Adams v. Hawaii Medical Service Association, 450 P.3d 780 (2019)

Facts

  • Brent Adams was diagnosed in August 2005 with stage III multiple myeloma. His doctors recommended a tandem approach: an autologous stem-cell transplant followed two to four months later by an allogenic stem-cell transplant using a matched sibling donor.
  • On November 1, 2005, Brent and his wife, Patricia Adams, notified their health insurer, Hawaii Medical Service Association (HMSA), of the diagnosis and asked for information about transplant facilities.
  • HMSA directed them to City of Hope in Duarte, California, an HMSA-approved transplant center. Brent and HMSA communicated over the following months about transplant-related coverage and precertification steps.
  • On December 15, 2005, Brent’s physician (Dr. Stein) sought precertification for the autologous transplant and noted that siblings would be tested to support a later allogenic transplant.
  • HMSA approved the autologous transplant but denied coverage for sibling donor testing at that time, stating it would reimburse testing only after a matched donor was identified.
  • On February 6, 2006, HMSA provided instructions for submitting a precertification request for an allogenic transplant.
  • On February 22, 2006, Brent told HMSA that a sibling was a match. HMSA replied that precertification was required, while also assuring Brent that his “care plan” and “goals remain appropriate and on target.”
  • On March 2, 2006, Dr. Stein submitted a precertification request for the allogenic transplant. On March 6, HMSA denied the request as “investigational.” Dr. Stein and the Adamses stated they were surprised because HMSA had not previously indicated that an allogenic transplant would not be covered.
  • In February 2007, Dr. Stein again sought approval for the allogenic transplant; HMSA again denied it.
  • In April 2007, the Hawaiʻi Insurance Commissioner reversed HMSA’s denial and ordered HMSA to provide coverage. HMSA appealed that administrative decision to circuit court.
  • The Adamses filed a separate civil action alleging HMSA acted in bad faith in administering Brent’s claim for the allogenic transplant. Their bad-faith case was stayed while the coverage dispute proceeded.
  • The coverage litigation ultimately resulted in a ruling that the plan expressly excluded coverage for the allogenic transplant. Even so, the bad-faith claim continued as a claim focused on HMSA’s conduct rather than entitlement to benefits.
  • After remand, the circuit court granted HMSA summary judgment on bad faith. The Intermediate Court of Appeals (ICA) affirmed, reasoning HMSA’s good-faith duty arose only when the allogenic precertification request was formally submitted on March 2, 2006, and HMSA denied it four days later. The Hawaiʻi Supreme Court granted certiorari.
  • Brent died less than three years after diagnosis; Patricia continued as personal representative of his estate and in her individual capacity.

Issues

  1. Whether an insurer’s duty of good faith and fair dealing in claim handling can be evaluated only within the narrow period after a formal precertification/claim submission and before the denial, or whether the duty may be assessed based on the insurer’s broader course of communications and conduct with the insured.
  2. Whether the record contained genuine issues of material fact about HMSA’s handling of the request for an allogenic stem-cell transplant that made summary judgment on the Adamses’ bad-faith claim improper.

Decision

  • The Hawaiʻi Supreme Court reversed the ICA and vacated the circuit court’s summary judgment for HMSA.
  • The court held there were genuine issues of material fact as to whether HMSA fulfilled its duty of good faith and fair dealing in its handling of Brent’s request for an allogenic transplant.
  • The case was remanded for further proceedings on the bad-faith claim.

Legal Principles

  • An insurer’s duty of good faith and fair dealing applies to claim handling and may be evaluated in light of the insurer-insured relationship and the insurer’s course of conduct, not only the moment a formal claim is filed and denied.
  • A bad-faith claim is distinct from a contract claim for benefits; a later determination that the plan excluded coverage does not automatically resolve whether the insurer acted reasonably and in good faith in its communications, investigation, and decisionmaking process.
  • Summary judgment is improper when evidence permits competing inferences about whether the insurer’s statements, timing, and handling were reasonable; courts must view the record in the light most favorable to the nonmoving party and may not resolve credibility disputes.

Conclusion

Adams held that a jury could reasonably find bad faith based on HMSA’s months-long communications and actions surrounding Brent Adams’s tandem transplant plan—such as directing care at an approved transplant center, discussing the “care plan,” and then abruptly denying the allogenic transplant as “investigational”—so the Hawaiʻi Supreme Court reversed summary judgment and remanded for trial-level proceedings on the bad-faith claim.