Weisman v. Blue Shield of California

Citations: 163 Cal. App. 3d 61; 209 Cal. Rptr. 169; 1984 Cal. App. LEXIS 2880Docket: Civ. 26964

Court: California Court of Appeal; December 21, 1984; California; State Appellate Court

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Michael Weisman, a medical doctor, appeals a jury verdict that denied him punitive damages against Blue Shield of California for failing to pay claims related to his psychoanalytic treatment. The case was heard in the California Court of Appeals, where Weisman argued that the court made errors in jury instructions regarding punitive damages and in awarding costs to Blue Shield for witness expenses. The court found that the jury was properly instructed and that the witness costs were justified, affirming the lower court's judgment.

Weisman, who held a position as a full-time assistant professor at UC San Diego and worked part-time at the Veterans Administration Hospital, began psychoanalysis with Dr. Alvin Robbins after experiencing emotional issues in 1975. He enrolled in a government benefit plan (FEP) administered by Blue Shield, which provided coverage for mental health treatment up to a $50,000 lifetime maximum. Weisman underwent therapy four times a week, which continued for five years until its mutual termination in 1981.

In 1978, Weisman sued Blue Shield for breach of the duty of good faith and fair dealing, alleging delays and improper handling of his claims, and sought $2 million in punitive damages. The jury found that Blue Shield had breached its obligations by reducing his therapy sessions and failing to process his claims timely, awarding Weisman $25,000 in compensatory damages but denying punitive damages. 

In the appeal, Weisman challenged the jury instruction related to punitive damages, specifically the definition of "conscious disregard" as provided in a modified jury instruction. He argued that the instruction imposed an impermissible additional burden of proof on him. The court, however, upheld the jury's instructions and the overall verdict.

Weisman argues that BAJI Nos. 14.71 and 14.72, when applied together, establish a two-pronged test for malice under section 3294, subdivision (c)(1). The first prong requires an understanding of others' rights, leading to a conscious disregard of those rights. The second prong necessitates that this disregard is willful and deliberate, with awareness of the potential consequences. Weisman asserts that the term "conscious disregard" is self-explanatory and inherently involves rights deprivation, thus requiring no further clarification. 

The court's modified BAJI No. 14.72 reflects the precedent set by Taylor v. Superior Court (1979), which indicated that an intoxicated driver with prior offenses could exhibit malice under Civil Code section 3294 if their actions showed a conscious disregard for the likely dangerous outcomes. The court agrees with the interpretation that a conscious disregard for others' safety can constitute malice for punitive damages, requiring proof that the defendant knew the probable risks and deliberately chose not to mitigate them.

Weisman attempts to narrow the application of the second prong of the test to the specific factual context of his case, a claim the court rejects. It cites cases like Grimshaw v. Ford Motor Co. and Nolin v. National Convenience Stores, which emphasize that legal principles apply consistently across different case types, rather than being confined to specific categories. The court concludes that the notion of malice, as defined in Civil Code section 3294, has long included a conscious disregard for the likelihood of causing injury to others.

In Gombos v. Ashe, the court recognized that "criminal indifference" can constitute malice under Civil Code section 3294, supporting punitive damages. A conscious disregard for safety, such as at a dangerous railroad crossing or an oily driveway, can justify punitive damages if it reflects a complete lack of concern for potential harm. While a breach of the covenant of good faith and fair dealing may warrant compensatory damages, it does not automatically lead to punitive damages. For punitive damages to apply, the insured must demonstrate that the insurer acted with intent by willfully neglecting necessary actions to mitigate the consequences of unjustly denying a claim. The court clarified that BAJI No. 14.72 sets a clear threshold for punitive damages, requiring identification of the defendant's awareness of potential harm and a deliberate failure to prevent it. The court found no error in this instruction. 

Regarding costs, Weisman contested Blue Shield's award for testimony from two doctors, arguing one was a "regular employee" and the other’s testimony was unnecessary. Under Code of Civil Procedure section 998, a plaintiff who does not accept a defendant's judgment offer and fails to achieve a more favorable outcome is responsible for the defendant's costs, including reasonable expert witness fees for those not classified as regular employees. Though "regular employee" is not explicitly defined in the statute, it generally refers to individuals under an employer's control regarding their work. 

Dr. Gabby practiced as a psychiatrist and served as a medical adviser to Blue Shield since 1966, dedicating two to four hours monthly to review medical records as an independent contractor. Dr. Lunsky was also self-employed as an evaluator for psychiatric claims and worked as a medical adviser for Blue Shield, spending about one day a week at their office. The court concluded, based on substantial evidence, that both doctors were not employees of Blue Shield. Costs for Dr. Culbertson's testimony were awarded, despite Weisman’s claim that they were not "reasonably necessary." Under Stenzor v. Leon, the claimant bears the burden to prove the necessity of costs when challenged, and the court has discretion in granting these costs. The court found that Dr. Culbertson’s testimony was necessary as he was the only independent witness. The judgment was affirmed, with concurrence from Wiener and Work, and the Supreme Court denied the appellant's petition for a hearing on March 20, 1985. 

The court's instructions regarding punitive damages emphasized that such damages may be awarded if the defendant's actions were oppressive, fraudulent, or malicious, with definitions provided for each term. The jury is to consider the reprehensibility of the conduct, the deterrent effect on the defendant, and the relationship between punitive and actual damages when determining the amount. The instructions also noted that acting with conscious disregard involves awareness of the probable dangers of one's conduct and a deliberate failure to avoid them.

Civil Code section 3294 allows plaintiffs to recover punitive damages in non-contractual breach actions when the defendant has acted with oppression, fraud, or malice. "Malice" is defined as conduct intended to cause injury or conducted with conscious disregard for others' rights or safety. The amendment to subdivision (c)(1) aligns with existing California punitive damage case law regarding this definition. During the trial, Weisman contended that Blue Shield's counsel improperly suggested to the jury that they should consider whether anyone intended to cause harm or disregarded Weisman's rights. Although Weisman's counsel objected, the court clarified that the jury should follow its instructions, and the modified BAJI No. 14.72 was given without objection. This instruction and admonishment remedied any potential error from the counsel's argument, and the court did not further address Weisman's claims on this issue. Additionally, the concept of conscious disregard as a form of malice was established by the court in 1960.