Lakeview NeuroCare Pennsylvania, Inc. v. Independence Blue Cross
MEMORANDUM (Order to follow as separate docket entry) re 5 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Independence Blue Cross Signed by Magistrate Judge William I. Arbuckle on 10/5/17. (ch1)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
INDEPENDENCE BLUE CROSS,
CIVIL ACTION NO. 1:17-cv-0396
MEMORANDUM ON MOTION TO DISMISS
Presently before the court is a Motion to Dismiss filed by Defendant
Independence Blue Cross (“IBC”) on May 18, 2017. (Doc. 5). IBC contends
Plaintiff Lakeview NeuroCare Pennsylvania’s (“Lakeview”) breach of contract
claim must fail because no contractual relationship formed between the parties due
to an invalid assignment. Lakeview contends the assignment was valid. For the
reasons stated herein, I will DENY the Motion to Dismiss.
BACKGROUND AND PROCEDURAL HISTORY
Lakeview is the former operator of a therapeutic residential care facility in
Lewistown, Pennsylvania, which provided care to patients with neurodevelopmental conditions. (Doc. 1, ¶5). IBC insured patient “JA” at all relevant
times through its agent, Magellan Behavioral Health (“Magellan”). Id. at ¶7. In
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pertinent part, the insurance policy issued by IBC to “JA” includes two nonassignment clauses:
Any rights of a Member to receive benefits under the Group Program
Document and Benefit Booklet are personal to the Member and may
not be assigned in whole or part to any person, Provider, or entity, nor
may benefits be transferred, either before or after Covered Services
are rendered. . . .
The right of a Member to receive benefit payments under this
Program is personal to the Member and is not assignable in whole or
in part to any person, Hospital, or other entity nor may benefits of this
Program be transferred, either before or after Covered Services are
rendered. (Doc. 5, Ex. A)
In March of 2014, Lakeview began corresponding with IBC regarding
admission, care, and payment for “JA.” Id. at ¶8. Lakeview claims IBC provided
verification for payment of “JA’s” treatment, advising they would remit to
Lakeview, an out-of-network provider, 70% of the treatment costs, leaving
responsibility for the remaining 30% with “JA’s” guardian. Id. at ¶9.
Lakeview claims that on April 9, 2014, an IBC representative advised: (1)
benefits for “JA’s” proposed stay and treatment would be paid notwithstanding
Lakeview’s out-of-network status; (2) there was no limitation on the number of
days IBC would cover regarding “JA’s” treatment; and (3) precertification was
unnecessary. Id. at ¶10.
“JA” was admitted to Lakeview in April of 2014. Id. at ¶11. On April 10,
2014, Lakeview claims IBC informed them payments would begin. Id. at ¶12.
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Lakeview claims IBC, through Magellan, certified “JA’s” stay and care
every seven (7) days for eighteen (18) consecutive months.1 Id. at ¶13. Lakeview
contends these continued reauthorizations caused Lakeview to provide care for
“JA” for many months without seeking alternatives. Id. at ¶15.
Lakeview remitted to IBC bills for “JA’s” care every thirty (30) days. Id. at
¶17. Lakeview did not receive denials from IBC, but rather requests for
clarification and correction. Id. Specifically, Lakeview alleges that on one occasion
Lakeview made corrections regarding “JA’s” diagnosis, rebilled IBC, and IBC
authorized payment. Id. at ¶18.
In March of 2016, IBC claimed, allegedly for the first time, that there was a
ninety (90) day benefit limit for 2014, a forty-five (45) day benefit limit in 2015,
and benefits were payable at 50%. Id. at ¶19. IBC allegedly announced these
policies after having authorized payments for the first fourteen (14) months of
“JA’s” care. Id.
In September of 2016, IBC paid Lakeview $28,550 for one month of “JA’s”
care. Id. at ¶20. IBC allegedly owes a total of $212,800 to Lakeview for “JA’s”
care. Id. at ¶21.
On March 7, 2017, Lakeview filed a Complaint alleging eight (8) counts
against IBS: (1) Bad Faith Insurance Practices; (2) Breach of the Pennsylvania
Lakeview claims it is in possession of approximately fifty-two (52) letters from IBC
supporting this assertion. (Doc 1, ¶14).
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Fraud/Misrepresentation; (4) Reasonable Expectation; (5) Unjust Enrichment; (6)
Promissory Estoppel; (7) Breach of Contract; and (8) Breach of Duty of Good
Faith and Fair Dealing. (Doc. 1).
On May 18, 2017, IBC filed the instant Motion to Dismiss for Failure to
State a Claim (Doc. 5) and a corresponding Brief in Support (Doc. 6). On June 15,
2017, Lakeview filed its Brief in Opposition. (Doc. 8).
STANDARD OF REVIEW
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a
complaint should be dismissed for “failure to state a claim upon which relief can
be granted.” In determining whether a complaint should be dismissed for this
reason, the Court must accept as true all allegations in the complaint, and all
reasonable inferences that can be drawn from the complaint are to be construed in
the light most favorable to the plaintiff. Jordan v. Fox Rothschild, O’Brien &
Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not
credit a complaint’s bald assertions or legal conclusions when deciding a motion to
dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997)
(citing In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 142930 (3d Cir. 1997). Additionally, a court need not “assume that the [plaintiff] can
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prove the facts … that [the plaintiff] has not alleged.” Associated Gen. Contractors
of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).
As the United States Supreme Court held in Bell Atlantic Corp. v. Twombly,
in order to state a valid cause of action a plaintiff must provide some factual
grounds for relief, which “requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of actions will not do.” 550 U.S.
544, 555(2007). “Factual allegations must be enough to raise a right to relief above
the speculative level.” Id.
In keeping with the principles of Twombly, the Supreme Court underscored
that a trial court must assess whether a complaint states facts upon which relief can
be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, the Supreme
Court held that, when considering a motion to dismiss, a court should “begin by
identifying pleadings that, because they are no more than conclusions, are not
entitled to the assumption of truth.” 556 U.S. 662, 679 (2009). According to the
Supreme Court, “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
Id. at 679 (citing
Twombly, 550 U.S. at 555). Rather, in conducting a review of the adequacy of
complaint, the United States Supreme Court has advised trial courts that they must:
[B]egin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal
conclusions can provide the framework of a complaint, they must be
supported by factual allegations. When there are well-pleaded factual
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allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief. Id. at 679.
Thus, a well-pleaded complaint must contain more than mere legal labels
and conclusions. A complaint must recite factual allegations sufficient to raise the
plaintiff’s claimed right to relief beyond the level of mere speculation. As the
United States Court of Appeals for the Third Circuit has stated:
[A]fter Iqbal, when presented with a motion to dismiss for failure to
state a claim, district courts should conduct a two-part analysis. First,
the factual and legal elements of a claim should be separated. The
District Court must accept all of the complaint's well-pleaded facts as
true, but may disregard any legal conclusions. Second, a District
Court must then determine whether the facts alleged in the complaint
are sufficient to show that the plaintiff has a “plausible claim for
relief.” In other words, a complaint must do more than allege the
plaintiff's entitlement to relief. A complaint has to “show” such an
entitlement with its facts. Fowler v. UPMC Shadyside, 578 F.3d 203,
210-11 (3d Cir. 2009).
In practice, consideration of the legal sufficiency of a complaint entails a
First, the court must “tak[e] note of the elements a plaintiff must plead
to state a claim.” Second, the court should identify allegations that,
“because they are no more than conclusions, are not entitled to the
assumption of truth.” Finally, “where there are well-pleaded factual
allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement for relief.” Santiago
v. Warminster Tp., 629 F.3d 121, 130 (3d Cir. 2010) (citations
In addition to these pleading rules, a civil complaint must comply with the
requirements of Rule 8(a) of the Federal Rule of Civil Procedure which provides:
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A pleading that states a claim for relief must contain (1) a short and
plain statement of the grounds for the court’s jurisdiction, unless the
court already has jurisdiction and the claim needs no new
jurisdictional support; (2) a short and plain statement of the claim
showing that the pleader is entitled to relief; and (3) a demand for the
relief sought, which may include relief in the alternative or different
types of relief.
Thus, a plaintiff’s complaint must recite factual allegations which are
sufficient to raise the plaintiff’s claimed right to relief beyond the level of mere
speculation, set forth in a “short and plain” statement of a cause of action.
The instant Motion to Dismiss concerns the enforceability of the non-
assignment clause contained in the “JA’s” IBC insurance policy. IBC challenges
Lakeview’s breach of contract claim2 by attacking the validity of the purported
contract between itself and Lakeview. That is, IBC contends the insurance contract
between itself and “JA” contains a valid non-assignment clause, rendering “JA’s”
assignment to Lakeview invalid. Therefore, Lakeview cannot bring a breach of
contract claim against IBC because there is no contract between these two parties.
(Doc. 6, pp. 5-6).
IBC frames the issue before the court as: “whether [the court] should follow
Pennsylvania law by enforcing the non-assignment clause in the [IBC] insurance
“Pennsylvania law requires that a plaintiff seeking to proceed with a breach of contract
action must establish ‘(1) the existence of a contract, including its essential terms, (2) a breach of
a duty imposed by the contract[,] and (3) resultant damages.’” Ware v. Rodale Press, Inc., 322
F.3d 218, 225 (3d Cir. 2003) (quoting CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058
(Pa. Super. Ct. 1999)).
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policy and dismissing Lakeview’s Complaint with prejudice.” (Doc. 6, p. 2). In
IBC’s view, a “clear and unambiguous” non-assignment clause in an insurance
policy is enforceable under Pennsylvania law if the insurer—in this case, IBC—
does not provide written consent to the assignment. Id. at 4-5. In support of its
position, IBC relies heavily on High-Tech-Enters., Inc. v. General Accident Ins.
Co., 635 A.2d 639 (Pa. Super. Ct. 1993). In High-Tech, an automotive body shop
brought action against an automobile insurer for unpaid benefits owed for repairs
to insured’s car. Id. at 641. The body shop relied upon an assignment of rights
from the insured to bring the claim, but failed to obtain the insurer’s written
consent for the assignment. Id. The trial court dismissed the complaint for want of
written consent from the insurer, finding that the insured, not High-Tech, was the
real party to the action. Id. The appellate court affirmed, stating: “The nonassignment language of the insurance policy is clear and unambiguous . . .
[and] . . . [w]ithout his insurer’s written consent, [the insured]’s alleged assignment
of his contractual rights under the policy never became effective.” Id. at 641-42.
Here, IBC contends the non-assignment clause in the instant policy must be
enforced because “JA” never obtained written consent from IBC to assign the
policy to Lakeview. (Doc. 6, p. 5). Accordingly, Lakeview would have no right to
bring suit against IBC as no contractual relationship formed between the parties as
a result of the non-assignment clause. (Doc. 6, p. 6).
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Lakeview argues the Motion to Dismiss should be denied because IBC has
not shown failure to state a breach of contract claim. (Doc. 8). Lakeview argues the
IBC non-assignment clause is void as against public policy because “post-loss
assignments . . . do not increase the risk to the insurer associated with an assignee,
as the insurer’s payment obligation has already become ‘fixed.’” (Doc. 8, pp. 8-9
(citing Egger v. Gulf Ins. Co., 903 A.2d 1219, 1224 (Pa. 2006); Nat’l Metal Servs.,
Inc. v. Metro Life Ins. Co., 49 A.2d 382 (Pa. 1946)). Specifically, Lakeview
contends that because the assignment was post-loss—after “JA” received care, IBC
was billed, and IBC failed to pay—the non-assignment clause was not enforceable.
(Doc. 8, p. 9) (citing Egger, 903 A.2d at 1224).
Lakeview also points out that IBC ignores the applicable case law from
Egger, 903 A.2d 1219 (2006), a case in which the Pennsylvania Supreme Court
held that a non-assignment clause was unenforceable after an insured-beneficiary
sustained a loss under the terms of the insurance policy. In making its
determination, the Egger court discussed the High-Tech case, as well as other
previous holdings regarding the applicability of non-assignment clauses. Id. at
1222-27. It should be noted that IBC cites directly to the Egger case in the
beginning of their argument section (Doc. 6, p. 4), quoting:
Generally, non-assignment clauses are included in insurance policies
for the protection of insurers. Such clauses are designed to guarantee
that an increase of the risk of loss by a change of the policy’s
ownership cannot occur without the consent of the insurer. Because
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non-assignment clauses limit the amount of risk that the insurer may
be forced to accept, courts will generally strike down an insured’s
attempt to assign its policy to a new insured. Egger, 903 A.2d at 1226
(citing Continental Cas. Co. v. Diversified Indus., Inc. 884 F.Supp.
937, 946 (E.D. Pa. 1995)).
However, IBC fails to include the second, and more applicable, half of this
quotation, which concludes:
Consistent with the general purposes of non-assignment clauses,
however, courts are reluctant to restrict the assignment of an insured’s
right to payment which has already accrued. Therefore, because an
insured’s right to proceeds vests at the time of the loss giving rise to
the insurer’s liability, restrictions on an insured’s right to assign its
proceeds are generally rendered void. Id.
The Egger Court explains that the holding in High-Tech is not as
straightforward as IBC indicates, noting: “[f]ederal courts, when applying
Pennsylvania law in analogous circumstances, have . . . validated post-loss
assignments made without consent of the insurer.” Id. at 1226 (citing Viola v.
Fireman’s Fund Ins. Co., 965 F.Supp. 654 (E.D. Pa. 1997)) (emphasis added).3 Put
another way, “despite the presence of a non-assignment clause in an insurance
contract, ‘[a]n assignment of the policy of the policy or rights thereunder after the
occurrence of the event, which creates the liability of the insurer, is not 
precluded.’” Viola, 965 F.Supp. at 658 (1997) (citing Nat’l Mem’l, 49 A.2d at
The court explains that a “loss” in this context is “the occurrence of the event, which
creates the liability of the insurer.” Egger, 903 A.2d at 1226 (citing Nat’l Mem’l Services, Inc. v.
Metro Life Ins. Co., 49 A.2d 382 (Pa. 1946)).
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The Egger court also noted: “The purpose of a no[n-]assignment clause is to
protect the insurer from increased liability, and after events giving rise to the
insurer's liability have occurred, the insurer's risk cannot be increased by a change
in the insured's identity.” Egger, 903 A.2d at 1226 (citing G. Couch, Encyclopedia
of Insurance Law §35.7 (3d ed. 1995)). The Viola court added:
[A]fter a loss has occurred, the right of the insured or his successor in
interest to the indemnity provided in the policy becomes a fixed and
vested right; [and] . . . is an obligation or debt due from the insurer to
the insured, subject only to such claims, demands, or defenses as the
insurer would have been entitled to make against the original insured.
965 F.Supp. at 958 (1997).
Applying these principles to the instant case and accepting Lakeview’s
allegations to be true, it is clear the Motion to Dismiss must be denied. In
construing the Complaint in the light most favorable to Lakeview, the assignment
occurred after “JA’s” treatment began and, therefore, the assignment occurred after
the loss occurred. Because a non-assignment clause is not enforceable after a loss
occurs, the instant non-assignment clause does not bar Lakeview’s breach of
contract claim. Even if written consent were required for a post-loss assignment,
which it is not, IBC allegedly certified “JA’s” care on a weekly basis for eighteen
(18) consecutive months, authorized monthly payments, and even made corrections
on bills from Lakeview. It would be inconsistent to conclude this assignment was
not supported by written consent given these alleged facts. It is for these reasons I
will deny the Motion to Dismiss regarding the breach of contract claim.
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Finally, Lakeview argues in the alternative that the Motion to Dismiss
should be denied because IBC fails to address any claims other than breach of
contract. Given that I have found IBC fails to meet its burden to show that
dismissal is required for the breach of contract claim, I find that it is of no
consequence that IBC does not address the other claims within the Complaint.
Thus, I will deny the Motion to Dismiss in full.
For the aforementioned reasons, I will DENY IN FULL the Motion to
Dismiss. An appropriate order shall issue.
Date: October 5, 2017
BY THE COURT
s/William I. Arbuckle
William I. Arbuckle
U.S. Magistrate Judge
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