Jahnke v. Blue Cross & Blue Shield of Kansas, Inc.
353 P.3d 455
| Kan. Ct. App. | 2015Background
- Samuel Jahnke (insured) obtained individual BCBS policies effective Sept. 1, 2008, which included a disclosed 240‑day waiting period for treatment of tumors.
- Jahnke underwent brain‑tumor surgery within the 240‑day waiting period; BCBS denied coverage and internal appeals were exhausted.
- Jahnke sued in state court alleging BCBS violated the Kansas Small Employer Health Care Act (K.S.A. 40‑2209f(f)) by imposing a waiting period longer than the 90‑day statutory maximum (Count II); Count I was later abandoned.
- BCBS removed to federal court asserting ERISA preemption; the federal court found ERISA’s safe‑harbor applied (no employer contribution) and remanded to state court; on remand the state district court ruled for Jahnke and awarded damages and attorney fees.
- On appeal BCBS raised, for the first time, that the Act provides no private right of action (enforcement lies with the Insurance Commissioner under the Kansas Unfair Trade Practices Act), challenging subject‑matter jurisdiction.
- The Kansas Court of Appeals held the Act creates no private cause of action, vacated the district court judgment, and dismissed the appeal; it also agreed ERISA safe‑harbor applied (no preemption).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Does the Kansas Small Employer Health Care Act (K.S.A. 40‑2209f(f)) grant a private right of action? | Jahnke argued he could sue directly in court to enforce the statute and recover damages. | BCBS argued the Act delegates enforcement exclusively to the Insurance Commissioner and contains no private remedy. | No private right exists; Act’s enforcement is through the Commissioner/KUTPA, so courts lack subject‑matter jurisdiction over the direct private suit. |
| 2. Is the claim properly characterized as a breach of contract? | Jahnke asserted the case was effectively a contract claim and thus within court jurisdiction. | BCBS and the court noted the pleadings alleged statutory violation, not breach; the 240‑day period was expressly disclosed in the policy. | The petition did not plead breach of contract and the record shows no such claim was tried by consent; breach claim fails. |
| 3. Does ERISA preempt the state law claim? | Jahnke relied on state law; he argued ERISA did not apply because plan payments came from individuals. | BCBS argued ERISA preemption (that policy was an ERISA plan). | Court adopted federal court’s finding that ERISA safe‑harbor applied (shareholders paid premiums, employer made no contribution) — no federal preemption. |
| 4. Were attorney fees properly awarded under K.S.A. 40‑256? | Jahnke argued denial of coverage was without just cause or excuse, supporting fees. | BCBS contended it had reasonable grounds to deny the claim. | Court below awarded fees, but appellate court vacated judgment (including fee award) because it lacked jurisdiction to entertain the statutory claim. |
Key Cases Cited
- Pullen v. West, 278 Kan. 183 (2004) (explains two‑part test for implying a private right of action under Kansas law)
- Nichols v. Kansas Political Action Committee, 270 Kan. 37 (2000) (statutory scheme showing exclusive administrative enforcement indicates no private cause of action)
- Spencer v. Aetna Life & Casualty Ins. Co., 227 Kan. 914 (1980) (legislature provided administrative remedies under KUTPA; courts should not expand private remedies)
- Earth Scientists (Petro Services) Ltd. v. U.S. Fidelity & Guaranty Co., 619 F. Supp. 1465 (D. Kan. 1985) (federal district court concluded KUTPA provides no private right; enforcement vested in Insurance Commissioner)