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Imbler v. Pacificare of California11/6/2002
Defendants and appellants PacifiCare of California, Inc. and PacifiCare Health Systems, Inc. appeal from a trial court's order denying their petition to compel arbitration in a lawsuit filed by plaintiff and respondent Donald Imbler. We affirm the order.
FACTUAL AND PROCEDURAL HISTORY
On July 20, 2001, plaintiff filed a complaint for damages against defendants PacifiCare of California, Inc. and PacifiCare Health Systems, Inc. (collectively PacifiCare).
The complaint alleged as follows: Plaintiff had developed prostate cancer. Plaintiff's doctors recommended that he undergo proton beam therapy. Because plaintiff's employer was in the process of changing health plans and entering into a new contract with PacifiCare, plaintiff asked PacifiCare if it would cover the therapy. PacifiCare told plaintiff that the therapy would be covered. Plaintiff subsequently enrolled in the PacifiCare plan, but PacifiCare denied coverage for the therapy. Plaintiff complained to the California Department of Managed Health Care (Department). When the Department submitted an inquiry to PacifiCare, PacifiCare advised the Department that it would cover the therapy. Thereafter, plaintiff received the therapy but PacifiCare then refused, and continues to refuse, to pay for the treatment. Based upon these allegations, plaintiff asserted causes of action for breach of the duty of good faith and fair dealing, breach of contract, unfair business practices under Business and Professions Code section 17200, intentional misrepresentation and negligent infliction of emotional distress.
On August 27, 2001, PacifiCare filed a notice of petition and petition to compel arbitration and for stay of proceedings (hereafter petition). On November 26, 2001, the trial court denied the petition. PacifiCare appeals.
On appeal, PacifiCare raises two issues:
(1) Whether Health and Safety Code section 1363.1 (section 1363.1) is preempted by the Federal Arbitration Act (FAA), or whether it is saved from preemption by the McCarran-Ferguson Act.
(2) Assuming arguendo that section 1363.1 applies, whether PacifiCare's plan documents comply with the disclosure requirements imposed by section 1363.1.
ANALYSIS
I. The FAA Does Not Preempt Section 1363.1
We first address preemption. Based on a recent case on point, Smith v. PacifiCare, we conclude that the FAA does not preempt section 1363.1 by operation of the McCarran-Ferguson Act.
A. Background
PacifiCare is a licensed heath care service plan. In a declaration filed in support of PacifiCare's petition, it stated: "PacifiCare is licensed in accordance with the Knox-Keene Health Care Service Plan Act of 1975, as amended, Cal. Health & Safety Code Section 1340 et seq. PacifiCare is a health care service plan that arranges for and facilitates the provision of health services for employer groups with which they contract."
"In California, health care service plans (or HMO's) are licensed and regulated by the Department of Managed Care under the Knox-Keene Act." One of the provisions of the act is section 1363.1; it provides that a health care service plan, that includes terms requiring binding arbitration to settle disputes, or providing for a waiver of the right to a jury trial, shall include the terms requiring binding arbitration as set forth under section 1363.1.
PacifiCare contends that section 1363.1 does not apply because it is preempted by the FAA. "The FAA applies to any `contract evidencing a transaction involving commerce' which contains an arbitration clause. (9 U.S.C. ยง 2.) Section 2 of the FAA provides that
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