Stonebridge challenging the medical necessity of paraplegic plaintiff's 90-day hospital stay.

LOS ANGELES – Thomas Nickerson, a Marine veteran and construction worker, landed in a wheelchair years ago as the result of a snowmobile accident.

So he bought accident insurance coverage in case anything else went wrong. But when he took a spill in his wheelchair exiting a van and broke his leg, he said his accident insurance didn't cover him the way he expected.

The insurance company, Stonebridge Life Insurance, decided that three months of his hospital stay was not medically necessary – even though the 55-year-old paraplegic was hospitalized under his doctor's orders. It also covered less than a fifth of the claim he sought for living expenses outside of medical care during his extended hospitalization.

The question of whether Nickerson's entire stay was medically necessary heads to a jury trial this week in Los Angeles Superior Court.

The insurance company did not consider his doctor's opinion and acted in bad faith when it denied the claim, according to Nickerson's attorney, William Shernoff.

Shernoff, of Shernoff Bidart Echeverria LLP, argued that the opinion of a patient's treating physician should carry more weight in a dispute than a doctor who reviews claims but never examined the patient.

That legal theory represents a shot across the bow of health and life insurance companies that often tap medical reviewers for second opinions. Such medical reviews are used for everything from workers' compensation claims to accident insurance claims like Nickerson's.

"It could really change more standard types of insurance relationships," said Jamie Court, president of Consumer Watchdog, which advocates for patient rights. "[Nickerson is] probably a model plaintiff because here's a case where, clearly, he bought this policy to deal with the circumstances that he faced – and he wasn't told that he should leave the hospital."

James Wood, a partner at Reed Smith LLP who is leading Stonebridge Life Insurance's defense team, could not be reached for comment. But in court briefs, the insurer denies acting in bad faith and argues its policy's coverage was "plain, clear and unambiguous."

Although the case springs from an accident insurance policy, which typically covers living expenses after an accident, the dynamics are familiar to those who wrangle with insurance plans over medical care reimbursements. Robert Bitonte, the past president of the Los Angeles County Medical Association, said that the case highlights wider disputes over the way medical necessity is defined.

"Patients say, 'I think it's necessary, my doctor thinks it's necessary – why isn't it medically necessary?' I think it's an honest question," Bitonte said.

It's not the first time the issue of medical necessity has surfaced in recent California court cases. Last year, a jury found that Anthem Blue Cross wrongfully denied a life-saving liver transplant to a patient. The jury awarded the patient out-of-pocket costs to cover the out-of-state transplant, as well as legal fees, but stopped just short of awarding punitive damages. In 2007, Cigna drew nationwide attention when it denied a liver transplant for a 17-year-old in Los Angeles because it was experimental, then changed course, though not before the patient died. A federal suit over the coverage denial was later tossed because the health plan was employer-provided.

In front of a jury this week, the Nickerson case likely will hinge on whether his doctor was right to order hospitalization or the insurer was correct that a skilled nursing facility was appropriate.

Both sides agree that Nickerson's policy did not cover days spent in a skilled nursing facility. The accident coverage was supposed to pay out $350 for each day that he spent in the hospital to help cover his rent, utilities and other bills.

Stonebridge paid an independent doctor in Florida to review Nickerson's medical files after he was discharged from the hospital, according to plaintiff's trial briefs. Based on that doctor's report, the insurer covered Nickerson's living expenses for 19 days because he was taking antibiotics for an infection that he developed from his broken leg. It concluded that it would have been more appropriate for Nickerson to spend the next 90 days in a skilled nursing facility rather than in a spinal cord injury unit, where the paraplegic spent his entire hospital stay, according to the trial briefs.

"I was really discouraged," Nickerson said.

He entreated Dr. Hung Nguyen, his physician at the Veterans Affairs Hospital in Long Beach, to write a letter to Stonebridge. Nguyen wrote that it is standard practice at Veterans Affairs hospitals not to transfer paraplegics to skilled nursing facilities, according to briefs in the case.

Shernoff hopes that a verdict from this case raises the bar for insurers challenging a treating physician's opinion. They should only be able to overrule a treating physician's decision about what is medically necessary, he said, if they can prove that it is unreasonable or runs counter to good medical practice.

"There hasn't been a case to cement that standard," Shernoff said.