorization to 81 hours/month citing medical necessity criteria.
- Plaintiffs pursued IMR; a three-physician panel split 2–1 in favor of the requested 157 hours; the Department ordered Blue Shield to authorize treatment.
- Plaintiffs sued Blue Shield and Magellan/MHI for breach of the implied covenant of good faith and fair dealing (bad faith), intentional interference with contract, and UCL violations; defendants moved for summary judgment.
- Trial court granted summary judgment, reasoning one IMR physician agreed with the denial; plaintiffs appealed.
- Court of Appeal reversed as to the bad faith and UCL claims (remanding for further proceedings), affirmed dismissal of intentional-interference claim, and found triable issues on punitive damages and other factual disputes (e.g., Magellan’s guidelines, provider pressure).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Blue Shield breached the implied covenant/good faith by denying ABA hours | Blue Shield used arbitrary medical-necessity guidelines that cap comprehensive ABA "early" and effectively cut hours at age 7, so claim was not fairly evaluated | Denial was reasonable; IMR panel included an independent physician who agreed with reduction, so genuine dispute exists | Reversed summary judgment: triable issues exist whether guidelines are unreasonable and whether claim was fairly evaluated; bad faith claim survives summary judgment |
| Whether the genuine dispute rule bars bad-faith liability when an independent reviewer agreed with insurer | Even if one reviewer concurred, insurer must have fairly, thoroughly evaluated claim; an insurer cannot hide behind a facially reasonable outcome reached by unfair criteria | One IMR physician agreed; thus a genuine dispute exists as a matter of law | Insurer cannot rely solely on a concurring reviewer; the record must show the insurer’s criteria and evaluation were reasonable and in good faith; triable issues remain |
| Whether defendants intentionally interfered with plaintiffs’ contract with CARD | Defendants pressured CARD to reduce hours and thereby disrupted plaintiffs’ contract | No enforceable written or implied contract existed with CARD; plaintiffs failed to show disruption—CARD did not reduce A.G.’s treatment after denial | Affirmed for defendants: plaintiffs failed to show a contract and actual disruption; intentional-interference claim fails |
| Whether plaintiffs state a UCL claim and have standing/injunctive relief | Bad-faith practices and systemic guidelines constitute unfair business practices; plaintiffs paid attorneys for IMR and seek injunctive relief to prevent future harms | Defendants contend no injury/standing and money damages suffice; broad injunctive relief improper without class | UCL claim survives as tied to bad-faith practice; paying for IMR counsel establishes standing; injunctive relief may be appropriate; class action not required for public injunctive relief |
Key Cases Cited
- Wilson v. 21st Century Ins. Co., 42 Cal.4th 713 (genuine-dispute rule requires insurer act in good faith and on reasonable grounds)
- Hughes v. Blue Cross of Northern California, 215 Cal.App.3d 832 (insurer may act in bad faith by using medical-necessity standards at variance with community standards)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (examples of insurer bad-faith tactics and implied covenant principles)
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (summary judgment standards and burden shifting)
- Zubillaga v. Allstate Indemnity Co., 12 Cal.App.5th 1017 (genuine-dispute rule cannot rest on an evaluation that is not full, fair, and thorough)
- Consumer Watchdog v. Department of Managed Health Care, 225 Cal.App.4th 862 (statutory and medical background on ABA as treatment for autism)
- McGill v. Citibank, N.A., 2 Cal.5th 945 (private plaintiff may seek public injunctive relief under the UCL without class action)