Plaintiffs assert claims against PHN and CareAmerica under three legal theories of the law of California (the state where most of the plaintiffs reside): (1) negligence; (2) negligence per se; and (3) aiding and abetting breach of fiduciary duty. All three claims fail as a matter of law.
The Standard for Decision
Summary judgment is appropriately granted pursuant to Fed. R. Civ. P. 56 where there is no genuine issue of material fact as to any essential element of the claim, and when, based upon facts not in dispute, the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert. denied, 116 L. Ed. 2d 117, 112 S. Ct. 152 (1991).
When a motion for summary judgment is made, the non-moving party may not rely solely on the pleadings, but by affidavits, depositions, answers to interrogatories, and admissions must show that there are specific facts demonstrating that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The task for the court is not to resolve disputed issues of fact, but to "assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987).
The Negligence Claims
Plaintiffs assert that PHN and CareAmerica had a duty to avoid conduct that would foreseeably cause harm to plaintiffs, and that PHN and CareAmerica both breached this duty when they contracted with unlicensed insurers to precertify "insureds." Plaintiffs contend that it was foreseeable to both PHN and CareAmerica that non-admitted insurers could victimize the plaintiffs herein and precertification might assist in the execution of that fraud. Defendants respond that, as a matter of law, they did not owe a duty of care to plaintiffs to investigate the alleged insurance carriers. Defendants contend that the connection between PHN's and CareAmerica's "conduct" and plaintiffs' injuries is too remote to support a duty to plaintiffs to investigate the financial accountability of the insurance companies with whom they had precertification contracts.
The issue raised herein is whether defendants owed plaintiffs a duty of due care that would have required PHN and CareAmerica to undertake at least some cursory investigation of the companies for whom it was performing precertifications. The parties offer no precedent on the scope of the duties, if any, a precertifier owes to prospective insurance applicants. Nor has this court's own research revealed any precedent that would impose upon precertifiers a duty running to the claimants or prospective insurance applicants to investigate the status of the insurance carriers with whom the precertifiers contract.
It is clear that the precertifiers and plaintiffs did not share any sort of contractual relationship. In the absence of privity, the California Supreme Court has held: "The determination when in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors among which are the extent to which the transaction was intended to affect plaintiff, the foreseeability of harm to him, the degree of certainty that plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, and the policy of preventing future harm." Biakanja v. Irving, 49 Cal. 2d 647, 320 P.2d 16 (1958). Key among these factors in the instant case is the proximity of the connection between the precertifiers' conduct and the plaintiffs' injury. The connection between PHN's and CareAmerica's "conduct" and plaintiffs' injuries is simply too remote to support the imposition upon plaintiffs of a duty to investigate the financial status of the insurance companies to whom the precertifiers submitted their evaluations. Notwithstanding plaintiffs' assertions to the contrary, it is not evident that the precertifiers' conduct was the cause in fact -- let alone the "proximate cause" -- of any loss incurred by the beneficiaries. Without more, plaintiffs' contentions that precertifiers' acts conferred a deceptive air of legitimacy to the situation cannot be the basis for the imposition of a duty to investigate the purported insurers or any other part of the fraudulent scheme.
The Negligence Per Se Claims
Plaintiffs contend that California statutes prohibit non-admitted insurance companies from issuing medical insurance to citizens of that state. Moreover, they contend that California Insurance Code § 1761 prohibits any person from transacting any business of insurance with a non-admitted insurer, unless the insurance complies with California's surplus lines laws. Plaintiffs contend that the precertification contracts entered into by PHN and CareAmerica with the non-admitted insurers or their third-party administrator agents violated Insurance Code § 1761 and were therefore illegal.
However, the statutory provision plaintiffs cite applies only to insurance brokers who "place" insurance, and is thus inapplicable to the precertifiers. Section 1761 states:
§ 1761. Placing insurance with nonadmitted insurer
Except as provided in Sections 1760 and 1760.5, a person within this State shall not transact any insurance on property located or operations conducted within, or on the lives or persons of residents of this State with nonadmitted insurers, except by and through a surplus line broker licensed under this chapter and upon the terms and conditions prescribed in this chapter.