AGG Healthcare attorneys Matthew M. Lavin and Aaron R. Modiano recently secured a revival of an $8.6 million reimbursement suit against Cigna Health and Life Insurance. In Bristol SL Holding, Inc. v. Cigna Health and Life Insurance Co., the Ninth Circuit ruled that plaintiff, a successor-in-interest to a bankrupt behavioral health provider, had derivative standing to bring suit under ERISA against Cigna for its denial of $8.6 million in reimbursement requests for out-of-network mental health and substance abuse treatment.
Notably, a three-judge panel declined to apply Simon v. Value Behavioral Health, Inc. to the plaintiff’s claim. The court narrowed Simon, which has historically limited derivative ERISA claims in the Ninth Circuit, to only bar derivative standing in situations that aggregate hundreds of unrelated claims from numerous health facilities. The plaintiff in Bristol, as a successor-in-interest to identical claims from one behavioral provider, had derivative standing on behalf of the bankrupt provider. The court notes that derivative standing for companies like the plaintiff directly benefits patients and prevents billion-dollar insurance companies from bankrupting disproportionately smaller healthcare providers in order to ensure they never have to pay for authorized services. This ruling will likely have widespread precedential impact on standing for ERISA claims in the Ninth Circuit.
In a separate opinion, the Ninth Circuit also reversed a lower court’s summary judgment ruling, reviving the plaintiff’s state law claims for breach of contract and promissory estoppel. Through hundreds of verification and authorization calls, evidence of prior course of dealing, and individualized treatment plans, as well as agreements over specific percentages of usual, customary, and reasonable (UCR) rates for services, the plaintiff introduced sufficient evidence to create a genuine dispute of material fact regarding the existence of an enforceable contract between the provider and Cigna. Together, these two rulings give the plaintiff another opportunity to pursue $8.6 million in reimbursement for treatment provided to patients suffering from the disease of addiction.
For more information about the Court’s decisions, please click here and here.