Johnson v. GEICO Insurance Company et al
Filing
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Memorandum of Opinion and Order: This matter is before the Court upon Defendants' Motion to Dismiss Plaintiff's Amended Class Action Complaint (Doc. 14 ). Also pending is Defendants' Motion to Strike Class Allegations in Plaintiff's Amended Class Action Complaint (Doc. [15). The motion to dismiss is GRANTED in PART and DENIED in PART and the motion to strike is GRANTED. Judge Patricia A. Gaughan on 12/10/18. (LC,S)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
Daniel Johnson,
Plaintiff,
Vs.
Geico Choice Insurance Company,
et al.,
Defendants.
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CASE NO. 1:18 CV 1353
JUDGE PATRICIA A. GAUGHAN
Memorandum of Opinion and Order
INTRODUCTION
This matter is before the Court upon Defendants’ Motion to Dismiss Plaintiff”s Amended
Class Action Complaint (Doc. 14). Also pending is Defendants’ Motion to Strike Class
Allegations in Plaintiff’s Amended Class Action Complaint (Doc.15). This is an insurance
coverage dispute. For the reasons that follow, the motion to dismiss is GRANTED in PART and
DENIED in PART and the motion to strike is GRANTED.
FACTS
For purposes of ruling on the motion to dismiss, the facts asserted in the Amended Class
Action Complaint (Doc. 12) are presumed true.
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Plaintiff Daniel Johnson purchased automobile insurance from defendant Geico Choice
Insurance Company.1 The policy contained medical payments coverage in the amount of
$10,000. The policy provides that defendant will pay “all reasonable expenses actually
incurred.”
On August 30, 2017, plaintiff was involved in a motor vehicle accident and sought
medical treatment from the Cleveland Clinic emergency room. He was billed $339.00 for
professional services and $796.00 for technical services. On September 9, 2017, plaintiff
returned to the Cleveland Clinic for additional treatment. He was billed $721.00 for professional
services and $1,070.00 for technical services. Thus, plaintiff was billed a total of $1060.00 for
professional services and $1866.00 for technical services. Plaintiff thereafter submitted the bills
to defendant. Defendant paid the full amount for professional services, but paid only $1211.00
for the technical services. Plaintiff alleges that defendant cited “Code 765” as the reason it did
not pay the remaining $665.00. Plaintiff alleges that defendant denied coverage for a portion of
services provided by a Dr. Hochman based on Code 765. It is unclear whether this is in addition
to the denial of the $665.00 for technical services. Regardless, plaintiff alleges that defendant
“paid the exact same service rendered by Dr. Hochman dozens of other times.”
Code 765 is a denial based on charges that are not “reasonable when compared to the
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Plaintiff named Geico Insurance Company and Geico Choice
Insurance Company as defendants. In their motion, defendants
point out that there is no formal entity known as “Geico Insurance
Company.” Given plaintiff’s allegations, defendants assume that
plaintiff intended to name Government Employees Insurance
Company and its affiliates. Regardless, for purposes of addressing
the pending motions and for ease of reference, the Court refers to
defendant in the singular.
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charges of other providers in the same geographic area.” According to plaintiff, the policy does
not permit such a denial. Plaintiff files this class action lawsuit on behalf of himself and other
similarly situated individuals. The complaint contains two claims for relief. Count one is a
breach of contract claim and count two is a claim for bad faith. Defendant moves to dismiss the
complaint and to strike the class allegations. Plaintiff opposes both motions.
ANALYSIS
A. Motion to dismiss
1. Standing
Defendant moves to dismiss on the grounds that plaintiff lacks standing to assert this
claim. According to defendant, the complaint lacks any factual allegations suggesting that
plaintiff incurred an injury-in-fact. Defendant claims that the complaint fails to allege that
plaintiff paid the $665.00 to the Cleveland Clinic or that the Cleveland Clinic made any effort to
collect the charges. Nor does plaintiff allege that he suffered damage to his credit reputation.
Defendant points out that it raised this precise issue in a previous motion to dismiss. Although
plaintiff filed an amended complaint, he made no effort to supplement any of this information.
In response, plaintiff argues that he alleges that the Cleveland Clinic billed him for
services and that defendant failed to pay those charges. Plaintiff further argues that there is no
provision in the policy that requires plaintiff to pay the Cleveland Clinic before defendant pays
plaintiff the coverage the policy provides.
Upon review, the Court finds that plaintiff has standing to assert the claims in the
complaint. In order to establish standing, the plaintiff “bears the burden of showing: (1) an
injury in fact that is ‘concrete and particularized’ and ‘actual and imminent,’ (2) that the injury is
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fairly traceable to the challenged action of the defendant, and (3) that the injury is likely to be
redressed by a favorable decision.” Springer v. Cleveland Clinic Employee Health Plan Total
Care, 900 F.3d 284 (6 th Cir. 2018)(citing Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547-48
(2016)). According to defendant, plaintiff fails to sufficiently allege an “injury in fact.” But,
plaintiff expressly alleges that he sought and received medical treatment from the Cleveland
Clinic and was billed for the services. According to the complaint, defendant wrongfully denied
coverage for the very services for which the Cleveland Clinic billed plaintiff. Having received a
bill for the services rendered, the Court finds that plaintiff suffered an injury in fact that is both
“concrete and particularized” as well as “actual and imminent.” The fact that the Cleveland
Clinic may theoretically opt to forego collection efforts does not alter plaintiff’s standing to
bring suit at this point.
For these same reasons, the Court finds that plaintiff’s failure to allege that he paid the
Cleveland Clinic or that the Cleveland Clinic refuses to “waive” the claim does not warrant
dismissal. According to defendant, these facts must be alleged in order for plaintiff to properly
state a claim for relief. But, the policy provides coverage for “all reasonable expenses actually
incurred by an insured...for necessary medical...services.” For purposes of a motion to dismiss,
the Court finds that an allegation that plaintiff sought medical services for which he received a
bill from the provider is sufficient to state a claim that plaintiff “actually incurred” expenses.
Discovery may demonstrate that the Cleveland Clinic will legally waive its right to collect for
those expenses, but the Court finds that plaintiff is not required to allege the inverse, i.e., that the
Cleveland Clinic has not waived its rights. Rather, the allegations in the complaint sufficiently
allege that plaintiff “actually incurred” a medical expense.
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2. Breach of contract
Here, plaintiff alleges that defendant refused to pay $665.00 of his medical bills on the
grounds that the charges were excessive in “comparison of similar charges in the area.”
Defendant argues that the policy expressly permits the $665.00 deduction it took in this case. In
response, plaintiff argues that the policy and governing law prohibit defendant from reducing the
amount it pays based on a comparison of charges in the area.
Upon review, the Court agrees with defendant that the policy does not contain a
wholesale prohibition on “comparison” reductions. The policy contains the following language:
PAYMENTS WE WILL MAKE
Under this Coverage, we will pay all reasonable expenses actually incurred by an insured
within one year from the date of accident for necessary medical, surgical, x-ray, dental
services, prosthetic devices, ambulance, hospital, professional nursing and funeral
services. The one year limit does not apply to funeral services. In addition, these
expenses shall be submitted for payment within two years from the date of the accident.
(Doc. 8-2 at PageID 130).
Plaintiff argues that O.R.C. § 2317.421 prohibits defendant from paying less than the
amount billed. According to plaintiff, the amount billed is prima facie evidence of
reasonableness. The statute provides as follows:
Admissibility of medical or funeral bills as prima-facie evidence of reasonableness
In an action for damages arising from personal injury or wrongful death, a written bill or
statement, or any relevant portion thereof, itemized by date, type of service rendered, and
charge, shall, if otherwise admissible, be prima-facie evidence of the reasonableness of
any charges and fees stated therein for medication and prosthetic devices furnished, or
medical, dental, hospital, and funeral services rendered by the person, firm, or
corporation issuing such bill or statement, provided, that such bill or statement shall be
prima-facie evidence of reasonableness only if the party offering it delivers a copy of it,
or the relevant portion thereof, to the attorney of record for each adverse party not less
than five days before trial.
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Contrary to plaintiff’s argument, this statute does not require that insurers pay the full
amount of the medical bill submitted by medical providers in all cases. Rather, it simply creates
a rebuttable presumption of reasonableness. St. Vincent Medical Center v. Sader, 654 N.E.2d
144, 146 (Ohio Ct. App. 1995). If the insurer challenges the medical bills by coming forward
with evidence that the charges are excessive for the geographic area, then the insurer need not
pay the charges. Id. Thus, far from mandating the payment of the face value of all medical bills
in all cases, O.R.C. § 2317.421 simply sets up the evidentiary mechanism to assess the
reasonableness of medical bills in personal injury or wrongful death actions.
Next plaintiff argues that the policy language is ambiguous and therefore defendant can
never deny coverage based on the grounds that it exceeds an “average” or “customary” amount.
According to plaintiff, the policy contains no language permitting such a deduction. In response,
defendant argues that the policy provides coverage only for “reasonable expenses.” If an
expense charged by a medical provider exceeds the amount charged by similar providers, then it
is unreasonable and is not a covered expense.
“The question of whether the language of an agreement is ambiguous is a question of
law.” United States v. Donovan, 348 F.3d 509, 512 (6th Cir. 2003) (citing Parrett v. Am. Ship
Bldg. Co., 990 F.2d 854, 858 (6th Cir. 1993)). Where the terms of a contract are clear and
unambiguous, the Court presumes that the parties’ intent resides in the words utilized in the
agreement. Gencorp, Inc. v. American Int’l Underwriters, 178 F.3d 804, 817-18 (6th Cir. 1999).
“[I]f the meaning of the contract is apparent, the terms of the agreement are to be applied, not
interpreted.” Id. “Only when the language of a contract is unclear or ambiguous, or when the
circumstances surrounding the agreement invest the language of the contract with a special
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meaning will extrinsic evidence be considered to give effect to the parties’ intentions.” Shifrin v.
Forest City Enterprises, Inc., 597 N.E.2d 499, 501 (Ohio 1992). Under Ohio law, common
words appearing in the contract “will be given their ordinary meaning unless manifest absurdity
results, or unless some other meaning is clearly evidenced from the face or overall contents of
the instrument.” Id. (internal quotation and citation omitted).
Upon review, the Court finds that nothing in the policy prevents defendant from denying
coverage for charges that exceed local averages as “unreasonable.” As set forth above, the
parties agreed that defendant would “pay all reasonable expenses actually incurred by an
insured...for necessary medical...services.” Plaintiff argues that other insurers use words such as
“usual, customary, and reasonable charges” in crafting coverage provisions. Here, however,
defendant used only the phrase “reasonable expenses.” But, insurers need not use the same
language in drafting policies. On its face, the term “reasonable” modifies the word “expense”
such that only “reasonable expenses” are covered. There is nothing on the face of the policy that
prevents defendant from denying coverage for expenses that are unreasonable in light of amounts
charged by other providers within the same locality. A simple example illustrates the point. If a
provider charged plaintiff $1 million to apply a bandage, the Court has no doubt that the policy
language allows defendant to deny coverage on the grounds that the charge is not a “reasonable
expense” since other providers in the locality do not charge nearly as much. As such, to the
extent plaintiff alleges that the policy prevents defendant from ever denying coverage based on a
comparison between the charge at issue and the amount charged by other providers, plaintiff
fails to state a claim for which relief may be granted.
On the other hand, the Court finds that plaintiff sufficiently alleges that defendant
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breached the insurance contract in denying plaintiff’s particular claim. Plaintiff asserts that
defendant refused to pay $665.00 based on a determination that the charge was unreasonable
when compared to the charges of other providers in the same geographic area. Plaintiff further
alleges that “defendant paid the exact same charge for the exact same service” dozens of other
times. In other words, plaintiff alleges that the $665.00 charge was not unreasonable. As such,
defendant wrongfully denied coverage. Thus, while plaintiff’s claim cannot be based on the
argument that the policy always prevents such deductions, plaintiff’s claim can be based on the
allegation that defendant wrongfully denied coverage based on the specific facts of plaintiff’s
claim.
3. Bad faith
Defendant moves to dismiss plaintiff’s bad faith claim on the grounds that “there is no
plausible breach of the policy.” Defendant claims that it had a proper basis to deny coverage for
unreasonable expenses. The Court, however, determined that plaintiff stated a claim for breach
of contract by alleging that the $665.00 reduction was not reasonable in that defendant often paid
the full charge. As defendant identified no other basis for dismissal of the bad faith claim, the
claim remains pending.
B. Motion to strike
Defendant moves to strike the class allegations on the grounds that an analysis of each
class member’s claim will require individualized inquires into the reasonableness of the medical
expense at issue. Defendant also argues that plaintiff fails to allege an ascertainable putative
class and that plaintiff is not an adequate class representative. According to defendant, discovery
will not alter the defects in the class claim. In response, plaintiff argues that the policy prohibits
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defendant from deducting any amount based on the fees charged by local providers. According
to plaintiff, this claim is a “classic case” for class treatment.
Upon review, the Court agrees with defendant. A court may strike class action
allegations before a motion for class certification where the complaint itself demonstrates that
the plaintiff cannot meet the requirements for maintaining a class action. See Pilgrim v.
Universal Health Card., LLC, 660 F.3d 943, 949 (6th Cir. 2011) (noting that Rule 23(c)(1)(A)
states that the district court should decide whether to certify a class “[a]t an early practicable
time” in the litigation). If discovery will not “alter the central defect in th[e] class claim,” a court
may strike class allegations prior to discovery. Id.; see also Cowitt v. CitiMortgage, Inc., 2013
WL 940466, at *2 (S.D. Ohio Mar. 8, 2013).
A plaintiff must meet the Rule 23(a) prerequisites and fall within one of the three types of
class actions listed in Rule 23(b) to receive class certification. Young v. Nationwide Mut. Ins.
Co., 693 F.3d 532, 537 (6th Cir. 2012). To meet the Rule 23(a) requirements, (1) the class must
be “so numerous that joinder of all members is impracticable;” (2) there must be “questions of
fact or law common to the class;” (3) “the claims or defenses of the representative parties” must
be “typical of the claims or defenses of the class;” and (4) the named plaintiff must “fairly and
adequately protect the interests of the class.” Fed. R. Civ. P. 23(a). The party seeking class
certification bears the burden of proving that it has met all four requirements of Rule 23. Young,
693 F.3d at 537.
Here, the Court need only address commonality because plaintiff’s own allegations show
that he cannot meet this requirement. Having concluded that plaintiff fails to state a claim for
relief based on a theory that the policy wholly prohibits defendant from ever denying coverage
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based on a comparison of fees charged by other providers, plaintiff must show that defendant
wrongfully denied his particular claim. Thus, defendant may do so by introducing evidence that
the charge he incurred was reasonable compared to the rates charged by other providers. But,
each putative class member will be required to introduce his or her own evidence in this regard.
A plaintiff residing in an urban area who received treatment from a specialist will rely on proof
very different from a plaintiff residing in a rural area who received treatment from a general
practitioner. To assess the validity of each plaintiff’s claim, this Court would be required to hold
a series of “mini-trials” and conduct an individualized analysis to determine the
“reasonableness” of each amount defendant did not cover. This type of individualized inquiry
renders class action treatment improper. Because it is apparent from the face of the complaint
that commonality cannot be satisfied, and because plaintiff fails to show how discovery will cure
this defect, the Court strikes the class allegations. The same analysis applies to plaintiff’s bad
faith claim. Having concluded that commonality cannot be satisfied, the Court need not address
the remaining arguments made by defendant.
CONCLUSION
For the foregoing reasons, the motion to dismiss is GRANTED in PART and DENIED in
PART and the motion to strike is GRANTED.
IT IS SO ORDERED.
Dated: 12/10/18
/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Chief Judge
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