Appendix — Dixie National Life Insurance Co. v. Ward (No. 07-1434)

APPENDIX

TABLE OF CONTENTS

Opinion of the Court of Appeals on Rehearing

TEES EI Sa ay eR oe nF la

Opinion of the Court of Appeals

10/5/07

Order of the District Court

5/10/06

Letter to J.E. Deaton from M. O’Brien

3/16/99

Letter to J. Hawkins from A. Cornelius

4/18/02

Letter to M. Ward from J. Turner

ESE,

Letter to E. Csiszar from M. Ward

8/14/02

Letter to M. Ward from B. Lemmon

8/29/02

Letter to E. Csiszar from M. Ward

10/2/02

Letter to M. Ward from P. Wuzzardo

10/31/02

ON REHEARING

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

NO. 06-2022

MARTHA WARD, ON BEHALF OF HERSELF AND ALL

OTHERS SIMILARLY SITUATED,

Plaintiff - Appellant,

versus

DIXIE NATIONAL LIFE INSURANCE COMPANY;

NATIONAL FOUNDATION LIFE INSURANCE

COMPANY,

Defendants - Appellees,

and

PALMETTO MARKETING ASSOCIATES,

INCORPORATED;

PATTI JENKINS,

Defendants.

SOUTH CAROLINA DEPARTMENT OF

INSURANCE;

AMERICA’S HEALTH INSURANCE PLANS,

INCORPORATED,

Amici Supporting Appellees.

No. 06-2054

MARTHA WARD, ON BEHALF OF HERSELF AND ALL

OTHERS SIMILARLY SITUATED,

Plaintiff - Appellee,

versus

NATIONAL FOUNDATION LIFE INSURANCE

COMPANY,

Defendant - Appellant,

DIXIE NATIONAL LIFE INSURANCE COMPANY,

Defendant - Appellee,

and

PALMETTO MARKETING ASSOCIATES,

INCORPORATED;

PATTI JENKINS,

Defendants.

SOUTH CAROLINA DEPARTMENT OF

INSURANCE;

AMERICA’S HEALTH INSURANCE PLANS,

INCORPORATED,

Amici Supporting Appellant.

Appeals from the United States District Court for

the District of South Carolina, at Columbia. Joseph

F. Anderson, Jr., Chief District Judge. (3:03-cv-

3a

03239-J FA)

Argued: May 23, 2007 Decided: October 5, 2007

Decided on Rehearing: November 29, 2007

Before MICHAEL and TRAXLER, Circuit

Judges, and WIDENER,! Senior Circuit Judge.

Vacated in part, affirmed in part, dismissed in

part, and remanded by unpublished per curiam

opinion.

PER CURIAM:

Plaintiff Martha Ward sued National Foundation

Life Insurance Company (National) and Dixie

National Life Insurance Company (Dixie), asserting

that National refused to pay the full amount of

benefits owed under supplemental cancer insurance

policies that were issued by Dixie and later assigned

to National. The district court certified a statewide

(South Carolina) plaintiff class rather than the

multistate class Ward sought to represent, and the

court later granted summary judgment in favor of

National on the breach of contract claims. Ward

appealed and National cross-appealed. In a prior

opinion, we concluded that although the district

t Judge Widener heard oral argument in this case but died

prior to the time the decision was filed. The decision is filed by

a quorum of the panel. 28 U.S.C. § 46(d).

4a

court properly limited the plaintiff class to South

Carolina residents, the court improperly granted

summary judgment on the breach of contract claims,

and we remanded for further proceedings on those

claims. We _ dismissed National's cross-appeal

without prejudice. See Ward v. Dixie Nat Life Ins.

Co., 2007 WL 2914954 (4th Cir. Oct. 5, 2007).

Ward filed a petition for rehearing, and National,

supported by various amici, filed a petition for

rehearing and rehearing en banc. We granted Ward’s

petition for panel rehearing and denied National’s

petition for rehearing, thus vacating our prior

opinion.? See Fourth Circuit I.0.P. 40.2. Dispensing

with further briefing and argument, we now vacate

the district court’s decision granting summary

judgment in favor of National, and we remand with

instructions for the district court to instead enter

judgment in favor of Ward on the breach of contract

claims. In light of our remand, we conclude that it

would be premature for us to consider the class

certification issue. We therefore dismiss without

prejudice National’s cross-appeal.

I.

In August 1990 Ward purchased a cancer

treatment benefit policy from Dixie covering both

herself and her husband. Ward’s policy is a type of

supplemental insurance under’ which __ direct

payments are made to the policyholder when an

insured patient undergoes covered cancer

2 Because no member of the court called for a vote on National’s

petition for rehearing en banc, the petition was denied. See

Fourth Circuit Local Rule 35(b).

5a

treatments. Benefits under this kind of policy are

paid regardless of whether the patient has other

insurance sufficient to cover all medical expenses.

When the patient has other insurance covering

cancer treatments, the policyholder is able to retain

the money received as a result of the supplemental

coverage.

Benefits under Ward’s policy vary as to the

procedure performed. In some sections the policy

provides clear caps as to the maximum benefit to be

paid. For example, the policy provides a “Schedule of

Operations” listing the maximum amount to be paid

— ranging from $150 for skin excisions to $3000 for

removal of an intracardiac tumor — for a variety of

operations. In many other sections of the policy no

dollar amounts are provided, and benefits are

calculated in relation to the “actual charges” for the

covered procedures. Section (F) of the policy, titled

“X-ray Therapy, Radium Therapy, Radiation

Therapy, and Chemotherapy Benefit,” provides an

example of this language:

We will pay the actual charges for

teleradiotherapy, using either natural

or artificially propagated radiation,

when used for the purpose of

modification or destruction of tissue

invaded by cancer. We will also pay the

actual charges made for plaques or

molds or the administration internally,

interstitially, or intracavitarially of

radium or _ radioisotopes in_ sealed

sources for the purpose of modification

or destruction of tissue invaded by

cancer. We will also pay the actual

6a

charges for cancericidal chemical

substances and the administration

thereof for the purpose of the

modification or destruction of tissue

invaded by cancer.

J.A. 221. Although the phrase is used repeatedly

throughout the policy, no definition for “actual

charges” is provided.

Dixie assigned Ward’s policy to National in 1994.

In 2001 Ward began filing claims under the policy

after her husband, James Ward (James), was

diagnosed with prostate cancer and started receiving

treatment. Shortly thereafter, a dispute between

Ward and National arose over how benefits paid in

the amount of the “actual charges” are calculated.

For a number of years after the assignment,

National appears to have calculated benefits in the

same manner that Dixie had previously done.

Specifically, when the benefit owed was based on the

“actual charges,” Dixie paid the benefit based on the

amounts billed to patients by their medical

provicers. Dixie paid such amounts even though

providers often have agreements with certain

insurers to accept as payment-in-full an amount less

than that reflected on the patient’s bill. In this case,

for example, James’s primary health insurance is

provided through a plan administered by Blue Cross

and Blue Shield of South Carolina (BCBS).

Regardless of the amounts billed to James, his

medical providers have an agreement with BCBS

that requires them to accept a discounted amount as

payment-in-full for services rendered to BCBS

insureds. This agreement prohibits providers from

Ta

attempting to collect an amount in excess of the pre-

negotiated, discounted fee from BCBS insureds such

as James. :

Toward the end of the year in 2001, National

changed its benefit payment practice. When Ward

submitted claims for James’s treatments in 2002,

she was told that she would have to submit an

explanation of benefits (EOB) statement. By viewing

the EOB, National would be able to determine what

the pre-negotiated discount rate was for James’s

treatments and calculate benefits in light of this

reduced amount. Ward refused to piovide National

with the EOB statements because she contended

that under the terms of her policy, the “actual

charge” was reflected in the nondiscounted bill that

she received rather than in the EOB.

On March 7, 2003, after Ward was unable to

resolve the dispute, she filed an action in the Court

of Common Pleas for Richland County, South

Carolina, against both Dixie and National. The

defendants removed the action to federal court on

October 10, 2003. On September 15, 2004, Ward

moved to certify a plaintiff class consisting of

all persons insured under cancer

policies from Defendant Dixie National

Life Insurance Company where Dixie

promised to pay to the insured the

“actual charges” incurred for certain

medical services, but instead paid not

the actual charges but rather the

(lesser) amount that the insured’s

primary health insurer negotiated with

the healthcare provider to pay for the

medical proceduref[.]

8a

S.A. 7. On May 5, 2005, the district court certified a

class of South Carolina residents. The court limited

the class to South Carolina residents based on its

understanding of South Cvrolina’s door-closing

statute, S.C. Code Ann. § 15-5-150. Ward, with

permission of the court, filed a third amended

complaint on September 27, 2005, asserting claims

for (1) breach of contract against both Dixie and

National; (2) bad faith refusal to pay against

National; and (3) breach of contract accompanied by

a fraudulent Act against National. Ward later

abandoned the bad faith claim. Cross-motions for

summary judgment followed. In addition, National

filed a motion, joined by Dixie, to decertify the

statewide class.

On May 10, 2006, the district court granted

National’s motion for summary judgment while

denying Ward’s. The court concluded that under

South Carolina contract law, the phrase “actual

charges” is not ambiguous and must be read to mean

“the charges for which the patient is liable when

medical services are rendered, not the fictional

amounts indicated on the invoice that the provider

does not expect the patient to pay.” J.A. 1074.

Because Ward did not prevail on her breach of

contract claims, the joint motion to decertify the

class and Dixie’s motion for summary judgment were

denied as moot.

Ward appeals both the grant of summary

judgment to National as well as the district court’s

decision to limit class membership to South Carolina

residents. National has filed a _ cross-appeal

contesting the district court’s decision to certify even

a statewide class.

9a

IT.

We begin with Ward’s argument that the district

court erred in concluding that, as used in her policy,

the unambiguous meaning of the phrase “actual

charges” is the discounted amount that medical

providers have agreed to accept as full payment

pursuant to a third-party agreement with another

insurer. Under South Carolina law when a term has

a “plain, ordinary, and popular meaning,” courts

must interpret the term to give effect to that

ordinary usage. Century Indem. Co. v. Golden Hills

Builders, Inc., 561 S.E.2d 355, 358 (S.C. 2002). When

a term has a plain meaning and that meaning is

“clear and unambiguous, the language [of the

contract] alone determines the contract’s force and

effect.” Schulmeyer v. State Farm Fire & Cas. Co.,

579 S.E.2d 132, 134 (S.C. 2003). Of course not all

terms are susceptible to plain and ordinary

definition because of the simple fact that they are

not popularly used. As a result, a contract term is

ambiguous when it lacks a plain definition and is

“capable of more than one meaning when viewed

objectiveiy by a reasonably intelligent person who

has examined the context of the entire integrated

agreement and who is cognizant of the customs,

practices, usages and terminology as_ generally

understood in the particular trade or business.”

Hansen v. United Servs. Auto. Ass’n, 565 S.E.2d 114,

117-18 (S.C. 2002).

In the district court’s endeavor to discern the

plain meaning of “actual charges” as used in Ward’s

policy, it reasoned that the word “actual” should be

given a separate meaning from the word “charges.”

Because the district court understood the word

10a

“actual” to mean something that is real or true, it

concluded that “actual charges” means the amounts

for which the patient is truly liable as opposed to

“the fictional amounts indicated on the invoice that

the provider does not expect the patient to pay.” J.A.

1074. We disagree both with the district court’s

interpretive approach as well as the conclusion that

it reached. The definition settled on by the district

court ig not the only one possible when the language

of the policy is considered in light of its context. As

we explain below, the meaning of the phrase “actual

charges” as used in Ward’s policy is ambiguous.

First, even under the district court’s approach —

defining each word separately and then putting

those definitions together — another meaning can

reasonably be found. The words “actual charges”

could also! e understood to mean the amount shown

on the bili sent to the patient regardless of whether

this amount is the same as the amount actually

owed. Viewed from within the four corners of the

policy, the phrase is ambiguous as there is nothing

to indicate whether “actual charges” is_ best

understood to mean the amount actually billed or

the amount actually owed. See Conner v. Am. Pub.

Life Ins. Co., 448 F. Supp.2d 762, 766 (N.D. Miss.

2006) (finding “inherent ambiguity in the undefined

term ‘actual charges”); Metzger v. Am. Fid. Assur.

Co., No. CIV-05-1387-M, 2006 U.S. Dist. LEXIS

70061, at *13 (W.D. Okla. Sept. 26, 2006) (same).

Second, we disagree with the assertion that the

district court was correct “in considering ordinary

dictionary definitions” of both “actual” and “charges.”

Appellees’ Br. at 21. We conclude that a person “who

is cognizant of the customs, practices, usages and

lla

terminology as generally understood” in the health

insurance industry would regard “actual charges” as

a term of art rather than two words to be separately

defined. Hansen, 565 S.E.2d at 117. The words are

used throughout the insurance policy together as a

phrase — a phrase that neither appears in a

standard dictionary nor has an ordinary, popular

usage. Contrary to the defendants’ contention,

South Carolina’s principles of contract interpretation

in no way prohibit courts from reading a phrase as a

term of art if that is how it would be regarded by an

objective observer well-versed in medical insurance

terminology. See Frazier v. Badger, 603 S.E.2d 587,

591 (S.C. 2004).

Third, even when viewed as a term of art, the

phrase remains ambiguous. Prior to filing this

lawsuit, Ward wrote to the South Carolina

Department of Insurance and asked to be provided

with a legal definition of “actual charge.” A

representative of the Department wrote back

explaining that “[t]he term ‘actual charge’ in

industry-wide standards is the amount that you are

legally obligated to pay for a specific service.” J.A.

611 (emphasis in original). In contrast to the view

taken by the Department of Insurance, numerous

health care dictionaries define “actual charge” as the

amount billed. See, e.g., Mosby’s Medical, Nursing,

and Allied Health Dictionary 26 (4th ed. 1994)

(“actual charge, the amount actually charged or

billed by a medical practitioner for a service. The

actual charge may not be the same as that paid for

the service by an insurance plan.”); Lee Hyde, The

McGraw-Hill Essential Dictionary of Health Care

133 (1988) (“actual charge. the amount a physician

12a

or other practitioner actually bills a patient or his

insurance for a medical service or procedure.”)

(emphasis in original). Because the policy itself does

not indicate which definition was intended by the

parties, we conclude that its meaning is ambiguous.

We must now determine what remedy flows from

our conclusion that the insurance policy is

ambiguous. In a typical contract dispute, the

meaning of an ambiguous contract is a question of

fact to be resolved by the jury. See, e.g., Café Assocs.,

Ltd. v. Gerngross, 406 S.E.2d 162, 164 (S.C. 1991)

(“As a general rule, written contracts are to be

construed by the Court; but where a contract is

ambiguous or capable of more than one construction,

the question of what the parties intended becomes

one of fact, and the question should be submitted to

the jury.”). Although statements of that general rule

appear in cases involving insurance disputes, see

Waters v. S. Farm Bureau Life Ins. Co., 617 S.E.2d

385, 388 (S.C. Ct. App. 2005), only latent ambiguities

in an insurance policy are resolved by a jury; patent

3 National and its supporting amici contend that, absent

compelling reasons, we must defer to the Department of

Insurance’s interpretation of “actual charges.” We disagree.

Although an agency’s interpretation of a statute it is charged

with enforcing is entitled to deference, see Dunton v. S.C. Bd. of

Examiners in Optometry, 353 S.E.2d 132, 133 (S.C. 1987), the

Department of Insurance has no statutory mandate to

pronounce the meaning of a term in an individual insurance

policy. We are of course interested in the Department’s

position, but South Carolina law does not in this case require

us to defer to the Department’s view of the matter.

13a

ambiguities must be resolved in favor of the insured.

See Cogdill v. Equity Life & Annuity Co., 203 S.E.2d

674, 677 (S.C. 1974); Hann v. Carolina Cas. Ins. Co.,

167 S.E.2d 420, 423 (S.C. 1969). Accordingly, if the

ambiguity in this case is patent, the district court

should have granted summary judgment in favor of

Ward on the breach of contract claims. If the

ambiguity is latent, the meaning of the policy must

be determined by a jury on remand.

A patent ambiguity is one where the uncertainty

as to meaning “arises upon the words of the will,

deed, or other instrument as looked at in themselves,

and before any attempt is made to apply them to the

object which they describe.” Hann, 167 S.E.2d at

422 (quoting Jennings v. Talbert, 58 S.E. 420, 421

(S.C. 1907)); cf. Stone Container Corp. v. Hartford

Steam Boiler Inspection & Ins. Co., 165 F.3d 1157,

1162 (7th Cir. 1999) (“A patent ambiguity in a

contract is one that is apparent from just reading the

contract.”). With a latent ambiguity, “the

uncertainty arises, not upon the words of the will,

deed, or other instrument as looked at in themselves,

but upon those words when applied to the object or

subject which they describe.” Hann, 167 S.E.2d at

422. A latent ambiguity thus “does not appear on

the face of the words used, nor is its existence known

until those words are brought into contact with

collateral facts.” Hastings v. Union Fire Ins. Co., 125

S.E. 923, 924 (S.C. 1924) (internal quotation marks

omitted); cf. Stone Container Corp., 165 F.3d at 1162

(“A latent ambiguity arises when, although the

contract is clear ‘on its face,’ anyone knowing the

background would know that it didn’t mean what it

seems to mean.”).

l4a

We believe that the phrase “actual charges” is

patently ambiguous. The phrase is susceptible of

more than one reasonable interpretation, and the

uncertainty of meaning arises thus from the phrase

itself, not from the application of the phrase to

collateral facts. See Cogdill, 203 S.E.2d at 677

(concluding that “lame back” as used in a policy

provision limiting disability benefits could plausibly

be construed in more than one way and that the

phrase was patently ambiguous); Hastings, 125 S.E.

at 924 (finding latent ambiguity in fire insurance

policy that covered two barns because the insured’s

property included two traditional barns and an

abandoned tenant house used by the insured as a

barn).

Because the ambiguity is patent, construction of

the policy is for the court rather than a jury. See

Cogdill, 203 S.E.2d at 677; Hann, 167 S.E.2d at 423.

South Carolina law very clearly requires us to

resolve the ambiguity in favor of the insured. See

Helena Chem. Co. v. Allianz Underwriters Ins. Co.,

594 S.E.2d 455, 459 (S.C. 2004) (“Where the words of

an insurance policy are capable of two reasonable

interpretations, the construction most favorable to

the insured should be adopted.”); Hann, 167 S.E.2d

at 423 (“It is settled beyond cavil in this jurisdiction

that the terms of an insurance policy should be

construed most liberally in favor of the insured, and

that in case of conflict or ambiguity, a construction

will not be adopted that defeats recovery if the policy

is reasonably susceptible of a meaning that will

permit recovery. We uniformly give the insured the

benefit of any doubt in the construction of the terms

used in an insurance policy.”). Accordingly, we

15a

vacate the district court’s grant of summary

judgment to National and remand with instructions

that the district court enter summary judgment in

favor of Ward on her breach of contract claims.

ITI.

A.

We now turn to the question of whether the

district court properly limited the class of plaintiffs

to those who, like Ward, are residents of South

Carolina. In her motion for class certification, Ward

made clear that she sought to represent persons

residing throughout the southern United States who

had bought policies from Dixie that were later

assigned to National. Because the proposed class

included non-residents of South Carolina, the

district court requested briefing from the parties on

the effect of South Carolina’s door closing statute,

S.C. Code Ann. § 15-5-150, on the potential out-of-

state class members. That statute provides:

An action against a corporation created

by or under the laws of any other state

government or country may be brought

in the circuit court:

(1) By any resident of this State for any

cause of action; or

(2) By a plaintiff not a resident of this

State when the cause of action shall

have arisen or the subject of the action

shall be situated within this state.

S.C. Code Ann. § 15-5-150. As recently reinterpreted

by the Supreme Court of South Carolina in Farmer

v. Monsanto Corp., 579 S.E.2d 325 (S.C. 2003), § 15-

16a

5-150 determines the capacity of a party to sue.

Furthermore, Farmer held that Ҥ 15-5-150 controls

the eligibility of class members in a class action

where the defendant is a foreign corporation.” 579

S.E.2d at 559. For suits in South Carolina state

court, the effect of Farmer is to limit class

membership to those persons who would have had

capacity to sue for themselves.

In ruling on Ward’s motion for class certification,

the district court concluded that § 15-5-150

prevented Ward from representing out-of-state

plaintiffs. The district court reached this conclusion

by relying on our prior decisions stating that “a

South Carolina federal court exercising diversity

jurisdiction must apply § 15-5-150 ‘unless there are

affirmative countervailing federal considerations.”

Proctor & Schwartz, Inc. v. Rollins, 634 F.2d 738,

739-40 (4th Cir. 1980) (quoting Szantay v. Beech

Aircraft Corporation, 349 F.2d 60, 64 (4th Cir.

1965)). Our decisions in Proctor & Schwartz and

Szantay, however, interpreted the door-closing

statute in light of the then-prevailing understanding

that § 15-5-150 restricted not capacity to sue but the

subject matter jurisdiction of state courts. In

Farmer the Supreme Court of South Carolina

overruled its prior cases stating that § 15-5-150 dealt

with jurisdiction.

In this case, we do not find it necessary to decide

what effect the reinterpreted door-closing statute

has on class membership in suits being heard in

South Carolina federal courts sitting in diversity.

This is so because, as we discuss next, Ward has

failed to establish that the proposed multistate class

17a

meets Rule 23(b)(3)’s requirement that common legal

issues predominate.

B.

Fed. R. Civ. P. 23 sets the requirements for class

certification. First, Rule 23(a) provides that

certification is proper only if

(1) the class is so numerous that joinder

of all members is impracticable, (2)

there are questions of law or fact

common to the class, (3) the claims or

defenses of the representative parties

are typical of the claims or defenses of

the class, and (4) the representative

parties will fairly and adequately

protect the interests of the class.

Fed. R. Civ. P. 238(a). Once Rule 23(a)’s

requirements of numerosity, commonality, typicality,

and representational adequacy are met, the proposed

class must still satisfy one of three additional

requirements for certification under Rule 23(b).

Because Ward sought class certification under Rule

23(b)(3), she was required to show that

questions of law or fact common to the

members of the class predominate over

any questions affecting only individual

members, and that a class action is

superior to other available methods for

the fair and efficient adjudication of the

controversy.

Fed. R. Civ. P. 23(b)(3). The predominance

requirement under Rule 23(b)(3) “is similar to but

‘more stringent’ than the commonality requirement

18a

of Rule 23(a).” Thorn v. Jefferson-Pilot Life Ins. Co.,

445 F.3d 311, 319 (4th Cir. 2006) (quoting Lienhart

v. Dryvit Sys., 255 F.3d 138, 146 n. 4 (4th Cir. 2001)).

The party seeking class certification bears the

burden of establishing all Rule 23 requirements. In

re A.H. Robins Co., 880 F.2d 709, 728 (4th Cir. 1989).

In her class certification memorandum, Ward

stated that “members of the Class are dispersed

throughout the southern United States.” S.A. 12.

She further noted that “Dixie marketed and sold

cancer policies in at least seven states other than

South Carolina, including Alabama, Florida,

Georgia, Louisiana, Mississippi, Tennessee, and

Texas.” Jd. Although Ward’s multistate class

purported to include “at a minimum, thousands of

persons” across the southern United States, Ward

never identified what state law would apply to the

claims of absent class members who are not

residents of South Carolina and whose claims have

no connection to that state. Jd. In a class action

potentially governed by the laws of multiple states,

identifying the applicable body or bodies of state law

is critical because “variations in state law may

swamp any common issues’ and_ defeat

predominance.” Casieno v. American Tobacco Co.,

84 F.3d 734, 741 (5th Cir. 1996). Ward has the

burden of showing “that common questions of law

predominate, and [she] cannot meet this burden

when the various laws have not been identified and

compared.” Gariety v. Grant Thornton, LLP, 368

F.3d 356, 370 (4th Cir. 2004); see also Cole v. GMC,

484 F.3d 717, 730 (5th Cir. 2007) (decertifying a

class because “[p]laintiffs have failed to adequately

address, much less extensively analyze, [ ] variations

19a

in state law”) (internal quotation marks and citation

omitted).

Because the district court ruled on the effect of

the door-closing statute before addressing the merits

of Ward’s motion for class certification, it did not

decide whether the proposed multistate class meets

the requirements of both Rule 23(a) and Rule

23(b)(3). Even assuming that this proposed class

could satisfy the requirements of Rule 23(a), Ward

has not established that the multistate class

satisfies Rule 23(b)(3)’s requirement that common

questions of law predominate. Specifically, Ward

failed to identify and compare the applicable state

laws. When a plaintiff seeking certification fails to

provide this analysis, it is not possible for the district

court to determine whether any variations in state

law “pose ‘insuperable obstacles’ to certification” of a

mu!tistate class. Spence v. Glock, GES.m.b.H., 227

F.3d 308, 313 (D.C. Cir. 2000) (quoting Walsh v.

Ford Motor Co., 807 F.2d 1000, 1017 (D.C. Cir.

1986)). The need in this case to identify all

governing state laws and compare any variations is

underscored by the decisions in two recent cases

where plaintiffs in states within the proposed

geographic class made claims materially similar to

Ward's. In contrast to our decision today under

South Carolina law, two district courts applying

contract law principles of Alabama and Louisiana

concluded that the meaning of “actual charges” is

unambiguous as a matter of law. See Claybrook v.

Cent. United Life Ins. Co., 387 F. Supp.2d 1199, 1203

(M.D. Ala. 2005); Jarreau v. Cent. United Life Ins.

Co., No. 05-83-FJP-SCR, 2006 U.S. Dist. LEXIS

51196 at *2 (M.D. La. May 16, 2006). In light of

20a

Ward’s failure to show that common issues of law

would be predominant in a multistate class, we

affirm the decision of the district court to limit class

membership to South Carolina residents regardless

of the effect of the door-closing statute. See United

States v. Smith, 395 F.3d 516, 519 (4th Cir. 2005)

(“We are not limited to evaluation of the grounds

offered by the district court to support its decision,

but may affirm on any grounds apparent from the

record.”).

IV.

We now turn to the cross-appeal filed by

National, one of the defendants. National claims that

the district court abused its discretion in certifying

even a statewide class because: (1) the class is not

sufficiently numerous; (2) Ward is neither a typical

nor adequate class representative; and (3) individual

issues will predominate the determination of class

members’ claims. On May 19, 2005, after the

statewide class had been certified but before any

party had filed a motion for summary judgment,

National and Dixie petitioned this court to review

the district court’s certification order pursuant to

Fed. R. Civ. P. 23(f). This rule grants us the

discretion to entertain appeals from class

certification orders prior to the entry of a final

judgment. See Lienhart, 255 F.3d at 145. Our court

applies a five-factor test to guide our discretion in

deciding whether to hear such interlocutory appeals:

(1) whether the certification ruling is

likely dispositive of the litigation; (2)

whether the district court’s certification

decision contains a substantial

weakness; (3) whether the appeal will

2la

permit the resolution of an unsettled

legal question of general importance; (4)

the nature and status of the litigation

before the district court (such as the

presence of outstanding dispositive

motions and the status of discovery);

and (5) the likelihood that future events

will make appellate review more or less

appropriate.

Id. In their Rule 23(f) petition, the defendants

raised the same objections to the: class certification

order that National now asserts in this appeal. We

denied the interlocutory petition for review on June

23, 2005.

National’s cross-appeal of the class certification is

before us as a result of the appeal taken by the

plaintiff, Ward, from a final judgment, namely, the

summary judgment awarded to defendant National.

Because we have decided to vacate that judgment

and remand the case for further proceedings,

National’s current challenge to class certification is

procedurally akin to the earlier interlocutory appeal.

This circumstance leads us to conclude that it would

be premature for us to address the class certification

issue. Earlier, when the district court certified the

statewide class, it explicitly reserved its authority to

decertify or modify the class at a future date. See

MeNamara v. Felderhof, 410 F.3d 277, 281 (5th Cir.

2005) (noting that under Rule 23(c)(1)(C) the district

court on remand “is free to reconsider its class

certification order as often as necessary before

judgment.”). The defendants went on to file motions

for summary judgment and for decertification of the

statewide class. After the district court granted

22a

summary judgment to National, the pending motion

to decertify was denied as moot. Now, in light of the

remand, the district court will be able to consider the

motion to decertify. Accordingly, we dismiss without

prejudice the cross-appeal filed by National. Cf.

Baskin v. Hawley, 810 F.2d 370, 371 (2d Cir. 1987)

(“Prudential considerations lead to our conclusion

that these appeals should be dismissed as premature

notwithstanding the fact that they are taken from

what was, at that time, a ‘final decision[ ]’ within the

meaning of 28 U.S.C. §1291.”) (alteration in

original).

V.

In sum, we conclude that the meaning of the

phrase “actual charges” as used in Ward’s policy is

patently ambiguous. We therefore vacate the

district court's grant of summary judgment to

National and remand with instructions for the

district court to grant summary judgment to Ward

on the breach of contract claims. We affirm, albeit

on alternate grounds, the district court’s decision to

limit class membership to South Carolina residents.

Finally, we dismiss without prejudice the cross-

appeal filed by National challenging the district

court’s certification of a statewide class.

VACATED IN PART,

AFFIRMED IN PART,

DISMISSED IN PART,

AND REMANDED

23a

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 06-2022

MARTHA WARD, ON BEHALF OF HERSELF AND ALL

OTHERS SIMILARLY SITUATED,

Plaintiff - Appeliant,

versus

DIXIE NATIONAL LIFE INSURANCE COMPANY;

NATIONAL FOUNDATION LIFE INSURANCE

COMPANY,

Defendants - Appellees,

and

PALMETTO MARKETING ASSOCIATES,

INCORPORATED; PATTI JENKINS,

Defendants.

SOUTH CAROLINA DEPARTMENT OF

INSURANCE; AMERICA’S HEALTH INSURANCE

PLANS, INCORPORATED,

Amici Supporting Appellees.

No. 06-2054

MARTHA WARD, ON BEHALF OF HERSELF AND ALL

OTHERS SIMILARLY SITUATED,

Plaintiff - Appellee,

versus

NATIONAL FOUNDATION LIFE INSURANCE

COMPANY,

Defendant - Appellant,

DIXIE NATIONAL LIFE INSURANCE COMPANY,

Defendant - Appellee,

and

PALMETTO MARKETING ASSOCIATES,

INCORPORATED; PATTI JENKINS,

Defendants.

SOUTH CAROLINA DEPARTMENT OF

INSURANCE; AMERICA’S HEALTH INSURANCE

PLANS, INCORPORATED,

Amici Supporting Appellant.

Appeals from the United States District Court for

the District of South Carolina, at Columbia. Joseph

F. Anderson, Jr., Chief District Judge. (3:03-cv-

03239-J FA)

Argued: May 23, 2007 Decided: October 5, 2007

Before MICHAEL and TRAXLER, Circuit

Judges, and WIDENER,** Senior Circuit Judge.

Reversed in part, affirmed in pari, dismissed in

part, and remanded by unpublished per curiam

opinion.

PER CURIAM:

The named plaintiff in this diversity class action,

Martha Ward, asserts that National Foundation Life

Insurance Company (National) refuses to pay the

full amount of benefits owed under supplemental

cancer insurance policies that were issued by Dixie

National Life Insurance Company (Dixie) and later

assigned to National. At the center of the dispute is

the parties’ disagreement over the meaning of the

policy language (“actual charges”) used to determine

benefits. We disagree with the district court’s

conclusion that, as used in Ward’s policy, the phrase

“actual charges” has an unambiguous meaning, and

we therefore vacate the summary judgment granted

to National and remand the case for further

proceedings.

* Judge Widener heard oral argument in this case but died

prior to the time the decision was filed. The decision is filed by

a quorum of the panel. 28 U.S.C. § 46(d).

26a

Although the district court certified a statewide

(South Carolina) plaintiff class, Ward seeks to

represent a multistate class. Because we conclude

that Ward has failed to show that the proposed

multistate class satisfies Rule 23(b)(3)’s requirement

that common legal issues are predominant, we

affirm the district court’s decision limiting

membership in the plaintiff class to those who, like

Ward, are South Carolina residents. In its cross-

appeal National asserts that even a statewide class

is improper. In light of our remand for further

proceedings, we conclude that it would be premature

for us to consider the class certification issue. We

therefore dismiss without prejudice National’s cross-

appeal.

I.

In August 1990 Ward purchased a cancer

treatment benefit policy from Dixie covering both

herself and her husband. Ward’s policy is a type of

supplemental insurance under’ which _ direct

payments are made to the policyholder when an

insured patient undergoes covered cancer

treatments. Benefits under this kind of policy are

paid regardless of whether the patient has other

insurance sufficient to cover all medical expenses.

When the patient has other insurance covering

cancer treatments, the policyholder is able to retain

the money received as a result of the supplemental

coverage.

Benefits under Ward’s policy vary as to the

procedure performed. In some sections the policy

provides clear caps as to the maximum benefit to be

paid. For example, the policy provides a “Schedule

of Operations” listing the maximum amount to be

27a

paid — ranging from $150 for skin excisions to $3000

for removal of an intracardiac tumor — for a variety

of operations. In many other sections of the policy

no dollar amounts are provided, and benefits are

calculated in relation to the “actual charges” for the

covered procedures. Section (F) of the policy, titled

“X-ray Therapy, Radium Therapy, Radiation

Therapy, and Chemotherapy Benefit,” provides an

example of this language:

We will pay the actual charges for

teleradiotherapy, using either natural

or artificially propagated radiation,

when used for the purpose of

modification or destruction of tissue

invaded by cancer. We will also pay the

actual charges made for plaques or

molds or the administration internally,

interstitially, or intracavitarially of

radium or radioisotopes in_ sealed

sources for the purpose of modification

or destruction of tissue invaded by

cancer. We will also pay the actual

charges for cancericidai chemical

substances and the administration

thereof for the purpose of the

modification or destruction of tissue

invaded by cancer.

J.A. 221. Although the phrase is used repeatedly

throughout the policy, no definition for “actual

charges” is provided.

Dixie assigned Ward’s policy to National in 1994.

In 2001 Ward began filing claims under the policy

after her husband, James Ward (James), was

28a

diagnosed with prostate cancer and started receiving

treatment. Shortly thereafter, a dispute between

Ward and National arose over how benefits paid in

the amount of the “actual charges” are calculated.

For a number of years after the assignment,

National appears to have calculated benefits in the

same manner that Dixie had previously done.

Specifically, when the benefit owed was based on the

“actual charges,” Dixie paid the benefit based on the

amounts billed to patients by their medical

providers. Dixie paid such amounts even though

providers often have agreements with certain

insurers to accept as payment-in-full an amount less

than that reflected on the patient’s bill. In this case,

for example, James’s primary health insurance is

provided through a plan administered by Blue Cross

and Blue Shield of South Carolina (BCBS).

Regardless of the amounts billed to James, his

medical providers have an agreement with BCBS

that requires them to accept a discounted amount as

payment-in-full for services rendered to BCBS

insureds. This agreement prohibits providers from

attempting to collect an amount in excess of the pre-

negotiated, discounted fee from BCBS insureds such

as James.

Toward the end of the year in 2001, National

changed its benefit payment practice. When Ward

submitted claims for James’s treatments in 2002,

she was told that she would have to submit an

explanation of benefits (KOB) statement. By

viewing the EOB, National would be able to

determine what the pre-negotiated discount rate was

for James’s treatments and calculate benefits in

hght of this reduced amount. Ward refused to

29a

provide National with the EOB statements because

she contended that under the terms of her policy, the

“actual charge” was reflected in the non-discounted

bill that she received rather than in the EOB.

On March 7, 2003, after Ward was unable to

resolve the dispute, she filed an action in the Court

of Common Pleas for Richland County, South

Carolina, against both Dixie and National. The

defendants removed the action to federal court on

October 10, 2003. On September 15, 2004, Ward

moved to certify a plaintiff class consisting of

all persons insured under cancer

policies from Defendant Dixie National

Life Insurance Company where Dixie

promised to pay to the insured the

“actual charges” incurred for certain

medical services, but instead paid not

the actual charges but rather the

(lesser) amount that the insured’s

primary health insurer negotiated with

the healthcare provider to pay for the

medical procedure].|

S.A. 7. On May 5, 2005, the district court certified a

class of South Carolina residents. The court limited

the class to South Carolina residents based on its

understanding of South Carolina’s door-closing

statute, S.C. Code Ann. § 15-5-150. Ward, with

permission of the court, filed a third amended

complaint on September 27, 2005, asserting claims

for (1) breach of contract against both Dixie and

National; (2) bad faith refusal to pay against

National; and (3) breach of contract accompanied by

a fraudulent Act against National. Ward later

30a

abandoned the bad faith claim. Cross-motions for

summary judgment followed. In addition, National

filed a motion, joined by Dixie, to decertify the

statewide class.

On May 10, 2006, the district court granted

National’s motion for summary judgment while

denying Ward’s. The court concluded that under

South Carolina contract law, the phrase “actual

charges” is not ambiguous and must be read to mean

“the charges for which the patient is liable when

medical services are rendered, not the fictional

amounts indicated on the invoice that the provider

does not expect the patient to pay.” J.A. 1074.

Because Ward did not prevail on her breach of

contract claims, the joint motion to decertify the

class and Dixie’s motion for summary judgment were

denied as moot.

Ward appeals both the grant of summary

judgment to National as well as the district court’s

decision to limit class membership to South Carolina

residents. National has filed a _ cross-appeal

contesting the district court’s decision to certify even

a statewide class.

I.

We begin with Ward’s argument that the district

court erred in concluding that, as used in her policy,

the unambiguous meaning of the phrase “actual

charges” is the discounted amount that medical

providers have agreed to accept as full payment

pursuant to a third-party agreement with another

insurer. Under South Carolina law when a term has

a “plain, ordinary, and popular meaning,” courts

must interpret the term to give effect to that

gla

ordinary usage. Century Indem. Co. v. Golden Hills

Builders, Inc., 561 S.E.2d 355, 358 (S.C. 2002).

When a term has a plain meaning and that meaning

is “clear and unambiguous, the language [of the

contract] alone determines the contract’s force and

effect.” Schulmeyer v. State Farm Fire & Cas. Co.,

579 S.E.2d 132, 134 (S.C. 2003). Of course not all

terms are susceptible to plain and ordinary

definition because of the simple fact that they are

not popularly used. As a result, a contract term is

ambiguous when it lacks a plain definition and is

“capable of more than one meaning when viewed

objectively by a reasonably intelligent person who

has examined the context of the entire integrated

agreement and who is cognizant of the customs,

practices, usages and terminology as_ generally

understood in the particular trade or business.”

Hansen v. United Servs. Auto. Ass’n, 565 S.E.2d 114,

117-18 (S.C. 2002).

In the district court’s endeavor to discern the

plain meaning of “actual charges” as used in Ward’s

policy, it reasoned that the word “actual” should be

given a separate meaning from the word “charges.”

Because the district court understood the word

“actual” to mean something that is real or true, it

concluded that “actual charges” means the amounts

for which the patient is truly liable as opposed to

“the fictional amounts indicated on the invoice that

the provider does not expect the patient to pay.” J.A.

1074. We disagree both with the district court’s

interpretive approach as well as the conclusion that

it reached. The definition settled on by the district

court is not the only one possible when the language

of the policy is considered in light of its context. As

32a

we explain below, the meaning of the phrase “actual

charges” as used in Ward’s policy is ambiguous.

First, even under the district court’s approach —

defining each word separately and then putting

those definitions together — another meaning can

reasonably be found. The words “actual charges”

could also be understood to mean the amount shown

on the bill sent to the patient regardless of whether

this amount is the same as the amount actually

owed. Viewed from within the four corners of the

policy, the phrase is ambiguous as there is nothing

to indicate whether “actual charges” is_ best

understood to mean the amount actually billed or

the amount actually owed. See Conner v. Am. Pub.

Life Ins. Co., 448 F. Supp.2d 762, 766 (N.D. Miss.

2006) (finding “inherent ambiguity in the undefined

term ‘actual charges”); Metzger v. Am. Fid. Assur.

Co., No. CIV-05-1387-M, 2006 U.S. Dist. LEXIS

70061, at *13 (W.D. Okle.. Sept. 26, 2006) (same).

Second, we disagree with the assertion that the

district court was correct “in considering ordinary

dictionary definitions” of both “actual” and “charges.”

Appellees’ Br. at 21. We conclude that a person “who

is cognizant of the customs, practices, usages and

terminology as generally understood” in the health

insurance industry would regard “actual charges” as

a term of art rather than two words to be separately

defined. Hansen, 565 S.E.2d at 117. The words are

used throughout the insurance policy together as a

phrase — a phrase that neither appears in a

standard dictionary nor has an ordinary, popular

usage. Contrary to the defendants’ contention,

South Carolina’s principles of contract interpretation

in no way prohibit courts from reading a phrase as a

33a

term of art if that is how it would be regarded by an

objective observer well-versed in medical insurance

terminolugy. See Frazier v. Badger, 603 S.E.2d 587,

591 (S.C. 2004).

Third, even when viewed as a term of art, the

phrase remains ambiguous. Prior to filing this

lawsuit, Ward wrote to the South Carolina

Department of Insurance and asked to be provided

with a legal definition of “actual charge.” A

representative of the Department wrote back

explaining that “[t]he term ‘actual charge’ in

industry-wide standards is the amount that you are

legally obligated to pay for a specific service.” J.A.

611 (emphasis in original). In contrast to the view

taken by the Department of Insurance, numerous

health care dictionaries define “actual charge” as the

amount billed. See, e.g., Mosby’s Medical, Nursing,

and Allied Health Dictionary 26 (4th ed. 1994)

(“actual charge, the amount actually charged or

billed by a medical practitioner for a service. The

actual charge may not be the same as that paid for

the service by an insurance plan.”); Lee Hyde, The

McGraw-Hill Essential Dictionary of Health Care

133 (1988) (“actual charge. the amount a physician

or other practitioner actually bills a patient or his

insurance for a medical service or procedure.”)

(emphasis in original). Because the policy itself does

not indicate which definition was intended by the

parties, we conclude that its meaning is ambiguous.

As the Supreme Court of South Carolina has

made clear, “Where there is ambiguity, uncertainty

or doubt as to proper construction of [an insurance]

contract, intention of the parties becomes a question

of fact for the jury to determine. After a

34a

consideration of extrinsic evidence, the jury is to

resolve all remaining ambiguity in favor of the

insured[.]” Waters v. S. Farm Bureau Life Ins. Co.,

617 S.E.2d 385, 388 (S.C. 2005) (quoting Garrett v.

Pilot Life Ins. Co., 128 S.E.2d 171, 174 (S.C. 1962)).

In light of the ambiguity of the phrase “actual

charges” in the policy at issue in this case, we vacate

the district court’s grant of summary judgment to

National and remand for further proceedings.

III.

A.

We now turn to the question of whether the

district court properly limited the class of plaintiffs

to those who, like Ward, are residents of South

Carolina. In her motion for class certification, Ward

made clear that she sought to represent persons

residing throughout the southern United States who

had bought policies from Dixie that were later

assigned to National. Because the proposed class

included non-residents of South Carolina, the

district court requested briefing from the parties on

the effect of South Carolina’s door closing statute,

S.C. Code Ann. § 15-5-150, on the potential out-of-

state class members. That statute provides:

An action against a corporation created

by or under the laws of any other state

government or country may be brought

in the circuit court:

(1) By any resident of this State for any

cause of action; or

(2) By a plaintiff not a resident of this

State when the cause of action shall

35a

have arisen or the subject of the action

shall be situated within this state.

S.C. Code Ann. § 15-5-150. As recently reinterpreted

by the Supreme Court of South Carolina in Farmer

v. Monsanto Corp., 579 S.E.2d 325 (S.C. 2003), § 15-

5-150 determines the capacity of a party to sue.

Furthermore, Farmer held that Ҥ 15-5-150 controls

the eligibility of class members in a class action

where the defendant is a foreign corporation.” 579

S.E.2d at 559. For suits in South Carolina state

court, the effect of Farmer is to limit class

membership to those persons who would have had

capacity to sue for themselves.

In ruling on Ward’s motion for class certification,

the district court concluded that § 15-5-150

prevented Ward from representing out-of-state

plaintiffs. The district court reached this conclusion

by relying on our prior decisions stating that “a

South Carolina federal court exercising diversity

jurisdiction must apply § 15-5-150 ‘unless there are

affirmative countervailing federal considerations.”

Proctor & Schwariz, Inc. v. Rollins, 634 F.2d 738,

739-40 (4th Cir. 1980) (quoting Szantay v. Beech

Aircraft Corporation, 349 F.2d 60, 64 (4th Cir.

1965)). Our decisions in Proctor & Schwartz and

Szantay, however, interpreted the door-closing

statute in light of the then-prevailing understanding

that § 15-5-150 restricted not capacity to sue but the

subject matter jurisdiction of state courts. In

Farmer the Supreme Court of South Carolina

overruled its prior cases stating that § 15-5-150 dealt

with jurisdiction.

36a

In this case, we do not find it necessary to decide

what effect the reinterpreted door-closing statute

has on class membership in suits being heard in

South Carolina federal courts sitting in diversity.

This is so because, as we discuss next, Ward has

failed to establish that the proposed multistate class

meets Rule 23(b)(3)’s requirement that common legal

issues predominate.

B.

Fed. R. Civ. P. 23 sets the requirements for class

certification. First, Rule 23(a) provides that

certification is proper only if

(1) the class is so numerous that joinder

of all members is impracticable, (2)

there are questions of law or fact

common to the class, (3) the claims or

defenses of the representative parties

are typical of the claims or defenses of

the class, and (4) the representative

parties will fairly and adequately

protect the interests of the class.

Fed. R. Civ. P. 23(a). Once Rule 2?{a)’s requirements

of numerosity, commonality, typicality, and

representational adequacy are met, the proposed

class must still satisfy one of three additional

requirements for certification under Rule 23(b).

Because Ward sought class certification under Rule

23(b)(3), she was required to show that

questions of law or fact common to the

members of the class predominate over

any questions affecting only individua!

members, and that a class action is

37a

superior to other available methods for

the fair and efficient adjudication of the

controversy.

Fed. R. Civ. P. 23(b)(3). The predominance

requirement under Rule 23(b)(3) “is similar to but

‘more stringent’ than the commonality requirement

of Rule 23(a).” Thorn v. Jefferson-Pilot Life Ins. Co.,

445 F.3d 311, 319 (4th Cir. 2006) (quoting Lienhart

v. Dryvit Sys., 255 F.3d 138, 146 n. 4 (4th Cir. 2001)).

The party seeking class certification bears the

burden of establishing all Rule 23 requirements. In

re A.H. Robins Co., 880 F.2d 709, 728 (4th Cir. 1989).

In her class certification memorandum, Ward

stated that “members of the Class are dispersed

throughout the southern United States.” S.A. 12.

She further noted that “Dixie marketed and sold

cancer policies in at least seven states other than

South Carolina, including Alabama, Florida,

Georgia, Louisiana, Mississippi, Tennessee, and

Texas.” Jd. Although Ward’s multistate class

purported to include “at a minimum, thousands of

persons” across the southern United States, Ward

never identified what state law would apply to the

claims of absent class members who are not

residents of South Carolina and whose claims have

no connection to that state. /d. In a class action

potentially governed by the laws of multiple states,

identifying the applicable body or bodies of state law

is critical because “variations in state law may

swamp any common issues’~ and_— defeat

predominance.” Castano v. American Tobacco Co.,

84 F.3d 734, 741 (5th Cir. 1996). Ward has the

burden of showing “that common questions of law

predominate, and [she] cannot meet this burden

38a

when the various laws have not been identified and

compared.” Gariety v. Grant Thornton, LLP, 368

F.3d 356, 370 (4th Cir. 2004); see also Cole v. GMC,

484 F.3d 717, 730 (5th Cir. 2007) (decertifying a

class because “[p]laintiffs have failed to adequately

address, much less extensively analyze, [ ] variations

in state law”) (internal quotation marks and citation

omitted).

Because the district court ruled on the effect of

the door-closing statute before addressing the merits

of Ward’s motion for class certification, it did not

decide whether the proposed multistate class meets

the requirements of both Rule 23(a) and Rule

23(b)(3). Even assuming that this proposed class

could satisfy the requirements of Rule 23(a), Ward

has not established that the multistate class

satisfies Rule 23(b)(3)’s requirement that common

questions of law predominate. Specifically, Ward

failed to identify and compare the applicable state

laws. When a plaintiff seeking certification fails to

provide this analysis, it is not possible for the district

court to determine whether any variations in state

law “pose ‘insuperable obstacles’ to certification” of a

multistate class. Spence v. Glock, GES.m.b.H., 227

F.3d 308, 313 (D.C. Cir. 2000) (quoting Walsh uv.

Ford Motor Co., 807 F.2d 1000, 1017 (D.C. Cir.

1986)). The need in this case to identify all

governing state laws and compare any variations is

underscored by the decisions in two recent cases

where plaintiffs in states within the proposed

geographic class made claims materially similar to

Ward’s. In contrast to our decision today under

South Carolina law, two district courts applying

contract law principles of Alabama and Louisiana

39a

concluded that the meaning of “actual charges” is

unambiguous as a matter of law. See Claybrook v.

Cent. United Life Ins. Co., 387 F. Supp.2d 1199, 1203

(M.D. Ala. 2005); Jarreau v. Cent. United Life Ins.

Co., No. 05-83-FJP-SCR, 2006 U.S. Dist. LEXIS

51196 at *2 (M.D. La. May 16, 2006). In light of

Ward’s failure to show that common issues of law

would be predominant in a multistate class, we

affirm the decision of the district court to limit class

membership to South Carolina residents regardless

of the effect of the door-closing statute. See United

States v. Smith, 395 F.3d 516, 519 (4th Cir. 2005)

(“We are not limited to evaluation of the grounds

offered by the district court to support its decision,

but may affirm on any grounds apparent from the

record.”).

IV.

We now turn to the cross-appeal filed by

National, one of the defendants. National claims that

the district court abused its discretion in certifying

even a statewide class because: (1) the class is not

sufficiently numerous; (2) Ward is neither a typical

nor adequate class representative; and (3) individual

issues will predominate the determination of class

members’ claims. On May 19, 2005, after the

statewide class had been certified but before any

party had filed a motion for summary judgment,

National and Dixie petitioned this court to review

the district court’s certification order pursuant to

Fed. R. Civ. P. 23(f). This rule grants us the

discretion to entertain appeals from class

certification orders prior to the entry of a final

judgment. See Lienhart, 255 F.3d at 145. Our court

40a

applies afive-factor test to guide our discretion in

deciding whether to hear such interlocutory appeals:

(1) whether the certification ruling is

likely dispositive of the litigation; (2)

whether the district court’s certification

decision contains a substantial

weakness; (3) whether the appeal will

permit the resolution of an unsettled

legal question of general importance; (4)

the nature and status of the litigation

before the district court (such as the

presence of outstanding dispositive

motions and the status of discovery);

and (5) the likelihood that future events

will make appellate review more or less

appropriate.

Id. In their Rule 23(f) petition, the defendants

raised the same objections to the class certification

order that National now asserts in this appeal. We

denied the interlocutory petition for review on June

23, 2005.

National’s cross-appeal of the class certification is

before us as a result of the appeal taken by the

Plaintiff, Ward, from a final judgment, namely, the

summary judgment awarded to defendant National.

Because we have decided to vacate that judgment

and remand the case for further proceedings on the

merits, National’s current challenge to class

certification is procedurally akin to the earlier

interlocutory appeal. This circumstance leads us to

conclude that it would be premature for us to

address the class certification issue. Earlier, when

the district court certified the statewide class, it

4la

explicitly reserved its authority to decertify or

modify the class at a future date. See McNamara v.

Felderhof, 410 F.3d 277, 281 (5 Cir. 2005) (noting

that under Rule 23(c)(1)(C) the district court on

remand “is free to reconsider its class certification

order as often as necessary before judgment.”). The

defendants went on to file motions for summary

judgment and for decertification of the statewide

class. After the district court granted summary

judgment to National, the pending motion to

decertify was denied as moot. Now, in light of the

remand, the district court will be able to consider the

motion to decertify. Accordingly, we dismiss without

prejudice the cross-appeal filed by National. Cf.

Baskin v. Hawley, 810 F.2d 370, 371 (2d Cir. 1987)

(“Prudential considerations lead to our conclusion

that these appeals should be dismissed as premature

notwithstanding the fact that they are taken from

what was, at that time, a ‘final decision| ]’ within the

meaning of 28 U.S.C. § 1291.”) (alteration in

original).

V.

In sum, we conclude that the meaning of the

phrase “actual charges” as used in Ward’s policy is

ambiguous. We therefore vacate the district court’s

grant of summary judgment to National and remand

the case for further proceedings. We affirm, albeit

on alternate grounds, the district court’s decision to

limit class membership to South Carolina residents.

Finally, we dismiss without prejudice the cross-

appeal filed by National challenging the district

court’s certification of a statewide class.

REVERSED IN PART,

AFFIRMED IN PART,

DISMISSED IN PART,

AND REMANDED

43a

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

COLUMBIA DIVISION

Martha Ward, C/A No. 3:03-3239-JFA

Plaintiff,

Dixie National Life

Insurance Company

and National Foundation )

Life Insurance Company, )

)

Defendants. )

)

)

)

)

)

Vv. )

)

)

)

ORDER

This matter is before the court on the parties’

cross-motions for summary judgment and a motion

to decertify filed by defendant National Foundation

Life Insurance Company (“National”) and joined by

defendant Dixie National Life Insurance Company

(“Dixie”). The parties fully briefed the motions and,

on April 18, 2006, the court heard extensive oral

argument. kor the reasons stated herein, the court

grants defendant National’s motion for summary

judgment, thereby rendering moot the motion to

decertify and defendant Dixie’s motion for summary

judgment. The court also denies plaintiff's motion for

summary judgment.

BACKGROUND

On or about August 26, 1990, plaintiff. Martha

Ward purchased an individual cancer treatment

benefit policy (the “Policy’) from Dixie. Plaintiff's

husband, James Ward (“James”), is listed as an

insured under the Policy. The Policy is a

supplemental benefits insurance policy that

“provides identified benefits in the event an insured

suffers a covered loss because of cancer,” with

benefits to be paid directly to the policyholder. The

Policy states that the amount of the benefits is

determined according to the “actual charges” for a

particular service or treatment rendered. The term

“actual charges” is neither defined in the Policy nor

in any other Dixie cancer policy form. The

construction of the term “actual charges” is the

gravamen of the dispute.

In 1994, plaintiff was notified of the transfer of

her Policy to National, and as a result, began paying

her premiums to National instead of Dixie. It is

undisputed that plaintiff paid all premiums due to

date under the Policy. In the latter part of 2001,

James was diagnosed with cancer and began

receiving treatment. Plaintiff submitted claims for

James’s cancer treatment to National and provided

the invoices from his healthcare providers as proof of

loss. Initially, National adjusted and paid plaintiff

the submitted ‘claims based upon the dollar amounts

stated in the providers’ invoices, which amounts did

not reflect the lower negotiated amounts that the

provider had previously agreed to accept, and did

accept, as payment in full for the services provided.

Rather, in cases where a patient such as James had

health insurance, the providers actually accepted as

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payment in full an amount less than the amount

indicated on their invoices. The providers maintain

numerous agreements with various public and

private health insurers in which the providers agree

to accept as payment in full for their services

negotiated rates lower than those indicated on their

invoices. Notwithstanding the uniform charges that

appear on the invoices, in reality, the negotiated

rates vary from insurer to insurer.

In late 2001, National began to request the

explanation of benefits forms (“EOBs”) from the

primary health insurer as part of its required proof

of loss documentation for submitted claims. National!

explains that the EOBs, and not the providers’

invoices, established the “loss” and the “actual

charges” incurred by the insured for cancer

treatment. Plaintiff refused to submit James’s EOBs

to National, and as a result, National refused to

process the claims she submitted for his cancer

treatment.

On August 14, 2002, plaintiff filed a complaint

with the South Carolina Department of Insurance

(“SCDOI”) regarding National’s request for the EOBs

and the definition of “actual charges.” The SCDOI

responded to her on August 29, 2002, by stating in

pertinent part: “Charges by providers that are

discounted due to other contracts become the actual

charges, as the discounted amount cannot be

balanced billed to either the insurance company or

the patient.” The SCDOI concluded that National

had handled the matter appropriately.

Plaintiff wrote a second time to the SCDOI on

October 2, 2002 asking for a “legal definition” of

“actual charges.” On October 31, 2002, the SCDOI

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responded by stating that there is “no specific

definition in the South Carolina Insurance Codes

and Regulations” for “actual charges.” The SCDOI

continued:

Health Insurance policies are not

meant to provide benefits for services

for which the insured person is not

legally obligated to pay. ... Since you

are not legally obligated to pay more

than the State Health Plan’s Allowable

Charge for any _ specific service,

National Foundation Life Insurance

Company has requested copies of the

State Health Plan’s Explanation of

Benefits (EOB’s) to determine how

much the provider has agreed to charge

you.

The SCDOI again found that National had handled

plaintiff's claims for benefits appropriately.

II, PROCEDURAL POSTURE

On March 7, 2003, plaintiff filed suit individually

in state court alleging claims for breach of contract,

bad faith, and breach of contract accompanied by a

fraudulent act. The case was removed to this court

on October 10, 2003 on the basis or diversity.

Plaintiff subsequently moved to amend her

complaint and sought class certification. On May 5,

2005, the court ordered class certification on the

breach of contract claim, defining the “plaintiff class”

as:

All persons insured during the class

period under cancer policies from

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defendant Dixie National Life

Insurance Company, sold in South

Carolina, where Dixie promised to pay

to the insured the “actual charges”

incurred for certain medical services,

but where the insured was paid the

amount that the insured’s primary

health insurer negotiated with the

healthcare provider to pay for the

medical procedure. The cancer policies

include all cancer policies sold in the

state of South Carolina regardless of

the internal number assigned the policy

by Dixie. Excluded from the class are

the officers, directors, and employees of

either of the defendants. The class

period is the maximum length of time

not time-barred.

Plaintiff, on behalf of herself and the class, filed a

Third Amended Complaint on September 27, 2005,

asserting the following claims: (1) breach of contract

against both defendants; (2) bad faith refusal to pay

first party claim against National;* and (3) breach of

contract accompanied by a fraudulent act against

National. In her Third Amended Complaint,

plaintiff alleges that the term “actual charges” as

used in her Policy and in other similar Dixie cancer

policies means “benefits paid on the basis of the

amount billed by the medical service provider, and

4 Plaintiff abandoned her bad faith claim at the hearing on

Apnil 18, 2006.

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without regard to any agreements between medical

service providers and third-party insurers.” Plaintiff

contends that National has breached the “plain

language” and “unambiguous terms” of the Policy

and other similar Dixie cancer policies by refusing to

pay claims based upon “actual charges,” as she

defines it, but by instead paying based upon the

“lesser amount that the insured’s public or private

third-party health msurer negotiated with the

healthcare provider.” Plaintiff is seeking

compensatory damages individually and on behalf of

other class members based upon the difference

between the amounts stated on the providers’

invoices and the amounts which National has paid

as benefits under the Dixie cancer policies.

Additionally, plaintiff seeks punitive damages and

attorneys’ fees.

Ili. DISCUSSION

A, SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate “if the

pleadings, depositions, answers to interrogatories,

and admissions on file, together with affidavits, if

any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to

a judgment as a matter of law.” Fed. R. Civ. P. 56(c).

It is well established that summary judgment should

be granted “only when it is clear that there is no

dispute concerning either the facts of the controversy

or the inferences to be drawn from those facts.

Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282,

1286 (4th Cir. 1987).

The party moving for summary judgment has the

burden of showing the absence of a genuine issue of

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material fact, and the court must view the evidence

before it and the inferences to be drawn therefrom in

the light most favorable to the nonmoving party.

United States v. Diebold, Inc., 369 U.S. 654, 655

(1962). When the defendant is the moving party and

the plaintiff has the ultimate burden of proof on an

issue, the defendant must identify the parts of the

record that demonstrate the plaintiff lacks sufficient

evidence. The nonmoving party, here the plaintiff,

must then go beyond the pleadings and designate

“specific facts showing that there is a genuine issue

for trial.” Fed. R. Civ. P. 56(e); see also Celotex Corp.

v. Catrett, 477 U.S. 317 (1986).

A party “cannot create a genuine issue of

material fact through mere speculation or the

building of one inference upon another.” Beale uv.

Hardy, 769 F.2d 213, 214 (4th Cir. 1985). Therefore,

“fm]Jere unsupported speculation...is not enough to

defeat a summary judgment motion.” Ennis v.

National Ass’n of Bus. & Educ. Radio, Inc., 53 F.3d

55, 62 (4 Cir. 1995).

B. PLAINTIFF’S BREACH OF CONTRACT

CLAIM AGAINST NATIONAL

The material facts are not in dispute. The

resolution of this case hinges on the meaning of the

term “actual charges” as used in plaintiffs Policy

and similar Dixie cancer policies. The construction

of a clear and unambiguous insurance contract is a

question of law for the court. See S.C. Dept. of Nat.

Resources v. Town of McClellanville, 550 S.E.2d 299,

302 (S.C. 2001). Therefore, the court must first

determine whether or not the Policy is ambiguous.

’

Plaintiff asserts that the term “actual charges’

unambiguously refers to the amount a provider bills

for a particular service. In her memorandum in

support of her motions for summary judgment,

plaintiff “concede[s] that when the evidence is

construed in the light most favorable to the

Defendants, the term ‘actual charges’ may be

capable of more than one reasonable interpretation.”

Plaintiff relies on the various interpretations Dixie

and other insurers have historically used to prove

the alleged ambiguity. In addition, plaintiff points

out that National itself at one time defined the term

differently than it currently does, thus arguing that

“actual charges” is capable of more than one

reasonable interpretation. Finally, plaintiff cites to

the deposition testimony of National’s expert and

other witnesses who define the term differently.

National argues that the court should not

consider the extrinsic evidence offered by plaintiff in

determining whether an ambiguity exists. Rather,

National asserts that the term “actual charges” is

unambiguous and should be given its plain meaning.

In construing terms of a contract, the court must

first look to the language of the contract to

determine the intentions of the parties. Because the

court 1s granting summary judgment to defendant

National, it must look at the evidence in the light

most favorable to plaintiff. In this light, the court

finds as a matter of law that the subject Policy

language is unambiguous. The meaning of the term

“actual charges” must be considered by reading the

Policy as a whole and considering the context and

subject matter of the insurance contract.5 Nowhere

within the four corners of the Policy is the term

“actual charges” used inconsistently or in a special or

technical sense. Rather, the use of the term “actual

charges” to mean the amounts owed to the providers

as payment in full is consistent with the other

language contained in the Policy. As is typical in

insurance policies, the Policy only pays benefits in

the event the insured suffers a “covered loss” and

submits written “proof of loss.” The court finds that

a loss can not be construed to extend to charges for

which the insured is not liable.

Furthermore, the rule of construction is that

every word of a contract should be given meaning

and effect if possible. See J.A. Fay & E. Co. v. Mims,

149 S.E. 246, 248 (S.C. 1929). The construction

urged by plaintiff, that “actual charges” means

whatever amount the healthcare provider puts on an

invoice, would render the word “actual” meaningless,

as “actual charges” would have no different meaning

5 The court recognizes that both defendants at one time paid

claims under the Policy pursuant to the construction of “actual

charges” urged by plaintiff. However, the court finds that

defendants’ prior actions are not to be considered in the

construction of an unambiguous contract. See Schulmeyer v.

State Farm Fire & Cas. Co., 579 S.E.2d 132, 134 (S.C. 2003)

(holding that if a contract’s language is clear and unambiguous,

the language alone determines the contract’s force and effect);

see also, Claybrook v. Central United, 387 F. Supp. 2d 1199

(M.D. Ala. 2005) (rejecting similar evidence and noting that

subsequent conduct of the parties in observance of a contract’s

terms cannot be considered as aids in its construction).

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from “charges.” The use of the word “actual” should

be given its plain and ordinary meaning in the

context of the Policy. The court finds that “actual

charges” are the charges for which the patient is

liable when medical services are rendered, not the

fictional amounts indicated on the invoice that the

provider does not expect the patient to pay.

fhis finding is in accord with the position taken

by the SCDOI. Under well-settled South Carolina

law, the SCDOI’s construction of the Policy is to be

accorded respectful consideration and should not be

overruled absent compelling reasons. See, e.g.,

Dunton v. S.C. Bd. of Exam’rs in Optometry, 353

S.E.2d 132, 133 (S.C. 1987).

Finally, at least one other federal district court

has agreed with the construction urged by National

and adopted by this court. In Claybrook v. Central

United, 387 F. Supp. 2d 1199 (2005), the Alabama

district court confronted a strikingly similar factual

scenario,® with nearly the same arguments at issue.

The Claybrook court held that the policy at issue was

unambiguous and the term “actual charges” must be

given its plain and ordinary meaning. The court

rejected similar extrinsic evidence offered by

plaintiff, holding that its analysis was confined to

the “four corners of an instrument unless the

6 The Plaintiff initially attempted to certify a nationwide class

in this case to include all of the Central United cancer policies,

including the Alabama policies at issue in Claybrook, on

grounds that the terms and benefits in the Central United

policies are sufficiently similar, if not identical, to the Dixie

cancer policies assumed by National in South Carolina.

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instrument contains latent ambiguities.” Jd. at

1203. The Claybrook court found that “in everyday

and plain language, the term ‘actual’ means ‘real,’

‘existing,’ not ‘potential’ or ‘possible.” Jd. at 1204.

The undersigned finds the Claybrook court’s analysis

well-reasoned and persuasive.

The court, having found that National properly

construes the term “actual charges” to mean the

amount accepted by the healthcare provider as

payment in full, finds that plaintiff's claim for

breach of contract must necessarily fail. Plaintiff

alleges that “Defendants breached the contract by

refusing to pay Plaintiff and other class members

100% of the ‘actual charges’, and instead proposing

to pay claims based on the reduced ‘negotiated fees’.”

The court finds that a patient’s EOB provides the

necessary proof of loss for payment of benefits,

because the EOB, and not the provider's invoice,

shows the true cost of the service rendered and the

real price paid for such service. Because National

has not refused to pay the benefits owed pursuant to

the terms of the Policy, as a matter of law, it cannot

be found liable to plaintiff for breach of contract.

Upon receipt of the requisite proof of loss from

plaintiff, National has indicated its willingness to

provide the benefits owed. Therefore, plaintiff

cannot recover on her breach of contract claim

against National, and the court grants National’s

motion for summary judgment.

c. PLAINTIFF’S BREACH OF CONTRACT

CLAIM AGAINST DIXIE

The court finds that this order renders moot any

remaining issues in Dixie’s Motion for Summary

Judgment. Plaintiff argues that any damages

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suffered by plaintiff and the class were caused by

contractual breaches by Dixie’s assignee, National.

Thus, plaintiff asserts that Dixie, as assignor, is

liable for any wrong committed by National. As

National is absolved of liability, plaintiff's breach of

contract claim against Dixie is likewise dismissed.

Therefore, the court need not reach the issues raised

by Dixie in its motion for summary judgment.

D. PLAINTIFF’S BREACH OF CONTRACT

ACCOMPANIED BY A FRAUDULENT ACT

CLAIM

Because breach of contract is an _ essential

element to plaintiffs second claim for breach of

contract accompanied by a fraudulent act, the court

grants summary judgment for National on plaintiff's

claim.

IV. CONCLUSION

For the foregoing reasons, the court grants

defendant National’s motion for summary judgment

[#216], and denies plaintiffs motion for summary

judgment [#212]. This decision renders moot the

motion to decertify [#219] and defendant Dixie’s

motion for summary judgment [#215].

IT IS SO ORDERED.

May 10, 2006 s/ Joseph F. Anderson, Jr.

Columbia, South Carolina United States District

Judge

March 16, 1999

J. Earl Deaton

969 Amick’s Ferry Road

Chapin, SC 29036

In Reply Refer To: 1999057-083-004

National Foundation Life Insurance Company

Dear Mr. Deaton:

We are enclosing a copy of the response received

from the above-captioned company, by this

Department, on March 15, 1999, to the complaint

you filed with this office. We regret our response to

you could not be more favorable, but based on the

documentation received, it appears this matter has

been handled appropriately by the company. Mr.

Deaton, when a provider renders medical services to

a Medicare eligible patient and accepts Medicare's

assignment, they accept as their actual charge

Medicare’s approved allowable amount. That

provider may not bill you more than the approved

amount when they accept Medicare assignment.

Therefore, the company needs the Medicare

Explanation of Benefits to determine the “actual

charges” so that the claim may be processed.

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We are closing our file since we have no further

jurisdiction in this matter. Thank you for the

opportunity to serve you

Respectfully,

MARY ANN O’BRIEN

Insurance Regulatory Analyst

Consumer Service Division

Knclosure

ce: James Byrd

Deputy Director

Consumer Services Division

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Division of Administration

Office of Consumer Services

300 Arbor Lake Drive, Suite 1200

Columbia, South Carolina 29223

Mailing Address:

P.O. Box 100105, Columbia, S.C. 29202-3105

Telephone: (803) 737-6180 or 1-800-768-3467

April 18, 2002

Mr. James Hawkins

The Methodist Oaks

Box 9005

Orangeburg, South Carolina 29116

In Reply Refer To: 112511

National Foundation Life Insurance Company

Dear Mr. Hawkins:

We are enclosing a copy of the response received

from the above-captioned company, by this

Department on Apmil 18, 2002, relative to the

complaint you filed with this office.

Mr. Hawkins, your insurer is requesting copies of

the Medicare Explanation of Benefits to determine

the allowable amount covered by Medicare. An

insured or an insurer is not liable for charges, which

an individual is not legally responsible for. Since

you [sic] physician accepted Medicare assignment,

you are not legally liable for anything over the

allowable amount and therefore the insurer is not

responsible for any amount over the allowable

amount. This, Mr. Hawkins is standard industry

practice. ‘his company is not doing anything any

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different did [sic] other carriers in the same type

situation [sic].

Therefore, you must provide the Explanation of

Benefits needed by the insurer for continued

processing of your outstanding claims.

We trust this the [sic] information is helpful in

understanding the actions of the company. We are

closing our file, since we have no further jurisdiction

in this matter.

Respectfully,

ALICIA CORNELIUS

Insurance Regulatory Analyst

Consumer Service Division

Enclosure

59a

NFL NATIONAL FOUNDATION LIFE

INSURANCE COMPANY

August 9, 2002

Ms. Martha Ward

1912 Amick Drive

Gilbert, SC 29054

Re: Claimant: James A. Ward

Policy Number: 02KC598860

Claim Numbers: 021910119 and 021900142

Dear Mrs. Ward:

This is in response to your July 22, 2002, inquiry

regarding the above referenced Policy. Our records

indicate that you purchased a Cancer Treatment

Benefit Policy that was issued with an effective date

of August 26, 1990. The Policy provides benefits

according to a schedule of benefits, for loss resulting

from hospital confinement, or other specified

expenses incurred for the treatment of Cancer. The

availability of benefits is subject to the definitions,

benefit provisions, exceptions and limitations. As

you are aware, the majority of the benefit categories

in your Policy are limited in their benefit structure

to the amounts specified; however, some are not, as

in the case of the “X-ray, Radium Therapy, Radiation

Therapy and Chemotherapy Benefit”. This benefit

would be considered unlimited based on actual

charges for such services. Since the Policy provides

benefits on an actual charge basis, the Explanation

of Benefits statements from Blue Cross/Blue Shield

are required to take into consideration any

discounted or written-off amounts that may have

been applied to the charges that were originally

60a

NFL NATIONAL FOUNDATION LIFE

INSURANCE COMPANY

Mrs. Martha J. Ward

August 9, 2002

Page 2

billed. Since any amounts written-off by a provider

cannot be balance billed to insurance companies or

the patient, such amounts cannot be considered as

actual charges. Your Policy also states that we will

“pay benefits to which you are. entitled

immediately upon receipt of the proof of loss

supporting the claim.” As the Explanation of

Benefits statements from Blue Cross/Blue Shield are

needed to verify your actual loss, they must be

submitted in order to establish proof of loss for your

claim. At this time, the above referenced claims are

pending Blue Cross/Blue Shield Explanation of

Benefits statements. Once these statements have

been received, we will be able to continue with

processing of Mr. Ward’s claims. I [sic] you have any

questions, please feel free to contact me directly at 1-

800-221-9039, extension 455.

Sincerely,

Joan Turner

Assistant Vice President

Communications Department

ksf/JT

6la

Martha J. Ward

1912 Amick Drive

Gilbert, SC 29054

August 14, 2002

SC Department of Insurance

Ernst N. Csiszar, Director

P.O. Box. 100105

Columbia, SC 29202

Dear Mr. Csiszar:

Please find enclosed a copy of a cancer policy that I

purchased July 26, 1990 through Dixie National Life

Insurance Company, which was later sold _ to

National Foundation Life Insurance Company. The

policy covers both my husband and myself. I have

had the unfortunate need to make claim against this

policy beginning in January of this year for my

husband.

I received the indicated payment amount for the

initial diagnosis by providing a pathology report. [

then submitted two subsequent claims for radiation

treatment attaching a UB52, which I was told was

the industry standard for paying actual charges on a

cancer policy. I received a request to provide EOB’s

for those dates of service and I explained that my

policy stated “actual charges” were to be reimbursed,

and that documentation had been provided along

with the claim. I received payment for those two

claims.

My questions are as follows:

e At the time my policy was issued, what were

insurance companies required to pay when the

62a

term “actual charges” was used to denote the

amount of reimbursement?

What type of documentation was to be

provided to establish the “actual charge” of my

covered procedure?

If the definition of “actual charges” has

changed since the issuance of my policy, I

would like to know the date of the change and,

if and how this change was to be conveyed to

any affected policyhoiders. I have kept all of

my correspondence associated with this policy

and I don’t have any document that indicates

a change in any portion of my policy.

My intention is not to defraud anyone. My

understanding of actual charges was the amount a

doctor or facility charges for a procedure, not

withstanding any agreements those doctors or

facilities may have with my insurance provider,

which my [sic] affect the amount I would owe to the

doctor or facility.

I await your response.

Sincerely,

Martha J. Ward

(803) 896-6830 work

(803) 892-6545 home

63a

SOUTH CAROLINA

DEPARTMENT OF INSURANCE

300 Arbor Lake Drive, Suite 1200

Columbus, SC 29223

P.O. Box 100105

Columbia, South Carolina 29202-3105

(803) 737-6180 or 1-800-768-3467

August 29, 2002

Ms. Martha J. Ward

1912 Amick Drive

Gilbert, SC 29054

In Reply Refer To: SC114610

National Foundation Life Insurance Company

Dear Ms. Ward:

We are enclosing a copy of the response received

from the national Foundation Life Jnsurance

Company, by this Department on August 29, 2002 to

the complaint you filed with this office. We regret

our response to you could not be more favorable, but

based on the documentation received, it appears the

company has handled this matter appropriately.

Charges by providers that are discounted due to

other contracts become the actual charges, as the

discounted amount cannot be balanced billed to

either the insurance company or the patient.

64a

We are closing our file since we have no further

jurisdiction in this matter. Thank you for the

opportunity to serve you.

Respectfully,

Bill Lemmon

Insurance Regulatory Analyst

Consumer Services Division

Enclosure

nema ment. enter eh SEPT sens Lee REID NUE sate nnemanronrcmianees eane anN

—— oe eee ee

65a

Ms. Martha J. Ward

1912 Amick Drive

Gilbert, SC 29054

October 2, 2002

SC Department of Insurance

Ernst N. Csiszar, Director

P.O. Box 100105

Columbia, SC 29202

Dear Mr. Ciszar:

This is in response to a recent correspondence by Bill

Lemmon of your office. In my letter to you dated

August 14, 2002, IJ specifically asked the SC

Department of Insurance’s bearing on an insurance

company’s obligation to pay claims when the term

“actual charges” was used to denote the amount of

reimbursement. My second question was, if the

definition of “actual charges” has changed since the

issuance of my policy, July 1990.

I do not feel that Mr. Lemmon handled my inquiry in

my best interest. What I received from him was the

enclosed letter dated August 29, 2002 with a

response from the National Foundation Life

Insurance Company dated August 27, 2002. I was

already aware of National Foundation’s position of

my request. I am interest in the definitions of SC

Department of Insurance.

I had two insurance agents who are licensed to write

cancer policies in the state of South Carolina to

review my policy. They both stated that they have

written policies with the term “actual charges” prior

66a

to 1992 and those policies have no bearing on a

patient’s benefits with any other policy they may

carry. As you are aware, my policy was written, July

1990, when the State Health Insurance offered by

Blue Cross-Blue Shield of SC did not have pre-

negotiated reimbursement rates with physicians

and/or health care providers, therefore payment was

made according to the charges submitted. If

National Foundation Life Insurance Company is

allowed to make reimbursement changes without

filing amendments to policies with the SC

Department of Insurance, what keeps all other

companies who wrote policies prior to 1992 the same

luxury? [sic]

I would very much like to finalize this issue,

therefore I am asking for an audit by your office on

the reimbursement laws of cancer pelicies written

prior to 1992 when the state health insurance

company developed pre-negotiated rates with health

care providers.

I await your response.

Sincerely,

Martha J. Ward

(803) 896-6830 work

(803) 892-6545 home

67a

SOUTH CAROLINA

DEPARTMENT OF INSURANCE

300 Arbor Lake Drive, Suite 1200

Columbus, SC 29223

P.O. Box 100105

Columbia, South Carolina 29202-3105

(803) 737-6180 or 1-800-768-3467

October 31, 2002

Ms. Martha J. Ward

1912 Amick Drive

Gilbert, SC 29054

In Reply Refer To: 114810

National Foundation Life Insurance Company

Dear Ms: Ward:

You have asked that our Department provide you

with a legal definition of “actual charge.” There is no

specific definition in the South Carolina Insurance

Codes and Regulations. The term “actual charge” in

industry-wide standards is the amount that you are

legally obligated to pay for a specific service.

Under South Carolina Insurance Regulation 69-34 G

(8) it is indicated that a Specified Disease and

Specified Accident Insurance Coverage policy can

provide benefits in one of two ways, on an expense-

incurred basis or an indemnity basis.

Your Cancer Policy, purchased from Dixie National

Life Insurance Company is a specified disease policy

providing benefits om an expense-incurred basis.