Adams v. Hawaii Medical Service Association. ( 2019 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
30-SEP-2019
09:10 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
________________________________________________________________
PATRICIA E.G. ADAMS, IN HER CAPACITY AS PERSONAL REPRESENTATIVE
OF THE ESTATE OF BRENT ADAMS, AND IN HER PERSONAL CAPACITY,
Petitioner/Plaintiff-Appellant,
vs.
HAWAII MEDICAL SERVICE ASSOCIATION,
Respondent/Defendant-Appellee.
________________________________________________________________
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; 1CC071001388)
September 30, 2019
NAKAYAMA, ACTING C.J., McKENNA, POLLACK, AND WILSON, JJ.,
AND CIRCUIT JUDGE SOMERVILLE,
IN PLACE OF RECKTENWALD, C.J., RECUSED
OPINION OF THE COURT BY WILSON, J.
Brent Adams (“Brent”) was forty years old when he was
diagnosed with stage III multiple myeloma, an aggressive and
life-threatening form of bone marrow cancer. Doctors determined
that Brent’s best chance of survival was to undergo a tandem
stem cell transplant in which he would receive a transplant of
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his own stem cells, known as an autologous transplant, and, two
to four months later, a stem cell transplant from a matched
sibling donor, referred to as an allogenic transplant. Shortly
after his diagnosis, Brent informed his insurance provider,
Respondent/Defendant-Appellee Hawaii Medical Service Association
(“HMSA”), of his intent to pursue autologous and allogenic
transplants. Brent and HMSA worked closely for the next several
months to ensure that Brent’s treatment would be covered by
insurance, but when Brent applied for coverage for the second
phase of the treatment, the allogenic transplant, HMSA denied
the claim. Less than three years after his diagnosis, Brent
died.
Brent and his wife, Petitioner/Plaintiff-Appellant
Patricia E.G. Adams (“Patricia”), filed the instant action
alleging that HMSA acted in bad faith in administering Brent’s
claim for the allogenic transplant; following Brent’s death,
Patricia pursued the action in her capacity as personal
representative of Brent’s estate and in her individual capacity.
There are genuine issues of material fact as to whether HMSA
fulfilled its duty of good faith and fair dealing in its
handling of Brent’s claim. Therefore, the Intermediate Court of
Appeals (“ICA”) erred when it affirmed the holding of the
Circuit Court of the First Circuit (“circuit court”) that there
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are no genuine issues of material fact regarding whether HMSA
acted in bad faith.
I. Background
Brent was diagnosed with stage III multiple myeloma in
August 2005. He informed HMSA of his condition on November 1,
2005 and requested information regarding facilities that provide
stem cell transplants. HMSA directed Brent and Patricia to seek
treatment at City of Hope, an HMSA-approved Blue Quality Center
for Transplant located in Duarte, California. 1 Dr. Anthony Stein
(“Dr. Stein”) enrolled Brent in a clinical trial for stem cell
transplants at City of Hope on December 29, 2005. At the time
of his diagnosis, Brent was a member of the HMSA Preferred
Provider Plan for Hawaii Employer-Union Health Benefits Trust
Fund (“the Plan”). Under Chapters 4 and 5 of the Plan, Brent
was required to submit a precertification 2 request by mail or fax
to HMSA seeking approval for the autologous and allogenic
transplants. HMSA had fifteen days to respond to a non-urgent
request.
1
A Blue Quality Center for Transplant “is a centers of excellence
bone marrow program offered through participating Blue Cross Blue Shield
Plans.”
2
The Plan defines “precertification” as “a special approval
process to ensure that certain medical treatments, procedures, or devices
meet payment determination criteria prior to the service being rendered.”
3
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HMSA assigned case managers to oversee Brent’s case
and they created a log of notes and communications. 3 According
to HMSA’s log, Patricia notified HMSA that she and Brent were
leaving for City of Hope on December 11, 2005 to pursue “testing
and consultation[.]” Patricia states in her declaration that
she told HMSA that Brent was going to City of Hope specifically
for the autologous and allogenic transplants and asked if there
was anything else that Brent needed to do to inform HMSA of the
treatment plan. She alleges that HMSA did not provide any
further instructions.
On December 15, 2005, Dr. Stein submitted a
precertification request for an autologous transplant. The
request notes that Brent’s siblings would be tested to determine
if they could serve as stem cell donors, in which case Brent
would consider pursuing an allogenic transplant following the
autologous transplant. HMSA timely approved the request for an
autologous transplant on December 21, 2005. Two days later,
City of Hope submitted an “urgent” precertification request to
test Brent’s siblings’ stem cells. The request was rescinded,
however, when HMSA explained to Dr. Stein that HMSA would only
pay for the matched sibling donor if, and when, there was a
3
Patricia claims that “[m]any of the things in [the log] do not
square with the facts, and many of the things [the case managers] wrote
either would not have been said or seem to be things they added which were
not discussed.”
4
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match. HMSA told Dr. Stein that “[o]nly the testing for the
person donating to this member will be paid for. If all 5
siblings are tested, only the donor sibling testing will be paid
for.” This effectively meant that Brent and Patricia would pay
out-of-pocket to test Brent’s five siblings, and if one of the
siblings matched, HMSA would reimburse Brent and Patricia for
the cost of testing the matched sibling.
Brent underwent an autologous transplant in January
2006. In preparation for the second phase of the treatment, the
allogenic transplant, Dr. Stein contacted HMSA regarding Brent’s
participation in City of Hope’s clinical trial for stem cell
transplants. HMSA’s log indicates that HMSA informed Dr. Stein
that clinical trials require precertification approval and are
assessed on a case-by-case basis. HMSA referred Dr. Stein to
the precertification division and recommended that he submit
data supporting the efficacy of the clinical trial.
In January and February 2006, Brent and Patricia
communicated numerous times with HMSA about Brent’s intent to
undergo the second phase of his treatment—the allogenic
transplant. On January 17, 2006, HMSA informed Patricia that
Dr. Stein had yet to submit a precertification request for the
allogenic transplant. On February 6, 2006, HMSA faxed Dr. Stein
information regarding the process to submit a precertification
request for an allogenic transplant and noted that this request
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was required “if they plan to do anything other than the tandem
autologous transplant.”4 On February 22, 2006, Brent informed
HMSA that one of his siblings appeared to be a match and he
hoped to pursue the allogenic transplant. HMSA replied that a
precertification request must be submitted and advised Brent
that “[i]n terms of the care plan, the goals remain appropriate
and on target[.]” Patricia checked on the status of the process
two weeks later, on February 27, 2006, and HMSA informed
Patricia that Dr. Stein had yet to submit a precertification
request for an allogenic transplant. HMSA noted that Patricia
wanted Dr. Stein to complete the precertification request
because they were “desperately trying to avoid any delays” and
“with the possibility that an allo transplant may be needed,
they will need as much advance notice as possible[.]” Patricia
maintains that the autologous and allogenic transplants were
recommended by Dr. Stein and accepted by HMSA as Brent’s
treatment plan from the beginning, as evidenced by his attempt
to enroll in the clinical trial for stem cell transplants on
December 29, 2005. HMSA advised Patricia that each phase of the
treatment required precertification authorization.
4
A tandem autologous transplant refers to two autologous
transplants in a row, as opposed to a tandem autologous-allogenic transplant.
6
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On March 2, 2006, Dr. Stein submitted a
precertification request for an allogenic transplant. 5 Four days
later, on March 6, 2006, HMSA notified Dr. Stein that the
request was denied because the procedure was “investigational.”
A formal denial letter was mailed on March 8, 2006. Patricia
and Brent were “taken by surprise[.]” They viewed the denial as
an abrupt change of position for HMSA, especially in light of
the fact that Brent had a matched sibling donor. Without
approval for an allogenic transplant, and wary of further delays
in his treatment, Brent underwent a second autologous transplant
in April 2006, instead of an allogenic transplant.
In February 2007, Dr. Stein submitted another
precertification request for an allogenic transplant. This,
too, was denied. HMSA’s internal appeals board upheld the
denial of coverage because multiple myeloma was not listed as a
condition for which an allogenic transplant was covered under
the Plan.6 Shortly thereafter, Brent filed a request for an
5
In his deposition, Dr. Stein explained that he waited to file the
precertification request for the allogenic transplant because he was under
the impression that he could not submit the request until it was determined
whether one of Brent’s siblings could serve as a stem cell donor.
6
Chapter 6 of the Plan provided “[y]ou are not covered for
transplant services or supplies or related services or supplies other than
those described in Chapter 4: Description of Benefits under Organ and Tissue
Transplants. Related Transplant Supplies are those that would not meet
payment determination criteria but for your receipt of the transplant,
including, and without limitation, all forms of bone marrow or peripheral
stem cell transplants.” Multiple myeloma was not included in the list of
conditions for which allogenic transplants were covered in Chapter 4.
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expedited external review of HMSA’s 2007 denial of coverage for
the allogenic transplant with the Insurance Commissioner of the
Department of Commerce and Consumer Affairs (“Insurance Panel”).
In its April 18, 2007 Findings of Fact, Conclusions of Law, and
Discussion and Order (“FOFs, COLs, and D&O”), the Insurance
Panel reversed HMSA’s 2007 denial of coverage. The Insurance
Panel found that although the allogenic transplant was not
specifically included under the Plan, it was not specifically
excluded either, and HMSA failed to consider professional
standards of care and expert opinions in concluding that the
efficacy of allogenic transplants was not supported by
sufficient evidence. The Insurance Panel ordered HMSA to
provide coverage for an allogenic transplant. Brent finally
received an allogenic transplant covered by HMSA in 2007, but he
died approximately one year later.
A. Procedural History
1. Related Appeals
HMSA appealed the Insurance Panel’s decision that the
allogenic transplant was covered under the Plan to the circuit
court. Shortly thereafter, Brent and Patricia filed the instant
case in circuit court asserting claims for breach of contract,
bad faith, intentional infliction of emotional distress
(“IIED”), negligent infliction of emotional distress (“NIED”),
and punitive damages. The circuit court stayed the instant case
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pending the resolution of HMSA’s appeal of the Insurance Panel’s
determination granting coverage for the allogenic transplant. 7
HMSA’s appeal from the Insurance Panel’s decision to
provide coverage for the allogenic transplant was affirmed by
the circuit court; the circuit court held that the allogenic
transplant was covered under the Plan. HMSA appealed to the ICA
and the ICA reversed the circuit court, holding that coverage
for an allogenic transplant was expressly excluded under the
terms of the Plan. Haw. Med. Serv. Ass’n v. Adams, 120 Hawaiʻi
446, 457, 209 P.3d 1260, 1271 (App. 2009) (“Adams I”). Because
the ICA found that the allogenic transplant was not covered, it
vacated the circuit court’s judgment and remanded to the circuit
court with instructions to reverse the Insurance Panel’s FOFs,
COLs, and D&O granting coverage for the allogenic transplant.
Id.
After the circuit court reversed the Insurance Panel’s
FOFs, COLs, and D&O pursuant to the ICA’s order, HMSA moved to
lift the stay and sought summary judgment on all claims in the
instant case, which included breach of contract, bad faith,
IIED, NIED, and punitive damages. 8 The circuit court granted
7
The Honorable Eden E. Hifo presided.
8
By this time, Brent had passed away. Patricia continued the
lawsuit in her capacity as personal representative of the estate of Brent and
in her individual capacity.
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summary judgment in favor of HMSA on all claims. On appeal, the
ICA affirmed in part and reversed in part the circuit court’s
judgment. Adams v. Haw. Med. Serv. Ass’n, No. 30314, 2013 WL
5443025, at *2 (App. Sept. 30, 2013) (SDO) (“Adams II”). The
ICA affirmed the circuit court’s grant of summary judgment in
favor of HMSA as to the breach of contract claim. Id. at *2.
It held that there were no genuine issues of material fact
because it previously found, in Adams I, that the Plan expressly
excluded coverage for allogenic transplants for the treatment of
multiple myeloma. Id. at *1. Accordingly, the ICA affirmed the
finding of the circuit court that HMSA did not breach its
contract with Brent by refusing to cover the allogenic
transplant. Id. at *1.
As to the bad faith claim, the ICA vacated the circuit
court’s entry of summary judgment in favor of HMSA on Brent’s
bad faith claim that HMSA mishandled his claim for an allogenic
transplant. Id. at *2. In so doing, the ICA distinguished
between an insurer’s bad faith failure to investigate a claim
and an insurer’s bad faith mishandling of a claim. Id. at *1-2.
The ICA noted that Patricia’s bad faith claim was based on
HMSA’s unreasonable delay in notifying Brent that an allogenic
transplant was not a covered benefit under the Plan. Id. at *2.
The ICA emphasized that in her declaration, Patricia alleged
that she had multiple conversations with HMSA’s representatives
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regarding the allogenic transplant in late 2005 and early 2006
and “they were not forthcoming with information crucial to the
Adamses’ understanding of coverage under the plan, and that
later, in March 2006, when HMSA notified the Adamses that
authorization for the procedure was denied, they were
‘surprised.’” Id.
The ICA characterized Patricia’s claim as “an
insurer’s bad faith mishandling of a claim, which would include
an unreasonable handing of a claim, such as an unreasonable
delay.” Id. at *1. Based on Patricia’s declaration, and the
fact that HMSA introduced no evidence that the March 2, 2006
request for an allogenic transplant was reasonably handled, the
ICA held that it could not conclude, as a matter of law, that
HMSA reasonably handled Brent’s claim for an allogenic
transplant. Id. at *2. Similarly, the ICA found that “based on
the evidence presented below, we cannot say that, as a matter of
law, the Adamses did not present a prima facie case for their
NIED and IIED claims in opposition to HMSA’s motion for summary
judgment.” Id. Accordingly, the ICA vacated the circuit
court’s grant of summary judgment in favor of HMSA as to the
NIED and IIED claims, as well as the bad faith claim based on
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HMSA’s mishandling of the claim. 9 Id. It affirmed the circuit
court’s judgment in all other respects and remanded the case to
the circuit court for further proceedings. Id.
2. The Instant Appeal
a) Circuit Court Proceedings
On remand to the circuit court, Patricia asserted that
HMSA mishandled Brent’s claim for an allogenic transplant and
therefore acted in bad faith. She also maintained her claims
for IIED, NIED, and punitive damages. As to the bad faith
claim, Patricia argued that HMSA knew that Brent was seeking an
allogenic transplant and misled her by providing assurances that
an allogenic transplant would be covered under the Plan. She
claimed that HMSA intentionally “kept silent” its policy to
exclude coverage for allogenic transplants for the treatment of
multiple myeloma. By remaining silent about its policy,
Patricia argued, HMSA intentionally delayed the denial of
coverage to deprive Brent of the opportunity to appeal the
9
The ICA affirmed the circuit court’s entry of summary judgment in
favor of HMSA on Patricia’s claim for bad faith based on HMSA’s failure to
investigate. Adams II, 2013 WL 5443025, at *2. It addressed Patricia’s
contention that HMSA acted in bad faith by failing to investigate the claim
“by refusing to consider new evidence in 2007 that allo-transplants had been
established as the gold standard for treating patients in Brent’s
circumstances.” Id. The ICA noted that “an insured [cannot] recover for the
tort of bad faith failure to investigate where the insured could not
establish liability on the part of the insurer on the underlying policy.”
Id. (alteration and emphasis in original) (quoting Enoka v. AIG Hawaiʻi Ins.
Co., 109 Hawaiʻi 537, 551, 128 P.3d 850, 864 (2006)). Because there was no
liability on the part of HMSA to pay for the allogenic transplant, the ICA
held that a claim based on HMSA’s failure to investigate the claim could not
lie. Id.
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decision. Patricia argued that HMSA mishandled the claim by
failing to timely inform Brent that the allogenic transplant was
not covered under the Plan and, therefore, breached the duty of
good faith and fair dealing implied in the insurance contract.
HMSA denied Patricia’s allegations and brought a
motion for summary judgment on all claims. HMSA argued that it
was entitled to summary judgment on the bad faith claim,
specifically, because: (1) the two-day period to deny coverage
was objectively reasonable, (2) HMSA did not “keep silent” its
policy on allogenic transplants for multiple myeloma, and (3) it
did not intentionally deprive Brent of the opportunity to appeal
the decision. The circuit court agreed and granted HMSA’s
motion for summary judgment as to all claims.
b) ICA Proceedings
On appeal to the ICA, Patricia challenged the circuit
court’s grant of summary judgment on the bad faith claim, in
part, on the basis that the record contained genuine issues of
material fact with regard to whether HMSA acted in bad faith by
mishandling Brent’s claim.10 In its June 8, 2018 summary
10
Patricia alleged three other points of error, none of which are
before this court. She argued that: (1) there was a genuine issue of
material fact as to whether City of Hope and Dr. Stein acted as HMSA’s
agents; (2) City of Hope was not required to identify a matched donor prior
to submitting the precertification request; and (3) the circuit court abused
its discretion by failing to order a continuance to provide Brent an
opportunity to obtain affidavits from his siblings in New Zealand.
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disposition order, the ICA affirmed the circuit court’s order
granting summary judgment in favor of HMSA. Adams v. Haw. Med.
Serv. Ass’n, CAAP-XX-XXXXXXX, 2018 WL 2753319, at *4 (App. June
8, 2018) (SDO) (“Adams III”). The ICA determined that no
genuine issues of material fact exist regarding whether HMSA
mishandled the claim because HMSA denied the precertification
request for the claim within the time period required under the
Plan. Id. at *3. Noting that Chapter 5 of the Plan explicitly
directed the insured to submit a written precertification
request, the ICA found that the absence of such a request meant
there was no claim for HMSA to process. Id. The ICA noted that
Brent’s request for an allogenic transplant was first submitted
on March 2, 2006, and within four days HMSA responded to the
request by calling Dr. Stein to inform him that the request was
denied; the ICA also found significant that a formal denial
letter was dispatched six days later on March 8, 2006. Id.
Because HMSA responded to the request within fifteen days, as
required under the Plan, the ICA held as a matter of law that
HMSA timely replied to the request. Id.
The ICA noted that “the duties of good faith and fair
dealing implied in every insurance contract[] arise after the
insured complies with the claims procedure described in the
insurance policy.” Id. (citing Safeco Ins. Co. of Am. v. Parks,
88 Cal. Rptr. 3d 730, 740 (Cal. Ct. App. 2009)). Thus, the ICA
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held, HMSA’s duty of good faith did not arise until Brent
complied with the claims procedure under the Plan by submitting
a formal precertification request for an allogenic transplant.
Id. Because Brent submitted the request on March 2, 2006 and
HMSA timely responded four days later, on March 6, 2006, the ICA
held that HMSA did not mishandle Brent’s claim. Id. It
affirmed the circuit court’s entry of summary judgment in favor
of HMSA on all claims, including the bad faith mishandling
claim. Id. at *4.
II. Standard of Review
An appellate court reviews “the circuit court’s grant
or denial of summary judgment de novo.” Querubin v. Thronas,
107 Hawaiʻi 48, 56, 109 P.3d 689, 697 (2005). This court has
also articulated that:
[S]ummary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law. A
fact is material if proof of that fact would have the
effect of establishing or refuting one of the essential
elements of a cause of action or defense asserted by the
parties. The evidence must be viewed in the light most
favorable to the non-moving party. In other words, we must
view all of the evidence and the inferences drawn therefrom
in the light most favorable to the party opposing the
motion.
Id. (alteration in original) (quoting Haw. Cmty. Fed. Credit
Union v. Keka, 94 Hawaiʻi 213, 221, 11 P.3d 1, 9 (2000)).
Hawaiʻi Rules of Civil Procedure (“HRCP”) Rule 56(e)
(2000) provides in relevant part:
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When a motion for summary judgment is made and supported as
provided in this rule, an adverse party may not rest upon
the mere allegations or denials of the adverse party’s
pleading, but the adverse party’s response, by affidavits
or as otherwise provided in this rule, must set forth
specific facts showing that there is a genuine issue for
trial. If the adverse party does not so respond, summary
judgment, if appropriate, shall be entered against the
adverse party.
Thus, “[a] party opposing a motion for summary judgment cannot
discharge his or her burden by alleging conclusions, ‘nor is he
[or she] entitled to a trial on the basis of a hope that he [or
she] can produce some evidence at that time.’” Henderson v.
Prof’l Coatings Corp., 72 Haw. 387, 401, 819 P.2d 84, 92 (1991)
(quoting 10A Charles Alan Wright, Arthur R. Miller & Mary Kay
Kane, Federal Practice and Procedure: Civil 2d § 2727 (1983)).
III. Discussion
The issue in this case is whether, viewing the
evidence in the light most favorable to Patricia, the record
contains evidence establishing that HMSA committed the tort of
bad faith by unreasonably handling Brent’s claim for an
allogenic transplant. It is well settled in this jurisdiction
that in every first-party insurance contract, the implied
covenant of good faith and fair dealing ensures “that neither
party will do anything that will deprive the other of the
benefits of the agreement.” Best Place, Inc. v. Penn Am. Ins.
Co., 82 Hawaiʻi 120, 123-24, 920 P.2d 334, 337-38 (1996). A
breach of this covenant is referred to as “bad faith.” Id. at
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127, 920 P.2d at 341. When an insurer acts in bad faith, it
gives rise to a cause of action for the tort of bad faith.
[T]he tort of bad faith is not a tortious breach of
contract, but rather a separate and distinct wrong which
results from the breach of a duty imposed as a consequence
of the relationship established by contract. Therefore,
the tort of bad faith allows an insured to recover even if
the insurer performs the express covenant to pay claims.
As such, an insurer could be liable for the tort of bad
faith for certain conduct where it would not be liable for
a tortious breach of contract.
Id. at 131, 920 P.2d at 345 (internal quotation marks and
citation omitted). Thus, the tort of bad faith does not arise
from a breach of the terms of the contract, but rather, from a
breach of a duty to act in good faith inherent in the
relationship between the insurer and the insured.
A claim for bad faith arising from the relationship
between the insurer and the insured can be grounded in an
“unreasonable handl[ing]” of the insured’s claim. Francis v.
Lee Enter., Inc., 89 Hawaiʻi 234, 238, 971 P.2d 707, 711 (1999).
“This court has held that reasonableness can only constitute a
question of law suitable for summary judgment when the facts are
undisputed and not fairly susceptible of divergent inferences,
because, where, upon all the evidence, but one inference may
reasonably be drawn, there is no issue for the jury.” Willis v.
Swain, 129 Hawaiʻi 478, 496, 304 P.3d 619, 637 (2013) (internal
quotation marks omitted) (quoting Guajardo v. AIG Haw. Ins., 118
Hawaiʻi 196, 206, 187 P.3d 580, 590 (2008)). Consequently, the
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issue of whether HMSA “unreasonably handle[d,]” Francis, 89
Hawaiʻi at 238, 971 P.2d at 711, Brent’s claim for an allogenic
transplant is suitable for summary judgment if the only
inference to be reasonably drawn from the record is that HMSA
reasonably handled the claim for the allogenic transplant,
Willis, 129 Hawaiʻi at 496, 304 P.3d at 637.
To determine whether an insurer reasonably handled a
claim, we consider the conduct of the parties to the contract
before and after the formal submission of the claim. See
Guajardo, 118 Hawaiʻi at 202-07, 187 P.3d at 586-91. In
Guajardo, the plaintiff was struck by a vehicle while she was
crossing the street. 118 Hawaiʻi at 198, 187 P.3d at 582. The
insurer of the driver of the vehicle offered to settle the
plaintiff’s claim for $100,000, but the plaintiff’s insurer, AIG
Hawaiʻi Insurance Company, Inc. (“AIG”), refused to authorize the
settlement. Id. AIG required the plaintiff to obtain a
judgment against the driver “to protect [AIG’s] subrogation
rights as required under her policy.” Id. The plaintiff filed
suit against AIG, alleging that it acted in bad faith by
misrepresenting that the policy required the plaintiff to pursue
the driver to judgment. Id. at 202, 187 P.3d at 586. This
court analyzed AIG’s conduct starting at “[t]he first
communication” between the plaintiff and AIG, when the plaintiff
reported that she had been hit by a vehicle. Id. at 203, 187
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P.3d at 587. Review of the conduct of AIG throughout the course
of the claims process revealed genuine issues of material fact
as to whether AIG breached its duty of good faith by
unreasonably handling the claim. Id. at 206, 187 P.3d at 590.
Similarly, in the instant case, it is necessary to
examine the relationship between the insurer and the insured
throughout the entire claims process, starting from “[t]he first
communication” between the parties, to determine whether the
insurer acted in bad faith. Id. at 203, 187 P.3d at 587. It is
not sufficient to determine only whether the insurer complied
with the terms of the contract. Best Place, 82 Hawaiʻi at 131-
32, 920 P.2d at 346-47; see also Enoka, 109 Hawaiʻi at 552, 128
P.3d at 865 (“Surely an insurer must act in good faith in
dealing with its insured and in handling the insured’s claim,
even when the policy clearly and unambiguously excludes
coverage.”). Here, the ICA analyzed HMSA’s conduct without
considering its conduct throughout the duration of its
relationship with Brent, starting with the first communication.
The ICA’s analysis was limited to the period from the day the
precertification request was filed, March 2, 2006, to the day
the request was denied, March 6, 2006. Adams III, 2018 WL
2753319, at *3. It found that HMSA handled Brent’s claim in a
reasonable manner when it responded to his claim for benefits
within four days of receipt of the request, as required under
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the Plan. Id. The covenant of good faith and fair dealing
implied in the insurance contract, however, required HMSA to act
in good faith before and after the formal submission of the
claim. See Best Place, 82 Hawaiʻi at 131-32, 920 P.2d at 345-46.
Thus, the ICA erred because it did not examine the conduct of
the parties before the formal submission of the claim on March
2, 2006.
Taking into consideration HMSA’s conduct throughout
its entire contractual relationship with Brent, the record
contains facts that are “fairly susceptible of divergent
inferences,” Willis, 129 Hawaiʻi at 496, 304 P.3d at 637
(citation omitted), regarding whether HMSA “unreasonably
handle[d]” Brent’s claim for an allogenic transplant, Francis,
89 Hawaiʻi at 238, 971 P.2d at 711. HMSA became aware that Brent
was considering pursuing an allogenic transplant on December 15,
2005, but did not inform him that an allogenic transplant was
not a covered benefit under the Plan until after the claim was
submitted on March 2, 2006. In light of the evidence in the
record, a reasonable inference could be made that HMSA’s failure
during this two and a half month period to inform the Adamses
that an allogenic transplant was not covered under the Plan
could have led Brent and Patricia to believe that an allogenic
transplant was covered.
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There is further evidence in the record that could
support the inference that HMSA unreasonably handled the claim
because it was aware that Brent was attempting to test his five
siblings to determine if one was a match, and yet, did not
inform Brent that the treatment was not covered under the Plan.
The December 15, 2005 precertification request for an autologous
transplant noted that Brent’s siblings would be tested to
determine if they could serve as stem cell donors, and that if
one of them could, Brent would consider pursuing an allogenic
transplant. Two days later, on December 17, 2005, City of Hope
submitted an urgent precertification request to test Brent’s
siblings’ stem cells in the hopes that one of the siblings would
match and Brent would be eligible for an allogenic transplant.
The request was rescinded, however, when HMSA explained to Dr.
Stein that it would only pay for testing if one of the siblings
proved to be a matching donor. Brent and Patricia paid out-of-
pocket to test Brent’s five siblings to determine whether he was
eligible for an allogenic transplant. Thus, the record could
support the inference that HMSA unreasonably handled the claim
because it was aware that Brent was taking steps to pursue the
treatment by having his siblings tested, but did not inform
Brent that an allogenic transplant was not covered under the
Plan. Instead, HMSA’s conduct may have implied that an
allogenic transplant was covered because it assured Brent that
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if one of his siblings was a match, HMSA would pay for the cost
of testing that sibling.
In the two months preceding the formal submission of
the claim on March 2, 2006, there is evidence that HMSA
continually instructed Brent to submit a precertification
request for an allogenic transplant and assured Brent that his
“care plan” and “goals remain appropriate and on target[.]”
This could also support the inference that HMSA “unreasonably
handle[d]” the claim by leading Brent and Patricia to believe
that an allogenic transplant was covered under the Plan.
Francis, 89 Hawaiʻi at 238, 971 P.2d at 711. According to HMSA’s
log of its communications with Brent and Patricia, on January
17, 2006, Patricia discussed with HMSA Brent’s intent to pursue
the allogenic transplant if one of his siblings could serve as a
donor. Also according to the log, on February 22, 2006, Brent
informed HMSA that it appeared that his sibling was a match and
“he didn’t want to wait until the last minute to get [the
allogenic transplant] approved and wanted to know what needs to
happen[.]” HMSA advised Brent that it sent Dr. Stein the
necessary documentation and instructions for submitting the
precertification request. HMSA also noted that “[i]n terms of
the care plan, the goals remain appropriate and on target; no
change in plan or acuity.” Again, on February 27, 2006,
Patricia stated that she checked on the status of approval for
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the allogenic transplant and noted that they “were desperately
trying to avoid any delays[.]” She also stated that, “with the
possibility that an allo transplant may be needed, they will
need as much advance notice as possible[.]” HMSA replied that
it would send Dr. Stein another reminder to file the
precertification request. Dr. Stein submitted the
precertification request on March 2, 2006 and HMSA denied the
claim on March 6, 2006. Dr. Stein stated in a deposition that
he was surprised by HMSA’s denial of coverage because,
throughout months of contact, HMSA never indicated that an
allogenic transplant was not covered under the Plan:
My office and other City of Hope personnel had several
contacts with HMSA in early 2006 attempting to obtain
authorization for Brent’s second tandem transplant to be an
allogenic rather than autologous transplant, and we were
never advised that allogenic transplant was not a benefit
of Brent’s Plan.
Patricia also described in her declaration being “taken by
surprise” when HMSA denied the claim “because no one had ever
mentioned anything about HMSA denying the allo transplant. . . .
We could not understand how HMSA could suddenly change its
position on covering the allo transplant when we knew Brent had
a matched donor.” Thus, the statements of Dr. Stein and
Patricia could constitute evidence that HMSA acted in a manner
that may have led Brent, Patricia, and Dr. Stein to believe that
the allogenic transplant was covered under the Plan, which could
support an inference that HMSA unreasonably handled the claim.
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As noted, “reasonableness can only constitute a
question of law suitable for summary judgment when the facts are
undisputed and not fairly susceptible of divergent
inferences[.]” Willis, 129 Hawaiʻi at 496, 304 P.3d at 637
(internal quotation marks omitted) (quoting Guajardo, 118 Hawaiʻi
at 206, 187 P.3d at 590). The foregoing facts are “fairly
susceptible of divergent inferences,” id., namely that HMSA may
or may not have “unreasonably handle[d]” Brent’s claim for an
allogenic transplant. Francis, 89 Hawaiʻi at 238, 971 P.2d at
711. Because divergent inferences may be reached based on the
facts of this case, the issue of whether HMSA “unreasonably
handle[d]” Brent’s claim for an allogenic transplant is not
suitable for summary judgment. Id.
IV. Conclusion
HMSA’s duty of good faith and fair dealing arose as a
consequence of the relationship established by the insurance
contract entered into by Brent and HMSA. Evidence of HMSA’s
conduct during its relationship with Brent raises genuine issues
of material fact as to whether HMSA “unreasonably handle[d]”
Brent’s claim for an allogenic transplant. Id. We vacate the
ICA’s July 6, 2018 judgment on appeal affirming the circuit
court’s grant of HMSA’s motion for summary judgment on the bad
faith claim and also vacate the circuit court’s order granting
summary judgment in favor of HMSA as to the bad faith claim. We
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remand to the circuit court for further proceedings consistent
with this opinion.
Rafael G. Del Castillo /s/ Paula A. Nakayama
Robert H. Thomas
Tred R. Eyerly /s/ Sabrina S. McKenna
Joanna C. Zeigler
for Petitioner /s/ Richard W. Pollack
Dianne Winter Brookins /s/ Michael D. Wilson
John-Anderson L. Meyer
for Respondent /s/ Rowena A. Somerville
25