The largest health insurance company in Idaho is fighting one federal lawsuit and recently lost a second after refusing to pay medical bills for two men who were seriously injured in motorcycle crashes.

Blue Cross of Idaho denied those claims based on a little-known exception: Insurers may refuse coverage when a patient is found to have committed “illegal acts.”

Idaho law says health insurers do not have to pay for medical care in certain situations — when someone is hurt while committing a felony or while intoxicated or taking unprescribed narcotics .

But the two injured Lewiston residents and an Idaho physicians group say Blue Cross is not following the law — it is abusing a loophole.

The patients never were charged with any crime. And, the attorney in one case argued, the basis for Blue Cross denials would not hold up in a criminal case.

“Illegal act” denials are not rare. Saint Alphonsus Health System says it sees one or two per month.

“If the denial of insurance coverage is found to be appropriate, we work with the patient on payment terms, as they often become self-pay,” said Saint Alphonsus spokesman Joshua Schlaich. “Most of these cases are major traumas with a week or more stay and complex care needs. These cases often have major financial implications for both the patient and the hospital.”

Patients, providers and family members across Idaho have questioned the legality of such denials, according to interviews.

Insurers in other states also deny claims on the basis of illegal activity.

Monroe Bird III was shot in Tulsa, Okla., by a security guard and ended up on a ventilator, The New York Times reported in 2015 . Bird was not charged with a crime, but his insurer denied coverage, saying the injuries stemmed from illegal activity. Without health coverage, his family was unable to move him to a rehab center, and he died at home “from a preventable complication often seen in paralyzed patients,” The Times reported.

The provision about illegal activity is standard in all health insurance contracts, but Blue Cross is the only one in Idaho that seems to be enforcing it, said Susie Pouliot, CEO of the Idaho Medical Association.

Insurers should not have to cover medical bills when a patient has broken the law, she said. But a third party should decide a crime occurred, she said, because the insurer has a financial interest in saying no.

“An insurance company [should not] be the judge, jury and executioner,” Pouliot said. “We have asked Blue Cross several times for their criteria for determining when an illegal act has occurred.”

Blue Cross is exploiting an ambiguity in the law. Susie Pouliot, Idaho Medical Association

The association — which represents doctors in the state, including those who lose money when an insurer does not pay — pushed for a bill in the 2016 Legislature that would change the criteria for “illegal acts”: a conviction for illegal use of alcohol or narcotics, or a final determination by the Idaho Department of Insurance that an illegal act was committed.

The insurance industry did not like the bill, Pouliot said. It was referred to the House Ways & Means Committee but went nowhere .

A lawyer who represents plaintiffs against Blue Cross says the provision is so vague that it could snare people for being in traffic accidents.

“If you think about it, it’s illegal to rear-end somebody, so if you get whiplash when you rear-end somebody, wouldn’t that be an illegal act?” said Lewiston attorney Kate Hawkins, of Clark & Feeney LLP.

Blue Cross declined to be interviewed for this story. Vice President of Marketing Don Mann sent this statement:

“Blue Cross of Idaho complies with all [patient privacy] requirements and does not release protected health information, and our health care policies comply with Idaho law … which states: ‘Intoxicants and Narcotics: The insurer shall not be liable for any loss sustained or contracted in consequence of the insured’s being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.’   ”

NO TRIAL NEEDED

Brooks LeCates was covered by a policy his father had through his job at Moscow’s Gritman Medical Center. Blue Cross was hired by Gritman to be a third-party administrator — processing claims, deciding benefit eligibility and other tasks.

LeCates, then 22, was riding a motorcycle on Idaho 12 in Nez Perce County on April 12, 2014. His motorcycle hit soft gravel on a corner, and he lost control and hit a fence. He was taken by ambulance to St. Joseph Regional Medical Center in Lewiston.

The hospital drew blood while admitting him to the emergency room. The lab tests found a blood alcohol content of .104, above the legal limit of 0.08. Doctors did not say in his medical record that they smelled alcohol on him or that he had slurred speech. The record called him “very alert,” “oriented,” could talk about his medical history and explain what hurt.”

Four days later, Blue Cross denied his claims. The bills totaled $45,841.

LeCates appealed. Blue Cross responded, saying again that it wouldn’t cover the bills because he was breaking the law.

“Mr. LeCates’ policy does not require that he be cited or found guilty in a court of law, only that he be engaged in an illegal act,” Blue Cross said. “It is illegal to drive while under the influence; therefore, he was engaged in an illegal act, under the terms of his policy.”

LeCates sued Blue Cross in March 2015.

‘BAD FAITH’

Zachary Q. Jones sued in July 2016, two years after he was in a motorcycle crash in Washington.

Jones was working for Howell Munitions and Technology in Lewiston. He was covered by the company’s health insurance plan, which Blue Cross administered. After the crash, in a county just over the Idaho-Washington state line, Jones was taken by Life Flight to St. Joseph Regional Medical Center.

He stayed there for a month. Blue Cross denied payment for all of his hospital stay, surgery and treatment — $444,436. The lawsuit does not specify what “illegal act” the insurer says Jones was committing when he crashed.

Guy Jones, who had power of attorney for his son, appealed the denial. Blue Cross responded six weeks later, denying the appeal.

Jones needed ongoing care. Blue Cross continued to reject the claims for five months, but started to pay for care in January 2015, the lawsuit said.

Blue Cross “failed to comply with its obligations under the contract and has exercised bad faith … and breached its fiduciary duty,” the lawsuit stated.

Blue Cross denied any wrongdoing. Jones is not entitled to payment, the company said, because the denial was “neither arbitrary nor capricious but was, instead, a reasonable and correct decision” and that it was “not an abuse of discretion.”

BATTLES CONTINUE IN COURT

U.S. Magistrate Judge Candy W. Dale ruled Sept. 16 in favor of LeCates.

She cited several reasons. Among them: Idaho law says a blood alcohol test must be done by a laboratory operated or approved by Idaho State Police. ISP has several rules those labs must follow and how they report results. The hospital’s blood tests were done differently, and hospital labs are not ISP-approved.

Aside from that, LeCates’s test results were not high enough to assume he was driving drunk, Dale said.

Blue Cross never requested a copy of the [police] report. Court ruling by Judge Candy Dale

Dale said she was “left with the firm conviction that a mistake was committed in this case,” concluding that Blue Cross “abused its discretion” and ordering Blue Cross to cover the hospital bills.

Pouliot said her group was pleased with that ruling but still believes there is a need for more clarity in the law.

“We believe that an illegal act should be based on a finding, not on a desire,” she said. Denying a claim after looking at a patient’s blood work “is probably not appropriate, especially given the fact that the insurance company has a vested interest in trying to deny a claim.”

Hawkins, the attorney in Lewiston, said that after the LeCates ruling, her firm now has more possible cases “coming up the pipeline.”

Blue Cross filed notice in late October to appeal Dale’s ruling in the U.S. Court of Appeals.

Meanwhile, the Jones case is on hold until December, while Blue Cross gives the claims a second look.