California Kaiser Permanente Lawsuit Dismissed

Plaintiff failed to pursue other options before suing, judge said

By Jon Hood
ConsumerAffairs.Com

September 9, 2009
A federal judge in California handed Kaiser Permanente a victory yesterday, dismissing a suit claiming that the insurance company failed to reimburse copayments after collecting its share from personal injury awards.

In her decision, Judge Maxine Chesney said that lead plaintiff Nicole Glaus failed to sufficiently pursue administrative remedies before filing the lawsuit. In a previous motion, Glaus conceded that she had not filed a formal complaint with Kaiser before initiating the suit.

Glaus, of Concord, CA, won an award of $4,250 from an individual who rear-ended her car. Kaiser, pursuant to its policy, sought reimbursements of its own costs from the civil award, but failed to credit Glaus the $20 she had already shelled out as a copayment.

Kaiser's "Evidence of Coverage," or EOC, which provides terms and conditions of coverage, requires consumers who obtain a judgment in their favor to reimburse Kaiser for services provided. The EOC explicitly provides, however, that this provision "does not affect your obligation to pay Cost Sharing for these Services, but we will credit any such payments toward the amount you must pay us under this paragraph."

Glaus brought suit on behalf of all Kaiser customers covered under a private employer's medical plan, who reimbursed Kaiser after collecting a civil judgment, and who were never reimbursed their copayment as required by Kaiser policy. Glaus said that the company's failure to reimburse the copayment violated both the terms of the contract and Kaiser's fiduciary duty to its customers.

In her decision, filed in response to Kaiser's motion to dismiss, Chesney relied on the exhaustion doctrine, which requires a putative plaintiff to pursue all available administrative options before resorting to litigation. Chesney noted that the Kaiser EOC explicitly laid out an administrative procedure for the resolution of customer complaints.

The policy provides that consumers "can file a grievance for any issue," as long as they "submit [the] grievance orally or in writing within 180 days" of the incident they are complaining about. The EOC allows grievances to be filed by mail, phone, online, or in person. Because Glaus received multiple EOC copies during her time with her employer, she was deemed to have had notice of these administrative procedures, and thus could not be excused from pursuing them.

The exhaustion doctrine, Chesney noted, is a judicially-created requirement, designed to prevent individuals from resorting to legal action unless absolutely necessary. Chesney asserted that "use of the [Kaiser] administrative grievance procedure could resolve the error quickly and inexpensively, without the need for the parties to expend resources to retain counsel and pay the costs incident to the filing and prosecution of a lawsuit."

Chesney dismissed the suit without prejudice, meaning that Glaus can refile her complaint if she is unsuccessful in recovering under Kaiser's administrative procedures. Another member of the class could also theoretically file suit in the interim, assuming that they have pursued all administrative remedies. While it is unclear how many individuals would be eligible to recover under Glaus's suit -- her class was defined relatively narrowly -- her attorney insists that enough people are affected to make a potential recovery substantial.

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