Alison Denham recently received a favorable decision for her client, Healthsource Maine, establishing that the spouse of a state employee alleging that his HMO has wrongfully denied him benefits must first bring his complaint through the internal appeals process and then to the State Employee Health Commission (SEHC) prior to seeking damages in the Superior Court. The court has stayed further proceedings in the case until plaintiffs follow the proper procedure.
Robert and Patricia Menneally filed suit in the Superior Court against Healthsource Maine alleging violations of Maine’s Unfair Claims Settlement Practices Act, breach of contract, as well as intentional and negligent infliction of emotional distress based on the alleged denial of various extended and long-term therapies after Robert Menneally’s stroke. Ms. Denham filed a summary judgment motion on behalf of Healthsource asserting, among other things, that the plaintiffs could not pursue damages against Healthsource in the Superior Court until they exhausted their administrative remedies.
The Bureau of Insurance has required all HMOs doing business in Maine to formulate internal appeals procedures for the resolution of members’ complaints. Healthsource has complied with this mandate by developing an internal appeals process, which is explained in its Group Subscriber Agreement. This plan for state employees also provided a unique final tier of administrative review. Once the member exhausts the internal appeal process yet remains dissatisfied with the outcome, he may bring further appeal to the State Employee Health Commission.
On the basis of the aforementioned arguments, Justice Robert E. Crowley held that the plaintiffs’ breach of contract claims as well as their claims under Maine’s Unfair Claims Settlement Pract ces Act must be stayed pending the exhaustion of the available administrative remedies.
Justice Crowley made two additional significant findings in his order. First, he makes clear that the Maine Unfair Claims Settlement Practices Act applied to HMOs as of June 30, 1998. Second, Justice Crowley declined to grant Healthsource’s motion for summary judgment on the emotional distress claims. Rather than relying on the clear precedent that emotional distress claims are inappropriate when they arise out of the denial of coverage itself, Justice Crowley chose instead to leave the door open for the plaintiffs to establish emotional distress on their claim that Healthsource did not provide adequate case management services.
