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Charlotte Phillips and Bob v. Wellpoint Inc.

December 10, 2012


The opinion of the court was delivered by: J. Phil Gilbert District Judge


This matter comes before the Court on defendants' motion for summary judgment (Doc. 116). Plaintiffs filed a response in opposition (Doc. 186) and to defendants' statement of undisputed material facts (Doc. 187), to which defendants replied (Doc. 202). For the following reasons, the Court grants defendants' motion for summary judgment.


The claims in this case arise from the same events underlying the claims in Cima v. WellPoint Health Networks, Inc., No. 05-cv-4127, previously before this Court. The Court has recounted the factual and procedural background of this claim in detail on several occasions. See e.g., Phillips v. WellPoint, Inc., No. 10-cv-357, 2012 WL 4490688 (S.D. Ill. Sept. 27, 2012); Cima v. WellPoint Health Networks, Inc., 250 F.R.D. 374 (S.D. Ill. 2008); Cima v. WellPoint Healthcare Networks, Inc., No. 05-cv-4127, 2006 WL 1914107 (S.D. Ill. July 11, 2006).

For purposes of this motion for summary judgment, the relevant facts are as follows. Plaintiffs were insureds of RightCHOICE Insurance Company and/or its parent corporation RightChoice Managed Care, Inc. ("RightCHOICE" collectively). In 2001, WellPoint, Inc.*fn1

("WellPoint") acquired RightCHOICE. Prior to this acquisition, WellPoint had to obtain the approval of the Illinois Department of Insurance ("IDOI"). As part of that approval process, WellPoint filed "Form A" which represented to the IDOI that it had "no present plans" to make material changes to RightCHOICE's business. Plaintiffs contend, however, that this was a misrepresentation made only for the purposes of obtaining regulatory approval, and WellPoint intended all along to withdraw RightCHOICE from the Illinois market. Thereafter, RightCHOICE did withdraw from the Illinois market, and RightCHOICE insureds were forced to convert to more expensive polices through Unicare National Services, Inc., Unicare Illinois Services, Inc., and Unicare Health Insurance Company of the Midwest, ("Unicare" collectively) which are subsidiaries of WellPoint. Insureds who could not afford the higher policy rates were forced to go through underwriting leaving many infirm insureds ineligible for insurance or eligible only for higher-priced insurance. Those who were ineligible or could not afford to accept a Unicare policy were forced to seek other coverage or go without health insurance.

Plaintiffs originally brought four claims including two Illinois Health Insurance Portability and Accountability Act ("Illinois HIPAA") claims, one breach of contract claim, and one Illinois Consumer Fraud Act ("CFA") and Uniform Deceptive Trade Practices Act claim. Subsequent to the Court's ruling on defendants' motion to dismiss, the only remaining claims are for breach of contract and unfair practices under the CFA. The Court will now consider whether defendants are entitled to judgment as a matter of law with respect to the remaining breach of contract and CFA unfair practices claim.


Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). The reviewing court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Chelios v. Heavener, 520 F.3d 678, 685 (7th Cir. 2008); Spath, 211 F.3d at 396.Where the moving party fails to meet its strict burden of proof, a court cannot enter summary judgment for the moving party even if the opposing party fails to present relevant evidence in response to the motion. Cooper v. Lane, 969 F.2d 368, 371 (7th Cir. 1992).

In responding to a summary judgment motion, the nonmoving party may not simply rest upon the allegations contained in the pleadings but must present specific facts to show that a genuine issue of material fact exists. Fed. R. Civ. P. 56(e)(2); Celotex, 477 U.S. at 322-26; Johnson v. City of Fort Wayne, 91 F.3d 922, 931 (7th Cir. 1996). A genuine issue of material fact is not demonstrated by the mere existence of "some alleged factual dispute between the parties," Anderson, 477 U.S. at 247, or by "some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Michas v. Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir. 2000). Rather, a genuine issue of material fact exists only if "a fair-minded jury could return a verdict for the [nonmoving party] on the evidence presented." Anderson, 477 U.S. at 252; accord Michas, 209 F.3d at 692.

I.Breach of Contract Claim

In their complaint, plaintiffs allege 142. . . . Defendants owed duties and obligations to [p]laintiffs and members of the class under the Subject Policies at issue, among others, to renew and not discontinue the policies except as allowed under the terms of the Subject Policies. 143. Defendants materially breached the terms and provisions of the subject policies owned by [p]laintiffs and class members when it discontinued [p]laintiffs' insurance with RightCHOICE and gave notice that the RightCHOICE plans will no longer be available shortly after and as a result of the merger of RightCHOICE and WellPoint, and then either forcing the insureds to renew their health insurance coverage under a new WellPoint/Unicare policy or automatically be enrolled in the WellPoint -- Unicare 1000 Deductible Plan.

Doc. 1-2, p. 3. These allegations are stated identically to the Cima plaintiffs' breach of contract allegations. Cima, No. 05-4127, Doc. 2-1, p. 18.

Plaintiffs point to two portions of the RightCHOICE policies in support of their claim that defendants both explicitly and implicitly breached the RightCHOICE policies. In support of their implicit breach argument, plaintiffs cite to Article II.H of the Certificate, which arguably incorporates Illinois HIPAA , as follows:

H. Conformity with State Statutes. This Certificate is issued for delivery in the State of Illinois, and shall be governed by the laws of that State and any applicable federal laws. Any Certificate provision that, on the Enrollment Date, is in conflict with the laws of the state where the Subscriber then lives is automatically amended to conform to the minimum requirements of those laws.

Doc. 1-3, p. 20; Doc. 1-1, p. 32. In support of their explicit breach arguments, plaintiffs point to provisions of the "Guaranteed Renewal" portion of the RightCHOICE policy, which closely tracks the relevant Illinois HIPAA provisions, as follows:

A. Termination of Certificate. All insurance will cease on termination of the Certificate.

1. RightCHOICE may non-renew or discontinue health insurance Coverage of an individual for any of the following:

c. Termination of Coverage. RightCHOICE is ceasing to offer Coverage in the individual market in accordance with state law.

If RightCHOICE decides to discontinue offering a particular type of health insurance coverage in the individual market, coverage may be discontinued only if RightCHOICE provides notice to each Subscriber at least 90 days prior to the discontinuation and then provides each member the option to purchase any other individual product currently being marketed.

If RightCHOICE decides to discontinue offering all health insurance coverage in the individual market, coverage may be discontinued only if RightCHOICE provides notice to each Subscriber at least 180 days prior to the date of expiration of their Coverage.

Doc. 103, p. 37.

In Cima, this Court concluded that all Cima defendants were entitled to judgment as a matter of law with respect to the Cima plaintiffs' breach of contract claim. Cima v. WellPoint Health Networks, Inc., No. 05-4127, 2008 WL 4671707 (S.D. Ill. Oct. 22, 2008). Cima plaintiffs asserted that their "claim of breach of insurance policy rests on the fact that RightCHOICE was not actually withdrawing or discontinuing its policies, it was simultaneously and in coordinated fashion, at the direction of WellPoint, converting the very same insureds to an on-going subsidiary, Unicare." Accordingly, the Court noted that "[p]laintiffs seek to prove that RightCHOICE and Unicare are alter egos and that both are under the direction and control of WellPoint." However, Cima plaintiffs "failed to present evidence from which the Court could reasonably conclude that RightCHOICE and Unicare [were] merely 'shell corporations' acting under the control and direction of WellPoint."

Here, defendants argue they are entitled to judgment as a matter of law on plaintiffs' breach of contract claim because RightCHOICE complied with the non-renewal provision of plaintiffs' policies and Illinois HIPAA, RightCHOICE's liabilities were not assumed by any other defendants, and defendants who were not parties to the RightCHOICE policies cannot be held liable for its breach. Accordingly, the Court now will consider the Phillips parties' arguments with regard to both RightCHOICE's and the other defendants' liability for their alleged breach of the RightCHOICE policies.

a.Breach of Contract Claim -- RightCHOICE

With respect to RightCHOICE's liability, plaintiffs' argument depends on the Court adopting its "enterprise-wide" view of the relevant HIPAA provisions. To that end, plaintiffs make a legislative intent argument contending that "Congress and the Illinois legislature never intended to permit rerating on intercompany transfers within a controlled group." Doc. 186, p. 11. Specifically, plaintiffs request this Court to make findings that "1) on the date of the transaction, the HIPAA provisions would be applied on an enterprise-wide basis[;] 2) Illinois HIPAA must be read in light of federal HIPAA's purpose, to guarantee renewability ...

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