SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK : IAS PART 49
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DOLORES PAYTON, as administratrix of
the ESTATE OF ROBERT PAYTON,
Index No. 100440/99
Plaintiff,

-against-

AETNA/US HEALTHCARE, ROBERT ROY, M.D.,
Medical Director of Aetna/US Healthcare,
MARTIN KODISH, M.D., Medical Director of
Aetna/US Healthcare,
Defendants.
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Herman Cahn, J.:

Defendants Aetna/US Healthcare ("USHC"), Robert Roy, M.D., and Martin Kodish, M.D., move for an order dismissing thirteen of the fifteen causes of action contained in the complaint, the demand for punitive damages, and all claims asserted against Roy and Kodish, as individual plaintiffs, CPLR 3211(a)(7).
Robert Payton, plaintiff's decedent, was an attorney who was 42 years old at the time of his death. This action is brought by Dolores Payton, Robert Payton's mother and the Administratrix of his estate. The complaint alleges that defendants failed to provide certain health care benefits for decedent, in breach of the individual health care contract and a separate insurance indemnity policy which decedent had purchased from USHC, a health maintenance organization (HMO). Roy and Kodish are USHC medical directors.
The complaint contains fifteen causes of action sounding in contract and tort, including breach of implied and express contract, negligence, gross negligence, fraud, and medical malpractice.
Plaintiff bases the action on the following factual allegations:
On January 14, 1998, decedent was admitted to St. Vincent's Hospital for treatment following an accidental drug overdose. He was discharged on January 26, 1998. From January 25, 1998, through August 17, 1998, the day he died as a result of a second drug overdose, decedent repeatedly asked USHC to approve coverage for his admission to an inpatient facility for chemical dependency rehabilitation. USHC initially failed to respond to decedent's requests. Subsequently, decedent was advised that coverage existed but USHC refused to approve requests by decedent and the inpatient facilities for reimbursement of the facilities' fees, thus effectively making it impossible for decedent to obtain admission. USHC then denied coverage on the ground that decedent had not purchased the necessary rider to the insurance contracts. USHC subsequently gave decedent conflicting instructions regarding the filing of a grievance appealing the denial.
Following the denial, decedent filed a formal complaint against USHC with the Consumer Services Bureau of the State Insurance Department, on June 22, 1998. By letter dated August 7, 1998, the Health Care Bureau of the State Attorney General's Office advised USHC that decedent's contract "plainly" covers inpatient substance abuse rehabilitation. Decedent died on August 17, 1998. Eight days after his death, the USHC internal grievance appeal committee held a hearing regarding decedent's appeal of USHC's coverage denial and determined that coverage should have been approved.
THE COMPLAINT:
The complaint contains fifteen causes of action. Many of them are redundant of other causes of action and extremely repetitious. As best the court can determine, the causes of action are as follows:
First: Breach of Contract and Tort, etc. All defendants
Second: Negligence All defendants
Third: Negligence, Recklessness USHC
Fourth Gross Negligence in that USHC acted recklessly USHC
in making medical determinations by unlicenced persons
Fifth: Misrepresentation USHC
Sixth: Misrepresentation USHC
Seventh: Breach of Contract USHC
Eighth: Breach of Contract USHC
Ninth: Misrepresentation, breach of fiduciary duty USHC
Tenth: Negligent failure to supervise employees USHC
Eleventh: Violation of Statute - GBL 349(a) USHC
Twelfth: Breach of Warranty USHC
Thirteenth: Malpractice Roy and Kodish
Fourteenth: Breach of fiduciary duty Roy and Kodish
Fifteenth: Breach of fiduciary duty Roy and Kodish
THE MOTION:
Defendants now seek dismissal of the tort claims on the grounds that plaintiff's factual allegations evidence nothing more than the existence of a long-running dispute concerning the scope of coverage and the operation of USHC internal grievance procedures, rather than a dispute concerning appropriate medical treatment. Defendants argue that, therefore, the tort claims are fatally defective, either as duplicative of the contract claims or as wholly unsupported by plaintiff's factual allegations.
In opposition, plaintiff contends that USHC, in determining coverage issues, necessarily makes medical determinations regarding the type of care which will be rendered to an insured and that USHC's improper processing of decedent's repeated demands for coverage and decedent's appeal was negligent and a proximate cause of decedent's death.
The Court notes that United Policyholders, a nonprofit educational corporation whose cited purpose is to educate policyholders regarding their rights and duties under their insurance policies, has submitted an amicus curiae brief in support of plaintiff's opposition to the motion.
On a motion to dismiss a complaint for failure to state a cause of action, the court must accept each factual allegation of the complaint as true, without expressing an opinion as to whether the plaintiff ultimately will be able to establish the truth of the allegations (Morone v Morone, 50 NY2d 481 [1980]). If plaintiff is entitled to recovery upon any reasonable view of the facts, the complaint is legally sufficient (219 B'way Corp. v Alexander's, Inc., 46 NY2d 506 [1979]). However, allegations consisting of bare legal conclusions, as well as factual claims flatly contradicted by documentary evidence, are not entitled to a presumption of truth or accuracy (Beattie v Brown & Wood, 243 AD2d 395 [1st Dept 1997]; Ullmann v Norma Kamali, Inc., 207 AD2d 691 [1st Dept 1994]).
Defendants seek to dismiss the first cause of action1 on grounds that it includes improper claims of tortious conduct and is duplicative of the contract claim.
In the first cause of action, plaintiff alleges that decedent was entitled to detoxification treatment benefits pursuant to the subject insurance policies and that defendants knew or should have known that decedent was suffering from serious physical and mental problems, including drug and alcohol addiction, and yet failed to exercise reasonable care in processing decedent's numerous demands for coverage and requests for an appeal of USHC's coverage denial. The claim includes elements of a variety of legal theories, including breach of contract, negligence, gross negligence, fraud and medical malpractice. Thus, the claim is procedurally defective because it intermingles claims of contract and negligence (see, CPLR 3014). More significantly, however, the cause of action duplicates the majority of the tort and contract claims asserted in the balance of the complaint. Therefore, paragraphs 13 to 30 of the complaint are stricken as redundant.
In the second and fourth causes of action, for negligence and gross negligence, plaintiff alleges that defendants failed to exercise reasonable and appropriate care and diligence in the consideration of the applications by decedent for health care benefits and in the processing of decedent's appeal of USHC's coverage denial. Plaintiff further alleges that defendants' wrongful repeated failure to approve decedent's numerous demands for reimbursement for rehabilitation expenses directly resulted in decedent's failure to overcome his medical and psychiatric problems and in his death.
These claims, when liberally construed are legally cognizable. Rather than claims for the benefit of a simple contractual bargain, plaintiff has here asserted claims to recover for damages which more commonly arise in the tort context. In the circumstances presented here, a recovery in tort may well be greater than a recovery based merely on the contract claim, which may be limited to recovery of the premiums paid by decedent. "A legal duty independent of contractual obligations may be imposed by law as an incident to the parties' relationship. Certain professionals . . . may be found subject to tort liability for failure to exercise reasonable care, irrespective of their contractual duties. . . . In these instances, it is policy, not the parties' contract, that gives rise to a duty of care," (Sommer v Federal Signal Corp., 79 NY2d 540, 551 [1992]), holding that tort claims asserted against a fire alarm company for failure to provide certain contractual services are legally viable).
Plaintiff has alleged in sufficient detail incidents of significant apparently unwarranted delay and confusion in the processing of decedent's requests for coverage and decedent's appeal and in the instructions given to decedent, which, if proven, may be found by the trier of fact to give rise to an inference of reckless disregard for decedent's health and well-being (see, Sommer v Federal Signal Corp., supra, at 554, Voorhis v Consolidated Rail Corp., 60 NY2d 878 [1983]).
In the context of a consumer who has purchased a "health care" policy with an HMO, and who then finds himself or herself requiring treatment, the HMO should be held to a high standard in the manner in which it executes its contractual obligations. Decisions on applications should be expeditiously made, and reviews of those decisions on internal appeal should be resolved quickly. This is especially so, because the consumer, as occurred here, often needs immediate hospitalization or admission to a medical or rehabilitative facility. USHC is undoubtedly aware of the precarious health conditions involving the holders of its policies. Thus, it may be implied to have undertaken a duty of acting in its decision making function with a high degree of care. Plaintiff has sufficiently pleaded a breach of this duty, to withstand dismissal on a pleading motion.
For these reasons, the branch of the motion seeking to dismiss the second cause of action is denied.
In the third and thirteenth causes of action, plaintiff asserts claims of medical malpractice against all three defendants and a claim for breach of "professional conduct" against Roy and Kodish, in their capacities as medical doctors.
The third cause of action asserted against USHC is barred by Public Health Law, §4410[1], which provides, in relevant part:


The section has been interpreted as exempting an HMO from malpractice liability where the HMO has merely determined coverage issues (see, e.g., Sciarretta v Multi-Speciality Med., P.C., NYLJ, Sept. 5, 1996, at 25, col 1 [Sup Ct, Kings County 1996]; Kirkland v Health Ins. Plan of Greater N.Y. d/b/a HIP, NYLJ, Apr. 29, 1996, at 31, col 6 [Sup Ct, Suffolk County 1996]). The Court concurs with the reasoning set forth in these decisions. Accordingly, since an HMO does not practice medicine, it cannot be liable for the negligence or malpractice of the person rendering professional services. This is not a situation where the HMO erased the line separating its administrative and medical treatment functions (see, Blaine v Community Health Plan, 179 Misc 2d 331 [Sup Ct, Albany County 1998]).
Plaintiff's argument that a utilization review by an HMO constitutes the practice of medicine is irrelevant. The Public Health Law defines a utilization review, in relevant part, as a review "to determine whether health care services . . . proposed to be provided to a patient . . . are medically necessary," (Public Health Law § 4900[8]) and specifically excludes "[a]ny determination of any coverage issues other than whether health care services are or were medically necessary," (Public Health Law § 4900[8][e]). The record amply demonstrates that defendants did not perform a utilization review of decedent's proposed rehabilitation treatment. The statute is consistent with the prior common law that held that an HMO that does not itself render medical service or care cannot be held liable for malpractice (Mitts v H.I.P. of Greater New York, 104 AD2d 318 [1st Dept 1984]; Sciarretta v Multi-Speciality Med., P.C., NYLJ, Sept. 5, 1996, at 25, col 1, supra).
The thirteenth and fourteenth causes of action for medical malpractice and breach of a fiduciary duty to render appropriate medical care asserted against Roy and Kodish are fatally defective.
Although the Public Health Law expressly permits the assertion of tort claims directly against individuals for their conduct while, or supervising others who are, "rendering professional services on behalf of an [HMO]," (Public Health Law § 4410[1]), here, plaintiff has failed to allege any facts from which an inference of malpractice by either Roy or Kodish may be drawn. To be legally viable, a claim for medical malpractice must include allegations of the existence of an express or implied doctor-patient relationship (Violandi v City of New York, 184 AD2d 364 [1st Dept 1992]; McKinney v Bellevue Hosp., 183 AD2d 563 [1st Dept 1992]). Plaintiff has failed to allege any facts tending to establish the existence of a doctor-patient relationship between either Roy or Kodish and decedent. In addition, the record is devoid of any such documentary evidence. The limited correspondence by Roy or Kodish to decedent cited by plaintiff conclusively demonstrates that each rendered coverage determinations only (see, Roy letter dated March 18, 1998; Kodish letter dated June 15, 1998).
The fourth cause of action contains allegations of gross negligence against USMC. But said allegations are based on the allegation that USMC is not licensed to practice medicine, and by making unlicenced medical determinations, it was liable for gross negligence. In view of the provision of § 4410 (i) P.H.L., no actionable claim is stated, and the cause of action is dismissed.
In the fifth cause of action for fraudulent misrepresentation, plaintiff alleges that, when offering its policies to decedent, USHC fraudulently and negligently misrepresented the benefits and health care services covered under those policies and the grievance procedures to be followed in the event that benefits are denied. The fraudulent inducement claim is dismissed as duplicative of the breach of contract claim. "A failure to perform promises of future acts is merely a breach of contract to be enforced by an action on the contract," (Tesoro Petroleum Corp. v Holborn Oil Co., 108 AD2d 607, 607 [1st Dept 1985]). Where the claim is "premised solely upon an alleged breach of contractual duties and the supporting allegations do not concern representations which are collateral or extraneous to the terms of the parties' agreement, a cause of action sounding in fraud does not lie" (McKernin v Fanny Farmer Candy Shops, Inc., 176 AD2d 233, 234 [2d Dept 1991]). Therefore, the fifth cause of action is dismissed.
In the sixth cause of action, plaintiff alleges that, during the term of the policies, USHC issued numerous written and oral communications to decedent containing fraudulent misrepresentations regarding the scope of coverage and the appeals procedure.
This claim is legally viable. The essential elements of a claim of fraud are: representation of a material existing fact, falsity, scienter, deception and injury (New York Univ. v Continental Ins. Co., 87 NY2d 308 [1995]). Scienter may be proven by demonstrating either direct knowledge of the true facts or reckless indifference to error (Skrine v Staiman, 30 AD2d 707 [2d Dept 1968], affd 23 NY2d 946 [1969]). Plaintiff has sufficiently alleged the existence of intentional and negligent misrepresentations in USHC's communications to decedent, including advising that coverage for the rehabilitation treatment requested was available, yet not approving treatment; not recognizing that decedent had previously requested coverage and that coverage had been denied; and then advising coverage was not available. Therefore, that branch of the motion to dismiss the sixth cause of action is denied.
The motion does not challenge the sufficiency of the seventh cause of action.
In the eighth cause of action, plaintiff alleges that USHC "in bad faith and gross disregard for the harmful consequences on the decedent, . . . , breached the insurance contract" (complaint, ¶ 63). New York does not recognize a cause of action for malicious, willful or bad-faith failure to perform a contractual obligation (McMahan & Co. v Bass, 250 AD2d 460 [1st Dept], lv dismissed in part, denied in part 92 NY2d 1013 [1998]). Therefore, the branch of the motion to dismiss the eighth cause of action is granted.
In the ninth cause of action, plaintiff alleges that USHC breached its fiduciary duty to decedent because USHC "had superior expertise or knowledge about health care and medical services, the availability of urgently needed care, and the process by which benefits could be appealed or grieved," (complaint, ¶ 67). Plaintiff has failed to allege the existence of a fiduciary duty arising out of, or extraneous to, the subject policies and has merely re-alleged the breach of contract claim (see, Charles v Onondaga Community Coll., 69 AD2d 144 [4th Dept 1979]). Therefore, that branch of the motion to dismiss the ninth cause of action, is granted.
In the tenth cause of action, plaintiff alleges that USHC negligently supervised Roy, Kodish and other USHC employees who processed decedent's coverage requests and appeals. Plaintiff further alleges that USHC should have known that its employees' conduct included unconscionable delay and the issuance of irresponsible and conflicting communications to decedent. When stripped of legal assumptions and conclusions and the familiar tort jargon, this claim is nothing more than an impermissible restatement of a claim for breach of contract and is, therefore, dismissed (see, Comtomark Inc. v Satellite Communications Network, Inc., 116 AD2d 499 [1st Dept 1986]).
In the eleventh cause of action, plaintiff alleges that USHC violated the statutory prohibition against deceptive business practices (Gen. Bus. Law § 349[a]). To state a valid claim of deceptive business practices, a plaintiff must allege that the alleged misconduct was part of a larger pattern of misconduct directed at the consuming public at large (New York Univ. v Continental Ins. Co., 87 NY2d 308 [1995]).
To allege such a violation, the conduct must be consumer-oriented and have a broad impact on consumers at large (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20 [1995]). A prima facie case also requires a showing that USHC is engaging in an act or practice that is deceptive or misleading in a material way and that plaintiff has been injured by reason thereof (Oswego Laborers' Local 214 Pension Fund, supra).
Plaintiff alleges that USHC engaged in deceptive acts regarding the way in which it advised the decedent of the availability of health care benefits and the availability of the appeal and grievance processes. At this stage of the litigation, the pleading validly states a cause of action. Unlike the situation presented in New York Univ. v Continental Ins. Co., supra, this is not simply a private dispute that does not affect the consuming public at large. Indeed, managed health care has a pervasive influence in the administration of health care, and the benefits required to obtain such care, in New York and the rest of the Country.
In New York Univ. v Continental Ins. Co., the Court of Appeals noted that the parties involved a major university acting through its director of insurance and a large national insurance company, and the action concerned a nonstandard policy for theft. The annual premiums were in excess of $55,000 and the policy provided coverage for losses up to $10 million. The situation presented here is more analogous to Oswego Laborers' Local 214 Pension Fund, supra, which involved standard documents that were not unique to the individual parties involved and which involved disparate bargaining positions (see, NY Univ. v Continental Ins. Co., supra, at 319).
In the twelfth cause of action, plaintiff alleges that defendants breached the express or implied warranties of merchantability and fitness for purpose. This claim is defective on its face and is, therefore, dismissed. The subject health care contract is a contract for services, not the sale of goods; therefore, these warranties are not applicable (see, Perazone v Sears, Roebuck & Co., 128 AD2d 15 [3d Dept 1987]; UCC § 2-101, et seq.)
The fifteenth cause of action for breach of "professional conduct" asserted against Roy and Kodish is dismissed without opposition.
To the extent that the remaining causes of action include claims against Roy and Kodish, those claims are dismissed. As to the contract claim, neither Roy nor Kodish are parties to the subject policies, nor can they be held individually liable for USHC's breach, if any, of the terms of the insurance policies (see, Rampell, Inc. v Hyster Co., 3 NY2d 369 [1957]; Bonanni v Straight Arrow Publs., Inc., 133 AD2d 585 [1st Dept 1987]). And, as discussed above, plaintiff does not allege any facts demonstrating the existence of a doctor-patient relationship between either of these defendants and the decedent or that either rendered any medical determination or opinion regarding decedent's condition or care.
That branch of the motion seeking to strike the punitive damages demand is granted. Generally, "[p]unitive damages are not recoverable for an ordinary breach of contract as their purpose is not to remedy private wrongs but to vindicate public rights" (Rocanova v Equitable Life Assur. Soc. of U.S., 83 NY2d 603, 613 [1994]). A private party may seek to recover punitive damages by demonstrating egregious tortious conduct by which the party was aggrieved, and that such conduct was part of a pattern of similar conduct directed at the public generally (Id.). However, the allegations of the complaint do not meet the tests set forth in Rocanova, supra. However, after discovery has been had, plaintiff may, if she feels it warranted, move to restore a properly pleaded claim for punitive damages. The court will revisit the issue if it is then raised.
The Court has considered the remaining arguments of the parties and finds them to be without merit.
Accordingly, it is
ORDERED that the motion is granted to the extent that the (complaint, ¶¶ 13-30) first, third, fifth, eighth, ninth, tenth, twelfth, thirteenth, fourteenth, and fifteenth causes of action, and all claims asserted against defendants Robert Roy, M.D., and Martin Kodish, M.D., are severed and dismissed; and it is further
ORDERED that the demand for punitive damages is stricken with leave to move to restore, after discovery is had; and it is further
ORDERED that the action in all other respects continues; and it is further
ORDERED that plaintiff serve an amended complaint, reflecting this decision, and removing the redundant and repetitious allegations, within twenty days of service of a copy of the decision on plaintiff's attorney.
This constitutes the decision and order of the Court.
Dated: March , 2000
ENTER:

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J.S.C.

1 Plaintiff has not labeled this claim in any manner; however, a reading of the complaint indicates that the first cause of action is set forth in paragraphs numbered 13 through 30.