FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER
IN THE INTERMEDIATE COURT OF APPEALS
oF THE STATE oF HAWAI‘I
---o0o---
BERT YOGI and DARNELL YOGI,
Plaintiffs-Appellees
v.
HAWAlI MEDICAL SERVICE ASSOClATION,
Defendant-Appellant
and
JOHN DOES l~99, JANE DOES l-99, DOE ENTITIES
l-20, AND DOE GOVERNMENTAL UNITS l-lO,
Defendants `
98 =9 ¥%‘J LZ §IIW B!UZ
NO. 29l45
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
- (CIVIL NO. 08-l-Ol47)
AUGUST 27, 2010
NAKAMURA, CHIEF JUDGE, FOLEY, and GINOZA, JJ.
OPINION OF THE COURT BY GINOZA, J.
Defendant-Appellant Hawaii Medical Service Association
appeals from the Order Denying HMSA's Motion to Compel
2008 in the Circuit Court
(HMSA)
Arbitration
of the First Circuit
below, HMSA sought to compel arbitration of claims brought by
(the Yogis) for
(Order) filed on April 9,
(circuit court).l By way of its motion
Plaintiffs-Appellees Bert Yogi and Darnell Yogi
bad faith, intentional infliction of
(IIED), and negligent infliction of emotional
allegations
breach of contract,
emotional distress
distress (NIED). These claims stem from the Yogis'
that, over a period of time, HMSA denied and delayed coverage for
a medical procedure recommended by Bert Yogi's physician.
1 The Honorable Sabrina S. McKenna presided.
GE"!L£
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On appeal, HMSA contends the circuit court erred in
denying its motion to compel arbitration because the Yogis'
claims are within the scope of an arbitration provision contained
in an HMSA Preferred Provider Plan. For the reasons set forth
below, we conclude that the circuit court was correct in denying
HMSA's motion to compel arbitration.
I. Background y
A. Request For Preauthorization of Medical Procedure
The parties do not dispute the facts in this case. In
l997, while working, Bert Yogi (Mr. Yogi) sustained injuries to
his shoulder, neck, and back which resulted in multiple surgeries
between 1998 and mid-2003. Over the years, Mr. Yogi received
various medications to alleviate the pain.
In February 2005, while Mr. Yogi was enrolled in HMSA's
Preferred Provider Plan for Hawaii Employer-Union Health Benefits
Trust Fund (Plan), his physician, Dr. Endicott, submitted a
preauthorization request to HMSA for an intrathecal infusion pump
to treat Mr. Yogi.2 HMSA denied coverage, initially on the basis
that Mr. Yogi was covered by workers' compensation insurance and
then later, after being informed the workers' compensation
insurer had denied coverage, on the basis that, inter alia, the
intrathecal infusion pump was not medically necessary.
In June 2005, Dr. Endicott requested that HMSA
reconsider its denial of preauthorization for the intrathecal
infusion pump. HMSA upheld its denial.
In January 2006, Mr. Yogi appealed HMSA's denial under
an internal appeal process set out in the Plan. Later that
month, HMSA issued its internal appeal decision denying coverage,
2 HMSA states that "[a]n intrathecal pump consists of a programmable
pump that is surgically implanted in the abdominal area and connected to a
catheter that is inserted into the intrathecal space of the spine. The pump
sends morphine directly into the cerebr0spinal fluid that surrounds the spinal
cord. The morphine blocks the neurotransmitters that the brain perceives as
pain."
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In February 2006, Mr. Yogi sought external review by
initiating a proceeding with the Hawafi Insurance Commissioner.
Such external review was provided for under the terms of the
Plan, as required pursuant to Hawaii Revised Statutes (HRS) §
432E-6 (2005 Repl.). A hearing was held before a three-member
panel selected by the Insurance Commissioner and, in July 2006,
the Insurance Commissioner issued a decision reversing HMSA's
denial of coverage for the intrathecal infusion pump. Mr. Yogi
thereafter underwent the procedure for placement of the
intrathecal infusion pump.
B. The Instant Lawsuit
On January 23, 2008, the Yogis initiated this action in
the circuit court, alleging that HMSA acted unreasonably,
wantonly, and oppressively in denying the preauthorization
request for the intrathecal infusion pump. In their complaint,
the Yogis assert claims for breach of contract, bad faith, IIED
and NIED, and seek damages.
On February l3, 2008, HMSA filed a Motion to Compel
Arbitration. After a hearing on March l8, 2008, the circuit
court issued its April 9, 2008 Order denying the motion, stating
in relevant part:
Defendant failed to identify any provision in the Plan for
disputes involving bad faith claims, and a provision for
further remedies such as those Plaintiffs are pursuing in
this case is also absent from the clause pertaining to a
review by the panel. Chapter 8 of the Plan does not,
therefore, mandate arbitration of Plaintiffs' claims herein.
On May 7, 2008, HMSA filed a Notice of Appeal from the
Order denying the motion to compel arbitration.
II. Standards of Review
A. Motion to Compel Arbitration
We review a ruling on a motion to compel arbitration de
novo and based on the same standards that apply to a summary
judgment ruling. The Hawafi Supreme Court has articulated the
applicable standards as follows:
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The trial court can only decide, as a matter of law, whether
to compel the parties to arbitrate their dispute if there is
no genuine issue of material fact regarding the existence of
a valid agreement to arbitrate. See Par-Knit Mills, Inc. v.
Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d Cir.1980).
Therefore, we hold that the standard of review applicable to
the trial court's decision in this case should be that which
is applicable to a motion for summary judgment. Accordingly,
we review this case de novo, using the same standard
employed by the trial court and based upon the same
evidentiary materials "as were before [it] in determination
of the motion."
Koo1au Radio1oqV, Inc. v. Queen's Medical Center, 73 Haw. 433,
439-40, 834 P.2d 1294, 1298 (1992) (citations omitted). §§§
also, Brown v. KFC Nat'1 Mqmt. Co., 82 Hawafi 226, 231, 921 P.2d
146, 151 (l996); Peters v. Aipa, 118 HawaiT.308, 312-13, 188
P.:zd 322, 326-27 (App. 2008).
B. Contract Interpretation
The standard of review applicable to the circuit
court's interpretation of the arbitration agreement is as
follows:
As a general rule, the construction and legal effect
to be given a contract is a question of law freely
reviewable by an appellate court. The determination whether
a contract is ambiguous is likewise a question of law that
is freely reviewable on appeal. These principles apply
equally to appellate review of the construction and legal
effect to be given a contractual agreement to arbitrate.
Brown, 82 Hawai‘i at 239, 921 P.2d at 159 (internal quotation
marks and citations omitted).
III. Discussion
As set forth by the Hawai‘i Supreme Court:
"when presented with a motion to compel arbitration, the
court is limited to answering two questions: 1) whether an
arbitration agreement exists between the parties; and 2) if
so, whether the subject matter of the dispute is arbitrable
under such agreement.“ Koblau Radiology, Inc. v. Queen's
Med. Ctr., 73 HaW. 433, 445, 834 P.2d 1294, 1300 (1992); see
also Luke v. Gentry Realty, Ltd., 105 Hawafi 241, 247, 96
P.3d 26l, 267 (2004) ("Even though arbitration has a
favored p1ace, there still must be an underlying agreement
between the parties to arbitrate." (Citation and internal
quotation marks omitted.)).
Hawaii Medica1 Ass'n v. Hawaii Medical Service Ass'n, 113 HawaiU.
77, 91, 148 P.3d 1179, 1193 (2006).
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Here, there is no dispute that an arbitration provision
is contained as part of Chapter 8 of the Plan. The crux of this
case, therefore, is whether the claims asserted by the Yogis in
this action come within the scope of that arbitration provision.
Because there are no genuine issues of material fact and the
issue presented turns on contract interpretation, we decide the
issue on appeal as a matter of law.
A. The Relevant Provisions Of The Plan
Given that our "principal objective is to ascertain and
effectuate the intention of the parties as manifested by the
contract in its entirety", §rgwn, 82 Hawai‘i at 240, 921 P.2d at
160 (citation omitted), and to give proper context to the
arbitration provision in this case, we set out all of the
pertinent parts of Chapter 8 of the Plan.
Chapter 8: Dispute Resolution
Your Request for an Appeal
Writing Us to Request an Appeal
If you wish to dispute a determination made by HMSA related
to coverage, reimbursement, any other decision or action by
HMSA, or any other matter related to this Aqreement, you
must request an appeal. Your request must be in writing
unless you are requesting an expedited appeal. We must
receive it within one year from the date of the action or
decision you are contestinq. In the case of coverage or
reimbursement disputes, this is one year from the date we
first informed you of the denial or limitation of your
claim, or of the denial of coverage for any requested
service or supply.
We will respond to your appeal within 60 calendar days of our
receipt of your appeal.
Expedited Appeal w
You may request expedited appeal if application of the time
periods for appeals above may:
l Seriously jeopardize your life or hea1th,
l Seriously jeopardize your ability to gain maximum
functioning, or
l Subject you to severe pain that cannot be adequately
managed without the care or treatment that is the
subject of the appeal.
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What Your Request Mnst Include
To be recognized as an appeal, your request must include all
of the following information:
l The date of your request.
l Your name.
l The date of the service we denied or date of the
contested action or decision (or in the case of
precertification for a service or supply, the date of
our denial of coverage for such service or supply).
l The subscriber number from your member card.
l The provider name.
l A description of facts related to your request and why
you believe our action or decision was in error.
l Any other information relating to your appeal
including written comments, documents, and records you
would like us to review.
If You Disagree with Our Appeal Decision
Request for Arbitration
If you disagree with HMSA's appeals decision, you must
either 1) request arbitration before a mutually selected
arbitrator, or 2) request a review by a panel appointed by
the Hawaii State Insurance Commissioner.
. . You must have fully complied with HMSA's appeals
procedures described above and we must receive your request
for arbitration within one year of the decision rendered on
appeal. In arbitration, one person (the arbitrator) reviews
the positions of both parties and makes the final decision
to resolve the disagreement. No other parties may be joined
in the arbitration. The arbitration is binding and the
parties waive their right to a court trial and jury.
. The questions for the arbitrator shall be whether we
were in violation of law, or acted arbitrarily,
capriciously, or in abuse of our discretion. The
arbitration shall be conducted in accord with the Federal
Arbitration Act, 9 U.S.C. §1 et seq., and such other
arbitration rules as both parties agree upon.
Request for Review by Insurance Commissioner
You may request review by a panel selected by the Hawaii
Insurance Commissioner by submitting a request for review
within 60 days of the date of HMSA's appeals decision to the
Insurance Commissioner at:
If your request for review is accepted by the Commissioner,
the Commissioner will appoint a three member panel composed
of a representative from another health plan, a provider not
involved in your care, and a representative from the
Commissioner‘s office. A hearing will be conducted within
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60 days and the panel will issue a decision within 30 days
of the hearing.
You may request expedited review by the Insurance
Commissioner if application of the above time frames may:
l Seriously jeopardize your life or health,
l Seriously jeopardize your ability to gain maximum
functioning, or
l Subject you to severe pain that cannot be adequately
managed without the care or treatment that is the
subject of the appeal.
(Emphasis added.)
In addition to the above, Chapter 10 of the Plan
contains a provision that the Yogis contend is relevant. lt
states:
Chapter 10: General Provisions
Dues and Terms of Coverage
Governing Law
To the extent not superseded by the laws of the United
States, this coverage will be construed in accord with and
governed by the laws of the state of Hawaii. Any action
brought because of a claim aqainst this coverage will be
litiqated in the state or federal courts located in the
state of Hawaii and in no other.
(Emphasis added.)
B. Scope Of The Arbitration Provision
The Hawafi Supreme Court has stated:
"Although the public policy underlying Hawafi law
strongly favors arbitration over litigation, the mere
existence of an arbitration agreement does not mean that the
parties must submit to an arbitrator disputes which are
outside the scope of the arbitration agreement." Brown v.
KFC Nat'l Mgmt. Co., 82 Hawai‘i 226, 244, 921 P.2d 146, 164
(1996) (citation and internal quotation marks omitted).
"What issues, if any, are beyond the scope of a contractual
agreement to arbitrate depends on the wording of the
contractual agreement to arbitrate." Rainbow Chevrolet,
Inc. v. Asahi Jyu)