Blue Cross & Blue Shield of Mississippi, Inc. v. Campbell

Blue Cross & Blue Shield of Mississippi, Inc., appeals from a judgment of the Circuit Court of Washington County in favor of William T. Campbell for $10,000 damages beyond his policy coverage with Blue Cross.

Finding no conduct by Blue Cross which would justify a claim for damages in excess of the policy provisions, we reverse and render judgment for Blue Cross.

FACTS

Campbell made application on October 2, 1980, for a non-group insurance policy with Blue Cross. In answer to the question of whether he had ever been treated for, or had known indication for (among other things) “alcoholism,” he marked “No.” He was likewise asked about “ulcer” and the answer was “No.”

The face of the application signed by Campbell in bold face type states:

I agree, that in the event illness, disease or infirmity for which I or my dependents, if any, receive care or treatment during the first twelve months after the effective date of the contract, has resulted from causes existing prior to the effective date of the contract, then no benefits shall be provided during or on account of such illness, disease or infirmity.

On October 16, 1980, Blue Cross issued a non-group policy to Campbell. It contained an exclusion for, or as a result of, any ailment or disease or physical condition existing at or before the effective date of the contract. The contract further provided that after the policy had been in force twelve months this exclusion would not apply, except for a congenital defect.

On December 3, 1980, six weeks later, Campbell appeared at the Emergency Room of Delta Medical Center in Green-ville, a local hospital (Delta Medical). He was discharged December 19, 1980.

Delta Medical in due course sent a claim to Blue Cross for Campbell’s hospitalization, showing the total hospital charges to be $8,210.87. The claim form gave as Campbell’s diagnosis: “acute alcoholic pan-creatitis.”

Of the total hospital charge of $8,210.87 for this first hospitalization in December, 1980, $4,555.75 was for drugs.

The claim form also contained the following statement signed by Campbell:

AUTHORIZATION TO PAY INSURANCE BENEFITS:

I hereby authorize payment directly to the above-named hospital of the Hospital Benefits, herein specified and otherwise payable to me but not to exceed the hospital’s regular charges for this period of hospitalization. I understand that I am financially responsible to the hospital for charges not covered by this authorization.

The medical staff of Blue Cross questioned this claim (hereinafter detailed), and on February 19, 1981, sent a form letter to the medical records librarian of Delta Medical requesting Campbell’s history and physical, and Discharge Summary. The final paragraph of this form letter states the following:

Payment of this claim will be delayed pending receipt and review of the above information. This information must be received within 20 days from the date of this request in order to avoid a denial due to lack of medical information. Please attach a copy of this request to the information to insure prompt handling.

Your assistance and cooperation are appreciated.

This form letter shows that a copy was mailed to Campbell at his Greenville address.

Apparently, Blue Cross received no reply from Delta Medical, and again on March 2, 1981, sent the same form letter to Delta Medical.

Following receipt of this information Delta Medical sent the requested hospital information. The following are sentences extracted from Campbell’s Discharge Summary:

... he stated that he had been drinking alcohol excessively on the week end and after that for an extended period of time.

* sfc * * * *

His past history further revealed that he had been treated in the past due to duodenal ulcer and he was a known alcohol abuser.

He * # # * *

After the 5th hospital day the patient showed signs of alcohol withdrawal, became disoriented, combative. This was managed with Haldol 5 mgs. given every 4 hours unless the patient was over 'sedated.

The following sentences are extracted from Campbell’s History:

HPI (History of Present Illness):

This patient was brought to the Emergency Room service with abdominal pain, nausea and vomiting of one day’s duration. He denied any diarrhea and stated that he had been drinking alcohol too much on the week end and every week end for quite an extended period of time.

PH (Past History):

He has been treated in the past due to duodenal ulcer.... He states that he has had a very heavy drinking habit, especially on the week ends for the past several years. [Emphasis added]

From Campbell’s Physical Examination the following diagnosis is quoted: DIAGNOSIS:

Acute pancreatitis possibly due to alcoholism.

Active duodenal ulcer.

General debility due to the above.

All of the above hospital records are signed by J.B. Yeldell, M.D.

Based on the hospital records transmitted to them, Blue Cross denied the claim.

On March 26, 1981, Campbell signed a Discharge Payment Agreement with Delta Medical. The agreement recited his hospitalization from December 3 to December 19, 1980, and that the total bill was $8,180.87. ín the agreement Campbell promised to pay this account at the rate of $50 a month, with no provision for interest, beginning May 1, 1981. The agreement does provide that in the event of a default Delta Medical could charge a collection fee of 15 percent upon the amount due.

Campbell was again hospitalized in Delta Medical on April 28, 1981, and discharged May 11, 1981. The claim to Blue Cross dated May 13, 1981, showed charges for hospitalization to be $2,823.28. The diagnosis on this claim states:

DIAGNOSIS:

Acute Pancreatitis along with acute gastritis UTI (urinary tract infection), etiology undetermined — possible duodenal ulcer, active.

This form, also signed by Campbell, likewise authorizes the payment of all benefits directly to the hospital. Also, across the face of the statement for hospital transmitted to Blue Cross there is stamped the following: “INSURANCE BENEFITS ASSIGNED TO DELTA MEDICAL CENTER.” The History signed by Dr. Yeldell in this second hospitalization states that the past history revealed Campbell “has been treated in the past due to pancreatitis, gastritis, duodenitis and peptic ulcer disease,” and because of this he was readmitted for further evaluation and treatment. The history showed that he had been treated in December for pancreatitis, and a duodenal ulcer.

In the Discharge Summary, the doctor stated: “The ulcer healing was deemed to be satisfactory. He was advised to remain on a convalescent diet and will be re-evaluated in my office in one week.” The Discharge Summary also stated that Campbell had a small active duodenal ulcer.

The Physical Examination of Campbell gave the following diagnosis:

DIAGNOSIS:

Acute pancreatitis along with acute gastritis.

Urinary tract infection, etiology undetermined.

Possible duodenal ulcer active.

Again, the Physical Examination, history and Discharge Summary are all signed by Dr. Yeldell.

On May 21, 1981, Blue Cross received from Delta Medical a copy of the original claim submitted for the December hospitalization. It is the same as the original transmitted, except a barely discernible line is drawn through, or at the bottom of “Acute alcoholic,” and further over on the form there is typed: “Acute Pancreatitis,” and there is printed in someone’s handwriting the following statement across the face of this copy:

CORRECTIVE BILLING

Wrong diagnosis Submitted

A1

Because there had been no correction of the hospital records, Blue Cross still denied the claim. Campbell was hospitalized again on June 16, 1981, to June 22, 1981. Again Delta Medical sent a claim form to Blue Cross with the diagnosis of “Acute Pancreatitis and small duodenal ulcer.” This claim form also contains the signed authorization to pay all benefits to Delta Medical. Also, there is stamped on the face of the statement: “INSURANCE BENEFITS ASSIGNED TO DELTA MEDICAL CENTER.” The total hospital charges were $1,514.50.

The final diagnosis for this hospitalization gave “acute pancreatitis, Small Duodenal Ulcer.”

The secondary diagnosis or complications gave “alcohol Abuse.”

Dr. Yeldell’s history stated in part: “he has been treated in the past due to the same condition. He also has been treated due to duodenal ulcer. He has been a known alcohol abuser and has been hospitalized on several occasions during the last year.”

The Physical Examination gave a diagnosis of “acute pancreatitis, with a possible active duodenal ulcer.” These are signed by Dr. Yeldell.

In July, 1981, Campbell employed a Greenville attorney, Leslie D. King, who wrote a letter to Blue Cross dated July 31, 1981, requesting reconsideration of, and payment of the claim. King’s letter enclosed a handwritten note from Dr. Yeldell stating that Campbell’s was not a pre-exist-ing condition. This letter with the doctor’s statement was received by Blue Cross on August 7, 1981. Blue Cross responded to King’s letter by letter dated August 27, 1981, the following:

Dear Mr. King:

In response to your correspondence, we have again reviewed the medical records pertaining to Mr. Campbell’s admissions on December 3, 1980, April 28, 1981, and June 16, 1981, to Delta Medical Center. Your correspondence included a letter from Dr. Yeldell. Based on the information supplied by Dr. Yeldell, it has been determined that benefits can be provided for these confinements. Therefore, payment will be made toward the previously denied charges in the near future.

Should there be any questions, please do not hesitate to contact us.

S/Ms. Linda Guenin, R.N.

Medical Review Department

The letter to King shows that copies were mailed to Campbell, Dr. Yeldell and Delta Medical.

On August 28, 1981, a letter was written to Blue Cross on King’s letterhead, but signed by Campbell as follows:

Blue Cross-Blue Shield Insurance Company

P.O. Box 1043

Jackson, Miss. 39205

ATTENTION: Claims Department

Gentlemen:

This letter comes to direct the check for claims of December, 1980, and April and June, 1981, be forwarded to my attorney, Leslie D. King in a check payable to the two of us.

Sincerely,

(Signed) William T. Campbell

WILLIAM T. CAMPBELL

[ XXX-XX-XXXX ]

On August 28 King wrote Mrs. Guenin the following letter:

This will acknowledge receipt of your letter under date of August 27, 1981, indicating a decision to pay towards the previously-denied charges. While my client is happy Blue Cross is now seeking to honor its contractual obligation, there are two points that must be clarified. First the check should be forwarded to my office and made payable to Mr. Campbell and my office jointly. The second and most difficult is the amount of the check. Because Blue Cross breached its obligation, my client has been forced incurr [sic] additional expenses in enforcement of this contract.

The additional expenses incurred by Mr. Campbell equal to 1/3 of the covered medical expenses. My calculations place this total figure at $13,352.97.

(Signed) Leslie D. King

Sally McDavid, General Counsel for Blue Cross responded with the following letter to King, dated September 1, 1981:

Dear Mr. King:

Your letter of August 28, 1981, to Mrs. Linda Guenin has been forwarded to me for reply.

As indicated in an earlier letter from Mrs. Guenin, the company has determined to pay contract benefits for services rendered Mr. Campbell which had been previously denied on the basis that the condition for which services were rendered pre-existed the contract effective October 15, 1980.

Your calculation of total charges in your July letter, which enclosed the memo from Dr. Yeldell, was not complete. Attached hereto is a full summation of the charges and the payment due toward those charges in accordance with the contract.

Mr. Campbell’s contract calls for an annual $100 deductible, with the balance of covered charges paid at 80 percent, except that hospital room and board charges are paid at 100 percent of the semi-private room rate.

According to claims we have received, the total charges for services rendered to Mr. Campbell are $13,028.65. Payment due under the contract for those services totals $10,574.92.

Our original denial of benefits was based on medical records. The March 26, 1981, memo of Dr. Yeldell, included in your July 31, 1981, letter, had not been presented to our company before, and we were not aware of his position until that time.

The full benefits available under Mr. Campbell’s contract, as set out above, are enclosed in a check made payable to Mr. Campbell and to you jointly. We do not make payments except for contract benefits.

Sincerely,

S/Sally McDavid

Blue Cross’s check payable to Campbell and to King in the amount of $10,574.92, dated September 2,1981, was endorsed and cashed.

From the proceeds of the check attorney King received $3,524.96, Campbell paid the hospital $3,000.00, a doctor bill of something less than $500.00, and kept the rest of the proceeds.

Campbell had no written contract with King. He testified: “I didn’t sign any kind of agreement. I hired him as my attorney to try and recover this bill Blue Cross wouldn’t pay.”

Campbell filed suit on October 5, 1981, and on July 27, 1982, filed an amended Declaration.

When trial commenced on November 19, 1982, Campbell’s amended complaint asked punitive damages in the amount of $100,-000 and actual damages in the amount of $25,000, all predicated on the wrongful refusal of Blue Cross to pay his claim.

The witnesses testifying for Campbell were: Campbell, Dr. Yeldell, and Charlene Oltremari Putnam, an insurance clerk with Delta Medical. Blue Cross offered two witnesses in defense, Patsy Cruz and Sally McDavid.

Cruz is a Registered Nurse employed in the Medical Review Department of Blue Cross. Her department, consisting of five registered nurses and a medical doctor, reviewed claims to determine, among other things, if they were for pre-existing conditions. She testified from the records in this case that Mrs. Dianne Flowers, the registered nurse in the department, first reviewed the claim for the December, 1980, hospitalization. She said that Mrs. Flowers screened the claim and determined that she needed to order the History, Physical and Discharge Summary from the hospital to provide an opinion as to whether or not the condition was pre-existing. She said that following receipt of these documents from Delta Medical, Mrs. Flowers was of the opinion that the condition was pre-existing. She said the physician Medical Director reviewed the records and agree with her that the condition was pre-existing and excluded under the policy. As to the December, 1980, hospitalization, Cruz testified:

The medical records indicated that the pancreatitis was possibly due to alcoholism. The records further documented that there had been a problem with drinking alcohol for quite a while. The records also indicated that he may have an ulcer on admission and the records showed that the patient indicated that he had had ulcers in the past. Based on Dr. Yeldell’s records from the hospital it appeared that the pancreatitis was due to alcoholism, or related to alcoholism and, there was nothing in the records in the Discharge Summary that disputed this or denied this and all of our medical resources tell us that this is possible and our Medical Director was in agreement.

As to the corrected diagnosis on a claim form on May 21, 1981, Cruz testified that the Medical Review Department again reviewed the medical records, and they were the same as theretofore submitted, and the denial was maintained.

As to the April, 1981, hospitalization, Cruz testified that they again ordered the History, Physical Examination and Discharge Summary which revealed that Campbell had again been treated for pan-creatitis and active duodenal ulcer, confirmed by x-ray. Based on the exclusion of the contract and the records from the first admission indicating it was pancreatitis, they again denied the claim. The people involved in denying the claim were Mrs. Flowers and Dr. Caldwell, their Medical Director.

She then testified that in August they received the letter from King, which had the statement in it from Dr. Yeldell indicating there was not a pre-existing condition. Prior to that time, Cruz testified they had not received any correspondence inquiry from anyone. She said that upon receipt of King’s letter, she initiated a re-consideration; Nurse Flowers was no longer with the department. Cruz and Mrs. Guenin made a thorough review, and after reviewing the claim, Cruz authorized payment of all the claims. She said that Dr. Caldwell was out at the time because of illness.

On cross examination Cruz testified that while the medical books did not diagnose “alcoholic pancreatitis,” and the medical diagnosis was “acute pancreatitis,” their statistics told them that alcoholism is one of the causes, in fact, one of the primary causes of acute pancreatitis. She further testified that the medical records in the case diagnosed the condition as acute pan-creatitis, and that these records also showed alcoholism for a protracted period.

The only person connected with Delta Medical who testified in this case, as above noted, was Charlene Oltremari Putnam, the insurance clerk. She had been employed about one and one-half years. When the claim was submitted, she testified: “I got back a thing stating they were not going to pay for a pre-existing condition,” and this was all she received. She said that the wrong diagnosis had been put on and she put the right diagnosis on the claim form. She said this claim and the two other claim forms for the other hospitalizations were all the documents that were submitted.

She testified on cross-examination that requests for follow-up records were not made through her, but through medical records. All she did was file insurance.

At the conclusion of the trial, the circuit judge granted Campbell five instructions on punitive damages. The jury made no award of punitive damages, however, finding in favor of Blue Cross on this issue.

The circuit judge also granted an instruction to the jury authorizing an award for actual damages, which reads as follows:

INSTRUCTION P 6

The Court instructs the jury that should you find from a preponderance of the evidence in this case that the Complainant, William T. Campbell has sustained actual damages as a proximate result of the actions of the Defendant, Blue Cross and Blue Shield of Mississippi, Inc., the Complainant, William T. Campbell, is entitled to a verdict in an amount which will reasonably compensate him for his loss. Such damages are called compensatory or actual damages and are awarded for the purpose of making the Complainant whole again insofar as a money verdict can accomplish that purpose.

In determining that award you may also consider any added sums of money the Complainant has been required to spend because of the Defendant’s actions.

The jury returned the following verdict:

We, the jury, find for the Complainant in the amount of $10,000.00 Dollars actual damage.

Judgment was thereupon entered for Campbell for $10,000.

LAW

We find Blue Cross’s assignment that there was no evidence to support the verdict of the jury and that it was entitled to judgment notwithstanding the verdict dispositive.

From this record, there was simply no issue of punitive damages or any other damages to be submitted to the jury, and the circuit judge erred in doing so.

NO BAD FAITH CASE

Blue Cross paid the full amount due under its policy prior to and without necessity of a suit being filed to collect it. The only question is whether under the facts of this case there was something about Blue Cross’s conduct which justified a jury deciding the company owed additional damages. There was no such justification and Blue Cross was entitled to a directed verdict or a j.n.o.v. in the circuit court.

Blue Cross is an insurance company which pays hospital claims. When a Blue Cross policyholder is hospitalized, he ordinarily assigns his claim to the hospital, as Campbell did in this case. The hospital in the usual course of business submits the hospital claim. While it is no doubt true that failure on the part of Blue Cross to pay a just claim assigned to a hospital can cause an insured problems, and conceivably if carried to extremes, subject Blue Cross to punitive damages in a suit by the policyholder, it is initially a claim submitted by and due the hospital.

The primary business of Blue Cross is dealing with and paying hospital claims. These claims did not belong to Campbell, but to Delta Medical. This was a case of one business institution dealing with another, and the medical records sent by Delta Medical clearly indicate a condition preceding the policy’s issuance.

There is no proof of Delta Medical doing any act, taking any step to satisfy Blue Cross’s contention that Campbell had been hospitalized for a pre-existing condition, or that the claim was excluded under the terms of the policy.

Hornbook Medicine tells us alcohol is a significant factor in pancreatitis. Harrison’s Principles of Internal Medicine, 9th Ed., states on p. 971: “Excessive use of alcohol is also a significant factor in the causation of pancreatitis.”

Table 309-1 of this same authority, p. 1503, lists thirteen known major causes of acute pancreatitis, with numerous sub-head causes. We quote through the first.

CAUSES OF ACUTE PANCREATITIS

I. Alcohol ingestion (acute and chronic alcoholism)

Here was a claim for a man with a history of alcohol abuse. Even after his fifth day in the hospital he was disoriented and had to be strapped to the bed. He was “managed” by Haldol, a drug.

Campbell’s drug bill on his first hospitalization was 55 percent of the total bill.

Why should Blue Cross be faulted for rejecting this claim? If a hospital wants to be paid for a claim in which its own records cast a serious doubt, the hospital should take the appropriate steps to see that Blue Cross is furnished with records or reputable medical opinion that the hospitalization was not for, or as a result of any ailment or disease or physical condition existing at or before the inception of a six-week-old insurance policy.

The uncontradicted testimony in this case is that the Blue Cross medical staff reviewed this claim and came to the conclusion, from the records submitted, this claim was excluded under the policy. Where is there any proof they acted arbitrarily or with caprice?

Indeed, it is clear from this record that this claim remains subject to serious doubt, at least a substantial portion of it. Valid argument would be made Blue Cross did its policyholders an injustice in not scrutinizing the claim more than it did before paying.

Strong argument is made about Dr. Yel-dell’s testimony at trial. It is not what Dr. Yeldell testified at trial, however, which is determinative of Blue Cross’s bona fide questioning of Campbell’s claim, but what Dr. Yeldell had written on the hospital medical records. Blue Cross had only the medical records before it when it denied the claim.

Even so, Dr. Yeldell at trial conceded that alcohol abuse is associated with fifty percent of all patients who have an attack of acute pancreatitis. Also, while Dr. Yel-dell could say with complete honesty that the acute pancreatitis attack (for which Campbell was hospitalized) did not exist 24 hours prior to his admission, he obviously could not say the acute pancreatitis attack did not result “from causes existing prior to the effective date of the contract.” While he did say the episodes which brought Campbell to the emergency room, the pain and suffering was of recent origin, he never said this acute attack was not as a “result of any ailment or disease or physical condition existing at or before” October 16, 1980. The quotes are the exclusionary language in the application and the policy, respectively.

Here we have claims submitted by the hospital which clearly suggest an etiology excluded by the insurance policy; Blue Cross denying the claims; and, the hospital taking no significant or realistic step to correct or clarify the information on the hospital records.

It was Campbell, not Delta Medical, who went to a lawyer, and the lawyer wrote a simple letter, not a demand or a threatening letter, but a simple letter in which he asked that the claim be reconsidered; and enclosed with this letter was a short handwritten note from Dr. Yeldell. Blue Cross reviewed the claim and in a matter of days wrote the attorney they were paying the claim, because Dr. Yeldell’s statement satisfied them.

As between Blue Cross and Delta Medical the trial record only reveals Oltremarr (Al) sending in the insurance claims, and “correcting” one of the three. Dr. Yeldell testified about someone in medical records “bugging” him about the wrong diagnosis, and that he may have written something for medical records.

There is nothing in the trial record, however, which suggests that Delta Medical mailed any written statement from Dr. Yel-dell correcting the reasons for Campbell’s hospitalization.

The very first time Blue Cross received any information about this, it was from Campbell. The very first time Blue Cross heard from Campbell, they acknowledged they would pay the claim.

In Standard Life Ins. Co. v. Veal, 354 So.2d 239 (Miss.1974), we held that it was the absence of any arguable or legitimate reason to deny the insurance claim which breathed life into a cause of action for damages beyond the policy coverage. And in Reserve Life Ins. Co. v. McGee, 444 So.2d 803 (Miss.1983), p. 809, we stated:

The trial court, of course, has the question as to whether or not as a matter of law the insurer had the right to deny payment of the actual money claimed under the policy.

In this case Blue Cross was acting well within its rights under the exclusionary provisions of Campbell’s policy in denying the claims submitted by Delta Medical, and there was simply no “bad faith” issue to be presented to the jury.

We therefore conclude that when Blue Cross paid Campbell under the policy provisions he had no further cause of action against the company.

The judgment of the Circuit Court is therefore reversed and judgment is entered here for Blue Cross.

This Court will not hesitate condemning an insurance company refusing to pay a claim when there is no legal reason for it to deny the claim. On the other hand, we have an obligation to support any insurance company fulfilling its lawful responsibility of investigating any claim which is dubious. It is not the function of this Court to penalize honest and realistic evaluations of claims.

REVERSED AND RENDERED.

PATTERSON, C.J., WALKER and ROY NOBLE LEE, P.JJ., and BOWLING, J., concur.

ROBERTSON, DAN M. LEE, PRATHER and SULLIVAN, JJ., dissent.

. Upon Campbell’s Discharge Sheet are the following notations:

PROVISIONAL DIAGNOSIS:

Acute alcoholic pancreatitis FINAL DIAGNOSIS:

Acute pancreatitis

SECONDARY DIAGNOSIS OR COMPLICATIONS:

Pneumonia

Campbell developed pneumonia during his hospitalization, treated successfully with penicillin.

. It is incredible that Blue Cross, knowing this claim had been assigned to Delta Medical, would issue a check for the full amount payable only to Campbell and King. See: International Harvester Co. v. Peoples Bank and Trust Co., 402 So.2d 856 (Miss.1981), a valid assignment conveys entire interest of assignor, leaving him no further interest therein. Also see: Schoolfield v. Hirsch, 71 Miss. 55, 14 So. 528 (1893). 6A C.J.S. Assignments § 81, pp. 728-29; and 6 Am.Jur.2d Assignments § 114, p. 196.

. Campbell testified he paid "other bills" with the remainder.

. See: Footnote 2, p. 837.

. Nor is it necessarily true, that because an insurance company pays a claim prior to being sued, it admits it owed it, and was therefore unjustified in not paying the claim to begin with. In this case it meant that Blue Cross gave Campbell the benefit of a doubt, a rather large benefit of a doubt.

' If we ever announce, as a rule of law, that in paying a claim which has been questioned the insurance company admits to some questionable conduct in handling the claim, then we will guarantee no insurance claim will ever be given the benefit of a doubt: If the company pays prior to litigation, it may subject itself to a bad faith claim. Who wants this?