Sole successor-in-interest assignee of healthcare provider has derivative standing to sue insurer under ERISA.
Sure Haven, a mental health and substance abuse treatment center that provided out-of-network services for Cigna enrollees, went out of business after Cigna stopped reimbursing for services to Cigna-insured patients. Bristol SL Holdings, Inc., became Sure Haven’s successor-in-interest through bankruptcy proceedings. Bristol sued Cigna as Sure Haven’s assignee, alleging state law and ERISA claims. The district court summarily adjudicated Bristol’s state law claims, and dismissed its ERISA claim for lack of standing. Bristol appealed.
The Ninth Circuit reversed. The court explained that the issue was whether the assignee was authorized by ERISA to bring a claim, not “standing,” yet many cases refer to the doctrine as one of “derivative standing.” The court held that Bristol may sue under ERISA as a healthcare provider’s first assignee and successor-in-interest through bankruptcy proceedings who owns all of the provider’s health benefit claims. The court distinguished Simon v. Value Behavioral Health, Inc., 208 F.3d 1073 (9th Cir. 2000), which held that an attorney who had acquired assignments of hundreds of unrelated health benefit claims lacked derivative standing under ERISA. The Simon panel worried that permitting derivative standing in that situation would transform health benefit claims into tradable commodities, which would not further the purpose of ERISA. But that concern was inapplicable to Bristol, whose claims were limited and specific. Moreover, refusing derivative standing to Bristol would create perverse incentives undermining the goal of ERISA by influencing insurers to force healthcare providers into bankruptcy to ensure they never had to pay for authorized services.
The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, who are partners at the appellate firm Horvitz & Levy LLP, and is republished with permission.