First State Orthopedics, P.A. v. Employers Insurance Company of Wausau ( 2020 )

SUPERIOR COURT OF THE STATE OF DELAWARE
FIRST STATE ORTHOPAEDICS, :C.A. NO. S19C-01-051 CAK
P.A., on behalf of itself and all others :
similarly situated,
Plaintiff,
V.
EMPLOYERS INSURANCE
COMPANY OF WAUSAU, et al.
Defendants.
Submitted: March 27. 2020
Decided: May 12, 2020
MEMORANDUM OPINION AND ORDER
Upon Defendants’ Motion to Dismiss - DENIED
John S. Spadaro, Esquire, John Sheehan Spadaro, LLC, 54 Liborio Lane, Smyrna,
DE 19977, Attorney for Plaintiff
Kevin J. Connors, Esquire, Marshall Dennehey Warner Coleman & Goggin,
Nemours Building, 1007 N. Orange Street, Suite 600, P.O. Box 8888, Wilmington,
DE 19899, Attorney for Defendants
D. Andrew Hatchett, Esquire, Tiffany Powers, Esquire & Robert Poole, Esquire,
Alston & Bird, One Atlantic Center, 1201 West Peachtree Street, Atlanta, GA
30309-3424, Pro Hac Vice Counsel for Defendants
KARSNITZ, J.
Plaintiff First State Orthopaedics, P.A. (“FSO”) filed a Complaint
alleging violation of the Delaware Workers’ Compensation Act by Defendant
insurers. FSO proposes to proceed as a class action.
In general terms Delaware law requires worker’s compensation
claimants, or their health providers, to submit medical bills for medical treatment
alleged to be related to the work injury to the responsible insurance carrier. The
carrier then either pays the bill or gives a reason for not paying. The Complaint
alleges that the Defendants when refusing to pay routinely gave the following
reason (or one substantially similar):
This service is not authorized by case
manager. Please contact the case
manager for further information.!
FSO alleges it provides medical services to many injured workers and
received the notice, along with many other health care providers. FSO is seeking a
judgment, and nothing else, for itself and the class of medical providers, declaring
that Defendants’ conduct violates Delaware Workers’ Compensation law.
Defendants’ initial response was to seek removal to Federal District
Court. The Federal Court remanded the case back to this Court in late August,
2019. Defendants then moved to dismiss the Complaint. Briefing ensued and oral
‘Complaint at Docket Index 1
argument was held in February, 2020. I allowed additional briefing on the issue of
whether Plaintiffs claim was moot, and that briefing was concluded in March,
Defendants claim the controversy is moot because they stopped the complained-of
practice before the Complaint was filed when they stopped using a certain
computer software program.
DEFENDANTS’ INITIAL TWO ARGUMENTS
When Defendants initially filed the motion to dismiss they made two
arguments. First, Defendants asserted Plaintiff's claim should have been reviewed
by the Delaware Industrial Accident Board and not this Court. In the alternative
Defendants argued that the challenged notice was in compliance with law.
PLAINTIFF’S RESPONSE
In response to the first argument FSO referred me to a Delaware
Supreme Court case which allowed claims associated with a work injury to be
adjudicated outside the normal system. Plaintiff disagrees with Defendant’s claim
the notice given was sufficient since it provided no meaningful or substantive
information.
DEFENDANTS’ LAST ARGUMENT
After the filing of the Complaint, motion practice seeking removal to
Federal Court, remand back to this Court, the filing of a motion to dismiss and
filing of Opening and Answering briefs on the motion, Defendants in their Reply
brief raised a third reason for dismissal. In their Reply brief Defendants for the
first time told me they had discontinued the complained of practice, and thus
dismissal was appropriate since Plaintiff lacked standing and its claim was moot. I
find it relevant that Defendants raised the mootness argument after many months
of defending the practice.
ANALYSIS
1. The Exclusivity Provision
I initially found merit in the argument that Plaintiff’s allegations
should be resolved by the Industrial Accident Board. After all, the Board has
original jurisdiction over workers’ compensation claims.”
A distinction exists, however, between the ordinary administrative
proceedings for benefits and civil litigation aimed at reforming a discrete claims-
handling practice. Our Supreme Court in Pierce v. Int’l. Ins. Co. of Ill.? reversed
an order granting summary judgment in favor of a carrier as to a claim for bad
faith in handling a worker’s compensation claim. The Superior Court had granted
*See generally 19 Del. C. §2301A (i).
°671 A.2d 1361 (Del. 1996).
the insurer’s motion based upon the then extant exclusivity provision.‘
In reversing the Superior Court the Supreme Court said:
Our previous decisional law has broadly
interpreted the exclusivity provisions of the WCL....
Where, however, as here, the injury alleged by
the employee arose after the work-related
accident, the provisions of 19 Del C. §2304
are inapplicable.... This temporal difference,
rather than the non-physical nature of the
harm, is significant and negates the argument
that the legislative intention was for the
exclusivity bar to apply.°
The temporal difference between, for example, an employee or employer’s work
place negligence, to which exclusivity would apply, and an insurer’s claims
handling which by definition follows the injury, to which exclusivity does not
apply, is Pierce’s controlling principle.° The Pierce rule is particularly applicable
to claims not by the injured worker, but by her medical provider for claims-
handling process disputes.
The Federal Court’s decision remanding this dispute provides further
support for Plaintiffs position. I was provided a part of the transcript from the
“Then found at 19 Del. C. §2304.
°Pierce, supra at 1365
*See also First State Orthopaedics, P.A. y. Liberty Mutual Ins. Co., 2016 WL 6518999
(Del. Super. Nov. 1, 2016).
Federal Court’s decision, in which the Court said, inter alia:
On this point I’m persuaded now that the
object of this is to be able to make an informed
decision whether or not to challenge particular
denials of claims that the plaintiff has submitted
and that the various defendants have denied.
The object of the litigation is not to recover the
166,000 or so dollars of claims that defendants
have put in evidence as the value of the claims
that have been denied. ...It is instead to be able
to make a decision that is an informed decision
as to whether or not to try to seek, through,
the channels that have exclusive original
jurisdiction, the IAB, whether to seek to recover
all or some of these dollars that were denied on
informed basis.’
The Federal Court’s decision gives further support that the case is about claims
handling, as in Pierce, and not individual benefits.
2. The Explanation for Non-Payment
19 Del. C. §2322F(e) reads in full:
(e) Denial of payment for health care services provided
pursuant to this chapter, whether in whole or part, shall
be accompanied with written explanation of reason for
denial.
In Defendants’ opening brief they argue that the response to a claim
’First State Orthopaedics, PA. v. Employers Ins. Co. of Wassau,
C. A. No. 1:19-CV-00509-LPS, hearing tr. At 51-55 (D. Del., Aug. 23, 2019).
6
for payment of medical bills which stated the service was “not authorized by case
manager” satisfies the statutory mandate. According to Defendants the plain
language of the statute allows the tautological response “we deny it because we
deny it”. I disagree.
Delaware law jealously guards the right and obligation of the
legislature to contro! outcomes through selection of statutory language.* Courts
should not rewrite statutes to meet their view of policy. But for me it does not
rewrite subsection 2322F(e) by requiring any denial be meaningful. More than
“we won’t pay because we say so, talk to the manager” is required.
In any event I am unwilling to accept Defendants’ position at this
stage of the litigation that the proferred explanation satisfies the notice provision
as a matter of law.
3. Cessation and Mootness
Defendants first raised these related issues in their Reply Brief in
support of their motion to dismiss. In their filing Defendants explained that before
this lawsuit was even filed Defendants were using different software which
eliminated the “see the manager” denial. As a result, according to Defendants, the
issue was moot, Plaintiff had no standing to challenge the denial, and Defendants’
“Arnold y. State, 49 A.3d 1180 (Del. 2012).
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motion should be granted.
Two points are relevant to me. First, I have no information as to why
it took until ten months into the litigation to raise the issue.? Second, even though
Defendants claim they are not currently using the form of denial, they are still
defending the practice leaving the specter of its use in the future.
The mootness issue is a more difficult one. The fact that Defendants
no longer use the complained-of practice creates a theoretical tone to the
proceeding, a “tilting at windmills” flavor.
The mootness claim implicates the doctrine of voluntary cessation.
The voluntary cessation of wrongful conduct does not moot a case or controversy
or deprive a court of its power to determine the legality of a practice.
[I]f it did, the courts would be compelled to
leave ([t]he defendant)...free to return to his old
ways.’°
Defendants’ response is to draw a distinction between ending the
practice prior to suit being filed, and ending it while suit is pending. I would have
considered this a serious impediment to Plaintiffs case had Defendants not
°*The Complaint was filed January 31, 2019. Defendants’ Reply Brief was filed
November 18, 2019.
Friends of the Earth, Inc. v. Laidlaw Envil. Services, 528 U.S. 167, 189 (2000), quoting
City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283, 289 (1982).
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continued their defense of the practice through today. The inescapable conclusion
is Defendants may return to their old ways in the future.
If Defendants were serious about ending the practice, they could
reach an agreement with Plaintiff to do so. They have not and as a result I believe
there remains a controversy to be litigated.
For all of the foregoing reasons Defendants’ motion to dismiss is
denied and Plaintiff's complaint for declaratory relief may continue.
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