245 Cal. App. 4th 821
Cal. Ct. App.2016Background
- Patient (Patient X) was admitted to Tenet Healthsystem Desert (Hospital) after an auto accident; Hospital informed Anthem-related phone line of admission and faxed clinical information disclosing Patient X had a .235 blood alcohol level and tested positive for cannabis.
- Patient’s member ID card listed Anthem entities and Keenan as agents/administrators for Eisenhower’s employer health plan; Hospital relied on the card’s pre-authorization number to contact Anthem/Keenan.
- Between May 7 and June 11, 2012, Anthem employees/case managers repeatedly authorized ICU and later acute rehabilitation treatment in written faxes and phone calls but did not disclose a plan exclusion for injuries caused while driving with blood alcohol over the legal limit.
- Hospital provided ~50+ days of inpatient and rehab care and later learned (October 24, 2012) of the exclusion; Anthem denied coverage and Hospital sued for fraud, suppression, negligent misrepresentation, and unfair business practices.
- The trial court sustained Anthem’s demurrer to Hospital’s third amended complaint without leave to amend on deceit-based claims; Hospital appealed.
- The Court of Appeal reversed and remanded, holding the TAC pled fraud, suppression, negligent misrepresentation, and UCL claims with sufficient particularity and that certain Anthem evidentiary arguments were improper on demurrer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TAC sufficiently pleads intentional fraud/deceit | Anthem repeatedly authorized care after receiving clinical info showing intoxication; authorizations amounted to affirmative misrepresentations that services were covered, pled with dates, persons, means, and reliance | Authorizations were only utilization-management/administrative acts; Anthem did not provide coverage and letters (not in record) show no misrepresentation | Court: TAC alleges how/when/where/by whom authorizations were made, course of dealing and industry custom, and justifiable reliance — fraud pled with particularity; demurrer improperly sustained |
| Whether TAC states fraud by suppression (concealment) | Anthem suppressed material exclusion (driving while intoxicated) while repeatedly authorizing care and seeking info it would not need if services were uncovered | Anthem argues it had no duty or its role was limited; evidence Anthem cites (letters) not before court on demurrer | Court: Allegations show Anthem made representations while failing to disclose material facts it knew; suppression claim adequately pled |
| Whether negligent misrepresentation claim is pleaded | Alternatively, if not intentional, Anthem negligently misrepresented coverage via authorizations and communications | Anthem argues communications are not promises of coverage and evidence shows limited role | Court: Because elements of intentional fraud are sufficiently pled, negligent misrepresentation (no scienter) is also sufficiently alleged |
| Whether trial court properly considered Anthem’s out-of-pleading letters/jurisdictional evidence on demurrer | Hospital relied on TAC allegations and course-of-dealing; letters were not judicially noticed or part of pleading | Anthem asked appellate court to consider its letters to show TAC contradictions | Court: Anthem’s letters were not properly before the court on demurrer and would not be judicially noticeable; court refused to consider them and rejected Anthem’s reliance on extrinsic evidence at pleading stage |
Key Cases Cited
- Fremont Indemnity Co. v. Fremont General Corp., 148 Cal.App.4th 97 (discussing appellate review of demurrer and judicial notice limits)
- Blank v. Kirwan, 39 Cal.3d 311 (standard on sustaining demurrer without leave to amend and plaintiff’s burden to show amendability)
- Lazar v. Superior Court, 12 Cal.4th 631 (fraud pleading specificity—how, when, where, to whom, by what means)
- Committee on Children's Television, Inc. v. General Foods Corp., 35 Cal.3d 197 (policy behind fraud pleading particularity and exceptions when defendant has superior knowledge)
- Marketing West, Inc. v. Sanyo Fisher (USA) Corp., 6 Cal.App.4th 603 (elements of concealment/suppression-based fraud)
- Gagne v. Bertran, 43 Cal.2d 481 (distinguishing negligent misrepresentation from intentional fraud)