Roose v. Lincoln County Employee Group Health Plan

Roose v. Lincoln County Employee Group Health Plan, 2015 MT 324 (Nov. 17, 2015) (Wheat, J.; McKinnon, J., dissenting) (4-1, aff’d)

Issue: (1) Whether the district court abused its discretion in certifying the proposed class; and (2) if the class was properly certified, whether the district court abused its discretion by defining the class over broadly.

Short Answer: (1) No, and (2) no.


Facts: Kent Roose was severely injured in a car accident in October 2007. The other driver, Stearns, was killed in the accident; his negligence is undisputed. Stearns’ liability insurance carrier tendered the limit of its coverage to Roose, and Stearns’ estate also paid Roose; however, these payments did not cover Roose’s $320,000 medical bill from Kalispell Regional Hospital.

At the time of the crash, Roose’s wife was an employee of Lincoln County, which provided health benefits via a group health plan that was part of JPT, a pool of local government health plans, and administered by EBMS. The plan would not pay medical costs if auto or third-party liability insurance was available to pay them.

The hospital asserted a medical lien for $40,000. Stearns’ insurer tendered its $100,000 liability limit to Roose in a check made out to him and the hospital. The hospital refused to sign the check or release its lien until Roose agreed to pay the hospital $40,000 of the $100,000, which Roose did.

Roose contacted EBMS to object to the fact that the $40,000 hospital charge was paid out of liability insurance rather than health insurance, and requested reimbursement. EMBS denied his request, and Roose sued. In Diaz v. State (Diaz III), the Court held that exclusions such as those in the plan violated § 2-18-902(4), MCA, the made-whole law. Appellants reimbursed Roose the $40,000.

On remand, Roose moved for partial summary judgment and class certification, arguing that Appellants’ systematic practices amounted to seeking subrogation before Roose was made whole. Roose moved for class certification of every member of Appellants’ plans subject to Montana law and containing the coverage exclusion. He requested declaratory judgment that the exclusion and the systematic practices violate Montana law, and an injunction ordering Appellants to cease illegal practices. On his own behalf, Roose requested a trial on actual and punitive damages for bad faith.

Procedural Posture & Holding: The district court certified a class for equitable relief under Rule 23(b)(2) and authorized notice to potential class members. It ruled that JPT must provide coverage for medical expenses regardless of third-party liability coverage, and ordered Appellants to remove the illegal exclusion from their plans and cease systematic practices that violate the law. It further ordered Appellants to process all claims incurred in the past without the illegal exclusion. It granted Roose’s motion for a trial on his bad-faith claim in a separate order. Appellants appeal the class certification, and the Supreme Court affirms.

Reasoning: (1) Appellants contend Roose failed to meet Rule 23(a)’s requirements for numerosity, commonality, and typicality, and adequacy of representation. The party seeking class certification bears the burden of proof.

The heart of the numerosity requirement is that joinder is impracticable. Appellants argue that a search of their records showed that Roose was the only person whose made-whole rights were violated by having liability payments applied to medical coverage when submitting claims to EBMS. The district court evaluated the evidence and determined other individuals are certain to be found even though they have not submitted claims.

Appellants argue that Roose’s bad-faith claim destroys commonality and typicality and makes Roose an inadequate representative. They argue that Roose seeks money damages, which falls outside the scope of Rule 23(b)(2). The U.S. Supreme Court has held that class certification under Rule 23(b)(2) is inappropriate where monetary relief is “not incidental” to the injunctive or declaratory relief sought. Wal-Mart. Here, any money damages would be incidental and therefore do not prohibit certification under Rule 23(b)(2). Nothing in Roose’s bad faith claim implicates issues in the class action.

Notice for Rule 23(b)(2) classes is discretionary, as opposed to the mandatory notice for 23(b)(3) damages classes. Rule 23(b)(2) classes are mandatory; class members may not opt out. Appellants argue notice in this case was improper. The district court held that, despite Appellants’ removal of the illegal exclusion, all policyholders are entitled to notice of its removal.

(2) The Court finds the class definition appropriately narrow and within the district court’s discretion.

Justice McKinnon’s Dissent: The Court “conflate[s] the requirements of Rule 23 to facilitate discovery for a plaintiff at the expense of procedural fairness for a defendant.” ¶ 43. Roose is the only person who had his claims treated in this manner, which does not suffice for numerosity. Moreover, notice for a mandatory class does not serve any due process interest if it is issued after the substantive decision had been made by the court. Justice McKinnon believes class certification was contrary to Rule 23 and an abuse of discretion.