Malcomson v. Liberty NW

September 10 2014
DA 13-0610
IN THE SUPREME COURT OF THE STATE OF MONTANA
2014 MT 242TINA MALCOMSON,
Petitioner and Appellee,
v.
LIBERTY NORTHWEST,
Respondent and Appellant.
APPEAL FROM: Montana Workers’ Compensation Court, WCC No. 2008-2103
Honorable James Jeremiah Shea, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Larry W. Jones (argued), Wills Law Firm, Missoula, Montana
For Appellee:
Stacy Tempel-St. John (argued), Linnell, Newhall, Martin & Schulke, P.C.,
Great Falls, Montana
For Amicus Curiae:
David Sandler (argued), Eddy Sandler Trial Attorneys, Kalispell, Montana
(Attorney for the Montana Trial Lawyers Association)
Kevin Braun, Special Assistant Attorney General, Helena, Montana
(Attorney for the State of Montana)
Oral Argument: May 6, 2014
Submitted on Briefs: July 15, 2014
Decided: September 10, 2014
Filed:
__________________________________________
Clerk
Justice Patricia Cotter delivered the Opinion of the Court.
¶1 Tina Malcomson filed a workers’ compensation claim in December 2007 after being
injured while working as manager of Freemo’s Pizza in Missoula, Montana. Liberty
Northwest (Liberty) was the insurer for the claim. After Malcomson withdrew her consent
to allow Liberty and its agents to have ex parte communications with her medical care
providers, Liberty terminated her benefits, claiming that Malcomson’s withdrawal of consent
violated §§ 39-71-604 and 50-16-527, MCA (2007).1 Malcomson sued to have her benefits
reinstated, asserting that the above statutes were unconstitutional. The Workers’
Compensation Court (WCC) held that § 39-71-604(3), MCA, as applied to the facts in this
case, violated Malcomson’s constitutional right of privacy. The WCC directed Liberty to
reinstate benefits and held that it could not have ex parte communications with Malcomson’s
medical team without Malcomson’s knowledge and opportunity to participate. In addition,
the court held that it lacked jurisdiction to determine the constitutionality of § 50-16-527(5),
MCA. Liberty appeals. We affirm.
ISSUE
¶2 A restatement of the issue on appeal is whether the WCC erred in concluding that
§ 39-71-604(3), MCA, violated Malcomson’s right of privacy set forth at Article II, Section
10 of the Montana Constitution.
1
The workers’ compensation law in effect on the injured employee’s last day of work
governs the claim. Mont. State Fund v. Grande, 2012 MT 67, ¶ 23, 364 Mont. 333, 274 P.3d 728.
Unless otherwise indicated, our references to applicable statutes will be to the 2007 version.
2
FACTUAL AND PROCEDURAL BACKGROUND
¶3 On December 21, 2007, Malcomson suffered a back injury while performing her work
duties. She sought medical treatment and filed a workers’ compensation claim on the same
day. Liberty hired Annie Young, a registered nurse with PACBLU Northwest, to act as
Malcomson’s medical case manager and as Liberty’s agent. Young presented to Malcomson
a Claimant’s Authorization form that Malcomson signed on January 3, 2008. This is a form
that workers’ compensation claimants must sign in order to receive workers’ compensation
benefits. In accordance with § 39-71-604(3), MCA, the authorization form provided that
Malcomson’s healthcare providers and Liberty could release healthcare information relevant
to Malcomson’s workers’ compensation claim to one another or their agents. The
authorization provided that communication between her doctors and Liberty could take place
without Malcomson’s knowledge or opportunity to participate. A few days later,
Malcomson signed a second Claimant’s Authorization form containing the same language.
Both authorization forms provided that Malcomson could revoke her authorization in writing
at any time and the revocation would be effective upon receipt by Liberty.
¶4 Young immediately began arranging appointments for Malcomson with providers not
of Malcomson’s choosing. Young attended appointments with Malcomson, changed
appointments to dates she deemed to be more compatible with Young’s schedule, and
contacted Malcomson’s doctors without Malcomson’s knowledge.
¶5 On March 7, 2008, Liberty notified Malcomson by mail that it was terminating her
temporary partial disability (TPD) wage benefits because Freemo’s notified Liberty that
Malcomson had been terminated from her job on February 23, 2008, for disciplinary reasons.
3
On March 12, 2008, Malcomson, through counsel, requested that her TPD benefits be
reinstated pending resolution of the dispute surrounding her termination. In the same letter,
Malcomson revoked the releases and authorizations she had signed previously, expressly
stating that neither Liberty nor PACBLU nor any of their agents had her permission to
“speak” to her healthcare providers without first notifying Malcomson or her attorney and
providing them an opportunity to participate in the communication.2 In lieu of the
authorization, Malcomson offered to provide a HIPAA-compliant release that would allow
Liberty to obtain copies of her medical file and bills without prior notice to her.
¶6 On March 31, 2008, Liberty notified Malcomson’s counsel that it would not reinstate
Malcomson’s TPD benefits. Moreover, Liberty indicated that because Malcomson had
revoked the release authorizing ex parte communications, it was terminating her medical
benefits as well. Despite subsequent attempts to fashion a release that was acceptable to both
Malcomson and Liberty, the parties were unable to do so.
¶7 On June 20, 2008, Malcomson filed a Petition for Emergency Trial with the WCC
asserting that the statutes relied upon by Liberty to terminate her medical benefits—i.e.,
§§ 39-71-604 and 50-16-527, MCA—were unconstitutional. On September 14, 2011, and
resuming on November 17, 2011, the WCC conducted a trial and heard testimony from
numerous witnesses including Malcomson, Liberty and PACBLU employees, doctors,
2
After Malcomson filed this action with the WCC, she discovered that Young had billed 1.1
hours for four telephone calls made directly to Malcomson’s doctor between March 13 and March
27. These calls were made without her knowledge and after Malcomson revoked Liberty’s and
PACBLU’s right to speak to Malcomson’s medical providers.
4
nurses, and counselors. On August 16, 2013, the WCC issued its Findings of Fact,
Conclusions of Law and Judgment.
¶8 As a preliminary matter, the WCC noted that Liberty had terminated Malcomson’s
medical benefits under both §§ 39-71-604 and 50-16-527, MCA, and that Malcomson had
challenged the constitutionality of both statutes. Although the two statutes are virtually
identical, the WCC concluded that it lacked jurisdiction to review the constitutionality of a
statute codified under the Uniform Healthcare Information Act. It therefore limited its ruling
to Malcomson’s challenge of § 39-71-604, MCA. This determination is not on appeal.
¶9 The WCC held that § 39-71-604(3), MCA, as applied in Malcomson’s case, violated
Malcomson’s constitutional right of privacy because it allowed Liberty to discuss
wide-ranging healthcare information with Malcomson’s doctors, nurses, and therapists—
some of which may not be relevant to Malcomson’s workers’ compensation claim—without
giving Malcomson or her attorney notice and the opportunity to participate in the
communication. The WCC concluded that while the State has a compelling interest in the
orderly administration of the workers’ compensation process, the statute at issue was not
narrowly tailored to effectuate that interest. It held that the statute abrogated the claimant’s
ability to safeguard her constitutional right of privacy and in so holding, rejected Liberty’s
argument that the statute was constitutional because it allowed the insurer to discuss only
relevant healthcare information with a healthcare provider ex parte. The court recognized,
however, that insurers have a legitimate reason to engage in administrative contact with
healthcare providers, and concluded that a release crafted to grant an insurer limited ex parte
contact to facilitate and expedite the administrative aspects of the claim handling
5
procedure—such as scheduling appointments and requesting medical records—would not
violate a claimant’s right of privacy.
¶10 Liberty filed a timely appeal.
STANDARD OF REVIEW
¶11 We review the WCC’s factual findings to determine whether they are supported by
substantial credible evidence and its conclusions of law for correctness. “Substantial
credible evidence is evidence that a reasonable mind might accept as adequate to support a
conclusion.” Additionally, this Court accords a high level of deference to the WCC’s factual
findings, and we will consider evidence “substantial even if it is contradicted by other
evidence, even if it is somewhat less than a preponderance, and even if it is inherently weak.”
Stewart v. Liberty Northwest Ins. Corp., 2013 MT 107, ¶¶ 16 and 31, 370 Mont. 19, 299 P.3d
820 (internal citations omitted).
¶12 “The party challenging the constitutionality of a statute bears the burden of proving
the statute unconstitutional beyond a reasonable doubt.” Henry v. State Compen. Ins. Fund,
1999 MT 126, ¶ 11, 294 Mont. 449, 982 P.2d 456.
DISCUSSION
¶13 Did the WCC err in concluding that § 39-71-604(3), MCA, violated Malcomson’s
right of privacy set forth at Article II, Section 10 of the Montana Constitution?
¶14 First, we briefly address the appropriate level of scrutiny to be applied to the
challenged statute. Malcomson argued and the WCC agreed that the appropriate level of
scrutiny for the statutory challenge was strict scrutiny, as the fundamental right of privacy
was implicated. In its briefing before this Court, Liberty does not challenge the WCC’s
6
application of a strict scrutiny standard nor does it urge us to apply rational basis review.
During oral argument, counsel for Liberty acknowledged that Liberty had not appealed from
the WCC’s application of strict scrutiny review to this case. Rather, Liberty argues that
because Malcomson has failed to establish that the statute even implicates the right of
privacy, the statute simply does not run afoul of the Constitution. Because Liberty has not
challenged the WCC’s level of scrutiny, we accept as correct the WCC’s conclusion of law
that strict scrutiny should be applied when analyzing § 39-71-604(3), MCA, because it
implicates privacy rights of constitutional significance. The right of privacy being a
fundamental right, legislation that infringes the exercise of the right of privacy must be
reviewed under a strict scrutiny analysis. The statute must be justified by a compelling state
interest and must be narrowly tailored to effectuate only that interest. Armstrong v. State,
1999 MT 261, ¶ 34, 296 Mont. 361, 989 P.2d 364.
¶15 The primary dispute in this case is whether the challenged statute, § 39-71-604(3),
MCA, implicates the right of privacy as guaranteed by Article II, Section 10 of the Montana
Constitution. Malcomson asserts it does; Liberty maintains it does not.
¶16 Section 39-71-604(3), MCA, provides:
A signed claim for workers’ compensation or occupational disease
benefits or a signed release authorizes a workers’ compensation insurer, as
defined in 39-71-116, or the agent of the workers’ compensation insurer to
communicate with a physician or other health care provider about relevant
health care information, as authorized in subsection (2), by telephone, letter,
electronic communication, in person, or by other means, about a claim and to
receive from the physician or health care provider the information authorized
in subsection (2) without prior notice to the injured employee, to the
employee’s authorized representative or agent, or in the case of death, to the
employee’s personal representative or any person with a right or claim to
compensation for the injury or death. (Emphasis added.)
7
“Relevant health care information” is defined as:
Health care information relevant to the claimant’s condition may include past
history of the complaints of or the treatment of a condition that is similar to
that presented in the claim, conditions for which benefits are subsequently
claimed, other conditions related to the same body part, or conditions that may
affect recovery.
Section 39-71-604(2), MCA.
¶17 We begin our discussion with a brief history of the subject statute. The Montana
Worker’s Compensation Act was first adopted in 1915. For 88 years, the provisions under
the Act with respect to filing an application for compensation were administered without the
inclusion of § 39-71-604(3), MCA, quoted above. This paragraph, authorizing ex parte
communications between a claimant’s healthcare provider and an insurer, was adopted by the
legislature in 2003. On October 18, 2005, the WCC ruled in a declaratory judgment action
that § 39-71-604(3), MCA (2003), was unconstitutional because it violated the petitioner’s
constitutional right to due process. Thompson v. State, 2005 MTWCC 53. While this
decision remained in effect, ex parte communications between insurers and a claimant’s
healthcare providers were not permitted. Subsequently, on September 7, 2007, the Supreme
Court reversed the decision of the WCC on procedural grounds, concluding that the WCC
did not have jurisdiction to issue a declaratory judgment. The provisions of § 39-71-604(3),
MCA (2003), were therefore resurrected.
¶18 Article II, Section 10 of the Montana Constitution guarantees:
The right of individual privacy is essential to the well-being of a free
society and shall not be infringed without the showing of a compelling state
interest.
8
¶19 Liberty argues that this is not a “right of privacy” case and should not have been
decided as one. It asserts that the WCC failed to apply the required two-prong test this Court
adopted to determine if the right of privacy is implicated, i.e., the Katz test, and, if it had
applied the test, the test would not have been satisfied.
¶20 The two-prong Katz test upon which Liberty relies requires a determination of
whether the person claiming the right of privacy has (1) a subjective or actual expectation of
privacy (2) that society is willing to recognize as reasonable. This Court first adopted the
test set forth in Katz v. United States, 389 U.S. 347, 88 S. Ct. 507 (1967), in Hastetter v.
Behan, 196 Mont. 280, 639 P.2d 510. Since then, we have applied the Katz test in numerous
cases in which the constitutional right of privacy has been potentially implicated, including
search and seizure cases,3 right to know cases,4 and right of privacy cases.5
¶21 Liberty maintains that Malcomson could not have an actual or subjective expectation
of privacy as to any medical information relevant to her claim because the WCC laws clearly
place her on notice that such information must be provided to the insurer. In other words,
Malcomson has no right of privacy in her medical information because she is on notice that
the statute has taken that right away. We reject Liberty’s Katz argument for two reasons.
¶22 First, Liberty’s argument is oversimplified. Malcomson does not dispute that an
insurer is entitled to have access to medical information relevant to her claim for benefits.
3
State v. Hill, 2004 MT 184, 322 Mont. 165, 94 P.3d 752.
4
Montana Human Rights Div. v. Billings, 199 Mont. 434, 649 P.2d 1283 (1982); State ex
rel. Great Falls Tribune Co. v. Montana Eighth Judicial Dist. Court, 238 Mont. 310, 777 P.2d 345(1989).
5
Gryczan v. State, 283 Mont. 433, 942 P.2d 112 (1997); State v. Nelson, 283 Mont. 231, 941
P.2d 441 (1997).
9
What she objects to is the provision of the statute which permits an agent of the insurer to
communicate directly with her physicians or other healthcare providers—personally or by
any other means—without prior notice to her or the opportunity to participate in the
discussion. Thus, she objects not to Liberty’s right of access to relevant medical
information, but rather to the method of access the statute permits it to utilize. Liberty’s
attempt to sweep away all expectation of privacy ignores the distinction made in the revised
statute between the right of access to medical information and the method whereby that
access is accomplished.
¶23 Second, as the WCC observed, this Court “has long recognized that the privacy
interests concerning a person’s medical information implicate Article II, Section 10, of the
Montana Constitution.” Nelson, 283 Mont. at 241-42, 941 P.2d at 447-48 (1997). In Nelson,
we applied the Katz test to Nelson’s claim that BAC test results obtained by a hospital
treating Nelson’s injuries were entitled to constitutional protection. We concluded that
“[m]edical records are quintessentially ‘private’ and deserve the utmost constitutional
protection.” Nelson, 283 Mont. at 242, 941 P.2d at 448. We said that such records could be
discovered by way of investigative subpoena only upon a showing of compelling state
interest under Article II, Section 10 of the Montana Constitution. Nelson, 283 Mont. at 242,
941 P.2d at 449. As Nelson establishes, this Court has already affirmatively applied Katz to
a claim of privacy in one’s medical information, and has found the expectation of privacy to
be of constitutional significance. This being so, the fact that the WCC did not perform a
Katz analysis in this case is of no moment.
10
¶24 Having established that our jurisprudence has long recognized a person’s privacy
expectation in her medical information, we now turn back to § 39-71-604(3), MCA, to
determine whether it passes constitutional muster. As noted above, legislation that infringes
the right of privacy must be reviewed under a strict scrutiny analysis. The subject statute
must be justified by a compelling state interest and be narrowly tailored to effectuate that
purpose. Gryczan, 283 Mont. at 449, 942 P.2d at 122.
¶25 We agree with Malcomson and the WCC that the State has a compelling interest in
the orderly administration of the workers’ compensation process. We further agree that the
statute at issue is not narrowly tailored to effectuate that interest. Section 39-71-604(2),
MCA, provides that by making a claim for workers’ compensation benefits, a claimant
authorizes her physician or other healthcare provider to disclose or release information
relevant to the claimant’s condition to the workers’ compensation insurer. This provision is
not challenged here. At issue, rather, is the provision of § 39-71-604(3), MCA, that permits
an agent of the insurer to communicate directly with a physician or other healthcare provider
and receive “relevant healthcare information” without prior notice to the claimant or her
authorized representative or agent.
¶26 Malcomson argues that she cannot protect her right of privacy if she is excluded from
communications between Liberty and her healthcare providers. While she concedes that
Liberty is entitled to relevant healthcare information pertaining to her claim, her concern is
that irrelevant medical information could be disclosed by her healthcare providers to Liberty
in her absence, or that negative comments made by Liberty’s agents to those providers could
adversely impact their perception of her as a patient and the manner in which they manage
11
her medical care. In support of her concerns, she cites multiple exchanges between Young
and members of her medical team that took place outside her presence which she claims
were intended by Young to paint her in a poor light. By way of example, it is undisputed
that Young complained to Malcomson’s therapist that Malcomson “rambles on” and “spends
a great deal of [Liberty’s] time/efforts with repetitive information.” Young also suggested
that the therapist not accommodate Malcomson if she was running late or running early for
her appointment. Malcomson fears that if Liberty has unfettered access to her healthcare
providers, she will never know whether it has obtained irrelevant medical information or has
cast her in a negative light to her prejudice, and she will be wholly unable to protect her
privacy interest in medical information that is irrelevant to her claim. We agree with
Malcomson and the WCC that these concerns are valid and justified.
¶27 This Court has previously disapproved of private interviews and correspondence
between an insurer and a claimant’s physicians for similar reasons. In Linton v. Great Falls,
230 Mont. 122, 749 P.2d 55 (1988), we addressed whether the WCC erred in allowing State
Fund to conduct private conversations with Linton’s doctors. Applying a previous version of
§ 39-71-604, MCA, we said that while a claimant waives any privilege of confidentiality as
to healthcare information which is relevant to the subject matter of her claim, a personal
interview between the insurance company and a claimant’s treating physician “must be done
openly to allay any suspicion that there is something available to one party, and not to the
other.” Linton, 230 Mont. at 134, 749 P.2d at 63. See also Jaap v. District Court of the
Eighth Judicial Dist., 191 Mont. 319, 623 P.2d 1389 (1981), in which we held that the Rules
12
of Civil Procedure addressing discovery do not allow private conversations with another
party’s physicians or medical team.
¶28 As amicus curiae, the State of Montana also argues that Malcomson has no
reasonable expectation of privacy in the disclosure of relevant medical information to
insurers. Because disclosure under the statute is expressly limited to relevant information,
the State continues, the statute is not subject to strict scrutiny and the mere specter of
potential for abuse by insurers does not render the statute infirm. Further, both Liberty and
the State point out that the workers compensation system is designed to be self-administering
and to minimize reliance on the court system. Section 39-71-105(3), MCA. The State cites
a Florida Court of Appeals case, S & A Plumbing v. Kimes, 756 So. 2d 1037 (Fl. Ct. App.
2000), in support of its position. The court in Kimes determined that Florida’s constitutional
right of privacy was not implicated by a similar ex parte communication statute because the
Florida workers compensation system “transposed dispute resolution for workplace injuries
from the private law of torts to a publicly administered and regulated system” under which a
claimant consents to disclosure of relevant healthcare information. Kimes, 756 So. 2d at
1042.
¶29 We made clear in Nelson that Montana’s right of informational privacy, “at a
minimum, encompass[es] the sanctity of one’s medical records.” Nelson, 283 Mont. at 242,
941 P.2d at 448. The State’s arguments fail to appreciate that this constitutional right
encompasses a “fundamental” right “to control circulation of personal information.” Nelson,
283 Mont. at 241, 941 P.2d at 448 (quoting Cutter v. Brownbridge, 228 Cal. Rptr. 545, 549
(Cal. Ct. App. 1986)). That a worker consents to release of relevant medical information
13
does not mean the worker loses all privacy interests in how that information is circulated or
disseminated. The right to control circulation of private information would be lost if the
individual does not know what healthcare information is being circulated or to whom.
¶30 The argument that § 39-71-604(3), MCA, is not narrowly tailored to effectuate the
State’s interest in the orderly administration of workers’ compensation cases finds support in
both the history of the subject statute and the admissions of counsel. As we note in ¶ 17, the
Workers’ Compensation Act has been in effect for nearly 100 years. For 90 of those years,
the Act contained no provision allowing agents of the insurer to communicate directly with
healthcare providers without prior notice to the injured employee, and yet relevant medical
information was obtained by insurers adjusting claims. Moreover, during the years
2005-2007 when the 2003 statute allowing ex parte communications was put on hold by
virtue of the Workers’ Compensation Court’s decision in Thompson, the parties exchanged
information by open email to which a claimant or her attorney was privy. When asked
during oral argument if this system was not workable, counsel for Liberty responded: “Not
at all, your honor. It is workable.” This concession was buttressed by the testimony of
agents for insurers who testified at Malcomson’s trial that they are able to obtain all the
information they need to process and administer a claim without having private talks with a
claimant’s physician.
¶31 In sum, the State’s interest in the orderly administration of workers’ compensation
cases was adequately effectuated for nearly 100 years without the necessity of ex parte
communications. The method for obtaining relevant medical information in effect before the
2003 amendment to § 39-71-604(3), MCA, was narrowly tailored to effectuate the State’s
14
interests. Because the State has long been able to administer the workers’ compensation
program without exposing injured workers to a potential violation of their constitutional right
of privacy, the statute as currently written is overbroad and cannot stand. Montana Envtl.
Info. Ctr. v. Dept. of Envtl. Quality, 1999 MT 248, ¶ 63, 296 Mont. 207, 988 P.2d 1236(“[A]ny statute or rule which implicates [a fundamental] right must be strictly scrutinized
and can only survive scrutiny if the State establishes a compelling state interest and that its
action is closely tailored to effectuate that interest and is the least onerous path that can be
taken to achieve the State’s objective.”). We therefore conclude that the unconstitutionality
of § 39-71-604(3), MCA (2003), under Article II, Section 10 of the Montana Constitution
has been established beyond a reasonable doubt and we affirm the conclusion of the WCC to
that effect.
¶32 The WCC concluded that the statute was unconstitutional as applied to Malcomson’s
case, even though she had also argued to the WCC that the statute was facially
unconstitutional. The WCC’s opinion broadly concluded “that insurers may not violate an
injured worker’s right to privacy by seeking ex parte contact to discuss medical issues[.]”
Further, the WCC held that “the statute is not narrowly tailored to effectuate” the State’s
“compelling interest in the orderly administration of the workers’ compensation process[.]”
These holdings are not limited to an “as-applied” challenge, but extend to other claimants
affected by the statute. We therefore conclude that the statute is facially unconstitutional
because it would impose the same violation of privacy interests on every injured worker to
whom it was applied.
15
¶33 Finally, we concur with the WCC’s conclusion that insurers have a legitimate interest
in engaging in ex parte contact with healthcare providers for the sole purpose of facilitating
the administrative aspects of the claim handling procedure, such as scheduling appointments
and requesting medical records. We agree with the WCC that a release crafted to authorize
this type of limited ex parte contact would not violate a claimant’s right of privacy.
CONCLUSION
¶34 For the foregoing reasons, we conclude the WCC did not err in ruling that
§ 39-71-604(3), MCA, “is unconstitutional because it violates Macolmson’s constitutional
right of privacy.” We further conclude the WCC did not err in concluding that a narrowly
crafted release authorizing insurers to have ex parte contact with healthcare providers solely
for administrative purposes would not violate a claimant’s right of privacy.
/S/ PATRICIA COTTER
We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ MICHAEL E WHEAT
/S/ JIM RICE
/S/ RAY DAYTON
District Court Judge Ray Dayton sitting
for the vacant position with the Court.
16