The California Court of Appeal affirmed summary judgment in favor of Kaiser Foundation Health Plan, Inc. (Kaiser Health Plan) and rejected plaintiffs’ enterprise theory of liability in a wrongful death action based on the alleged failure of a Kaiser Health Plan-contracted hospital to treat a patient during an emergency.
The plaintiffs claimed that the failure of Kaiser Downey Hospital, which is exclusively contracted with Kaiser Health Plan, to appropriately care for plaintiff Gopal caused her death. The hospital initially determined that Gopal had a brain bleed—a neurosurgical emergency—but that the hospital did not have a neurosurgery department and therefore could not treat her. Gopal was not a Kaiser Health Plan member, so the hospital followed its procedures for members of non-contracted health plans by contacting Gopal’s health plan, CareMore, and referring her for care pursuant to CareMore’s instructions. Gopal received surgery after a lengthy wait, and died shortly thereafter.
At the trial court, the plaintiffs argued that the hospital’s failure to provide timely treatment to Gopal resulted in her death and that Kaiser Health Plan should be liable for the omission because Kaiser Health Plan and the hospital “comprise one integrated, joint enterprise that is completely controlled by the entity with the money and power.” The three-judge panel rejected plaintiffs' theory.
First, the court explained that Kaiser Health Plan is a health care service plan authorized under California’s Knox-Keene Health Care Service Plan Act (Knox-Keene Act). Health care service plans are not health care providers. Rather, health care service plans contract with providers who deliver and furnish health care services. Kaiser Health Plan’s exclusive contract with the hospital delegated duties onto the provider pursuant to the Knox-Keene Act and the Act “bars claims against a plan for vicarious liability.”
The plaintiffs did not challenge the Knox-Keene Act’s bar against vicarious liability, but instead claimed enterprise liability based on California common law. The court noted that enterprise liability is available to plaintiffs under limited circumstances. First, the separate entities must have interests that are so aligned that “the separate corporate personalities are merged,” and one entity “is a mere adjunct of the other or the two companies form a single enterprise.” Second, an inequitable result must follow if the acts or omissions at issue are treated as those of only one entity rather than the two as a combined entity.
The panel determined that neither condition was met. With respect to the first condition, the court did not find fault with the arrangement between Kaiser Health Plan and the hospital. The court stated that the contractual relationship between the two entities was not only appropriate, but it was necessary under the Knox-Keene Act to permit Kaiser Health Plan to meet its obligations. The court further determined that no inequitable result would follow by granting summary judgment as to Kaiser Health Plan because the appropriate defendants to the action, the hospital and the other providers that were involved with the patient’s care, remained defendants. Therefore, the court upheld the trial court’s grant of summary judgment to Kaiser Health Plan.