delivered the opinion of the court:
Pursuant to Supreme Court Rule 308 (87 Ill. 2d R. 308), the circuit court entered an order finding that certain previous interlocutory orders involve questions of law as to which there is substantial ground for difference of opinion, and that an immediate appeal would materially advance the ultimate termination of the litigation. We granted defendant’s application for leave to appeal to consider the following questions certified by the trial court:
“1. In the circumstances of this case, where the relevant health care benefits contracts do not explicitly state that the insurer will not pay claims for services that the insurer determines are ‘not medically necessary,’ do the plaintiffs state a claim for relief based upon the insurer’s denial of claims on the basis of its determination that the health care was ‘not medically necessary?’
2. In the circumstances of this case, does the question stated above present common questions of law or fact which predominate over individual questions, and do the parties designated by the Court as representative parties adequately represent the interests of the class in conformance with the requirements of Illinois Civil Practice Act, Section 57.2(a)(3)?
3. Is the Illinois Department of Insurance a necessary party to this action?”
The trial court’s orders answered the first two questions in the affirmative and the last question in the negative. For the reasons which follow, we affirm the orders of the trial court.
Plaintiffs are beneficiaries of health insurance policies issued by the defendant, Health Care Services Corporation (hereinafter referred to as “Blue Cross”) and health care providers who rendered care to persons insured by Blue Cross. This suit was brought as a class action for damages, declaratory judgment, and injunctive relief. The gravamen of the consolidated complaint is that Blue Cross, in the absence of contractual or other legal authority, regularly refused to pay for medical and hospital care which Blue Cross independently determined was not medically necessary. Blue Cross moved under section 45 of the Civil Practice Act (Ill. Rev. Stat. 1981, ch. 110, par. 45, now codified without change of substance at Ill. Rev. Stat. 1981, ch. 110, par. 2 — 615) to dismiss the complaint on the ground that it was insufficient as a matter of law. Blue Cross also moved to join the Department of Insurance as a necessary party. On October 8, 1980, the trial court refused to dismiss three of the four counts of the consolidated complaint and ruled that the Department was not a necessary party. The trial court also determined that the cause could be tried as a class action and certified three sub-classes. As already indicated, the circuit court subsequently made the necessary findings to support an interlocutory appeal under Rule 308 and we granted the defendant’s application for leave to appeal.
Opinion
The first issue presented for review is whether plaintiffs state a claim for relief by alleging that Blue Cross denied their insurance claims based on Blue Cross’ independent determination that the health care rendered was not “medically necessary” despite the failure of the relevant contracts to state explicitly that this determination may be made by the insurer and that it could form the basis for the noncoverage. In deciding whether the trial court properly denied Blue Cross’ motion to dismiss, we need only determine whether the consolidated complaint alleges facts sufficient to constitute a cause of action. See Illinois Housing Development Authority v. Sjostrom & Sons, Inc. (1982),
Count I of the consolidated complaint alleged that various named plaintiffs were at all relevant times insured under group or nongroup contracts issued by Blue Cross and that they had regularly paid or caused to be paid premiums to the defendant in consideration of the insurance provided. Copies of the insurance agreements were attached to the complaint. The complaint further alleged that the terms and conditions of the contracts are substantially identical in all material respects and that none of the policies provides for independent review of a determination by an insured’s physician as to when hospitalization is medically necessary or desirable, nor for denial of claims in the event that Blue Cross disagrees with the medical determination made by the insured’s physician. The complaint also alleged that Blue Cross has engaged in a pattern of refusing to pay its insureds’ legitimate claims for the costs of health care for the stated reason that Blue Cross determined that such care was not medically necessary despite authorization of the care by the insureds’ physicians. The complaint concluded that this practice constituted a breach of contract. Count I also alleged that the cause was brought as a class action because the large size of the class (over 1,000 members) makes joinder of all class members impracticable, that questions of fact and law common to the class predominate over questions affecting only individual members, and that the named plaintiffs will fairly and adequately protect the interest of the class.
Count II sought recovery for common law fraud and Count III sought recovery for violation of the Consumer Fraud and Deceptive Business Practices Act (Ill. Rev. Stat. 1981, ch. 121V2, pars. 261 through 272). Count IV was stricken by the trial court. This appeal concerns only the sufficiency of count I.
Count I adequately alleges the existence of a valid contract and breach thereof (see generally Steinberg v. Chicago Medical School (1977),
Blue Cross contends, however, that the Non-Profit Health Care Service Plan Act (Ill. Rev. Stat. 1981, ch. 32, pars. 551 through 562i (hereinafter referred to as the Act)) under which Blue Cross is organized, authorizes it to review claims and deny those which it determines to be “medically unnecessary.” Technically, this contention comprises “affirmative matter” which avoids the legal effect of the claim and therefore should have been raised by a motion under section 48(l)(i) of the Civil Practice Act. (Ill. Rev. Stat. 1981, ch. 110, par. 48(l)(i), now codified without change of substance as Ill. Rev. Stat. 1981, ch. 110, par. 2 — 619(a)(9); see Illinois Housing Development Authority v. Sjostrom & Sons, Inc. (1982),
“Sec. 5. Any corporation subject to the provisions of this Act may enter into contracts for the rendering of health care service to any of its subscribers and provide for payment for any such service.
A health care service plan corporation shall impose no restrictions on the physician who treats a subscriber as to methods of diagnosis or treatment ***. ***
The rates charges by such corporation to the subscriber for health care service shall, at all times, be subject to the approval of the Director of Insurance of the State of Illinois.
Rates to be charged to subscribers or subscriber groups shall be deemed unreasonable if the Director of Insurance finds that the health care service corporation has failed to make a vigorous, good-faith effort to contain rates of reimbursement to hospitals and other participating health care providers as well as to promote cost-effective alternative forms of health care.” (Emphasis added.) (Ill. Rev. Stat., 1982 Supp., ch. 32, par. 555.)
While we agree with Blue Cross that one of the goals of the Act is health care cost control, we cannot agree that the cited portion of the Act mandates the particular, after-the-fact, form of cost control advocated by Blue Cross. The statute is couched in general terms and, contrary to Blue Cross’ interpretation, does not purport to require any particular method of cost control.
Moreover, Blue Cross’ argument relies on an isolated part of the statute taken out of context. “ Tt is a cardinal rule of statutory construction that significance and effect should, if possible, without destroying the sense or effect of the law, be accorded every paragraph, sentence, phrase and word. [Citation.] A statute should be so construed, if possible, that no word, clause or sentence is rendered meaningless or superfluous. [Citations.]’ (People ex rel. Barrett v. Barrett (1964),
“All rates or basis of payments to health care providers made by [Corporations organized under the Act] pursuant to the contracts provided for above shall be approved prior to payment by the Director of Insurance.
The Director shall have the power to require immediate renegotiation of such rates or basis of payments whenever he determines that they provide for excessive payments or that they fail to include reasonable incentives for cost control, or that they otherwise substantially and unreasonably contribute to escalation of the costs of providing health care services to subscribers, or that they are otherwise inconsistent with the purposes of this Act.” (Ill. Rev. Stat., 1982 Supp., ch. 32, par. 555.)
When read in context, the statutory language upon which Blue Cross relies does not appear to be intended as a limit on Blue Cross’ obligation to pay claims arising from existing contracts, but rather limits the rate base allowable by the Department of Insurance to payments made by Blue Cross for services which were “necessary or desirable.” Blue Cross intimates as much in its brief, citing the Report and Recommendation of the Hearing Officer in Blue Cross’ 1976-77 rate proceedings. This report concluded that the “necessary or desirable” language of the statute “may be used as a limiting standard in evaluating payments to providers as a component of rates” (Emphasis added.) Our conclusion that the statute does not limit Blue Cross’ obligation to pay claims predicated on existing contracts is bolstered by the statutory language which provides that “[a] health care service plan corporation shall impose no restrictions on the physician who treats a subscriber as to methods of diagnosis or treatment ***.” (Ill. Rev. Stat., 1982 Supp., ch. 32, par. 555.) This prohibition indicates a legislative intent to maintain the traditional physician-patient relationship and to insulate the physician’s exercise of independent judgment and discretion from constraints developed by insurance companies. We conclude therefore that the Act does not limit Blue Cross’ obligation to pay under the instant contracts and accordingly does not constitute affirmative matter sufficient to avoid the thrust of plaintiffs’ complaint.
Blue Cross also argues that the Department of Insurance has ordered Blue Cross to deny coverage based on medical necessity evaluations. As support for this assertion, Blue Cross relies oh several orders issued by the Department of Insurance. Blue Cross argues that because payment of claims is largely the determining factor in establishing the rates which Blue Cross may charge for coverage, the Department of Insurance will only sanction claim payments that are “necessary or desirable.” Initially, we note that most of the orders which Blue Cross cites were entered in rate-setting proceedings. In this context the purpose for which the Department will “sanction” Blue Cross’ claim payments becomes clear: the Department of Insurance will not allow payments which were neither necessary nor desirable to form the basis for the establishment of premium rates. This is made even clearer in the report and recommendation in the above 1976-77 rate proceeding statement already quoted that the “necessary or desirable” language of the statute “may be used as a limiting standard in evaluating payments to providers as a component of rates." (Emphasis added.) This cannot be equated with requiring Blue Cross, regardless of contractual provisions, to deny claims for services which it determines independently to be medically unnecessary.
Further examination of the orders cited by Blue Cross reveals that none of them may fairly be characterized as requiring Blue Cross to deny claims for unnecessary services. The Insurance Director’s order of November 14, 1975, required Blue Cross to “[i]nstitute a procedure whereby any claim settlement resulting in a reduction of benefits based upon an apparent lengthy or unnecessary hospitalization shall be substantiated by facts and not assumptions.” Contrary to Blue Cross’ assertion, this order does not mandate Blue Cross to refuse to pay otherwise valid claims based on an evaluation of medical necessity, but rather orders Blue Cross not to deny a claim because the length of hospitalization exceeds an arbitrary “cut-off” point. The next “order” on which Blue Cross relies is the Director’s formulation of a rate-base issue: “Are the proposed filed rates based only upon costs incurred for that care which is necessary or desirable for the promotion or preservation of a person’s mental or physical health?” The obvious import of this query is that an inflated basis of payment should not be used to increase the rates which Blue Cross may charge for coverage. As indicated above, this is quite different from requiring Blue Cross, regardless of contractual provisions, to evaluate claims independently for medical necessity. The next order on which Blue Cross relies requires Blue Cross to notify “subscribers of the reasons for denial in readily understandable language whenever [Blue Cross] denies reimbursement for care determined not to be covered, inappropriate [sic] or unnecessary [sic].” (Emphasis added.) This order does not require a necessity determination in the absence of contractual authorization and we will not interpret it to provide such a contractual exclusion by implication. The next order which Blue Cross calls to our attention rejected Blue Cross’ proposed rider providing for medical necessity denials and does not support Blue Cross’ position.
Blue Cross has characterized these orders as “the Department’s enforcement policy,” but nothing in any of the orders supports Blue Cross’ position in this court. We conclude that Blue Cross is not required by the Department of Insurance to conduct medical necessity evaluations in the absence of contractual authorization.
Blue Cross next contends that the unambiguous language of the governing contracts provides coverage only for hospital care that is medically necessary. Blue Cross points to the contract of plaintiff Allison as an example and admits that this contract is identical to those of several other plaintiffs and “closely resembles the contracts” of the remaining plaintiffs. Blue Cross contends that the medical necessity requirement is included in the contractual definitions of the terms “hospital” and “hospital service.” The Allison contract defines “hospital” as
“any institution governmentally licensed as such for the care of the sick which provides service under the supervision of a Physician to patients whose conditions require continuous confinement to bed, including the regular provision of bedside service by registered nurses. ***.”
“It is axiomatic that ‘[a]mbiguous provisions or equivocal expressions whereby an insurer seeks to limit its liability will be construed most strongly against the insurer and liberally in favor of the insured.’ (Bell v. Continental Assurance Co. (1970),
It is appropriate for us to note here that, despite criticism from some authorities (see, e.g., 1C Appleman, Insurance Law and Practice sec. 705.35 n.6 (1981)), we think Van Vactor remains analytically sound. Blue Cross’ brief has focused on the policy considerations associated with reducing unnecessary medical treatment and the concomitant cost of insurance premiums. This policy analysis is one-sided, however; the other side which we must consider is the legitimate expectation of the insured that coverage will be provided unless a specific exclusion applies. (Schmidt v. Equitable Life Assurance Society of the United States (1941),
In summary, we agree with the trial court that count I of plaintiffs’ complaint states a cause of action not avoided by other affirmative matter and we conclude that the motion to dismiss was properly denied as to this count.
The second issue for review is whether a class action is appropriate to an adjudication of this case. Section 2 — 801 of the Code of Civil Procedure provides:
“An action may be maintained as a class action in any court of this State and a party may sue or be sued as a representative party of the class only if the court finds:
(1) The class is so numerous that joinder of all members is impracticable.
(2) There are questions of fact or law common to the class, which common questions predominate over any questions affecting only individual members.
(3) The representative parties will fairly and adequately protect the interest of the class.
(4) The class action is an appropriate method for the fair and efficient adjudication of the controversy.” (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 801.)
In the instant case, the trial court specifically found that each of these
requirements was satisfied. The decision to certify a class is a matter committed to the sound discretion of the trial court and will be reversed only upon a clear abuse of discretion or the application of impermissible legal criteria. (Schlenz v. Castle (1981),
The first requirement under the statute is that the class must be so numerous that joinder of all members is impracticable. (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 801(1).) The allegation in the complaint that the class consists of over 1,000 members provides an ample basis for the trial court’s conclusion that joinder of all members is impracticable. See Tassan v. United Development Co. (1980),
The second requirement under the statute is that there are questions of law or fact common to the class and which predominate over any questions affecting only individual members. (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 801(2).) Blue Cross argues that the need for proof, on a case-by-case basis, of the attending physician’s actual determination of medical necessity requires reversal of the trial court’s ruling on the ground that the common questions of law or fact do not predominate. Initially, we note that unlike McCabe v. Burgess (1979),
“Certainly if Blue Cross were to produce clear and convincing evidence of fraud, duress or bad faith in any of the *** identified claims, or any of the additional subscribers found to be within the class, the court would deal appropriately with that claim. However, ‘the hypothetical existence of individual issues is not a sufficient reason to deny the right to bring a class action.’ Harrison Sheet Steel Co. v. Lyons (1959),15 Ill. 2d 532 , 538,155 N.E.2d 595 .)” (Emphasis added.) Van Vactor v. Blue Cross Association (1977),50 Ill. App. 3d 709 , 721,365 N.E.2d 638 .
Scott v. Ambassador Insurance Co. (1981),
The third statutory requirement for the maintenance of a class action is that the representative parties will fairly and adequately protect the interests of the class. (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 801(3).) Blue Cross contends that the representative plaintiffs are unable to represent the class because of antagonistic interests arising from potential class members concerned only with coverage for psychiatric care and others concerned with nonpsychiatric issues. Blue Cross does not indicate how this distinction may be equated with antagonism. Under the Illinois statute, there is no “typicality” requirement (compare Ill. Rev. Stat. 1981, ch. 110, par. 2 — 801(3), with Fed. R. Civ. P. 23(aX3)), and this absence “should insure that the duty to represent fairly and adequately will not be confused with a similarity in claims ***.” (Ill. Ann. Stat, ch. 110, par. 2 — 801, Historical and Practice Notes, at 92 (Smith-Hurd 1983).) Hence, a class representative may not be disqualified merely because his claim is not exactly the same as the claims of other potential class members. As Blue Cross notes, however, where the representative party seeks relief antagonistic to the interests of class members, the representation is not fair and adequate. (Client Follow-Up Co. v. Hynes (1982),
The fourth requirement under the statute for the maintenance of a class action is that the class action is an appropriate method for the fair and efficient adjudication of the controversy. (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 801(4).) Blue Cross argues that a class action is an inappropriate method of adjudication because “individualized” notice would be grossly unmanageable or impossible. This argument confuses the requirements of the cited statutory provision (which mandates a consideration of the relative economy and efficiency of a class action (McCabe v. Burgess (1979),
“Upon a determination that an action may be maintained as a class action, or at any time during the conduct of the action, the court in its discretion may order such notice that it deems necessary to protect the interests of the class and the parties.” (Emphasis added.) (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 803.)
The statutory requirement of notice is thus not absolute; rather, whether notice is to be given at all and the kind of notice which may be required are matters for the trial court’s discretion. The exercise of this discretion is, of course, limited by the dictates of due process. Due process, however, does not require individual notice in all circumstances. (People ex rel. Wilcox v. Equity Funding Life Insurance Co. (1975),
The final issue for review is whether the Illinois Department of Insurance should be joined as a necessary party. (See Ill. Rev. Stat. 1981, ch. 110, par. 2 — 405.) The standard of review of a trial court’s refusal to require joinder of a party is whether the trial court abused its discretion. (Lain v. John Hancock Mutual Life Insurance Co. (1979),
“A necessary or indispensable party is one whose presence in the suit is required for any of three reasons: (1) to protect an interest which the absentee has in the subject matter of the controversy which would be materially affected by a judgment entered in his absence [citations]; (2) to reach a decision which will protect the interests of those who are before the court [citations]; or (3) to enable the court to make a complete determination of the controversy [citation].” (79 Ill. App. 3d 264 , 268-69,398 N.E.2d 278 .)
Blue Cross’ argument that the Department is a necessary party rests on the assumption that “a disputed practice results from the agency’s activities.” As we have already decided, the Department has not required Blue Cross’ disputed practice. Interestingly, the Department filed an affidavit in the trial court stating that the Department “is aware of no provision of the Act [the Non-Profit Health Care Service Plan Act (Ill. Rev. Stat. 1981, eh. 32, pars. 551 through 562i)] which would permit the Department to render interpretations of contracts between [Blue Cross] and its subscribers; or to adjudicate the rights of such parties ***.” The affidavit concluded that no decision of the circuit court in the instant case could “in any way detract” from the Department’s regulatory activities. In light of these circumstances, we conclude that the Department does not qualify as a necessary party for any of the reasons enumerated above. We therefore cannot hold that the trial court abused its discretion in failing to require joinder of the Department.
For the foregoing reasons, we affirm the orders of the circuit court.
Affirmed.
WILSON, P.J., and LORENZ, J., concur.