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State Law Claims of Sub-Assignee to Recover ERISA Benefits Subject to Complete Preemption

State Law Claims of Sub-Assignee to Recover ERISA Benefits Subject to Complete Preemption

Gables Ins. Recovery, Inc. v. Blue Cross and Blue Shield of Fla., Inc., 813 F.3d 1333 (11th Cir. 2015)

ERISA and Life Insurance News
(April, 2016)

South Miami Chiropractic provided certain services to an insured of Blue Cross. When Blue Cross did not pay the resulting claim, South Miami assigned its alleged right to payment to Gables. 

Gables sued Blue Cross, asserting only state law claims as the "successor in interest to the rights of the medical provider as an intended third party beneficiary of the pertinent health insurance contract." Gables disclaimed any notion that it was seeking relief under ERISA.   

Gables sought relief under theories that Blue Cross breached the contract (i.e., the insurance policy) and that South Miami had confirmed coverage with Blue Cross. According to Gables, Blue Cross had agreed to pay for the services and thus had breached an oral contract by failing to pay the claim. Finally, Gables sought to recover for quantum meruit and open account. 

Blue Cross removed the case to federal court on the grounds of ERISA complete preemption and moved to dismiss the complaint on the basis that South Miami had not exhausted administrative remedies. Gables, in turn, moved to remand the case to state court.

The district court denied the motion to remand and dismissed the action without prejudice, holding that federal question jurisdiction existed as the result of ERISA complete preemption and that Gables had failed to exhaust administrative remedies.

On appeal, Gables challenged only the jurisdictional finding. The company argued that its claims arose out of a "separate duty independent of the ERISA plan." 

The Eleventh Circuit disagreed. To succeed as a third party beneficiary, Florida law required a breach of the underlying contract. "Absent a wrongful denial of benefits under the ERISA plan—the contract—Gables cannot succeed on a third party beneficiary breach of contract claim," the court held. 

The claims based on the alleged oral agreement also did not arise out of a duty independent of the plan. Rather, the complaint "expressly tethers Florida Blue's preauthorization to its obligations under the ERISA insurance plan," the court held. 

Moreover, the claims were within the scope of ERISA § 502(a). Thus, "despite Gable's efforts to distance its claims from the ERISA plan, each count is based expressly on Florida Blue's alleged breach of the ERISA-regulated employee health benefits plan—that is, an alleged wrongful denial of coverage under the plan," the court held. 

Finally, Gables had standing to sue under ERISA by virtue of the assignment. Gables asserted that it lacked standing because it was a "sub-assignee and not the healthcare provider." The Eleventh Circuit rejected the distinction, noting that the court had "never drawn the line Gables urges us to draw …."  

"Just as nothing in ERISA's statutory language prohibits healthcare providers from obtaining derivative standing through assignment," the court wrote, "nothing in the statutory language prohibits non-healthcare providers from obtaining derivative standing through a sub-assignment." 

Allowing the use of a sub-assignment also would not frustrate the purposes of ERISA. "To the contrary," the court reasoned, "allowing a provider to assign the right to bring suit may protect plan participants by transferring the burden of bringing suit from healthcare providers who may be unable to collect on denied claims unless they outsource the collection effort to a third-party."

Click here to view the full April 2016 Edition of the ERISA and Life Insurance News.

H. Sanders Carter
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Andrea K. Cataland
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Kenton J. Coppage
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Dorothy H. Cornwell
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