Dameron Hospital Association v. Geico General Insurance Company

Filing 19

ORDER signed by Senior District Judge John A. Mendez on 10/24/24 GRANTING 12 Motion to Dismiss with leave to amend and DENIES Defendants Motion to Dismiss the breach of contract claim only as it pertains to self-pay patient J.M.. If Plaintiff el ects to amend its complaint, it shall file a 1st Amended Complaint within twenty (20) days of this Order. Defendants' responsive pleadings are due twenty (20) days thereafter. Additionally, Defendants' counsel is ORDERED to pay $250 to the Clerk of the Court, within 5 days of this Order, for violation of the specified page limits for Reply Briefs pursuant to 11 Order. (cc: Finance Dpt.) (Licea Chavez, V)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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)
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)
)
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Plaintiff,
)
)
v.
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GEICO GENERAL INSURANCE COMPANY, )
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a Nebraska Corporation,
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Defendant.
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DAMERON HOSPITAL ASSOCIATION, a )
)
California Non-Profit
)
Association,
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Plaintiff,
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v.
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GEICO INDEMNITY COMPANY, a
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Maryland Corporation,
)
)
Defendant.
DAMERON HOSPITAL ASSOCIATION, a
California Non-Profit
Association,

Case No. 2:24-cv-01379-JAM-AC

ORDER GRANTING IN PART
DEFENDANTS’ MOTION TO DISMISS

Case No. 2:24-cv-00934-JAM-AC

INTRODUCTION OF CASE
Before the Court is two related cases involving Geico General
Insurance Company and Geico Indemnity Company (“Defendant(s)”), who
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move to dismiss the Complaint by Dameron Hospital Association

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(“Plaintiff”) for failure to state a claim.

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and 10; Compl., ECF No. 1 (both).

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identical claims and legal arguments and were related pursuant to

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Local Rule 123.

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motions.

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See Reply, ECF Nos. 15 and 14.

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Motions are denied in part and granted in part with leave to

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amend.1

See ECF No. 9 (both).

I.

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These cases involve nearly

See Opp’n, ECF Nos. 14 and 12.

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See Mot., ECF No. 12

Plaintiff opposed the
Defendants filed replies.

For the reasons below, Defendants’

FACTUAL ALLEGATIONS

Plaintiff Dameron Hospital operates an emergency room in

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Stockton, California and seeks injunctive, declaratory, and

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compensatory relief arising from Defendants’ Geico General

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Insurance Company (“Geico General”) and Geico Indemnity Company

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(“Geico Indemnity”) failure to pay Dameron Hospital certain

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benefits due under various patients’ automobile policies.

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Compl. at 24-25 (both).

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purported assignment of Med-Pay (“MP”) and Uninsured Motorist

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(“UM”) benefits by five patients who were admitted and discharged

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from Dameron Hospital.

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benefits pursuant to the Assignment of Benefits (“AOB”) contained

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in each patients’ respective Conditions of Admission (“COA”)

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paperwork.

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Administration healthcare as their medical insurance (D.S., X.K.,

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M.A., A.G.) and one individual (J.M.) is alleged to be a self-pay

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patient with no other insurance.

See

Specifically, this case involves the

Dameron claims entitlement to these

Four of the patients have Medicare or Veterans

See Compl. ¶ 4 (both).

Each of

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled
for August 20, 2024.
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2

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these individuals is alleged to maintain automobile coverage

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through either Defendant Geico General Insurance Company or Geico

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Indemnity Company.

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See Compl. ¶ 6-7 (both).

Dameron Hospital alleges three causes of action in its

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Complaint.

The First Cause of Action is a claim for injunctive

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relief under California’s Unfair Competition Law, Business and

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Professions Code § 17200 (“UCL”) stemming from a breach of

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contract.

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Defendants for failure to honor the assignment of MP or UM benefits

The Second Cause of Action alleges breach of contract by

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in Dameron Hospital’s COAs signed by the aforementioned emergency

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room patients.

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under the Medicare Secondary Payer Act, U.S.C.A. § 1395y(b)(3)(A)

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(“MSP Act”), alleging that Defendants have primary payer

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responsibility for the services rendered by Plaintiff Dameron

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Hospital.

The Third and final Cause of Action is a claim

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II.

OPINION

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A.

Legal Standard

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A Rule 12(b)(6) motion challenges the sufficiency of a

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complaint for “failure to state a claim upon which relief can be

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granted.”

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pleading standard set forth in Bell Atlantic Corp. v. Twombly, 550

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U.S. 544, 570 (2007), a plaintiff survives a motion to dismiss by

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alleging “enough facts to state a claim to relief that is

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plausible on its face.”

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“factual content that allows the court to draw the reasonable

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inference that the defendant is liable for the misconduct

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alleged.”

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Rule 12(b)(6) stage, the Court must accept all nonconclusory

Fed. R. Civ. P. 12(b)(6).

Under the plausibility

The complaint must contain sufficient

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

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At the

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factual allegations of the complaint as true and construe those

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facts and the reasonable inferences that follow in the light most

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favorable to the Plaintiff.

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F.3d 1068, 1072 (9th Cir. 2005).

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B.

Id.; see also Knievel v. ESPN, 393

Analysis
1. Plaintiff Fails to State a Claim for Breach of

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Contract

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a. The COAs Are Unenforceable Adhesion Contracts Under

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California Caselaw for Patients with Medical

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Insurance

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Defendants argue that the COAs and AOBs that Plaintiff

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requires patients to sign upon admittance or discharge from

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Dameron Hospital are adhesion contracts, thus there is no breach

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of contract claim for such unenforceable contracts that defy the

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reasonable expectations of the signatory.

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Plaintiff argues that an unpublished district court order in this

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district, Dameron Hosp. Ass’n v. State Farm Mut. Auto. Ins. Co.,

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2018 WL 1425981, at *4 (E.D. Cal. Mar. 22, 2018) (hereinafter,

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“State Farm 2018”) supports its position that the AOBs are valid

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contracts.

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correctly point out in their Reply, State Farm 2018 did not

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address arguments that AOBs are unenforceable as adhesion

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contracts that defy reasonable expectations.

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Importantly, unlike this Court, the State Farm 2018 district court

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order did not have the benefit of the analysis in Dameron Hosp.

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Assn. v. AAA N. California, Nevada & Utah Ins. Exch., 77 Cal. App.

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5th 971 (2022)(“AAA”) – a recently decided case – which as

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discussed below, deemed Dameron Hospital’s COAs unenforceable

See Opp’n at 10; Exhibit 1.

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See Mot. at 9.

However, as Defendants

See Reply at 6.

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adhesion contracts under California law.

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The factual allegations and legal arguments in this case are

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strikingly similar to those at issue in AAA: both involve Dameron

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Hospital, automobile insurers, and questions surrounding the

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assignment of MP and UM benefits.

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disposes the contract issue in its favor, however, the Court finds

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that AAA squarely holds that Dameron Hospital’s COAs are adhesion

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contracts and are unenforceable if patients do not reasonably

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expect such assignment of benefits to occur.

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Plaintiff argues that AAA

Id. at 988, 994.

“The distinctive feature of a contract of adhesion is that

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the weaker party has no realistic choice as to its terms.” AAA at

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992, quoting Wheeler v. St. Joseph Hosp., 63 Cal. App. 3d 345, 356

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(1976).

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recently admitted to an emergency room for injuries sustained in

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an accident or any individual under the care of medical

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professionals and awaiting discharge from a hospital.

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Defendants persuasively point out, Dameron Hospital’s COAs possess

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all the characteristics of a contract of adhesion because “[t]he

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would-be patient is in no position to reject the proffered

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agreement, to bargain with the hospital, or in lieu of agreement

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to find another hospital.”

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Cal. App. 3d at 357.

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There is arguably no weaker party than an individual

As

AAA, at 992-93, quoting Wheeler, 63

The COAs Dameron Hospital requires are dense standardized

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contract forms, which must be signed by or on behalf of all

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patients receiving emergency medical services, before any patient

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may be discharged.

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of emergency care like those in this case are in no position to

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bargain with Dameron Hospital over the terms of the COA or refuse

See Compl. Exhibit 1; ¶ 8.

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Patients in need

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to sign it and find another emergency room.

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As California caselaw maintains, the enforceability of an

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adhesion contract “depends upon whether the terms of which the

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adherent was unaware are beyond the reasonable expectations of an

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ordinary person or are oppressive or unconscionable.”

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quoting Wheeler at 357.

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Dameron Hospital required patients to sign are unenforceable when

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applied to those who would not reasonably expect to sign away

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their benefits, namely those with medical insurance.

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AAA at 993,

Here, the Court finds that the COAs that

As AAA explained, “[p]atients with medical insurance coverage

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expect that coverage will ‘insulate [them] from any monetary

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obligation for such medical care.’”

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(quoting Whiteside v. Tenet Healthcare Corp., 101 Cal. App. 4th

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693, 705 (2002)).

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patients’ UM and MP benefits once again to recoup more than what

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health insurance companies would otherwise pay for their patients

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is simply another attempt to reduce a capped amount of funds that

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are intended to compensate the patient for the patients’ losses

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and expenses.

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AAA, 77 Cal. App. 5th at 988

Just like in AAA, Plaintiff’s attempt to claim

Id.

Both policy holders insured by Geico General – D.S. and X.K.

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– have medical insurance.

D.S. is alleged to have Veterans

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healthcare benefits and X.K. has Medicare.

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Similarly, two of three Geico Indemnity policy holders – M.A. and

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A.G. – are also Medicare recipients.

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straightforward application of AAA, these patients constitute the

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precise type of patient whose reasonable expectations would not

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align with Dameron Hospital’s AOBs.

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policy holder with medical insurance would not reasonably expect
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Id.

Compl. ¶ 4.

Thus, under a

The lesson of AAA is that any

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to assign their MP and/or UM Benefits because persons with these

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benefits “expect benefits to be paid directly to them to

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compensate them for their bodily injuries.”

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Id. at 993-94.

Plaintiff suggests that government-funded insurance may be

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different than other insurance.

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not contain sufficient factual allegations to support its claim

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that Medicare or Veterans healthcare insurance is a “payer of last

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resort” under the facts of this case.

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But Plaintiff’s Complaint does

The only scenario AAA recognized where an AOB was not

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immediately invalid as beyond the reasonable expectations of an

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ordinary person concerned the patient, R.D., who had MP benefits

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that were capped at $5,000.

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see also Opp’n at 7.

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court found that a trier of fact could conclude it was within

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reasonable expectations that Dameron would collect amounts beyond

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the $5,000 policy from other benefits.

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to be a self-payer with no other insurance, parallels R.D. because

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without medical insurance, he is not similarly situated to those

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with Medicare or Veterans healthcare who would reasonably expect

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their MP or UM benefits to compensate them for their injuries.

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See Compl. ¶ 31.

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contention that AAA acknowledged there might be an assignment

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expectation for first-party MP where the patient was self-paying

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(i.e., had no other form of health insurance or health care

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payment coverage) and finds that Dameron Hospital has plausibly

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stated a claim for breach of contract only with regard to the

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self-pay patient J.M. 77 Cal. App. 5th at 992-995.

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///

AAA, 77 Cal. App. 5th at 992, 995;

Because R.D. had a cap on his benefits, the

Here, J.M., who is alleged

Thus, the Court agrees with Plaintiff’s

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b. Partial Assignment May Be Valid Assignments As to

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J.M.

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Given the Court’s determination that Dameron Hospital’s COAs

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and the AOBs within them are unenforceable adhesion contracts for

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those with medical insurance, the Court need not reach the partial

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assignment issue except with regard to J.M., the self-payer.

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the case of J.M., it is plausible that it was within that

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individual’s reasonable expectations for Dameron Hospital to

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collect direct payments from Geico Indemnity out of J.M.’s MP or

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UM benefits since J.M. is alleged to have had no other insurance

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and these automobile benefits do cover medical expenses in

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addition to compensating bodily injuries.

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that if J.M. could have reasonably expected to sign over “all

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medical payments under any policy of insurance, and all uninsured

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and underinsured motorist insurance benefits payable to or on

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behalf of the patient,” to Dameron Hospital, it is possible that

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the assignments, even if partial, are valid.

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In

Therefore, it follows

Compl., ¶ 10.

Defendants’ partial assignment argument, discussed in Mot. at

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11, boils down to a debate over reasonable expectations, which at

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this stage of litigation, is subject to a low standard of

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plausibility.

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(1940), Reichert v. Gen. Ins. Co. of Am., 68 Cal. 2d 822, 834

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(1968), and Portillo v. Farmers Ins. Exch., 238 Cal. App. 2d 58

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(1965) for the proposition that their consent is needed.

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at 11, 13.

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decided in distinguishable contexts.

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automobile insurance context, rather, it discusses publishing

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rights.

Defendants cite Stein v. Cobb, 38 Cal. App. 2d 8

See Mot.

However, these cases are inapposite because they were
Stein does not deal with the

Reichert deals with property damage and fire insurance.
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Portillo deals with the wrongful death context where an individual

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did not survive their injuries, implicating a very different body

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of common law not in operation here.

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Defendants’ arguments that personal injury causes of action cannot

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be transferred, this would at most mean that J.M.’s UM benefits,

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which are paid directly for personal injuries and not at issue in

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this case, are not transferrable.

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claiming J.M.’s UM benefits, and only alleges that Geico paid MP,

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which exists to cover medical expenses, in violation of the AOB.

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Even if the Court credited

Here, Dameron Hospital is not

See Compl. ¶ 31.

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Based on these cases, the Court is not persuaded as a matter

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of law that Geico’s consent was necessary to assign MP benefits or

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that partial assignments “increase[] Geico’s burden beyond what it

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contracted for” because presumably, if a patient can reasonably

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expect to assign automobile benefits to cover medical expenses,

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they would not expect to receive these benefits directly from

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their automobile insurer, meaning that Geico would only need to

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pay MP benefits to Dameron Hospital.2

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Construing the facts most favorable to the Plaintiff that

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J.M. received MP benefits from Geico Indemnity as alleged in

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Compl. ¶ 31, the Court finds that Plaintiff has plausibly pleaded

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that J.M. could have assigned their automobile benefits to Dameron

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Hospital.

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2. Plaintiff Fails to State a Claim Under the UCL

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The UCL protects California's consumers by prohibiting any

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In any case, the Court cannot consider the additional arguments
regarding Stein, Reichert, or Portillo discussed in the latter
half of Defendant’s Reply because it exceeds the page limit set by
the filing order in this case. See Order, ECF No. 11-2; 5.
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“unlawful, unfair or fraudulent business act or practice.” Cal.

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Bus. & Prof. Code § 17200.

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are injunction and restitution.

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Plaintiff has failed to state a viable breach of contract claim

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for four of the five patients due to the unenforceable nature of

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the adhesion contracts, it follows that the UCL claims flowing

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from those allegations similarly fail.

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fifth patient, J.M., also fails because breach of contract claims

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are not actionable under the UCL and Plaintiff has failed to

The remedies available under the UCL
Id.

As discussed below, because

The UCL claim as to the

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allege any unlawful, unfair, fraudulent, or injurious conduct to

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consumers.

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a. Unlawful Prong
Under the “unlawful prong” of § 17200, a specific activity is

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not proscribed, rather, the UCL “borrows violations of other laws

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and treats them as unlawful practices that the [UCL] makes

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independently actionable.”

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v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999)

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(citing Farmers Ins. Exch. v. Superior Court, 2 Cal. 4th 377, 383

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(1992)).

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contract is insufficient” to support a claim under the unlawful

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prong of California’s UCL.

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Servs., 622 F.3d 1035, 1044 (9th Cir. 2010); Vascular Imaging

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Professionals, Inc. v. Digirad Corporation, 401 F. Supp.3d 1005,

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1014 (S.D. Cal. 2019) (quoting Shroyer); see also Mazal Group, LLC

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v. Espana, 2:17-cv-05856-RSWL-KS, 2017 WL 6001721, at *4 (C.D.

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Cal. Dec. 4, 2017) (granting motion to dismiss UCL claim when

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plaintiff did not go beyond alleging a violation of common law).

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Plaintiff in the instant case does not go beyond alleging common

Id. at 1048.

Cel-Tech Commc’ns, Inc.

However, “a common law violation such as breach of

See Shroyer v. New Cingular Wireless

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law contract violations and has, therefore, failed to state a

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claim under the first prong of the UCL.

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b. Unfair Prong
Plaintiff argues that a business practice is unfair “when the

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practice ‘offends an established policy or when the practice is

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immoral, unethical, oppressive, unscrupulous or substantially

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injurious to consumer.’[citations]”.

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Company v. Sup. Ct., 45 Cal.App.4th 1093, 1104 (1996).

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Dameron Hospital fails to allege anything beyond the purported

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violation of the AOBs and an unsubstantiated California policy

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that “favors enforceability of a hospital patient’s assignment of

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insurance benefits.”

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State Farm Fire & Casualty
Yet,

Compl. ¶ 19.

As demonstrated by the caselaw surrounding patients’

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reasonable expectations, the established policy is that automobile

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insurers, like Geico, will directly pay their policyholders MP and

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UM benefits.

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practice claim because Geico’s payments to patients are in line

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with well-established practices in the medical and automobile

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insurance industry.

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On its face, there is no plausible unfair business

Plaintiff’s UCL claim under the unfair competition prong is

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simply a repetition of its contract claim. As discussed above,

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this prong of the UCL claim is both not covered by the UCL and

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unenforceable.

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counter, Dameron does not explain why its own interest in

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receiving direct payment from Geico outweighs the insureds’

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interests in receiving their auto-policy benefits directly from

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Geico and using those benefits to pay their medical bills.

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at 7.

See Compl. ¶ 19.

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Additionally, as Defendants

Reply

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In sum, Plaintiff fails to allege any immoral, unethical,

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oppressive, unscrupulous or injurious behavior attributable to the

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Defendants.

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claims are not covered by the UCL, Plaintiff must assert that

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Geico’s practices harm consumers to state a plausible claim for

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relief under the UCL.

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to comply with an unenforceable contract does not by itself create

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a harm to consumers or the insured individuals.

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contracts are unenforceable precisely because the lack of

Because the AOBs are unenforceable and contract

As currently alleged, Defendants’ failure

In fact, these

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negotiation or opportunity to examine adhesion contracts makes

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them restrictive and oppressive for consumers.

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comply with an unenforceable contract is not unlawful nor unfair.

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Dameron’s claim under the UCL is therefore dismissed.

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Geico refusal to

3. Dameron fails to state a claim under the Medicare
Secondary Payer Act
Plaintiff argues that it is entitled to payment since

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Defendant is the primary payer under federal law and that Medicare

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is the payer of last resort.

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argue that Plaintiff’s allegations are simply conclusory

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statements and Plaintiff has not adequately alleged that Geico

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General and Geico Indemnity are responsible for the medical

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services at issue.

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cause of action is available under the MSP Act only where a

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primary plan fails to provide for primary payment or reimbursement

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in accordance with the Act.

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claim under the MSP Act is plausible only if Defendants are

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primary plan providers.

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See Compl. ¶ 30, 54.

Mot. at 6.

Defendants

The parties agree that a private

Mot. at 15; Opp’n at 18.

Thus, a

While Plaintiff alleges in its Complaint that Defendants’
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automobile insurance coverage is primary to patients’ Medicare

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coverage, the federal law Plaintiff cites specifies situations in

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which Medicare is the secondary payer, for example, where an

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individual is insured by another healthcare plan.

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54; 42 U.S.C.A. § 1395y(b).

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plans, which are defined by federal statute as “a group health

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plan or large group health plan” 42 U.S.C.A. § 1395y(a)(2)(A)(ii).

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These group health plans are defined as “plan[s] (including a

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self-insured plan) of, or contributed to by, an employer

See Compl. ¶

The MSP Act refers to certain primary

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(including a self-employed person) or employee organization to

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provide health care (directly or otherwise) to the employees,

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former employees, the employer, others associated or formerly

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associated with the employer in a business relationship, or their

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families.”

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statute, the MSP Act defines primary plans as other medical

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insurance plans, not automobile insurance policies.

26 U.S.C.A. § 5000(b)(1),(2).

By letter of the

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Dameron Hospital alleges that Defendants are the primary

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payers, but whether an automobile insurer can by law be a primary

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payer is not addressed in the MSP Act’s statutory text.

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the statute does not reference automobile insurance at all and

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addresses only other healthcare insurance.

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U.S.C.A. § 1395y(b).

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the proposition that Geico has payment responsibility in this

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case.

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Ins. Co., 974 F.3d 1305, 1316 (11th Cir. 2020)).

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case is not binding on this Court and even if the Court accepts

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Plaintiff’s allegation that Medicare and Veterans healthcare are

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never primary insurers, this does not automatically make another

Indeed,

See generally, 42

Plaintiff cites an out of circuit case for

See Opp’n at 8 (citing MSP Recovery Claims v. Ace American

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However, that

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presumably secondary insurance, like automobile insurance, a

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primary payer.

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identify the type of coverage at issue or any applicable

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settlement agreement or contractual obligation to establish that

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Geico has payment responsibility.

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As Defendants point out, Plaintiff fails to

See Mot. at 17.

Here, Dameron Hospital’s allegations are too conclusory to

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plausibly support primary medical payment responsibility for

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Defendants who are automobile insurers.

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hospital “prays for leave to take discovery from Geico and then

Id. While Dameron

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file an amended complaint,” as discussed below, the Court instead

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grants Defendants’ motion to dismiss this claim without prejudice.

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C.

Leave to Amend

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A court granting a motion to dismiss a claim must decide

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whether to grant leave to amend.

Leave to amend should be “freely

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given” where there is no “undue delay, bad faith or dilatory

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motive on the part of the movant, . . . undue prejudice to the

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opposing party by virtue of allowance of the amendment, [or]

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futility of [the] amendment . . . .”

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178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d

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1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to

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be considered when deciding whether to grant leave to amend).

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all of these factors merit equal weight.

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consideration of prejudice to the opposing party . . . carries the

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greatest weight.”

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F.2d 183, 185 (9th Cir. 1987)).

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is proper only if it is clear that “the complaint could not be

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saved by any amendment.”

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Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys.,

Foman v. Davis, 371 U.S.

Not

Rather, “the

Id. (citing DCD Programs, Ltd. v. Leighton, 833
Dismissal without leave to amend

Intri-Plex Techs., Inc. v. Crest Group,

14

1

Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v.

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Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) (“Leave need

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not be granted where the amendment of the complaint . . .

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constitutes an exercise in futility . . . .”)).

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Here, the Court finds that it is not clear that the

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Complaint’s defects cannot “be saved by [] amendment,” and

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allowing Plaintiff an opportunity to try to save its claims at this

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stage of the litigation would not be prejudicial to Defendant since

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the Court is allowing Plaintiff’s breach of contract claim for

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patient J.M. to move forward.

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III.

ORDER

For the reasons set forth above, the Court GRANTS Defendant

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Geico General Insurance Company and Geico Indemnity Company’s

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Motions to Dismiss WITH LEAVE TO AMEND and DENIES Defendants motion

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to dismiss the breach of contract claim only as it pertains to

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self-pay patient J.M..

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If Plaintiff elects to amend its complaint, it shall file a

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First Amended Complaint within twenty days of this Order.

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Defendants’ responsive pleadings are due twenty days thereafter.

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Additionally, Defendants’ counsel is ordered to pay $250 to the

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Clerk of the Court, within five days of this Order, for violation

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of the specified page limits for Reply Briefs pursuant to the Order

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Regarding Filing Requirements, ECF No. 11-2; 5.

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IT IS SO ORDERED.
Dated: October 24, 2024

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