EMPLOYERS INSURANCE COMPANY OF WASAU; HELMSMAN MANAGEMENT SERVICES, LLC; LIBERTY INSURANCE CORPORATION; LIBERTY MUTUAL FIRE INSURANCE COMPANY; LM INSURANCE CORPORATION; THE FIRST LIBERTY INSURANCE CORPORATION; and WASAU UNDERWRITERS INSURANCE COMPANY v. FIRST STATE ORTHOPAEDICS, P.A., on behalf of itself and all others similarly situated
No. 27, 2023D
IN THE SUPREME COURT OF THE STATE OF DELAWARE
January 8, 2024
Submitted: October 18, 2023
Court Below:
Before VALIHURA, TRAYNOR, LEGROW, GRIFFITHS, Justices; and DANBERG, Chief Judge,1 constituting the Court en Banc.
Upon appeal from the Superior Court of the State of Delaware. REVERSED.
Kevin J. Connors, Esquire, MARSHALL DENNEHEY WARNER COLEMAN & GOGGIN, Wilmington, Delaware; Andrew Hatchett, Esquire (argued), Tiffany Powers, Esquire, ALSTON & BIRD LLP, Atlanta, Georgia, for Defendants Below, Appellants/Cross-Appellees Employers Insurance Company of Wausau, et al.
John S. Spadaro, Esquire (argued), JOHN SHEEHAN SPADARO, LLC, Wilmington, Delaware; Jonathan L. Parshall, Esquire, Lauren A. Cirrinicione, Esquire, MURPHY & LANDON, Wilmington, Delaware, for Plaintiff Below, Appellee/Cross-Appellant First State Orthopaedics.
LEGROW, Justice:
Each side in this declaratory judgment action appeals aspects of the Superior Court‘s decision awarding summary judgment to the appellee. Despite the numerous issues the parties raised, resolution of this appeal turns on the appellee‘s standing to file this action. The appellee‘s complaint sought a declaration that a billing code utilized by the appellant to deny insurance coverage to the appellee‘s patients violated Delaware‘s workers’ compensation law. The appellant, however, implemented a new billing system six months before the appellee filed this action, and none of the codes that the appellant uses in its new system contains the challenged language in the old code.
The Superior Court held that the appellant‘s pre-suit voluntary discontinuation of the code did not divest the appellee of standing because (i) the appellant never conceded that the challenged code violated Delaware law, and the appellant therefore might resume using the code in the future; and (ii) the appellant had not “corrected” its response to 19 invoices for which it denied coverage using the challenged code.
We conclude that the appellee lacked standing to bring the case. In concluding otherwise, the Superior Court applied mootness principles. Although both doctrines assess a controversy‘s justiciability, mootness and standing involve distinct inquiries. Under the mootness doctrine, a party‘s voluntary cessation of challenged conduct after litigation commences ordinarily does not moot an otherwise live controversy. But a defendant‘s voluntary cessation of conduct before litigation begins generally renders a controversy non-justiciable for lack of standing. In this case, the appellant stopped using the challenged code six months before the appellee filed its complaint. Accordingly, the appellee‘s request for a declaration regarding the code‘s compliance with Delaware‘s workers’ compensation law did not seek to redress an actual or imminent injury. And the appellant‘s alleged failure to correct its responses to 19 invoices could not confer standing because the prospective relief that a declaratory judgment affords would not redress the injury caused by the statements already issued to the appellee‘s patients.
We therefore reverse the Superior Court‘s opinion granting summary judgment to the appellee.
The factual background relevant to this appeal is undisputed and relatively uncomplicated.
A. Factual Background
Appellee, First State Orthopaedics, P.A. (“FSO“), is a Delaware orthopaedic practice.2 Appellants Employers Insurance Company of Wausau Liberty Insurance Corporation, Liberty Mutual Fire Insurance Company, LM Insurance Corporation, The First Liberty Insurance Corporation, and Wausau Underwriters Insurance Company are insurance companies operating under the Liberty Mutual Group.3 These insurers underwrite workers’ compensation insurance in Delaware.4 Appellant Helmsman Management Services, LLC (“Helmsman“) is a wholly-owned subsidiary of Liberty Mutual Holding Company, Inc., providing third-party claims administration services to Liberty Mutual‘s Group members, including the other Appellants.5 Collectively, Appellants are referred to as “Liberty.”
In 2017 and 2018, Liberty routinely issued Explanation of Benefits forms to FSO using “Code x553.”6 Those forms purported to deny coverage of workers’ compensation bills for procedures that FSO performed. The Explanation of Benefits generated by Code x553 stated:
THIS SERVICE NOT AUTHORIZED BY CASE MANAGER. PLEASE CONTACT THE CASE MANAGER FOR FURTHER INFORMATION.7
FSO argues that this denial contravenes certain sections of the Delaware Workers’ Compensation Code because the response fails to provide a meaningful explanation for the reason for the denial.8 FSO relies on three sections of Title 19 to support its position. First,
[a]ll medical expenses shall be paid within 30 days after bills and documentation for said expenses are received by the employer or its insurance carrier for payment, unless the carrier or self-insured employer notifies claimant or the claimant‘s attorney in writing that said expenses are contested or that further verification is required.9
And
The centerpiece to FSO‘s claim in its Complaint is a third section of the workers’ compensation statute:
According to FSO, although Code x553 purports to deny coverage because the “service [is] not authorized by the case manager,” the explanation lacks any discernible meaning and prevents the claimant or provider—in this case FSO—from contesting the denial.15 FSO‘s claim below turned on whether Section 2322F(e) requires an insurer to provide a “meaningful” explanation when it denies coverage and, in turn, whether Code x553 provides such an explanation.
B. Procedural Background
FSO filed its original complaint (the “Complaint“) containing the above allegations on February 1, 2019.16 Six months earlier, however, in August 2018, Liberty began using new bill review software for reasons unrelated to this litigation.17 Unlike Liberty‘s previous software, the new software did not contain any coverage denials with the same language as Code x553.18 After the software migration was completed in 2018, Liberty no longer issued coverage denials using the language in Code x553.19
In addition to setting forth the reasons why Code x553 allegedly violates the workers’ compensation statute, the Complaint sought relief on behalf of FSO individually and as assignee of certain patients who had received coverage denials using Code x553 language.20 During the litigation, FSO identified 19 uncorrected responses to patient invoices for which it sought relief.21
FSO also sought class certification so that it could represent the interests of any Delaware patient or entity that received a coverage denial containing Code x553 language.22
28. Contrary to the defendants’ contentions, the [challenged Explanation of Benefits] do[oes] meet the requirements of
19 Del. C. §§ 2362(b) ,2322F(e) , and2322F(h) . This is because, though the [challenged Explanation of Benefits] purport[s] on their face to deny coverage for the health care invoice(s) in question, they do not set forth any reason for the carrier or TPA‘s denial of coverage.
29. The defendants’ use of the [challenged Explanation of Benefits] is in violation of
19 Del. C. §§ 2362(b) ,2322F(e) , and2322F(h) , and therefore contrary to law.24
Liberty moved to dismiss FSO‘s Complaint in September 201925 but did not initially challenge FSO‘s standing.26 Liberty first raised standing in a letter to the court filed after briefing on its motion was complete.27 In its letter, Liberty argued that FSO lacked standing because Liberty “voluntarily terminated the allegedly deficient explanation before FSO filed its Complaint and for reasons independent of this litigation.”28
On May 12, 2020, the Superior Court denied Liberty‘s motion to dismiss. Although Liberty raised its standing argument belatedly, the court nevertheless addressed the issue.29 The court held that FSO had standing despite Liberty having abandoned Code x553 during the software migration because Liberty‘s defense of the code during the litigation left “the specter of its use in the future.”30 As to the
merits
On November 6, 2020, FSO filed its Amended Complaint, adding a new subclass for class certification, expanding the declaratory relief sought, and adding a new purported injury:
28. Contrary to the defendants’ contentions, the [challenged Explanation of Benefits] do not meet the requirements of
19 Del. C. §§ 2362(b) ,2322F(e) , and2322F(h) . This is because, though the [challenged Explanation of Benefits] purport on their face to deny coverage for the health care invoice(s) in question, they do not set forth any reason for the carrier or TPA‘s denial of coverage.
preventing it from ever using again Code x553 or the language contained therein. Id.; see App. to Opening Br. at A352 (Hearing on Motion for Reargument) (The Court: “I will turn to the defense. Is there any hope to have the two parties or the two lawyers -- the two groups of lawyers in this case put their heads together to reach some sort of stipulated resolution?” Liberty‘s Counsel: “Certainly. I think we would agree that we -- we weren‘t using the code when we started, that we would never use the code again in the future. If the Court enters an order that we are not allowed to use this code in the future, I don‘t know why that applies to us as a company, a group of defendants.“); id. at A996 (Liberty‘s Opposition to FSO‘s Motion for Class Certification) (“Moreover, Defendants have offered to stipulate to a consent judgment with FSO that precludes Defendants from ever using the challenged denial code again in the future, and FSO‘s corporate designee testified that the proposed consent judgment would provide all the relief that FSO seeks in this litigation“); id. at A1183 (Hearing on Summary Judgment) (Liberty‘s Counsel: “So then the other thing is, well, what about going forward? And again, because of the discontinued pre-suit, we don‘t think you need a consent judgment, we don‘t think there was standing to begin with. It was discontinued pre-suit. But we are willing to, because we have no interest in using this code again; we are willing to stipulate that we have discontinued the code and that we are no longer interested in using it again in the future.” The Court: “Well, when you say no longer interested, you would no longer use it in the future?” Counsel: “Yes. Which means stipulate to a binding judgment from the Court saying you are not allowed to use it. And we, of course, would be legally required to follow Your Honor‘s order.“).
29. The defendants’ use of the [challenged Explanation of Benefits] is in violation of
19 Del. C. §§ 2362(b) ,2322F(e) , and2322F(h) , and therefore contrary to law. In addition, the defendants have not undertaken to provide class members with a revised or corrected explanation in place of, in substitution of, or in supplement to, the offending “non-explanation“; and this, too, is contrary to law.32
In April 2021, FSO filed its Motion for Class Certification under
Class A
All persons or entities who, at any time since January 31, 2016, submitted to one or more of the defendants a health care invoice with respect to care provided to a Delaware workers’ compensation claimant where —
(i) the defendant responded to the submission by stating that
THIS SERVICE [IS] NOT AUTHORIZED BY CASE MANAGER. PLEASE CONTACT THE CASE MANAGER FOR FURTHER INFORMATION, and
(ii) the defendant neither paid all or any part of the invoice within 30 days of receipt, nor communicated in writing, within 30 days of receipt, any other basis for withholding payment for the invoice.
Class B
All members of Class A who have not received from any defendant a revised or corrected explanation in place of, in substitution of, or in supplement to, the putative explanation set forth above.34
In March 2022, Liberty filed its Motion for Summary Judgment, arguing that it was entitled to judgment because: (1) FSO
In its opposition to Liberty‘s motion, FSO argued that it had standing despite Liberty‘s pre-Complaint elimination of Code x553 because Liberty had not corrected some of its coverage denials that contained Code x553 and continued to defend its use of the code.38 This, FSO argued, would be remedied by relief in the form of a declaratory judgment “confirming that claim denials under Section 2322F(e) must set forth meaningful explanations.”39
On December 29, 2022, the Superior Court issued its opinion resolving both motions.40 The court first denied FSO‘s Motion for Class Certification on the basis that FSO had failed to prove that class certification was appropriate in this context, given that Liberty already had ceased using Code x553 and a declaratory judgment stating that Code x553 violated Section 2322F(e) would bind Liberty regardless of whether it expressly applied to FSO or the entire proposed class.41
The court then considered each of Liberty‘s summary judgment arguments. The court rejected Liberty‘s argument that FSO‘s Complaint was untimely under the three-year statute of limitations. The court reasoned that although Liberty began using Code x553 more than three years before FSO filed suit, FSO filed the Complaint in its capacity as its patients’ assignee, and Liberty had denied coverage for certain invoices issued to those patients within the three-year limitations period.42
The court next addressed Liberty‘s argument that Code x553 met Section 2322F(e)‘s requirements.43 The court reiterated its previous holding that Section 2322F(e) required an insurer to provide a “meaningful explanation for a denial” that could “be readily understood.”44 The court then held that FSO had raised a material
factual dispute as to whether it understood the meaning of Code x553 such that it could “make an informed decision whether or not to challenge particular denials.”45
As to Liberty‘s standing argument, the Superior Court concluded that FSO had standing because: (1) the 19 uncorrected claim denials presented an ongoing injury; and (2) Liberty‘s unwillingness to “admit that [it] violated
The court reasoned that:
The challenged conduct and the dispute over it are ongoing. Defendants have not proffered a global effort to withdraw their explanation, or to correct them with new explanations. Even if Defendants have corrected the explanation for Plaintiff‘s patients, the challenged claim denials remain the operative explanation for other numerous patient claims in Delaware. Defendants’ designee would not concede that the claim denials must communicate an actual basis in fact or law for insurer‘s position. Thus, there remains an ongoing dispute between the parties. I find that [FSO] has standing.47
The court also held that Liberty failed to carry its burden on the mootness defense because it could resume using Code x553 in the future, it had not corrected
all of the explanations containing Code x553, and FSO‘s requested relief would have a “practical effect” on the existing dispute.48
The court then entered summary judgment sua sponte for FSO. The court reasoned that Code x553 did not, as a matter of law, provide a meaningful explanation.49 The court entered the following declaratory judgment, “I declare that the response to request to pay medical bills pursuant to Delaware‘s Workers’ Compensation Law requires a meaningful response from an insurance carrier denying the request. The response at issue here, Code x553, does not comply with the Delaware Workers’ Compensation Law.”50
C. Contentions on Appeal
Liberty appealed the Superior Court‘s opinion, arguing that the court erred when it denied Liberty‘s Motion for Summary Judgment as to standing, the statute of limitations, and Code x553‘s compliance with Section 2322F(e).51 FSO cross-appealed, arguing that the court erred when it denied the Motion for Class Certification because FSO met all of
II. STANDARD OF REVIEW
This Court reviews the Superior Court‘s grant of summary judgment de novo.53 We also review questions of justiciability, including standing, de novo.54
III. ANALYSIS
Although both parties raise issues for our consideration, we need only address Liberty‘s standing argument to resolve this appeal. Because we conclude that FSO did not have standing when it filed its Complaint, we do not reach the parties’ other arguments.
In order to adjudicate a matter, a court must have a justiciable controversy
parties’ arguments and the Superior Court‘s decision require us to discuss the distinction between mootness and standing. FSO‘s arguments frequently conflate the two doctrines, but they are not the same, and the standards should not be muddled.58
asks whether an injury that has not yet happened is sufficiently likely to happen, and mootness asks whether an injury that has happened is too far beyond a useful remedy. Political-question analysis also is affected by the extent of individual injury.“).
The United States Supreme Court has recognized that the interrelatedness between standing and mootness can prove troublesome for courts to disentangle.59 To oversimplify the distinction between the two, “standing generally assesses whether [the plaintiff‘s personal] interest exists at the outset, while the doctrine of mootness considers whether it exists throughout the proceedings.”60 Moreover, the “[s]tanding doctrine functions to ensure, among other things, that the scarce resources of the [] courts are devoted to those disputes in which the parties have a concrete stake.”61 By contrast, when “mootness is an issue, the case has been
brought and litigated, often [] for years[,] [and] [t]o abandon the case at an advanced stage may prove more wasteful than frugal.”62
Under Article III of the United States Constitution, a plaintiff bears the
In contrast, a party seeking to employ the mootness doctrine, typically the defendant, bears the burden of establishing that the controversy has become moot.70 The mootness doctrine addresses cases where a controversy existed at the time the plaintiff commenced litigation but the controversy later dissolves.71 Where a defendant voluntarily discontinues their conduct in response to a complaint being filed, we apply the mootness doctrine.72 In those cases, voluntary cessation does not automatically deprive the court of jurisdiction to hear the case.73 Under the mootness standard, the defendant bears the
(3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” (quoting Soc‘y Hill Towers Owners’ Ass‘n v. Rendall, 210 F.3d 168, 175-76 (3d Cir. 2000))). See also Albence v. Higgin, 295 A.3d 1065, 1086 (Del. 2022) (“Delaware‘s standards for determining standing are generally the same as the requirements for establishing Article III standing in federal court. Unlike the federal courts, however, where standing may be subject to stated constitutional limits, we apply the concept of standing as a matter of self-restraint to avoid the rendering of advisory opinions at the behest of parties who are mere intermeddlers.” (internal quotations and citations omitted)).
When, however, a defendant ceases engaging in the challenged conduct before a lawsuit is filed, the correct doctrine to be applied is standing, not mootness.75 For the reasons that follow, FSO did not prove standing to bring its declaratory judgment claim because it could not satisfy the first or third prongs of the standing analysis.76 The Superior Court therefore should have dismissed FSO‘s claims.
A. FSO cannot demonstrate injury in fact.
The Superior Court held that FSO demonstrated injury in fact, notwithstanding Liberty‘s pre-suit abandonment of Code x553, because (1) Liberty had not corrected the 19 claim denials, and (2) Liberty continued to defend Code x553 on its merits, thereby suggesting it could resume using the code in the future.77 As to the uncorrected claim denials, past harm does not automatically establish an imminent injury,78 and, as explained in Section III(B) of this Opinion, a declaratory
judgment does not provide retrospective relief and therefore would not redress a purported injury.79The Superior Court erred in concluding that Liberty‘s defense of Code x553 on its merits established an injury in fact. That defense had no bearing on FSO‘s standing under the circumstances of this case. First, the record amply demonstrated that there was no real or immediate risk that Liberty would continue to use Code x553. Although Liberty argued the code was consistent with Delaware law, Liberty declared that it would not use Code x553 again;80 consistently offered to enter into a stipulation or consent order not to use the code;81 confirmed
In addition, although we sympathize with the lower court‘s frustration with Liberty‘s at-times-confusing position—consistently defending Code x553 while representing that its use had been permanently discontinued84—the court‘s analysis regarding Liberty‘s theoretical future use of the billing code conflated mootness with standing.85 The cases on which
The Superior Court centered its standing analysis on Sanborn v. Geico General Insurance Co., a case involving a defendant‘s voluntary cessation of conduct after the plaintiff filed its complaint.87 In Sanborn, the plaintiff filed a complaint seeking a declaration that her insurance company‘s policy of refusing to pursue deductible recovery violated
[a]t the time Ms. Sanborn filed this action, GEICO‘s then-current policy did not routinely seek recovery of the deductibles of its insured until the applicable deductible was exhausted. Shortly after Ms. Sanborn filed her lawsuit, GEICO‘s new claims-handling policy was implemented. The new policy provides that GEICO will assert its subrogation rights and protect its insureds’ interests, regardless of whether the applicable deductible has been exhausted. Although GEICO‘s new policy adheres to
21 Del. C. § 2118(a)(2)(f) , GEICO has made it clear, in this litigation and as recently as at oral arguments on October 26, 2015, that GEICO still disagrees with the Court‘s decision in Stratton and does not believe its former policy violated21 Del. C. § 2118(a)(2)(f) . Accordingly, and despite the new claims-handling policy, GEICO still maintains the position that the insurer is not required to pursue recovery of an insured‘s deductible until the deductible is exhausted.91
Although the Sanborn parties and the court framed the issue as one concerning the plaintiff‘s standing, settled law establishes that the justiciability question before the Sanborn court actually was mootness. Again, because standing is assessed at the time a complaint is filed, GEICO‘s policy change after the plaintiff filed her complaint would not prevent her from establishing
The decision in Sanborn underscores the importance of distinguishing standing from mootness when justiciability questions arise. For instance, while purportedly addressing the plaintiff‘s standing, the court considered GEICO‘s refusal to concede that its old policy violated the Delaware statute despite having implemented a new, conforming policy and stated, “[t]he discrepancy between GEICO‘s policy and its interpretation of the statute render the injury suffered by Ms. Sanborn one that is capable of evading review. Therefore, the Court determines that Ms. Sanborn has plead[ed] the existence of an injury sufficient to establish standing.”93 But the “evading review” exception does not apply to the standing doctrine.94 Sanborn therefore is best understood as a mootness case, and the Superior Court‘s reliance on Sanborn and on concerns that Liberty would re-deploy Code x553 was mistaken for purposes of resolving FSO‘s standing.95
FSO‘s reliance on Knox v. Service Employees International Union, Local 100096 and Cooper v. Charter Communications Entertainments I, LLC97 is similarly misplaced.98 In Knox, the Supreme Court held that a union‘s consistent defense of its challenged practices preserved the controversy between the parties even though the union ceased the practice and offered the plaintiffs relief while the appeal was pending.99 Knox does not, as FSO contends, support the proposition that a defendant‘s consistent defense of the merits of their conduct creates the injury in fact required to establish standing.100 Instead, Knox addresses a scenario in which a defendant‘s voluntary cessation of conduct during litigation will fail to moot a controversy.101 For the same reasons, Cooper does not do the legwork that FSO believes it does because, again, the defendant there ceased the disputed conduct after the complaint was filed, and for those reasons, the First Circuit held that the claims were not moot.102
Finally, FSO argues that because Liberty did not raise its mootness argument on appeal, it implicitly waived its standing argument.103 FSO posits that Liberty has conceded the existence of a live controversy by failing to renew its mootness argument.104 This argument falters for two reasons. First, as discussed above at length, standing and mootness are distinct doctrines, and Liberty is free to argue that FSO lacks standing without also arguing that the controversy is moot. In fact, it would be inconsistent for Liberty to argue that the same action—cessation of challenged conduct—both divested FSO of
B. FSO cannot demonstrate redressability.
The Superior Court also erred in concluding that FSO‘s injury could be redressed in this action. Under the standing doctrine‘s redressability prong, the relief sought must be capable of redressing the plaintiff‘s injury or grievance.107 “To determine whether an injury is redressable, a court will consider the relationship between ‘the judicial relief requested’ and the ‘injury’ suffered.”108 Additionally, the plaintiff must show that it is likely, not just speculative, that the requested relief will redress the injury.109 Here, FSO sought solely declaratory relief, which affords only prospective, i.e., forward-looking, relief.110 Where a plaintiff seeks a declaratory judgment, it must show that, absent a favorable outcome in litigation, the defendant‘s wrongful conduct will go unchecked.111 This principle precludes an action for declaratory judgment where the defendant
FSO sued Liberty on behalf of patients whose bills were rejected with Code x553 on the Explanation of Benefits. Given Liberty‘s discontinuation of Code x553 before FSO filed suit, the only injury that FSO arguably pleaded relates to the existing, uncorrected claim denials.113 Because a declaratory judgment stating that Code x553 violates the statute would not redress the injury that those patients have suffered, the claim denials do not confer standing to FSO.114
The declaratory judgment that the Superior Court entered confirms this conclusion. The court declared that “the response to request to pay medical bills pursuant to Delaware‘s Workers’ Compensation Law requires a meaningful response from an insurance carrier denying the request. The response at issue here, Code x553, does not comply with the Delaware Workers’ Compensation Law.”115 Nothing in that declaration required Liberty to reissue the claim denials with new codes. The court simply declared that using Code x553 violates
In fact, during our Court‘s oral argument, FSO conceded that the court would have had to provide “corresponding declaratory relief” to redress the injury caused by the uncorrected claim denials.117 FSO then acknowledged that it would have to seek an injunction to correct previous claim denials and that the relief the Superior Court granted was “entirely about future conduct.”118 When pressed for an answer as to how relief that only concerns future conduct could redress past conduct, FSO ultimately conceded that only an injunction would require Liberty to reissue the invoices that contained Code x553.119
And although it held that FSO had standing, the Superior Court‘s opinion reflects the non-redressability of FSO‘s past-conduct claim. In its opinion denying Liberty‘s Motion for Summary Judgment, the court acknowledged that FSO‘s “declaratory judgment claim is based on [Liberty‘s] general practice of sending [Explanations of Benefits] with Code x553 to patients, [while] [t]he claims it asserts as assignee are specific claims, arising from specific transactions.”120 The court was hesitant to award anything other than prospective relief, stating “injunctive relief is not necessary or warranted, as I am unwilling to punish [Liberty] for past conduct, particularly given their abandonment of the use of Code x553.”121 We are unable to reconcile that statement with the court‘s holding that the declaratory judgment it entered would redress the existing, uncorrected denials.
In summary, because the forward-looking relief that FSO sought—a declaratory judgment—would not redress the only existing or imminent injury it can point to—the previously submitted invoices—FSO lacked standing when it filed its Complaint.
IV. CONCLUSION
For the foregoing reasons, the Superior Court erred in denying Liberty‘s Motion for Summary judgment as to FSO‘s standing. We therefore REVERSE the Superior Court‘s opinion. Jurisdiction is not retained.