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Under California law, arbitration agreements within health care plans must state that the right to a jury trial is being waived, and must do so in clear language, prominently displayed immediately above the signature line, according to a federal district court in California.
In Schlegel v. Kaiser Foundation Health Plan, Inc., No. 2:07-CV-00520-MCE-KJM, 2007 WL 2492393 (E.D. Cal. Aug. 30, 2007), Schlegel enrolled in Kaiser’s individual health insurance policy plan, which contained an agreement to arbitrate plan disputes. While a member of the plan, Schlegel developed a condition that would eventually require him to undergo a kidney transplant. Kaiser referred Schlegel to an outside provider who placed him on a transplant waiting list.
Kaiser later opened its own transplant center, and required enrollees to leave the outside providers and enroll with Kaiser’s center. When Kaiser’s center closed soon after, Schlegel brought a court action against Kaiser, alleging that its mishandling of its own program denied him the opportunity to obtain a needed transplant. Kaiser sought to compel arbitration of the dispute in accordance with the plan enrollment agreement.
The Court held that Kaiser could not compel arbitration of the dispute, because the plan enrollment agreement did not contain a valid agreement to arbitrate. Specifically, the Court found that the arbitration agreement within the enrollment document did not comply with California’s statutory requirements for health care service plan arbitration agreements, including that the plan state “in clear and understandable language,” in a “prominently displayed,” “separate article,” immediately above the signature line, that the enrolling party is waiving the right to a jury trial.
Here, the Court found the arbitration agreement within Kaiser’s plan did not comply with the statute. The Court observed that the arbitration agreement did not stand out and was not readily noticeable, because it was in a similar or smaller font as compared to the rest of the plan, and was not set off in any way from the other provisions. This alone, according to the court, was sufficient evidence that the arbitration agreement was not statutorily compliant and not enforceable.
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