Kaiser's actions in the following case seem breathtakingly avaricious.
Warren v. Kaiser Foundation Health Plan, Inc.
47 Cal. App. 3d 678
[Civ. No. 44986. Court of Appeals of California, Second Appellate District, Division One.
April 29, 1975.]
Plaintiff and Appellant,
KAISER FOUNDATION HEALTH PLAN, INC.,
Defendant and Respondent
(Opinion by Thompson, J., with Wood, P. J., and Lillie, J., concurring.) [47 Cal. App. 3d 679]
Grenert & Echan, Grenert, Echan & Ross and Michael A. Ross for Plaintiff and Appellant.
Thelen, Marrin, Johnson & Bridges, W. Glenn Cornell and James W. Baldwin for Defendant and
This appeal from a judgment (order) of dismissal entered after respondent's demurrer
was sustained to appellant's complaint for declaratory relief with leave to amend
involves: (1) the propriety of declaratory relief as a remedy where a breach of contract
is alleged; and (2) the sufficiency of the complaint in indicating appellant's right to a
declaration in his favor. We conclude that the complaint adequately alleges that a
declaratory judgment is appropriate to avoid multiplicity of litigation and to construe a
contract creating a continuing relationship despite the breach of the contract by
respondent and that the contract may, at trial, properly be construed as one of
adhesion granting to appellant the rights for which he contends. Accordingly, we
reverse the judgment.
Since the judgment results from trial court action sustaining a demurrer to appellant's
complaint, we treat the allegations in that pleading as true for the purposes of this
appeal. Respondent (Kaiser) is a nonprofit corporation offering health care services to
"members" of its health plan. Appellant became a member of Kaiser's plan by reason of
a "Group Medical and Hospital Service Agreement" between the Los [47 Cal. App. 3d
681] Angeles Unified School and City Junior College Districts and Kaiser. By reason of
appellant's membership, his wife and children also became members of the Kaiser plan.
Kaiser is obligated by the terms of the written contract to furnish medical care to
members of the plan but "only by Physicians and Hospitals as defined [in the written
plan]." "Hospitals" are defined as those which have contracted with Kaiser, and
"Physicians" are specified as those who are members of a medical group which has
similarly contracted. "Medical Office" is defined as an outpatient facility staffed by such
a medical group.
A "Schedule of Benefits," incorporated in the written contract, includes a segment
entitled "L. Out of Area Benefits." Subsections 1 and 2 of that segment provide for a
monetary coverage to a maximum of $1,000 reimbursement of medical expense arising
out of accidental injury or emergency illness occurring "more than thirty (30) miles from
[the member's] residence and outside the Service Area." "Service Area" is defined as
the portion of Los Angeles, Ventura, San Bernardino, Orange, and Riverside Counties
within 30 miles of a hospital or medical office under contract with Kaiser. The coverage
included, in subsections 1 and 2 of segment L, provides reimbursement for emergency
medical, hospital, and ambulance service. Subsection 1 is entitled "Accidental Injury
Outside Service Area" and subsection 2 is denominated "Emergency Illness Outside
Service Area." Subsection 3 of segment L bears the caption "Continuing or Follow-up
Treatment." It states: "Monetary payment on account of accidental injury or emergency
illness shall be limited to emergency care required before the Member can, without
medically harmful or injurious consequences, return to the Southern California Service
Area or a Hospital or Medical Office in the nearest Service Area. Benefits for continuing
or follow-up treatment shall be provided only at an appropriate Hospital or Medical
Office in the nearest Service Area."
On August 22, 1973, while covered by the Kaiser plan, appellant's wife Kathleen
Warren and two children were involved in a serious automobile accident. The children
burned to death in a resulting fire which consumed the wrecked automobile, while
Kathleen Warren was burned over 70 percent of her body. Rendered unconscious by
the injury, Mrs. Warren was not able to request that a fire department emergency
ambulance crew arriving at the scene take her to a Kaiser facility. The rescue
ambulance took her to the Sherman Oaks Community Hospital, [47 Cal. App. 3d 682]
the most accessible hospital equipped to render medical care to critical burn victims.
Appellant contacted Kaiser "seeking affirmation" that the Kaiser plan would reimburse
for expenses incurred in the treatment of Mrs. Warren at Sherman Oaks Community
Hospital. On August 31, Kaiser wrote appellant denying liability for Mrs. Warren's
treatment on the theory that expenses at other than a Kaiser contract hospital and
charges by physicians not under contract with Kaiser were not reimbursable. Kaiser
expressed the "hope" that Mrs. Warren could be transferred to a Kaiser hospital
"without undue delay." Mrs. Warren could not be transferred from Sherman Oaks
Community Hospital because of her critical condition.
Mrs. Warren remained at Sherman Oaks Community Hospital until September 10 when
she died of her injuries. In the 20-day period after the accident, appellant incurred over
$19,000 in medical and hospital expenses incident to the treatment afforded his wife.
On October 11, 1973, appellant demanded that Kaiser reimburse him for $2,000 of the
medical and hospital expense which he had paid, and that Kaiser pay the remainder of
the expenses incurred. Kaiser denied coverage on October 31 by a letter from its
counsel stating: "The relevant Kaiser Foundation Health Plan, Inc. Contract provides
that medical and hospital services be rendered at designated facilities. In any event,
Mr. Warren should have requested immediate transfer of his wife to the nearest Kaiser
Foundation Hospital, such as the Panorama City facility."
Ignoring the opportunity presented by the October 31 letter that might have impelled a
more avaricious plaintiff to assert a "bad faith denial of coverage" claim, appellant, on
February 11, 1974, filed the action in declaratory relief which commenced the case at
bench. The action was filed to secure an interpretation of pertinent coverage by the
Kaiser contract as a speedy resolution of the controversy between the parties in order
to avoid the multiplicity of actions that would otherwise result, as the persons and
entities that had rendered medical and hospital services to Mrs. Warren sued appellant
and appellant cross-complained against Kaiser.
Kaiser demurred to appellant's complaint, asserting that it does not state a cause of
action in declaratory relief because: (1) the cause of action asserted is on a matured
claim which should be adjudicated in [47 Cal. App. 3d 683] another form of action; and
(2) appellant's claim for reimbursement is not covered by the Kaiser plan. The trial
court sustained the demurrer, granting appellant 30 days leave to amend. Appellant did
not amend and the action was dismissed. This appeal followed.
The trial court erred in sustaining the demurrer since neither ground of demurrer is well
Code of Civil Procedure section 1060 provides: "Any person interested under a ...
contract ... may, in cases of actual controversy relating to the legal rights and duties of
the respective parties, bring an original action in the superior court ... for a declaration
of his rights and duties in the premises, including a determination of any question of
construction ... arising under such ... contract. He may ask for a declaration of rights or
duties, either alone or with other relief; and the court may make a binding declaration of
such rights or duties, whether or not further relief is or could be claimed at the time ..."
The broad scope of Code of Civil Procedure section 1060 is limited by section 1061
which states: "The court may refuse to exercise the power granted ... in any case where
its declaration or determination is not necessary or proper at the time under all the
 The discretion to refuse to entertain an action in declaratory relief vested in the trial
court by section 1061 is not unlimited. It may be exercised only when there is a basis in
fact for the conclusion that the declaration is not necessary or proper. (Columbia
Pictures Corp. v. DeToth, 26 Cal. 2d 753, 762 [161 P.2d 217, 162 A.L.R. 747]; 3 Witkin,
Cal. Procedure (2d ed.) Pleading, § 720.) Here there is an inadequate factual basis for
the conclusion drawn by the trial court.
Any doubt should be resolved in favor of granting declaratory relief. (3 Witkin, Cal.
Procedure (2d ed.) Pleading, § 721.)  While the court may refuse to entertain the
action where "the rights of the complaining party have crystallized into a cause of action
for past wrongs, [and] all relationship between the parties has ceased to exist ..."
(Travers v. Louden, 254 Cal. App. 2d 926, 929 [62 Cal.Rptr. 654]), it may not exclude
the action where the alternative remedy of suing upon the matured breach is not as
"speedy and adequate or as well suited to the plaintiff's needs as declaratory relief."
(Maguire v. Hibernia S. & L. Soc., 23 Cal. 2d 719, 732 [146 P.2d 673, 151 A.L.R. 1062];
3 Witkin, Cal. Procedure (2d ed.) Pleading, § 724.) A lawsuit for breach of contract is
neither as speedy and adequate nor as well suited as declaratory relief to [47 Cal. App.
3d 684] the plaintiff's needs where, despite the breach, a relationship between the
parties continues so that a declaration may guide their future conduct (Columbia
Pictures Corp. v. DeToth, supra, 26 Cal. 2d 753; Ermolieff v. R.K.O. Radio Pictures, 19
Cal. 2d 543, 549 [122 P.2d 3]), or where the use of declaratory relief will avoid a
multiplicity of suits that may ensue if a different remedy is pursued (California Bank v.
Diamond, 144 Cal. App. 2d 387 [301 P.2d 60]; see also Bridges v. Cal-Pacific Leasing
Co., 16 Cal. App. 3d 118, 127 [93 Cal.Rptr. 796]).
[3a] Here, although the complaint claims that Kaiser breached its contract, it also shows
on its face that the relationship between appellant and Kaiser is a continuing one since
appellant continued to be a member of the plan after the claimed breach. A declaration
of the right of a member of the plan for reimbursement of medical expense incurred in
an emergency so grave as to preclude access to Kaiser contract hospitals and
physicians will guide the future conduct of the parties. If nothing else, a declaration in
Kaiser's favor will be the warning that the plan may not be adequate to the needs of its
members, including appellant. fn. 1 Here, also, the remedy of declaratory relief will
avoid multiplicity of litigation. Appellant has incurred substantial obligations for the care
of his late wife. If those obligations must be reimbursed by Kaiser, threatened lawsuits
by those who provided the medical and hospital care will be avoided.
In summary, appellant pleaded a controversy concerning the construction of the
contract creating the Kaiser plan and facts establishing the proposition that declaratory
relief is faster, more adequate, and better suited than would be an action for breach of
contract. Under those circumstances, the trial court was in error in exercising its
discretion to deny the remedy.
The trial court's error was prejudicial.  While Code of Civil Procedure section 1060
entitles a plaintiff suing pursuant to its provisions to a declaration of rights and duties
even if the eventual declaration may be adverse (Bennett v. Hibernia Bank, 47 Cal. 2d
540 [305 P.2d 20]; 3 Witkin, Cal. Procedure (2d ed.) Pleading, § 730), error of the trial
court in refusing to entertain the action is nevertheless not prejudicial if it is clear from
the face of the complaint that the plaintiff's position is [47 Cal. App. 3d 685] untenable
and that a declaration adverse to the plaintiff will end the matter. (Haley v. L. A. County
Flood Control Dist., 172 Cal. App. 2d 285, 293 [342 P.2d 476]; 3 Witkin, Cal. Procedure
(2d ed.) Pleading, § 731.) [3b] Here that is not the case.
It is by no means clear that Kaiser's restrictive interpretation of its coverage will prevail
at trial. The contract is alleged as one of adhesion and must be construed strictly
against Kaiser to achieve the reasonable expectation of the members of the plan. While
the contract is generally one for the provision of medical services rather than a policy of
insurance in the strict sense, it does provide insurance coverage in the form of
compensation for medical expenses incurred in emergencies. The case at bench deals
with an emergent situation. Subsection 3 of segment L of the schedule of benefits,
which is particularly applicable here, is monumentally ambiguous. While subsections 1
and 2 of the segment bear headings indicating that they are applicable only to
emergency illness and accidental injury occurring outside the "Service Area,"
subsection 3 is headed "Continuing or Follow-up Treatment." By its terms, subsection 3
first provides for reimbursement of expenses incurred, but follows with the requirement
that the services be provided by a contract hospital or medical office, a requirement
which, if satisfied, would make reimbursement unnecessary because Kaiser is obligated
by other portions of the agreement to furnish services by its contract physicians and
hospitals without charge. Subsection 3 grants a right to reimbursement for emergency
care "required before the Member can, without medically harmful or injurious
consequences, return to the Southern California Service Area or a [contract] Hospital
or [contract] Medical Office in the nearest Service Area." (Italics added.) In view of the
virtual incomprehensibility of the language of subsection 3 when read with the contract
in general, the use of the disjunctive rather than conjunctive in the provision for
emergency treatment raises the reasonable expectation of a member of the plan that
should an emergency arise Kaiser will reimburse him for expenses of "follow-up care" if
he is either unable, because of the emergency, to return to the Southern California
area or enter a contract hospital or medical office without undue medical risk. That
construction validates appellant's claim for reimbursement.
Since the face of the complaint establishes the likelihood that appellant aided by
evidence may establish the validity of his position at trial, the action of the trial court in
denying him the opportunity to [47 Cal. App. 3d 686] proceed on his legally sufficient
complaint for declaratory relief is prejudicial. (See Jefferson Incorporated v. City of
Torrance, 266 Cal. App. 2d 300 [72 Cal.Rptr. 85].)
The judgment (order) is reversed.
Wood, P. J., and Lillie, J., concurred.
FN 1. Respondent argues that the relationship of Mrs. Warren with Kaiser terminated
with her death. The argument ignores the proposition that Mrs. Warren's relationship
with Kaiser was derivative from her husband's participation in group coverage and that
Mr. Warren's relationship is not shown to have terminated.
Kaiser Permanente bad faith denial of
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Conahan v. Sebelius and Kaiser
Foundation Health Plan, Inc.
November 20, 2014
By April Dembosky
A union of 2,500 mental
health clinicians at Kaiser
have voted to authorize a
strike, just one week after
Kaiser’s nurses went on
strike for two days.
Kaiser agreed to
pay a $4-million
fine levied by
The Department of
Managed Health Care
found patients were
subject to excessively long
wait times to get a therapy
appointment, or were
shuttled into groups when
they wanted individual
Psychiatric social worker
Clement Papazian says
various fixes, like after-
hours appointments, still
aren’t meeting demand.
“Kaiser has attempted to
make some changes, but
inadequate in really
addressing the full nature
of the problem,” he says.
“Our mental health
workers are really fed up.”
These complaints are part
of a long, drawn-out
between Kaiser and its
therapists. Bargaining has
been dragging on for four
years with no settlement.
And the small,
Union of Healthcare
Workers is eager to
make a name for
Union president Sal
Rosselli says the threat of
a statewide strike will
strengthen the union’s
position when they return
to the table next month.
“We’ve had it,” Rosselli
said. “We’re drawing a line
in the sand. And we’ll be
presenting Kaiser with a
final offer to resolve this
In a statement, Kaiser was
critical of the union’s strike
“After a long hiatus,
NUHW has now
Permanente to resume
bargaining in Northern
California. But for the
union to threaten a strike
before we even meet, and
to resort to clichéd
bargaining tactics, makes
us concerned about the
union’s intentions. We
hope the union will join us
in seeking solutions to the
challenges we face. But
whichever way the union
chooses to go, we are
going to continue to work
hard on our own to make
Kaiser says the union has
resisted several of its
proposals, like sending
some patients to non-
Kaiser therapists for
treatment. It says
increasing access to
mental health care is a
challenge faced by the
entire health care
industry, and Kaiser is
working hard to make