Government of Guam v PacifiCare Health Insurance Company of Micronesia Inc [2004] GUSC 16; 2004 Guam 17 (14 September 2004)

IN THE SUPREME COURT OF GUAM

GOVERNMENT OF GUAM AND EDNA T. PAULINO,
Plaintiffs-Appellees,

v.

PACIFICARE HEALTH INSURANCE COMPANY
OF MICRONESIA, INC.,
dba PACIFICARE ASIA PACIFIC,
Defendant-Appellant.

OPINION

Filed: September 14, 2004

Cite as: 2004 Guam 17

Supreme Court Case No.: CVA04-006
Superior Court Case No.: CV1426-03

Appeal from the Superior Court of Guam
Argued and submitted on July 16, 2004
Hagåtña, Guam

Appearing for Defendant-Appellant: Randall Todd Thompson, Esq. Mair, Mair Spade & Thompson A Professional Corp. 238 A.F.C. Flores St. Ste. 801 Pacific News Bldg. Hagåtña, Guam 96910

Appearing for Plaintiffs-Appellees: David J. Highsmith, Esq. Special Asst. Atty. Gen. The Law Office of David J. Highsmith, P.C. 194 Hernan Cortes Ave. Hagåtña, Guam 96910

BEFORE: F. PHILIP CARBULLIDO, Chief Justice; ROBERT J. TORRES, JR., Associate Justice; PETER C. SIGUENZA, JR., Justice Pro Tempore.

CARBULLIDO, C.J.:

[1] This appeal concerns the 2003 Group Health Insurance Agreement/Health Services Agreement (AAgreement@) executed by the Government of Guam (AGovernment@) and PacifiCare Health Insurance Company of Micronesia, Inc., dba PacifiCare Asia Pacific (APacifiCare@), for group health insurance coverage for Government of Guam employees, retirees and dependents. A dispute arose between the parties regarding coverage under the Agreement for Fiscal Year 2004 (AFY 2004"), and PacifiCare submitted the dispute to arbitration as required under the Agreement. The three-member arbitration panel issued a unanimous award releasing PacifiCare from any further obligation to provide coverage under the Agreement for FY 2004. Upon motion of the Government, the lower court vacated the arbitrators= award. The lower court found that the arbitrators exceeded their authority in relieving PacifiCare from any further obligations under the Agreement, and further found that the arbitration award was made in disregard of the law and did not draw its essence from the Agreement. PacifiCare appeals the lower court=s decision vacating the arbitration award. For the reasons stated herein, we reverse.

I.

[2] In November of 2002, PacifiCare and the Government executed a 2003 Group Health Insurance Agreement/Health Services Agreement. The Agreement was a contract for group health insurance for Government of Guam employees, retirees and dependents for Fiscal Year 2003. The Agreement contained an automatic annual renewal provision and general procedures for setting annual rates. The Agreement also provided that disputes arising under the Agreement were to be submitted to arbitration.

[3] During the summer of 2003, the parties engaged in negotiations concerning rates and benefits to be applied to their Agreement for FY 2004. As a result of these negotiations, on August 26, 2003, PacifiCare served a ANotice of Impasse and Demand for Arbitration@ (ADemand@) upon the Government. The Demand contained four specific enumerated statements of dispute, as follows:

a. PacifiCare maintains that the Agreement does not permit Defendant to proceed with open enrollment for Fiscal Year 2004 by permitting Government of Guam employees and retirees to select PacifiCare at Fiscal Year 2003 rates and benefits;

b. PacifiCare maintains that under federal law and the Agreement, it is merely required to offer renewal of coverage for Fiscal Year 2004 at rates and benefits that PacifiCare deems appropriate. PacifiCare further maintains that it has fulfilled this obligation by making several offers of renewal and that PacifiCare=s last offer has been expressly rejected by Defendant. As a consequence, PacifiCare has no further obligation to provide any medical or dental coverage for Government of Guam employees and retirees for Fiscal Year 2004; or,