Blaik v. Health Care Service Corporation

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

A.B., a minor child, by and through her )

Parent and Legal Guardian SHERRI BLAIK,1 )

)

Plaintiff, )

)

v. ) Case No. CIV-19-968-D

)

HEALTH CARE SERVICE CORPORATION, )

d/b/a/ BLUE CROSS BLUE SHIELD )

OF OKLAHOMA, )

)

Defendant. )

O R D E R

Before the Court is Defendant Health Care Service Corporation’s Motion for

Summary Judgment [Doc. No. 136], filed under Fed. R. Civ. P. 56.2 Plaintiff A.B., by and

through her mother Sherri Blaik, filed a Response [Doc. No. 152], and Defendant replied

[Doc. No. 158]. The Court later allowed Plaintiff to file a supplement [Doc. No. 169], and

Defendant replied [Doc. No. 172]. The Motion is fully briefed and at issue.

Background

Plaintiff A.B, acting through Sherri Blaik, brings claims for breach of contract and

breach of the insurer’s duty of good faith and fair dealing as stated in the Second Amended

1 The case was initiated by Sherri Blaik individually and on behalf of her minor child, A.B.

The caption of this Order reflects the current parties.

2 The Court authorized sealed filings of Defendant’s Motion and the parties’ briefs to

prevent the disclosure of protected health information. The pleadings and the Court’s prior orders

are not sealed. The Court finds this Order also may be publicly filed.

Complaint [Doc. No. 33] and the Supplemental Complaint [Doc. No. 65]. The individual

claims of A.B.’s parents, Will and Sherri Blaik, were dismissed in September 2021. See

9/23/21 Order [Doc. No. 57]. Federal jurisdiction is based on diversity of citizenship, and

the substantive law of Oklahoma applies. Plaintiff claims that Defendant withheld payment

for a covered service, Applied Behavior Analysis (“ABA”) therapy, from April 2019 to

October 2019 and then mishandled and denied ABA therapy claims throughout the

remainder of A.B.’s treatment by the service provider.3 Claims regarding ABA therapy

services from August 2020 (when the Second Amended Complaint was filed) to November

2021 were added by the Supplemental Complaint.

Following discovery, Defendant now moves for summary judgment on all claims

or, alternatively, Plaintiff’s bad faith claim. Defendant asserts that Plaintiff cannot prevail

for the following reasons: 1) At no time between April 2019 and November 2021 was

ABA therapy “medically necessary” for A.B.’s condition; 2) Defendant’s preauthorization

decisions – where it was asked to approve the therapy provider’s treatment plan for A.B.

before the services were provided – are not actionable; 3) Defendant’s delay in paying for

Plaintiff’s ABA therapy services between April and October 2019 did not cause any

damages; and 4) any claim based on Defendant’s denial of payment for ABA therapy

services after April 2021 is barred by Plaintiff’s failure to exhaust the appeal process

provided by the contract. Defendant asserts that Plaintiff cannot establish bad faith because

3 Claims for ABA therapy received by A.B. before April 5, 2019, were resolved by mutual

agreement in prior litigation and are not at issue in this case. See A.B. ex rel. Blaik v. Health Care

Serv. Corp., Case No. CIV-14-990, Sealed Order (W.D. Okla. Apr. 5, 2019) (“Blaik I”).

Defendant had a good-faith belief that ABA therapy was not medically necessary for A.B.’s

condition, and because Plaintiff failed to disclose a primary diagnosis that A.B. received

in 2019 and so withheld material information to a determination of medical necessity.

Standard of Decision

Summary judgment is proper “if the movant shows there is no genuine issue as to

any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.

P. 56(a). A material fact is one that “might affect the outcome of the suit under the

governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is

genuine if the evidence is such that a reasonable jury could return a verdict for either party.

Id. at 255. All facts and reasonable inferences must be viewed in the light most favorable

to the nonmoving party. Id.

The movant bears the initial burden of demonstrating the absence of a dispute of

material fact warranting summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-

23 (1986). If the movant carries this burden, the nonmovant must then “set forth specific

facts” that would be admissible in evidence and that show a genuine issue for trial. See

Anderson, 477 U.S. at 248; Celotex, 477 U.S. at 324. “To accomplish this, the facts must

be identified by reference to affidavits, deposition transcripts, or specific exhibits

incorporated therein.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998);

see Fed. R. Civ. P. 56(c)(1)(A). The Court’s inquiry is whether these facts present “a

sufficient disagreement to require submission to a jury or whether it is so one-sided that

one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52.

Statement of Facts 4

Since August 2008, A.B. has had health insurance coverage under a group policy

offered by Defendant called “Health Check Select Care.” The policy requires Defendant

to pay for covered services that the insured receives from a hospital or other provider

subject to a “Medical Necessity Limitation.” See Def.’s Mot. Summ. J., Ex. 10 [Doc.

No. 136-11] at 13, 28 (ECF page numbering) (hereafter, “Policy”).5 The limitation

provides: “This program provides Benefits for Covered Services that are Medically

Necessary.” Id.6 It then states the definition of “Medically Necessary,” which as amended

in 2015 states:

Medically Necessary (or Medical Necessity) – Health care services that the

Plan determines a Hospital, Physician, or other Provider, exercising prudent

clinical judgment, would provide to a patient for the purpose of preventing,

evaluating, diagnosing or treating an illness, injury, disease or its symptoms

and that are:

• in accordance with generally accepted standards of medical practice;

4 Plaintiff has responded to Defendant’s facts with narrative statements containing few

citations to the record. Plaintiff similarly presents additional facts in argumentative statements

that generally lack citations to supporting materials. This briefing style does not satisfy Fed. R.

Civ. P. 56(c)(1)(A) or LCvR56.1(d). The Court endeavors in this section to state facts properly

presented by the parties that are not adequately opposed. To the extent this endeavor falls short,

the Court exercises its discretion under LCvR56.1(e) to deem admitted facts that are not

specifically controverted. The Court disregards facts that are not adequately supported.

As to briefing style, Defendant’s approach of submitting a voluminous record of exhibits

that are repetitive (including exhibits already in the record) and overinclusive (in that some do not

relate to the issues presented) is not helpful. Defendant’s appendix of roughly 1300 pages is

excessive and does not strengthen Defendant’s summary judgment position.

5 Because the policy consists of multiple documents, the Court uses the page numbers

supplied by the electronic case filing (ECF) system for ease of reference.

6 In addition to the Medical Necessity Limitation, the policy contains an exclusion stating

that “we do not provide benefits for services . . . [w]hich we determine are not Medically

Necessary, except as specified.” Id. at 50.

• clinically appropriate, in terms of type, frequency, extent, site and duration,

and considered effective for the patient’s illness, injury or disease; and

• not primarily for the convenience of the patient, Physician, or other health

care Provider, and not more costly than an alternative service or sequence of

services at least as likely to produce equivalent therapeutic or diagnostic

results as to the diagnosis or treatment of that patient’s illness, injury or

disease.

Id. at 116. For covered services such as ABA therapy, the policy requires service providers

to request a prior determination of medical necessity through a precertification or

preauthorization process. Obtaining precertification does not relieve a provider from

submitting post-service claims or guarantee that payment will be made, but it does prevent

Defendant from denying the provider’s claims as not medically necessary. When a service

is provided and a claim is submitted without preauthorization or after preauthorization was

denied, Defendant determines whether medical necessity is met when processing the claim.

A.B. was diagnosed at a young age with hypoplasia of the corpus callosum

(“HCC”), a congenital condition in which a central bundle of nerve fibers between the two

hemispheres of the brain is not fully developed or is absent. See Blaik I, Order of Feb. 12,

2018, 2018 WL 840764, at *2 & n.4. This condition caused multiple developmental

deficits for which A.B. was prescribed treatment, including ABA therapy, when she was

five years old. ABA therapy “is an intensive one-on-one therapy designed to analyze a

person’s maladaptive behavior and eliminate those behaviors through repetitive

performance of modified behaviors.” Id. at *2. When the present dispute began in April

2019, A.B. was ten years old.

A.B. received ABA therapy from Therapy and Beyond (“T&B”) from April 8, 2019,

to October 2019 without payment to T&B until Defendant approved outstanding claims in

October 2019.7 T&B did not request precertification of its services but instead submitted

post-service claims for ABA therapy that it provided to A.B. from April 8, 2019, forward.

During this time, A.B. was receiving direct treatment approximately 12.5 hours per week.

Before acting on the claims, Defendant requested additional information from T&B by

letters sent in July and August 2019. T&B did not receive these letters until August 16,

2019, due to a mailing error. T&B provided clinical information on September 9, 2019,

and Defendant authorized payment of T&B’s post-service claims on October 1, 2019.

T&B also submitted on September 11, 2019, a request for precertification of

comprehensive services including more than 40 hours per week of ABA therapy for A.B.

To allow time for consultation, Defendant temporarily authorized 45 hours per week of

ABA therapy services from September 11, 2019, through October 2, 2019, which was later

extended to October 25, 2019. Ultimately, all T&B’s claims for services provided from

April through October 2019 were paid. During this period, T&B never refused to provide

services to A.B., did not seek payment from A.B. or her parents, and did not change A.B.’s

therapy schedule due to a lack of payment.8

7 As noted, any payment for services that A.B. received before April 8, 2019, was resolved

through the settlement of Blaik I. See supra note 3.

8 The last stated fact is supported by the deposition testimony of Sherri Blaik and T&B’s

designated witness that the delay in payment from April to October did not affect A.B.’s treatment

schedule. In opposition to Defendant’s Motion, Plaintiff attempts to dispute this fact by submitting

the affidavit of Sherri Blaik stating that T&B waited to learn whether Defendant would cover ABA

therapy for A.B. before recommending a comprehensive level of treatment that T&B believed was

necessary. See Blaik Aff. [Doc. No. 152-4], ¶¶ 3, 11-12, 14. The affidavit provides no specific

Defendant initially denied T&B’s request for precertification of services to be

provided after October 25, 2019. In November 2019, however, Defendant reversed course

and authorized comprehensive ABA therapy services (45 hours per week) for a six-month

period from October 26, 2019, to April 26, 2020. Plaintiff points out that this abrupt and

largely unexplained change of position followed the filing of this lawsuit on October 23,

2019.9 Defendant stated that the decision to authorize this level of service was made to

explore the effectiveness of comprehensive treatment to ameliorate A.B.’s deficits. T&B

provided an average of approximately 30 hours per week of ABA therapy to A.B. during

this time period, and Defendant paid all T&B’s post-service claims.

On April 3, 2020, T&B submitted a request for precertification of the same level of

services for another six months and provided a report documenting A.B.’s progress. On

April 17, 2020, T&B submitted a revised request to include a schedule of services that

Defendant had requested. The same day, Defendant issued a precertification decision that

approved as medically necessary only 17.25 hours per week for the next six months, from

April 26, 2020, to October 27, 2020. Two reasons were given: 1) the proposed treatment

schedule showed A.B. receiving ABA therapy simultaneously with attending school,

facts to show how Mrs. Blaik knew of T&B’s belief or intention to increase services – that is, that

she has personal knowledge of these matters as required by Fed. R. Civ. P. 56(c)(4). In fact, T&B

recommended an increase in services in its first request for precertification in September 2019,

before Defendant had made a coverage decision. The Court finds the fact that T&B did not change

A.B.’s treatment due to the delay in payment is not addressed by Plaintiff in the manner required

by Rule 56(c)(1)(A) and considers it undisputed. See Fed. R. Civ. P. 56(e)(2).

9 Following a medical review on October 24, 2019, that concluded increased services were

not needed, the same reviewer made a terse note on November 4, 2019, stating that “a decision

was made to authorize an increased level of services to give [A.B.] a chance to improve.” See

Mot. Summ. J., Ex. 16 [Doc. No. 136-17] at 3.

contrary to Defendant’s guidelines that prohibited services during classroom participation;

and 2) the progress report indicated that the comprehensive level of services had not

resulted in “significant improvement.” See Mot. Summ. J., Ex. 26 [Doc. No. 136-27] at 1.

Plaintiff points out that this reasoning ignores the disruption of A.B.’s routine and isolation

caused by the COVID-19 pandemic and the fact that school closures prevented A.B. from

attending school because she was unable to participate in remote learning.

T&B appealed Defendant’s April 2020 preauthorization decision. The appeal was

assigned to a licensed psychiatrist, Dr. Thomas Krajewski, who was not involved in the

initial decision and was not Defendant’s employee. He upheld the decision to authorize

only 17.25 hours per week of ABA therapy because the progress report did not show

improvement in critical areas and T&B did not sufficiently explain how ABA therapy

would be delivered during school hours without interfering with the educational process.

During the six-month period beginning April 26, 2020, T&B provided an average of

approximately 18 hours per week of ABA therapy to A.B. For service hours that exceeded

the precertification, Plaintiff paid T&B separately and submitted claims for reimbursement.

Defendant paid all claims submitted by both T&B and Plaintiff during this period.10

10 Plaintiff purports to dispute this fact with a conclusory statement that “there were

additional claims for ABA therapy during this time that were denied by [Defendant]” and a citation

to a 67-page exhibit that is a collection of explanation-of-benefits (“EOB”) forms addressed to

Plaintiff. See Resp. Br. at 11, citing Pl.’s Ex. 8a [Doc. No. 152-8]. The Court has reviewed the

first two EOB’s for services provided during April and May 2020 (pages 1-15 of the exhibit); all

T&B’s claims were paid in May and June 2020 respectively. The Court declines to go further; it

has no obligation to search the record for evidence to support Plaintiff’s position. See Doe v. Univ.

of Denver, 952 F.3d 1182, 1191 (10th Cir. 2020); Mitchell v. City of Moore, 218 F.3d 1190, 1199

(10th Cir. 2000). Thus, the Court considers this fact to be undisputed under Rule 56(e)(2).

On October 2, 2020, T&B submitted a request for precertification of services for

another six months, through April 2021, of approximately 30.5 hours per week of ABA

therapy for A.B. Defendant requested additional information regarding A.B.’s treatment

schedule to show when ABA therapy would occur in relation to A.B.’s school attendance

and other therapies; T&B responded that A.B. had school virtually on a flexible schedule

without set hours. On October 23, 2020, Defendant issued a precertification decision that

approved only 18.75 hours per week through April 28, 2021. The stated reason was that a

medical necessity review showed A.B. was making progress at the existing level of services

and an increase was not needed. T&B appealed; the appeal was assigned to Dr. Krajewski;

and he again concurred in the decision. T&B pursued a second level of appeal, and another

psychiatrist, Dr. Phillip Helding, also concurred. During this service period, T&B provided

an average of approximately 16 hours per week of ABA therapy for A.B. Defendant paid

all claims submitted by T&B and Plaintiff for this period.11

On April 9, 2021, T&B requested precertification of 30.5 hours per week for the

next six months and, as with prior requests, submitted a progress report. Defendant denied

this request on April 28, 2021. Defendant decided that ABA therapy should no longer be

covered because the report showed a lack of improvement and A.B. had reached a plateau,

with behavior “at similar levels despite 3 years of intervention.” See Mot. Summ. J., Ex. 45

[Doc. No. 136-46]. Although Plaintiff disagrees with this conclusion, she does not address

11 Like the prior six-month period, Plaintiff makes a conclusory statement that some ABA

therapy claims were denied and cites a 62-page exhibit of EOB forms. See Resp. Br. at 12, citing

Pl.’s Ex. 8b [Doc. No. 152-9]. For the same reasons previously stated, the Court finds that

Plaintiff’s response is insufficient and considers this fact undisputed. See supra note 11.

the progress report except to show that T&B prepared an updated report in response to the

denial that demonstrated A.B.’s progress. This fact seems to concede rather than refute

that the report submitted with the precertification request did not sufficiently show A.B.’s

improvement.12

In May 2021, T&B appealed the decision to discontinue coverage of ABA therapy

services. A psychiatrist who was not involved in the initial decision, Dr. Rasik Lal, upheld

the decision despite additional information from T&B. Dr. Lal expressed the opinion that

“corpus callosum problems change at age 11,” “the likelihood of further significant

improvement [after age 11] is almost zero,” and at 12 years old A.B. was “not likely to

develop further.” See Resp. Br., Ex. 11 [Doc. No. 152-13], Tr. at 8:17-24, 9:11-13. T&B

pursued two more levels of appeal without success; two other psychiatrists agreed with the

initial decision. One of them, Dr. Helding, stated he was unaware of scientific evidence

that further ABA therapy would result in significant improvement. See Mot. Summ. J.,

Ex. 49 [Doc. No. 136-50]. Defendant informed Plaintiff that the denial decision was final,

and all appeals had been exhausted, by letter dated September 3, 2021.

After the unsuccessful appeals, T&B continued to provide ABA therapy services to

A.B. and submit post-service claims. Consistent with its preauthorization decision,

Defendant denied the claims. Neither T&B nor Plaintiff appealed these denials. In October

2021, Plaintiff decided to discontinue services from T&B effective November 19, 2021.

12 Plaintiff also points to a statement in Sherri Blaik’s affidavit that A.B. showed

considerable improvement as a result of ABA therapy. See Resp. Br. at 12, citing Blaik Aff. ¶ 13.

This statement is neither tied to the October 2020 to April 2021 time frame nor does it address

T&B’s progress report for this period. Thus, it does not demonstrate a disputed fact.

As additional material facts, Plaintiff points out that the record shows Defendant

took no action on T&B’s April 2019 claims for approximately three months, despite a

policy provision promising a benefit determination within 30 days or notice that additional

time was needed. See Policy at 64-65. Plaintiff points out that the first precertification in

2019 was made under circumstances that could be viewed as coercive, in that the reviewer

pressured the therapy provider to lower the recommended hours of service and stated no

services would be authorized if the provider would not agree. This type of negotiation of

ABA therapy precertification requests is part of Defendant’s standard operating procedure.

See Resp. Br., Ex. 14 [Doc. No. 152-16]. Plaintiff asserts that the circumstances

surrounding the first (and only) precertification of comprehensive services in November

2019 could be viewed as a response to this lawsuit.

Plaintiff also shows that Defendant’s unfavorable coverage decisions were based on

an internal medical policy regarding ABA therapy for autism spectrum disorder.

Reviewing physicians also applied this medical policy and routinely agreed with the initial

decision. This policy provided that approval of ABA therapy required an autism diagnosis.

See id., Ex. 18 [Doc. No. 152-20]. More than once, both the initial decisionmaker for a

precertification request and the reviewing physicians relied on the fact that A.B. did not

have an autism diagnosis. See, e.g., id. Ex. 3 [Doc No. 152-3]. Finally, Defendant utilized

contract physicians who were not licensed in the State of Oklahoma, contrary to state law.

See Okla. Stat. tit. 36, § 1250.5(10).

Discussion

A. Medical Necessity

Defendant first asserts that Plaintiff cannot establish either a contract or bad faith

claim because the policy did not cover ABA therapy services for A.B. at any time

between April 2019 and November 2021. Invoking the Medical Necessity Limitation,

Defendant contends Plaintiff must prove ABA therapy was medically necessary by

showing that 1) A.B. had a valid prescription or order from a licensed physician or

psychologist and 2) all elements of the definition of “medically necessary” are met. On

the latter point, Defendant relies on the opinions of its retained expert to argue that ABA

therapy is not consistent with generally accepted standards of medical practice for A.B.’s

conditions and is not considered effective for any of A.B.’s diagnoses. See Mot. Summ.

J. at 18-21.13

Plaintiff responds that Defendant’s argument is inconsistent with the historical

facts. Defendant made a medical necessity determination in Plaintiff’s favor multiple

times when it authorized T&B’s services and paid for A.B.’s treatment. Defendant

approved the ABA therapy services that A.B. received from April to September 2019,

the full level of services requested from September 2019 through April 2020, and a lesser

level of services from April 2020 through April 2021. Plaintiff contends “[t]he only

‘medical necessity’ factual issue in dispute is whether or not the additional hours

requested by [A.B.’s] medical providers were also medically necessary – in addition to

13 In its reply brief, Defendant argues why Plaintiff bears the burden of proof on this issue

but alternatively asserts that it has shown a lack of medical necessity. See Reply Br. at 5 n.4.

the hours that were determined to be medically necessary by [Defendant].” See Resp.

Br. at 20.

Defendant’s only response to this argument is to deny that its favorable coverage

decisions were based on proof of medical necessity. See Reply Br. at 5-6 (ABA therapy

was covered “despite the lack of evidence of medical necessity”). Defendant notes that

precertification decisions made in November 2019, April 2020, October 2020, and April

2021 were accompanied by statements questioning whether ABA therapy was shown to

be effective for HCC and whether the approved level of services was medically

necessary. See Reply Br. at 6.

The Court finds that Defendant attempts through its summary judgment position

to litigate coverage conditions that were met or waived when it approved and paid T&B’s

claims for ABA therapy services. Despite the concerns expressed by medical reviewers,

Defendant preauthorized ABA therapy for A.B. and paid post-service claims from 2019

until 2021. Further, Defendant’s argument that ABA therapy was never a covered

service for A.B. is inconsistent with its position on other summary judgment issues. For

example, Defendant ostensibly delayed payment to T&B for services provided between

April and October 2019 because precertification had not been requested and Defendant

needed to determine medical necessity. See Mot. Summ. J. at 7, ¶ 13 (“Rather than

denying T&B’s post-service claims for failure to seek precertification, [Defendant]

reached out to T&B . . . so that Defendant could determine whether the claims for ABA

therapy were medically necessary under A.B.’s policy.”); id. at 26 (relying on this

asserted fact to negate bad faith). Defendant also asserts that Plaintiff cannot show bad

faith because Defendant granted precertification of some ABA therapy services and paid

T&B’s post-service claims for approximately two years, highlighting that only part of

the services failed a medical necessity test. See id. at 26. Defendant provides no legal

authority for the proposition that it can now rewrite its coverage decisions by asserting

that ABA therapy was never a covered service and demanding that Plaintiff prove

otherwise.14

In short, the Court finds that Defendant has not shown it is entitled to summary

judgment on the first proposition urged, that is, Plaintiff cannot prove any of the ABA

therapy services provided to A.B. were medically necessary.15

B. Preauthorization Decisions

Defendant asserts that Plaintiff cannot prove a claim for breach of contract based

on Defendant’s denials of T&B’s requests for precertification of services because the

policy does not require Defendant to approve precertification requests and instead

provides that Defendant is only liable for wrongly denying post-service claims.

Defendant characterizes a precertification decision as a “condition precedent to

coverage” under the policy but contends a precertification denial bears no contractual

consequences. See Mot. Summ. J. at 21-22; Reply at 21-22. Plaintiff disagrees with

14 In attempting to litigate coverage, for example, Defendant calls for Plaintiff to produce

a prescription for services provided from 2019 to 2021 based on its current position that a 2013

prescription from A.B.’s physician was invalid after five years. However, the validity of the

prescription was not questioned at the time of Defendant’s coverage decisions.

15 In light of this conclusion, the Court need not decide which party has the burden of proof

on this issue. The Court notes, however, the policy lists a lack of medical necessity as an exclusion

from coverage, which an insurer would ordinary be required to prove.

the premise of this argument. Plaintiff contends a precertification decision that is a

condition of coverage obliges the insurer to perform its precertification review in good

faith and in accordance with the policy terms.

Upon consideration, the Court is not persuaded by Defendant’s argument. One

cannot leap from the proposition that Defendant had no obligation to approve

precertification requests to the conclusion that it could exercise its power to deny

precertification with impunity. Defendant concedes that a precertification request

triggers a duty to make a medical necessity determination. Under its own authority, a

breach of contract is a material failure to perform a duty imposed by the agreement. See

Mot. Summ. J. at 21 (quoting Milroy v. Allstate Ins. Co., 151 P.3d 922, 926 (Okla. Civ.

App. 2006)); Reply Br. at 9 n.8. Here, the duty allegedly breached is Defendant’s

contractual obligation to perform a medical necessity review in accordance with the

terms of the policy.

Neither party provides legal support for their position on an insurer’s duty

regarding precertification decisions. Although the Court has found no Oklahoma case

on point, other courts have determined that the duty of good faith advocated by Plaintiff

is implied in an insurer’s agreement to pay for covered health care services. See

McKenzie v. Pac. Health & Life Ins. Co., 118 Or. App. 377, 381, 847 P.2d 879, 881

(1993) (“within defendant’s obligation to pay all covered claims was the duty to

determine, in good faith, whether a claim is covered, and to refrain from arbitrarily

refusing to pre-authorize medical treatment”). The duty to make preauthorization

decisions in good faith was further explained in Eggiman v. Mid-Century Ins. Co., 134

Or. App. 381, 895 P.2d 333, 336 (1995), which concerned personal injury protection

(“PIP) coverage under an automobile insurance policy. There, the court rejected the

insurer’s position that it had no express contractual duty to preauthorize medical

treatment so it had no duty to act in good faith when making a preauthorization decision.

The court explained:

As in McKenzie, a duty to preauthorize in good faith is properly implied

because, absent such a duty, a PIP insurer could avoid its contractual

obligations altogether by arbitrarily withholding preauthorization.

Without preauthorization—without assurance that the insurer will pay the

cost of treatment—medical providers may refuse to provide the treatment,

or PIP insureds may feel compelled not to obtain covered treatment,

frustrating contractual expectations.

Id. (footnote omitted). These decisions are consistent with Oklahoma law imposing a

duty of good faith on contractual provisions that give one party discretion to perform.

See, e.g., EKE Builders, Inc. v. Quail Bluff Assoc., 714 P.2d 604, 608 (Okla. Civ. App.

1985) (where construction contract was contingent on property owner obtaining

construction loan, the owner was “obliged to make a good faith effort to obtain the

required loan”).

Viewed in this way, the Court finds that Defendant has not shown it is entitled to

summary judgment on the ground that a preauthorization decision cannot form the basis

of a breach of contract claim.

C. Causation of Damages

Defendant also asserts that its delayed payments to T&B for services provided to

A.B. from April through October 2019 did not cause any damages. Defendant argues,

based on deposition testimony, that T&B did not refuse to provide any services, change

A.B.’s therapy schedule, or seek payment from Plaintiff because it went unpaid for

several months. Defendant thus seeks a determination as a matter of law that any breach

of contractual duties based on its nonpayment of T&B’s claims for several months did

not cause Plaintiff to suffer any damages.

Under Oklahoma law, the essential elements of a breach of contract claim are:

“1) formation of a contract; 2) breach of the contract; and 3) damages as a direct result of

the breach.” See Digital Design Grp., Inc. v. Info. Builders, Inc., 24 P.3d 834, 843 (Okla.

2001); accord Cates v. Integris Health, Inc., 412 P.3d 98, 103 (Okla.), cert. denied, 138 S.

Ct. 2659 (2018). Here, the existence of an insurance contract is undisputed, and Defendant

assumes its delay in processing T&B’s claims for ABA therapy provided from April to

October 2019 may breach the contract. Defendant challenges the third element of a

contract claim, namely, that Plaintiff suffered damages as a direct result of the breach.

Plaintiff’s response on this issue is a speculative argument that Defendant’s delay

deprived A.B. of timely treatment with a comprehensive course of ABA therapy that

could have ameliorated her deficits. Plaintiff contends Defendant’s failure to respond

to T&B’s claims for April 2019 services created uncertainty about whether Defendant

would cover ABA therapy for A.B. and T&B was unwilling to provide the level of

services that it believed was medically necessary until Defendant made a coverage

decision. This argument is unsupported by a presentation of facts in the manner required

by Rule 56. See supra n.8. Thus, the Court finds that Plaintiff has failed to demonstrate

a genuine dispute of material fact on the issue of damages caused by Defendant’s delay of

payment.

Therefore, the Court finds that Defendant has shown that it is entitled to summary

judgment on the damages issue raised by its Motion. The Court rules as a matter of law

that Plaintiff cannot recover damages for Defendant’s delayed payments to T&B for

services it provided from April to October 2019.

D. Administrative Exhaustion

Defendant seeks to enforce a contractual requirement that Plaintiff must exhaust

a two-level internal appeals process before filing suit. Defendant asserts that “Plaintiff

did not appeal any denial of post-service claims after April 26, 2021,” and thus “the

insurance policy’s express terms bar Plaintiff’s lawsuit to the extent it is based on such

decisions.” See Mot. Summ. J. at 24. Defendant contends Plaintiff’s claims based on

denials of coverage after April 26, 2021, are barred by noncompliance with a policy

provision that imposes a mandatory precondition to suit.

Plaintiff disputes that she failed to satisfy the exhaustion requirement, arguing

that T&B completed the appeals process on A.B.’s behalf when T&B sought review of

Defendant’s precertification decision that ABA therapy services were not medically

necessary after April 28, 2021.16 Plaintiff contends a new appeal was not required each

time a post-service claim was denied based on that decision, particularly when the

appeals process was ongoing when the claims were made. Alternatively, Plaintiff asserts

that any noncompliance should be excused as futile, given that Defendant completed a

full medical review of the decision to discontinue coverage and reached a final

16 The Complaint/Appeals Procedure of the policy expressly allows a provider to appeal

for the insured.

determination that A.B. would not benefit from further ABA therapy, in part, due to her

age.

The Court has previously decided in ruling on a Rule 12(b)(6) motion raising this

issue: “Defendant’s assertion that A.B.’s contract claim is barred by her failure to

complete an administrative appeals process mandated by the policy is an affirmative

defense rather than an element of her claim.” See 9/23/21 Order [Doc. No. 57] at 15.

Accordingly, Defendant bears the burden to prove that it is entitled to summary judgment

on Plaintiff’s claims that are allegedly foreclosed by a lack of administrative exhaustion.

“In Oklahoma, unambiguous insurance contracts are construed, as are other

contracts, according to their terms.” Max True Plastering Co. v. U.S. Fid. & Guar. Co.,

912 P.2d 861, 869 (Okla. 1996); see May v. Mid-Century Ins. Co., 151 P.3d 132, 140

(Okla. 2006) (to determine a party’s obligations under an insurance contract, “we must

examine the provisions of the policy”). “The terms of the parties’ contract, if

unambiguous, clear, and consistent, are accepted in their plain and ordinary sense, and

the contract will be enforced to carry out the intention of the parties as it existed at the

time the contract was negotiated.” Dodson v. St. Paul Ins. Co., 812 P.2d 372, 376 (Okla

1991); see May, 151 P.3d at 140 (“Where the language of a contract is clear and

unambiguous on its face, that which stands expressed within its four corners must be

given effect.”).

Defendant relies for its administrative exhaustion defense on a provision of the

policy stating that an insured “must exhaust the Appeal Process (Level I) and Re-review

Process (Level II) before pursuing other legal remedies.” See Mot. Summ. J. at 23-24.17

Case law supports the general proposition that an unambiguous policy provision that

requires an insured to exhaust an appeal process before filing suit is enforceable under

Oklahoma law. See Evans v. Kirke-Van Orsdel, 122 F. App’x 947, 949 (10th Cir. 2004)

(unpublished) (Oklahoma substantive law governed disability benefit plan).18 In Evans,

the insured employee failed to appeal a denial of disability benefits to an annuity board

identified in the insurance plan, despite receiving written notice of the right to appeal.

After rejecting numerous arguments made by the insured, the court of appeals concluded

that summary judgment was properly granted to the defendants due to the plaintiff’s

“unexcused failure to satisfy the plan’s exhaustion requirement.” Id. at 952.

Here, Defendant’s exhaustion argument is more nuanced. Defendant contends

Plaintiff was required to exhaust the appeals process repeatedly. Defendant asserts that

even though Plaintiff completed both levels of appeals when it denied precertification

of coverage for ABA therapy services for A.B. after April 28, 2021, Plaintiff was also

required to complete both levels of appeals when Defendant later denied claims for

services provided after April 28, 2021, based on that precertification decision.

Defendant relies for this position on language in the Complaint/Appeal Procedure

17 Defendant provides a citation to the record that is incorrect, in that the page number

(“Ex. 10 at HCSC-AB-0000703”) does not exist. The citation most likely reflects a typographical

error; a similar provision appears in the original policy at bates-numbered page HCSC-AB-

000070. However, the policy was amended in 2006 to replace the Complaint/Appeal Procedure

provision with a new one that contains the statement quoted by the Court. See Policy at 101 (ECF

page numbering).

18 Unpublished opinion cited pursuant to Fed. R. App. P. 32.1(a) and 10th Cir. R. 32.1(A).

provision that states procedures for appealing both adverse benefit determinations and

precertification decisions, and an absence of language in the policy stating that an

insured need not appeal both decisions. See Reply Br. at 12 (citing Policy at 100-01).

Defendant argues that its interpretation of the policy is a common sense reading because,

even though precertification is denied, appealing the denial of a post-service claim could

yield a different result and would provide an opportunity to supply additional, updated

information.

Upon consideration, the Court is unable to conclude that Defendant’s view of the

exhaustion requirement is supported by an unambiguous policy provision, particularly

as applied to the facts of this case. There is no question that Plaintiff exhausted the appeals

process regarding Defendant’s decision to discontinue coverage of ABA therapy services

for A.B. when precertification was denied on April 28, 2021. It is undisputed that the final,

second-level review of the noncoverage decision was not completed until September 2021.

Defendant has not identified any language of the policy that would require Plaintiff to

restart the appeal process each time Defendant denied a post-service claim based on its

precertification decision (which was still under review) and repeat the entire process for

each denial of coverage for services in an ongoing course of treatment. Even if Defendant’s

“common sense” argument is considered, Defendant does not explain why T&B should be

required to initiate a new appeal process in order to submit additional clinical information

or assessments. T&B did actually submit an updated assessment for A.B. during the appeal

process that was completed.

In short, the Court finds that Defendant’s exhaustion defense cannot be decided

as a matter of law on the record presented.

E. Bad Faith

To establish a breach of Defendant’s duty of good faith and fair dealing, Plaintiff

must show that Defendant breached the insurance contract and, in so doing, acted in a

manner constituting bad faith. See Brown v. Patel, 157 P.3d 117, 121 (Okla. 2007); see

also Badillo v. Mid Century Ins. Co., 121 P.3d 1080, 1093 (Okla. 2005) (per curiam). The

elements of a bad faith claim are “(1) the claimant was entitled to coverage under the

insurance policy at issue; (2) the insurer had no reasonable basis for delaying [or denying]

payment; (3) the insurer did not deal fairly and in good faith with the claimant; and (4) the

insurer’s violation of its duty of good faith and fair dealing was the direct cause of the

claimant’s injury.” Ball v. Wilshire Ins. Co., 221 P.3d 717, 724 (Okla. 2009).19

Defendant first seeks summary judgment on Plaintiff’s bad faith claim on the

ground that Plaintiff cannot establish the second element. Defendant contends the

undisputed facts show it had a reasonable basis for initially delaying payment, refusing to

authorize ABA therapy services at the level T&B requested, and denying payment after

April 2021: a good faith inquiry and determination that ABA therapy was not medically

necessary for A.B.’s HCC diagnosis.

19 To establish the second element, a plaintiff must prove that the insurer’s “refusal to pay

the claim in full was unreasonable under the circumstances because (a) it had no reasonable basis

for the refusal, (b) it did not perform a proper investigation, or (c) it did not evaluate the results of

the investigation properly.” See Duensing v. State Farm Fire & Cas. Co., 131 P.3d 127, 138 (Okla.

Civ. App. 2006) (citing OUJI–CIV (2d) 22.2).

Upon consideration of the facts shown by the summary judgment record with all

reasonable inferences drawn in Plaintiff’s favor, as required by Rule 56, the Court finds

there is a genuine dispute of material fact as to whether Defendant acted in bad faith in

delaying and refusing coverage for ABA therapy services provided to A.B. Plaintiff has

demonstrated minimally sufficient facts regarding Defendant’s handling of claims for

coverage of ABA therapy for A.B. that could reasonably be found to show bad faith

conduct in breach of the policy. Solely as a limited example, Plaintiff has shown that

Defendant made no response to T&B’s April 2019 claims for months, pressured T&B to

reduce the initial precertification requests, refused to authorize comprehensive ABA

therapy services after the first six-month period ended in April 2020, terminated ABA

therapy coverage when A.B. reached 12 years of age, and utilized contract physicians

who were not licensed to practice in Oklahoma. Regardless of the Court’s view of the

facts presented, the Court simply concludes that reasonable jurors could find from the

summary judgment record that Defendant acted in bad faith by failing to cover ABA

therapy services that were needed to treat A.B.’s condition.

Alternatively, Defendant asserts that Plaintiff cannot prevail on her bad faith claim

because undisputed facts show she withheld important information bearing on Defendant’s

determination of coverage. This argument refers to facts presented in Defendant’s Motion

that A.B. received a primary diagnosis in February 2019 of a rare genetic disorder,

Skraban-Deardorff syndrome, that was never disclosed by T&B or Plaintiff when making

their claims. Defendant contends this information was material to its coverage decisions

and Plaintiff’s misconduct in withholding the information prevents her from any recovery

for Defendant’s bad faith conduct (if any was committed).

Setting aside whether Defendant’s argument accurately states Oklahoma law, the

Court finds that a genuine dispute of material fact prevents a resolution of this potential

defense to a bad faith claim as a matter of law. Defendant has not presented undisputed

facts that show the additional diagnosis that A.B. received in February 2019 was material

to a determination whether ABA therapy was a covered service for her HCC condition.

Conclusion

For these reasons, the Court finds that genuine disputes of material facts exist and

that Defendant 1s not entitled to summary judgment on any ground asserted in its Motion

except the recovery of damages based on Defendant’s delay in paying for ABA therapy

services provided from April to October 2019. Subject to this ruling on one item of

damages, this case shall proceed to trial on Plaintiff's claims for breach of contract and

insurer’s bad faith.

IT IS THEREFORE ORDERED that Defendant’s Motion for Summary

Judgment [Doc. No. 136] is GRANTED in part and DENIED in part.

IT IS SO ORDERED this 17" day of September, 2024.

\" hie

Nd Q.

TIMOTHY D. DeGIUSTI

Chief United States District Judge

24