IMELDA VICTORIA, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; KAISER FOUNDATION HOSPITALS et al., Real Parties in Interest, 40 Cal. 3d 734

Opinion BIRD, C. J. Does the arbitration provision in a health service agreement, which covers any claim “arising from rendition or failure to render services,” apply to a claim against the health care provider for negligent employment of an orderly accused of sexually assaulting a patient? I. Petitioner, Imelda Victoria, was admitted to a hospital owned by real party in interest, Kaiser Foundation Hospitals (hereafter Kaiser), for brain surgery in August of 1984.

According to the allegations of petitioner’s complaint, she was repeatedly sexually assaulted, raped and sodomized during her recovery from the surgery by real party in interest, Haynes, a hospital orderly. Petitioner sued both the alleged perpetrator and Kaiser. Her complaint stated two causes of action against Kaiser, one for the negligent infliction of emotional distress and the other for the negligent selection, employment, retention and supervision of the employee who committed the alleged assaults.

Specifically, petitioner contends that Kaiser knew that the employee had sexually assaulted female patients on at least two prior occasions. Kaiser answered the complaint and moved to stay the action and compel arbitration. Kaiser argued that the allegations of petitioner’s complaint fell within the scope of an arbitration clause contained in the group medical and hospital service agreement (Agreement) between Kaiser and Southern California Edison Company, the firm through which petitioner became a Kaiser member.

Respondent superior court granted Kaiser’s motion, stayed the action and ordered that the matter proceed to arbitration. This petition followed. II. Petitioner seeks a writ of mandate directing the superior court to set aside its order compelling arbitration and to exercise its jurisdiction to hear the case. She argues that her causes of action against Kaiser are outside the scope of the arbitration clause. She has requested expedited review because, she asserts, her life expectancy is short.

This case requires the court to balance the general policy favoring arbitration against ordinary principles of contract, which require that agreements be interpreted to reflect the intent of the parties. Ambiguities in contract language are to be resolved against the drafter. The arbitration clause in this contract provides that, “Any claim arising from alleged violation of a legal duty incident to this Agreement shall be submitted to binding arbitration if the claim is asserted: (1) by a Member . . .[;]

(2) On account of death, mental disturbance or bodily injury arising from rendition or failure to render services under this Agreement, irrespective of the legal theory upon which the claim is asserted;

(3) For monetary damages exceeding the jurisdictional limit of the Small Claims Court; and

(4) Against one or more of the following . . .: (

a) Health Plan, (

b) Hospitals, (

c) Medical Group, (

d) Any Physician, or (

e) Any employee of the foregoing.” (Italics added.) “ [Arbitration has become an accepted and favored method of resolving disputes [citations], praised by the courts as an expeditious and economical method of relieving overburdened civil calendars. [Citation.]” (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 706-707 [131 Cal.Rptr. 882, 552 P.2d 1178]; see also Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 322 [197 Cal.Rptr. 581, 673 P.2d 251] [hereafter Ericksen].) However, judicial enthusiasm for alternative methods of dispute resolution must not in all contexts override the rules governing the

interpretation of contracts. Certain basic principles of contract

interpretation are applicable. First, “the policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate.” (Wheeler v. St. Joseph Hospital (1976) 63 Cal.App.3d 345, 356 [133 Cal.Rptr. 775, 84 A.L.R.3d 343], italics added; accord Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481 [121 Cal.Rptr. 477, 535 P.2d 341].) In addition, “[hjowever broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.” (Civ.

Code, § 1648, italics added.) Finally, ambiguities in standard form contracts are to be construed against the drafter. (Baker v. Sadick (1984) 162 Cal.App.3d 618, 625 [208 Cal.Rptr. 676]; Player v. Geo. M. Brewster & Son, Inc. (1971) 18 Cal.App.3d 526, 533 [96 Cal.Rptr. 149]; Civ. Code, § 1654.) This court must apply these basic principles to determine whether the petitioner’s causes of action fall within the scope of the arbitration clause. Many arbitration provisions between health care providers and patients are governed by Code of Civil Procedure

section 1295. Enacted as a part of the Medical Injury Compensation Recovery Act (MICRA),

section 1295 provides that any contract for medical services which contains an arbitration provision must include certain specified language alerting the patient to the scope and nature of the arbitration. Certain “health care service plans” are exempted from these requirements if they comply with alternative statutory notice requirements. (Code Civ. Proc., § 1295, subd. (f).) Kaiser is an exempt health care service plan. As such, it is not required to utilize the specific language of Code of Civil Procedure

section 1295. However, it is required to include in its disclosure forms a statement that the plan utilizes arbitration to settle disputes. (Health & Saf. Code, § 1363, subd. (a)(10).) The plan contracts must also “set forth the type of disputes subject to arbitration, the process to be utilized, and how it is to be initiated.” (Health & Saf. Code, § 1373, subd. (i), italics added.) Kaiser claims it intended to encompass “everything it does” within the scope of the arbitration clause.

It argues that both of petitioner’s causes of action fall within the scope of the arbitration clause and that the parties could not have drafted a clause which more clearly expressed the intent to include such claims. Petitioner contends that her causes of action against Kaiser are outside the scope of the arbitration clause. She claims that the boilerplate language drafted by Kaiser is not specific enough to satisfy the statutory requirement.

Essentially, she argues that a clause purporting to waive the patient’s constitutional right to trial by jury, and her opportunity for appeal and judicial review, should be much more explicit if it is to be given effect. Specifically, petitioner contends that the language of the arbitration clause calls for a two-step analysis. First, to be covered by the clause, a claim must arise from “a legal duty incident to” the Agreement. Second, it must arise from “the rendition or failure to render services” under the Agreement. Petitioner argues that her claims do not meet this second requirement.

The term “services” in the arbitration clause must be defined by looking to the “Definitions” in

section 1, subparts K and L of the Agreement, according to petitioner. Subpart K defines “Medical Services” and subpart L defines “Hospital Services.” The

definitions to which petitioner refers are as follows: “K. Medical Services: Except as expressly limited or excluded by this Agreement, those medically necessary professional services of physicians and surgeons, other health professionals and paramedical personnel, including medical, diagnostic, therapeutic and preventative services which are (1) generally and customarily provided in Southern California and (2) performed, prescribed, or directed by the Attending Physician. “L.

Hospital Services: Except as expressly limited or excluded by this Agreement, those medically necessary services for registered bed patients which are (1) generally and customarily provided by acute general hospitals in Southern California and (2) prescribed, directed or authorized by the Attending Physician.” Throughout the Agreement, the term “services” is used in various contexts from which it is clear that the term refers primarily to Medical and Hospital Services.

It is reasonable to assume that the term “services” in the arbitration clause refers to Medical and Hospital Services as defined and used elsewhere in the Agreement. (See Civ. Code, § 1641 [“The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other”].) Petitioner contends that her claims against Kaiser do not involve rendition of or failure to render Medical or Hospital Services, as defined in subparts K and L, and are, therefore, not covered by the arbitration clause.

Section 11 of the Agreement gives further insight into the definition of “Hospital Services.” It provides in part, “When prescribed, the following Hospital Services are provided without charge: room and board; general nursing care; services and supplies; use of operating room; private room; intensive care room and related hospital services; special diet; special duty nursing; medications . . .; and medical supplies.” Kaiser argues that the services provided by an orderly are included in this definition of “Hospital Services.” Kaiser stresses that plaintiff’s primary claim against the hospital is for the negligent employment of the orderly.

Kaiser’s employment of the orderly, it argues, arose out of its duty to provide Hospital Services. The only means by which the hospital can provide any services to patients is by employing individuals to perform those services. Thus, it contends, plaintiff’s claim that the hospital negligently employed the orderly arises from the rendition or failure to render services under the Agreement. Petitioner argues that her cause of action did not arise from the rendition of services under the Agreement, but from an intentional sexual assault committed outside the employee’s scope of employment.

The orderly’s alleged conduct can scarcely be characterized as “medically necessary services,” which are “prescribed, directed or authorized by [an] attending Physician.” If Kaiser intended the arbitration clause to apply to every dispute between the hospital and a patient, there was no need to define arbitrable claims as those arising from rendition or failure to render “services” under the Agreement. The parties’ conflicting

interpretations, each of which has some inherent appeal, demonstrate that the scope of the arbitration clause is at best ambiguous. Petitioner states that any ambiguity in the arbitration clause should be interpreted in her favor. Kaiser, on the other hand, contends that even if the clause is ambiguous “it should be construed broadly to encompass all claims not clearly beyond its scope.” Petitioner contends that the arbitration clause should be interpreted in her favor because the clause is part of a contract of adhesion.

If the arbitration clause is adhesive, ambiguities will be subject to stricter construction against the party with the stronger bargaining power. (Graham v.

Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 819, fn. 16 [171 Cal.Rptr. 604, 623 P.2d 165]; Ericksen, supra, 35 Cal.3d at p. 322, fn. 7.) “The term ‘adhesion contract’ refers to standardized contract forms offered to consumers of goods and services on essentially a ‘take it or leave it’ basis without affording the consumer a realistic opportunity to bargain and under such conditions that the consumer cannot obtain the desired product or services except by acquiescing in the form contract.” (Wheeler v. St.

Joseph Hospital, supra, 63 Cal.App.3d at p. 356.) The arbitration clause here is similar, if not identical, to the clause which was approved by this court in Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d 699.

Although the contract in that case was not a product of individual bargaining, this court found that it was not adhesive because it was the result of bargaining between parties enjoying equal bargaining strength—the Board of Administration of the State Employees Retirement System and Kaiser. (Id., at pp. 710-711.) In addition, the plaintiff in that case had the opportunity to select from several medical plans, some of which did not include arbitration provisions. (Id., at p. 711.) As in Madden, the Agreement here is between parties of apparently equal bargaining strength—Southern California Edison Company and Kaiser.

Therefore, it is difficult to conclude that the arbitration clause included in the Agreement is the result of overreaching by a party with superior bargaining power. Although the entire Agreement cannot be denominated an adhesion contract, it does have some adhesive characteristics. (See Player v. Geo. M. Brewster & Son, Inc., supra, 18 Cal.App.3d at pp. 533-534.) Petitioner points out that the Agreement is a lengthy, standard form contract. The arbitration clause is but a small, indistinguishable part.

It is apparent that the Agreement is a standard form contract which Kaiser utilizes for all, or almost all, of the groups to which it provides services. (See, e.g., Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d 699; Wilson v. Kaiser Foundation Hospitals (1983) 141 Cal.App.3d 891, 894 [190 Cal.Rptr. 649].) The last two pages of the Agreement, which contain spaces for the signatures of representatives of both sides, are simply attached to Kaiser’s standard Medical and Hospital Services Agreement. The language of the Agreement was drafted by Kaiser.

It is not clear whether Southern California Edison Company could have procured Kaiser coverage for its employees without accepting the terms of Kaiser’s standard contract. Unlike Madden, it is not clear from the record whether petitioner’s father had an opportunity to select an alternative health care plan which did not require arbitration. In the context of this case, ordinary rules of contract

interpretation should be applied. While it has been held that “doubts concerning the scope of arbitrable issues are to be resolved in favor of arbitration” (Ericksen, supra, 35 Cal.3d at p. 323), that rule was announced in the context of a commercial contract devoid of allegations or evidence of adhesion. The agreement in this case may be more analogous to standardized insurance contracts in which it has long been established that “ambiguous clauses ... are to be interpreted against the insurer . . . .” (Steven v.

Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 868 [27 Cal.Rptr. 172, 377 P.2d.284].) In Steven, this court noted that “[t]he rule of resolving ambiguities against the insurer does not serve as a mere tie-breaker.” (Steven v. Fidelity & Casualty Co., supra, 58 Cal.2d at p. 871.) Instead, “it rests upon fundamental considerations of policy [, i]n view of the somewhat fictional nature of intent in standardized contracts . . . .” (Ibid.) Although “[t]he law favors contracts for arbitration of disputes between parties” (Player v. Geo. M.

Brewster & Son, Inc., supra, 18 Cal.App.3d at p. 534), “ ‘there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate . . . .’” (Weeks v. Crow (1980) 113 Cal.App.3d 350, 353 [169 Cal.Rptr. 830], quoting Freeman v. State Farm Mut. Auto. Ins. Co., supra, 14 Cal.3d at p. 481; see also Wheeler v. St.

Joseph Hospital, supra, 63 Cal.App.3d at p. 356.) In determining the scope of an arbitration clause, “[t]he court should attempt to give effect to the parties’ intentions, in light of the usual and ordinary meaning of the contractual language and the circumstances under which the agreement was made [citation]. ” (Weeks v. Crow, supra, 113 Cal.App.3d at p. 353.) The intentions of the parties to this arbitration clause are not clear.

When arbitration provisions first became commonplace in health service contracts, the issue was often whether medical malpractice claims were covered in addition to financial disputes over hospital bills or physician’s fees. (See Henderson, Contractual Problems in the Enforcement of Agreements to Arbitrate Medical Malpractice (1972) 58 Va.L.Rev. 947, 975.) In Madden, this court noted the “growing interest in and use of arbitration to cope with the increasing volume of medical malpractice claims.” (Madden v.

Kaiser Foundation Hospitals, supra, 17 Cal.3d at p. 708.) The Legislature’s enactment of Code of Civil Procedure

section 1295, which specifically provides for the arbitration of claims of “professional negligence,” acknowledged and encouraged the use of arbitration in malpractice disputes. Thereafter, a plaintiff could no longer reasonably contend that this type of arbitration clause was not intended, or expected, to apply to medical malpractice claims. Petitioner’s claims involve neither financial disputes nor medical malpractice. Instead, she alleges a breach of the common law duty of an employer to exercise due care in the employment and supervision of an employee who inflicted intentional harm on her. (See Berger v.

Southern Pac. Co. (1956) 144 Cal.App.2d 1 [300 P.2d 170, 60 A.L.R.2d 1104].) Furthermore, the employee’s alleged misconduct was entirely outside the scope of his employment. It had nothing to do with providing, or failing to provide, services. He is not accused of negligently failing to empty a bedpan. He is accused of the sexual assault and rape of petitioner. Surely it was not contemplated, let alone expected, by either party to the Agreement that this sort of attack would befall petitioner while she was hospitalized under Kaiser’s care.

It is, therefore, difficult to conclude that the parties intended and agreed that causes of action arising from such an attack would be within the scope of the arbitration clause. It is a well-settled rule of law that ambiguities in a written contract are to be construed against the party who drafted it. (See Baker v. Sadick, supra, 162 Cal.App.3d at p. 625; Player v. Geo. M. Brewster & Son, Inc., supra, 18 Cal.App.3d at p. 533; Taylor v. J. B.

Hill Co. (1948) 31 Cal.2d 373, 374 [189 P.2d 258].) “In cases of uncertainty . . . the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” (Civ. Code, § 1654.) The arbitration clause in this case was drafted by Kaiser. Petitioner challenges Kaiser’s

interpretation of that clause. Since the application of the clause to the causes of action is uncertain, ordinary contract principles require the clause to be construed in favor of petitioner. Kaiser relies principally on three cases as support for its argument that petitioner’s claims fall within the scope of the arbitration clause: Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d 699, Herrera v. Superior Court (1984) 158 Cal.App.3d 255 [204 Cal.Rptr. 553] and Baker v. Sadick, supra, 162 Cal.App.3d 618. This reliance is misplaced. All three of these cases involve causes of action for medical malpractice.

Petitioner’s causes of action are not related to medical malpractice, and the application of the arbitration clause to her claims is much less obvious. Madden held that a bargaining agent for a group who contracts for medical treatment on behalf of a beneficiary has “the authority to enter into an agreement providing for arbitration of claims for medical malpractice. ” (Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d at p. 709, italics added.) The opinion in Madden did not address the scope of the arbitration clause.

Thus, this holding sheds little light on the application of the arbitration clause to a cause of action unrelated to medical malpractice. Both Herrera and Baker held that the term “professional negligence,” as used in Code of Civil Procedure

section 1295, included intentional torts. In Herrera, the Court of Appeal concluded that a complaint for medical malpractice, which included allegations of intentional torts by the defendant physician, was subject to arbitration. There, the arbitration clause contained the clear and unmistakable language required by Code of Civil Procedure

section 1295, which by its express terms applies only to actions for medical malpractice. The court concluded that “[tjhe arbitration provision’s own definition of malpractice obviously includes more than negligence. Moreover, it is settled law that a malpractice action can include theories other than negligence . . . .” (Herrera v. Superior Court, supra, 158 Cal.App.3d at p. 261.) The Herrera court’s expansive reading of the term “medical malpractice” as used in the arbitration clause has little bearing on the issue presented here. Again, this case does not involve an action for medical malpractice.

Similarly, the issue in Baker involved the scope of a clause that provided for the arbitration of “any dispute as to medical malpractice.” (Baker v. Sadick, supra, 162 Cal.App.3d at p. 622.) The defendant doctor maintained that the arbitrator was without authority to award punitive damages against him, arguing that the reference in Code of Civil Procedure

section 1295 to “professional negligence” did not include intentional torts. However, the Court of Appeal allowed the award of punitive damages. (Id., at p. 626.) Like Herrera, Baker is distinguishable from this case in that it involves only medical malpractice claims. To the extent that it provides a meaningful analogy, the Baker court’s construction of an ambiguous arbitration clause against the drafter scarcely supports Kaiser’s position. (Baker v.

Sadick, supra, 162 Cal.App.3d at p. 625.) Finally, Kaiser argues that the “tenor” of Ericksen, supra, 35 Cal.3d 312, requires a decision in favor of arbitration in all but the most egregious of circumstances. “[I]n order for the Ericksen rule to operate, properly,” Kaiser contends, “it must be applied without limitation or other qualifying decisions.” Any limiting rule “would sound the death knell for the entire arbitration system. ...” In the narrow context of this case, however, construction of the arbitration clause against its drafter is fully warranted.

An ambiguous arbitration clause is contained in a standardized form contract. The cause of action against Kaiser is for the negligent employment of an orderly who, acting entirely outside the scope of his employment, is alleged to have committed grievous assaults on a patient. Such an

interpretation does no violence to the general policy in favor of arbitration. III. The scope of the arbitration clause here is unclear. The ambiguity in that language must be interpreted against the drafter, Kaiser. Since the orderly’s alleged conduct fell outside the scope of his employment and it is unlikely that the parties either intended or agreed that the clause would apply in these circumstances, the contract should be so construed. Let a writ of mandate issue to respondent superior court directing that the order to compel arbitration be set aside.

The superior court is ordered to exercise its jurisdiction to bring this case to trial as expeditiously as possible. Mosk, J., Broussard, J., Reynoso, J., and Kawaichi, J., concurred. Petitioner’s causes of action against the orderly are not at issue in this proceeding. Plaintiff was eligible for membership in Kaiser as a family dependent of her father, an employee of Southern California Edison Company. Code of Civil Procedure

section 1295 provides in pertinent part: “(

a) Any contract for medical services which contains a provision for arbitration of any dispute as to professional negligence of a health care provider shall have such provision as the first

article of the contract and shall be expressed in the following language: ‘It is understood that any dispute as to medical malpractice, that is as to whether any medical services rendered under this contract were unnecessary or unauthorized or were improperly, negligently or incompetently rendered, will be determined by submission to arbitration as provided by California law, and not by a lawsuit or resort to court process except as California law provides for judicial review of arbitration proceedings.

Both parties to this contract, by entering into it, are giving up their constitutional right to have any such dispute decided in a court of law before a jury, and instead are accepting the use of arbitration. ’ “(

b) Immediately before the signature line provided for the individual contracting for the medical services must appear the following in at least 10-point bold red type: “‘Notice: by Signing This Contract You Are Agreeing to Have Any Issue of Medical Malpractice Decided by Neutral Arbitration and You Are Giving Up Your Right to a Jury or Court Trial. See

Article 1 of This Contract.’ “(

c) Once signed, such a contract governs all subsequent open-book account transactions for medical services for which the contract was signed until or unless rescinded by written notice within 30 days of signature. Written notice of such rescission may be given by a guardian or conservator of the patient if the patient is incapacitated or a minor. “(

d) Where the contract is one for medical services to a minor, it shall not be subject to disaffirmance if signed by the minor’s parent or legal guardian. “(

e) Such a contract is not a contract of adhesion, nor unconscionable nor otherwise improper, where it complies with subdivisions (a), (

b) and (

c) of this section. “(

f) Subdivisions (a), (b), and (

c) shall not apply to any health care service plan contract offered by an organization registered pursuant to

Article 2.5 (commencing with

Section 12530) of Division 3 of Title 2 of the Government Code, or licensed pursuant to

Chapter 2.2 (commencing with

Section 1340) of Division 2 of the Health and Safety Code, which contains an arbitration agreement if the plan complies with paragraph (10) of subdivision (

a) of

Section 1363 of the Health and Safety Code, or otherwise has a procedure for notifying prospective subscribers of the fact that the plan has an arbitration provision, and the plan contracts conform to subdivision (

h) of

Section 1373 of the Health and Safety Code.” The reference in the last sentence quoted to subdivision (

h) of

section 1373 of the Health and Safety Code appears to be erroneous. It is Health and Safety Code

section 1373, subdivision (z), not subdivision (h), which deals with arbitration.

Section 1295, subdivision (

f) and Health and Safety Code

section 1373 were amended simultaneously. (Stats. 1976, ch. 1185, §§ 92, 94, pp. 5320, 5323.) A Senate amendment to Assembly Bill No. 3371 inserted new subdivision (

h) into Health and Safety Code

section 1373, resulting in a redesignation of the former subdivision (

h) as subdivision (i). The reference to subdivision (

h) in Code of Civil Procedure

section 1295 was apparently overlooked, however. It was not amended to reflect the new designation. It is clear that Code of Civil Procedure

section 1295, subdivision (g)’s reference to Health and Safety Code

section 1373, subdivision (

h) was actually intended to refer to

section 1373, subdivision (z). Therefore, references in this opinion will be to

section 1373, subdivision (i). Kaiser argues repeatedly that “it is difficult to imagine what, if not the language used, could convey the parties’ intent to arbitrate all claims arising out of services rendered (or not rendered) pursuant to the Agreement. ” (Italics added.) Of course, this characterization completely begs the question. The issue in this case is whether petitioner’s causes of action are within the scope of the phrase “arising out of services rendered (or not rendered) pursuant to the Agreement. ” Kaiser’s repetition of the phrase does not make it any less ambiguous, nor in any meaningful way clarify its scope. (See, infra, p. 742.) For example,

section 11 of the Agreement (the Benefit Schedule) provides in part that, “Members are entitled to the Medical and Hospital Services and other benefits set forth in this Section, upon payment of specified Supplemental Charges or Non-Member rates. These services and benefits are available only if and to the extent that they are provided, prescribed or directed by a Physician . . . .” (Italics added.) While there are certain additional types of “services” defined in the Agreement (e.g., “Extended Care Services,” “Ambulance Service,” “Mental Health Services”) these additional

definitions appear clearly inapplicable to petitioner’s causes of action. Petitioner claims that the enrollment form is also a standardized form. Three lines of small print repeat a portion of the arbitration clause, but, she says, almost half of that language is obliterated by another form which is attached to the enrollment form. See ante, footnote 3, for the text of Code of Civil Procedure

section 1295. In addition, the court in Herrera noted only that medical malpractice can include causes of action for battery, breach of contract, and deceit. (Herrera v. Superior Court, supra, 158 Cal.App.3d at p. 261.) It did not hold, nor imply, that the arbitration clause at issue would necessarily be applicable to a cause of action against a doctor for an intentional tort arising outside the scope of the provision of medical services—for example, sexual assault on a patient. Assigned by the Chairperson of the Judicial Council.