Roseville Community Hosp. v. State of California

—Plaintiff Roseville Community Hospital seeks to hold the state and the state Attorney General liable for damages suffered when Health Maintenance, Inc. (HMI), a private, prepaid health care service, became bankrupt, owing the hospital more than $135,000. The hospital alleges that its loss resulted from negligent enforcement of the state laws governing prepaid health care plans. The defendants demurred; claiming statutory immunity from liability. The trial court sustained the immunity defense. The hospital appeals from the ensuing judgment of dismissal.

Between 1965 and 1976 private prepaid health care service plans were regulated by a set of Government Code provisions known as the Knox-Mills Health Plan Act. The act was designed to regulate plans other than those operated by licensed insurance carriers. We summarize the act’s principal features as set forth in the (now repealed) provisions of the Government Code:

Health care service plans were forbidden to engage in deceptive advertising or solicitation; although no penalties were prescribed, the Attorney General was authorized to attain compliance by conference, by cease and desist orders and, at his election, by…