Sliney v. New Castle County

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
Kenneth Sliney, )
)
Plaintiff, )
) C.A. No. N19C-05-061 FWW
v. )
)
New Castle County and Highmark )
BCBSD, Inc., )
)
Defendants. )
Submitted: September 13, 2019
Decided: December 23, 2019
Upon Defendant Highmark BCBSD, Inc.’s Motion to Dismiss
GRANTED.
Upon Defendant New Castle County’s Motion to Dismiss
DENIED in Part and GRANTED in Part.
ORDER
Francis J. Murphy, Esquire, Jonathan L. Parshall, Esquire, Murphy & Landon, 1011
Centre Road, #210, Wilmington, DE, 19805; Attorneys for Plaintiff, Kenneth Sliney.
Benjamin Chappel, Esquire, Justin M. Forcier, Esquire, Reed Smith, LLP, 1201 N.
Market Street, Suite 1500, Wilmington, DE 19801; Attorneys for Defendant
Highmark BCBSD, Inc.
Mary A. Jacobson, Esquire, Mengting Chen, Esquire, New Castle County Office of
Law, New Castle County Government Center, 87 Reads Way, New Castle, DE
19720; Attorneys for Defendant New Castle County.
WHARTON, J.
This 23rd day of December, 2019, upon consideration of the Motions to
Dismiss of Defendants New Castle County! and Highmark BCBSD, INC.,? and
Plaintiff Kenneth Sliney’s Responses;? it appears to the Court that:
(1) In June and July of 2017, Kenneth Sliney’s (“Sliney”) minor son
received inpatient medical treatment at Caron Treatment Center (“Caron”).4 New
Castle County (“the County”), Sliney’s employer, supplied his health insurance,°
which Highmark BCBSD, Inc. (“Highmark”) administered.° Sliney paid $48,150
for treatment at Caron and received a reimbursement of $4,432.? Highmark later
denied payment for the inpatient treatment at Caron.’ After unsuccessfully
appealing first directly to Highmark, Sliney submitted the claim for independent
review by Medwork Independent Review, as a part of Highmark’s appeal process.”
On April 18, 2018, Medwork Independent Review issued a decision upholding the
denial of benefits.!°
! Def. New Castle County’s Mot. to Dismiss, D.I. 11.
2 Def. Highmark BCBSD, Inc.’s Mot. to Dismiss, D.I. 9.
3Pl.’s Resp. in Opp. to def. New Castle County’s Mot. to Dismiss, D.I. 15.; Pl.’s
Resp. in Opp. to Def. Highmark BCBNSD, Inc.’s Mot. to Dismiss, D.I. 14.
4P1.’s Compl. at ff 1, 10, 11, DI. 1.
> Id. It is undisputed that Plaintiff's insurance coverage included his minor son. Jd.
° Pl.’s Compl. at Jf 1, 4, 6, 8, 9, D.I. 1.
7 Td. at 917.
8 Td. at FF 12, 13.
? Id. at J 14.
Id. at 415.
(2) On May 8, 2019, Sliney brought this action against the County and
Highmark, alleging breach of contract (Count I) and bad faith breach of contract
(Count II).'' On August 14, 2019, Highmark moved to dismiss.!? On August 16,
2019, the County also moved to dismiss or, in the alternative, for a more definite
statement.'? On September 13, 2019, Sliney responded to both motions."4
(3) A motion to dismiss for failure to state a claim pursuant to Superior
Court Rule 12(b)(6) will not be granted if the “plaintiff may recover under any
reasonably conceivable set of circumstances susceptible of proof under the
IS The Court's review is limited to the well-pled allegations in the
complaint.
complaint.'® In ruling on a motion under Rule 12(b)(6), the Court “must draw all
reasonable factual inferences in favor of the party opposing the motion.”!” Dismissal
is appropriate “only if it appears with reasonable certainty that the plaintiff could not
prove any set of facts that would entitle him to relief.”'® The pleading standards
governing a motion to dismiss in Delaware are minimal.'? Delaware is a notice-
" Td. § at 20-25.
'2 Def.’s Mot. to Dismiss, D.I. 9 (Highmark).
'3 Def.’s Mot. to Dismiss, D.I. 11 (County).
'4 PI's Resp. Mot. Dismiss, D.I. 14-15.
'S Browne v. Robb, 583 A.2d 949, 950 (Del. 1990).
'© Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005).
"7 Td.
18 Td.
'9 See Central Mort. Co. v. Morgan Stanley Mort. Capital Holdings LLC, 27 A.3d
531, 536 (Del. 2011).
pleading jurisdiction, and a complaint need only “give general notice as to the nature
of the claim asserted against the defendant in order to avoid dismissal for failure to
state a claim.”2°
(4) The Court turns first to Highmark’s 12(b)(6) Motion to Dismiss.
Highmark moves to dismiss Count I’s breach of contract claim arguing that Sliney
has not alleged the existence of a contract between Sliney and it.*! As to Count II,
Highmark asserts that without a contractual relationship, Sliney cannot establish a
breach of the implied covenant of good faith or any other contractual obligation.”
In opposition, Sliney argues that he is a third-party beneficiary of the County’s
administration contract with Highmark, and as such, he may sue for breach of that
contract.”?
(5) A contract made for the benefit of a third party is enforceable and the
third party may sue to enforce a promise made for the third party’s benefit, even as
a stranger to the written agreement.”* Under general contract principles, in order to
be a third-party beneficiary, the parties to the contract must have intended to confer
°° Nye v. Univ. of Del., 2003 WL 22176412, at *3 (Del. Super. Ct. Sept. 17, 2003);
see also Super. Ct. Civ. R. 8(a)(1).
2] Def.’s Mot. to Dismiss at 3, D.I. 9 (Highmark).
22 Id.at 3-6.
?3 P].’s Resp. Mot. Dismiss at 5, D.I. 14 (Highmark).
*4 Farmers Bank of State of Del. v. Howard, 276 A.2d 744, 745 (Del. Ch. 1971).
4
a benefit on the third party.” To state a claim for breach of contract, a party must
simply plead: (1) the existence of the contract; (2) a breach of the contract; and (3)
damages suffered because of the breach.”° A plaintiff need not plead specific facts
to state an actionable claim.’
(6) The issue under Count I is whether Sliney has alleged that he is a third-
party beneficiary of the contract between the County as the insurer and the third-
party administrator of the health insurance plan - Highmark. In Delaware, whether
the parties to a contract intend a third party to be a beneficiary of that contract is
determined by the language of the contract.”’ As an employee of the County, Sliney
is clearly an intended beneficiary of the contract between the County and Highmark
for the purposes of the administration of benefits. But, Sliney has not alleged that
he is a third-party beneficiary of the agreement between the County and Highmark
for the purposes of coverage determination. The Complaint fails to allege a
potentially viable claim against Highmark for breach of contract. Therefore, the
Court GRANTS Highmark’s Motion to Dismiss Count I.
*° Delmar News, Inc. v. Jacobs Oil Co., 584 A.2d 531, 534 (Del. Super. Ct. 1990).
6 VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
27 Td. at 611.
8 Willis v. City of Rehoboth Beach, 2004 WL 2419143, at *2 n3 (Del. Super. Ct.
Oct. 14, 2004) (The Court’s interpretation of an insurance policy is matter of law)
(citations omitted).
(7) With respect to Count II, under the implied covenant of good faith and
fair dealing, a party may not violate the express terms of an agreement but still
deprive the other of the fruits of the bargain.”’ “Thus, parties are liable for breaching
the covenant when their conduct frustrates the “overarching purpose” of the contract
by taking advantage of their position to control implementation of the agreement
terms.”°° Our Supreme Court has recognized that an insured has a cause of action
for breach of the implied covenant of good faith when the insurer refuses to honor
its obligations under the policy and clearly lacks reasonable justification for doing
so.?!
(8) Here, Sliney alleges that after Highmark denied payment for his son’s
inpatient treatment at Caron, Sliney “submitted the claim for the care at [Caron] for
an ‘external review’.”*? The independent reviewer subsequently affirmed
Highmark’s denial of payment. Apart from Sliney’s failure to allege that he is a
third-party beneficiary of the contract between the County and Highmark, Count I],
*? Dunlap, 878 A.2d at 444,
°° Td.at 441 (quoting Breakaway Solutions, Inc. v. Morgan Stanley & Co., 2004 WL
1949300, at *12, (Del. Ch. 2004).
3! See Enrique v. State Farm Mut. Auto. Ins. Co., 142 A.3d 506, 512 (Del. 2016)
(citing Connelly v. State Farm Mut. Auto. Ins. Co., 135 A.3d 1271, 1274-75, 2016
WL 836983, at *3 (Del.2016); EL. DuPont de Nemours & Co. v. Pressman, 679
A.2d 436, 445-46 (Del.1996); Pierce v. Int'l Ins. Co. of Ill., 671 A.2d 1361, 1367
(Del.1996); Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254, 265-66
(Del.1995)).
*2 Pl.’s Compl. at J 13-14., D.I. 1.
alleging bad faith, fails for a different reason. Despite its conclusory language of
bad faith, that claim is undermined by the allegation that a subsequent independent
review affirmed Highmark’s decision. Thus, Sliney actually alleges a reasonable
justification for Highmark’s refusal to pay the claim, thereby defeating his bad faith
claim.*? Accordingly, Sliney has not stated a claim of bad faith, and Highmark’s
Motion to Dismiss Count IT is GRANTED.
(9) The Court now turns to the County’s Motion to Dismiss pursuant to
Superior Court Civil Rule 12(b)(6), or in the Alternative, for a More Definite
Statement.*4 The County relies on 18 Del. C. §6416(b), which provides a rebuttable
presumption against coverage of the claim, to assert that Sliney failed to plead
sufficiently both the breach of contract and bad faith claims.*> The County also
asserts immunity under 18 Del. C. §6418(b) for both counts. Sliney concedes that
coverage of the claim is subject to a rebuttable presumption, but argues that the
presumption is “rebuttable,” not irrebuttable, and that the County’s immunity does
not immunize it from all wrongful conduct.*°
(10) The County’s Motion is premature. The arguments are ones that the
Court expects the parties may ask it to revisit after they have conducted appropriate
3 Id at 15., DL. 1.
34 Def.’s Mo. to Dismiss at 1, D.I. 11 (County).
35 Td. at 97.
36 P].’s Resp. Mot. Dismiss at 4, D.I. 15 (County).
7
discovery. For present purposes, Sliney alleges under Count I: (1) the insurance
contract between himself and his employer, the County; (2) a breach of that contract
by the County’s failure to pay the covered amount; and (3) damages in the sum of
the amount left unreimbursed for the covered expenses. Under the Rule 12(b)(6)
pleading standard, Sliney has pled sufficiently a breach of contract under Delaware’s
low pleading standard. The County’s Motion to Dismiss is DENIED. Further, the
County’s request for a more definite statement also is DENIED. Additional
specifics of the allegations of the type sought by the County may be gleaned from
discovery. Count II, however, fails for one of the same reasons it fails against
Highmark — the conclusory allegation of bad faith is undermined by the allegation
that the denial of Sliney’s claim was upheld when it was submitted for independent
review.
(11) The Court finds Sliney’s allegations against the County sufficient to
state a claim as to Count I, but not as to Count II. The County’s Motion to Dismiss
or, in the Alternative, for a More Definite Statement is DENIED as to Count I and
GRANTED as to Count II.
THEREFORE, Defendant Highmark BCBSD, Inc.’s Motion to Dismiss is
GRANTED, and the Complaint is DIMISSED WITHOUT PREJUDICE.
Defendant New Castle County’s Motion to Dismiss, or in the Alternative for a More
Definite Statement is DENIED as to Count I, and GRANTED as to Count II, and
the Complaint is DISMISSED WITHOUT PREJUDICE as to Count II.
Plaintiff Kenneth Sliney is granted leave to file an Amended Complaint no
later than 30 days from the date of this Order.
IT IS SO ORDERED. ~) fo
Ferfis W. Whartot, J.