Bristol SL Holding Inc. v. Cigna Health & Life Ins. Co., No. 20-56122, __ F.4th __, 2022 WL 129139 (9th Cir. Jan. 14, 2022) (Before Circuit Judges Kleinfeld, Nelson, and Vandyke).
 
The Ninth Circuit has accomplished the seemingly impossible by making an issue of derivative standing to file suit appear straightforward in a short, published decision this week. 
 
A mental health and substance abuse treatment center called Sure Haven was bankrupted when Cigna stopped reimbursing the company for services Sure Haven regularly provided to Cigna insureds. Plaintiff Bristol SL Holdings became the successor-in-interest to Sure Haven through a bankruptcy proceeding.
 
Sure Haven was an out-of-network provider for Cigna. Bristol claimed that Sure Haven obtained benefit assignments and always called to verify and seek authorization for benefit coverage before treating Cigna-covered patients. Despite these calls, Cigna ultimately began denying all claims submitted by Sure Haven. The parties dispute the contents of the verification calls and the reason for the denials.
 
Bristol filed suit asserting numerous state-law causes of action and an ERISA claim for benefits. The district court dismissed the ERISA claim with prejudice, holding that neither the text of ERISA nor the law of the Ninth Circuit permit an assignee of a healthcare provider to file suit for plan benefits.
 
The Ninth Circuit disagreed. The court first noted that it was well established that healthcare providers can assert derivative claims as assignees of their patients’ benefit claims. The district court had relied on a Ninth Circuit decision, Simon v. Value Behavioral Health, Inc., which had recognized limits to this kind of derivative standing. The court of appeals, however, saw Simon as distinguishable. Unlike Simon, which involved the aggregation by an attorney of hundreds of unrelated claims from numerous different health facilities, Bristol, as successor-in-interest to one healthcare provider whose claims were all denied for the same reason, brought claims that were much more focused and specific. Thus, the concern expressed by the Simon court with commodifying healthcare claims was absent in this case.   
 
The Ninth Circuit also reasoned that permitting standing in this situation would align with ERISA’s protective goals, while denying standing to sue would create perverse incentives by essentially allowing an insurer that succeeds in bankrupting a provider to get off scot-free. Finally, the court noted that several other circuits had extended ERISA standing beyond the healthcare provider itself. The court saw its holding as “a modest one: We hold only that the first assignee as a successor-in-interest through bankruptcy proceedings who owns all of one healthcare provider’s health benefit claims has derivative standing.”           
 
A short and, for the plaintiff, sweet decision. 
 
For the Ninth Circuit’s unpublished disposition of the remaining issues in the case, and many other interesting ERISA developments, keep reading.
Continue Reading Healthcare Provider’s Bankruptcy Successor May Sue Under an Assignment of Benefits