Madden v. Kaiser Foundation Hospitals

In Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, the Court found that the health insurance contract was not one of adhesion, noting that "In the characteristic adhesion contract case, the stronger party drafts the contract, and the weaker has no opportunity, either personally or through an agent, to negotiate concerning its terms. The Kaiser plan, on the other hand, represents the product of negotiation between two parties, Kaiser and the board, possessing parity of bargaining strength. Although plaintiff did not engage in the personal negotiation of the contract's terms, she and other public employees benefitted from representation by a board, composed in part of persons elected by the affected employees, which exerted its bargaining strength to secure medical protection for employees on more favorable terms than any employee could individually obtain." (Id. at p. 711.) In Madden v. Kaiser Foundation Hospitals, the California Supreme Court held "that an agent or other fiduciary who contracts for medical treatment on behalf of his beneficiary retains the authority to enter into an agreement providing for arbitration of claims for medical malpractice." (Id. at p. 709, fn. omitted.) The plaintiff in Madden was a state employee. (Id. at p. 702.) The Board of Administration of the State Employees Retirement System (board) was statutorily authorized to negotiate contracts for group medical plans for state employees. (Id. at pp. 703-704.) The board entered into a contract with the defendant for the provision of health care to state employees; the contract included an arbitration provision. (Id. at p. 704.) When the plaintiff sued the defendant for malpractice, the defendant moved to compel arbitration. (Id. at p. 705.) The Supreme Court explained that the plaintiff was bound by the arbitration provision because: "Civil Code section 2319 . . . authorizes a general agent 'To do everything necessary or proper and usual . . . for effecting the purpose of his agency.' . . . We conclude that arbitration is a 'proper and usual' means of resolving malpractice disputes, and thus that an agent empowered to negotiate a group medical contract has the implied authority to agree to the inclusion of an arbitration provision." (Id. at p. 706.)