Justia Contracts Opinion Summaries

A non-profit hospital ("plaintiff") that provided medical services to beneficiaries of Local 272 Welfare Fund ("Fund"), an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1101, filed a complaint against defendants seeking payment for over $1 million in medical services provided to beneficiaries that the Fund had allegedly failed to reimburse. At issue was whether a healthcare provider's breach of contract and quasi-contract claims against an ERISA benefit plan were completely preempted by federal law under the two-pronged test for ERISA preemption established in Aetna Health Inc. v. Davila. The court held that an "in-network" healthcare provider may receive a valid assignment of rights from an ERISA plan beneficiary pursuant to ERISA section 502(a)(1)(B); where a provider's claims involved the right to payment and not simply the amount or execution of payment when the claim implicated coverage and benefit determinations as set forth by the terms of the ERISA benefit plan, that claim constituted a colorable claim for benefits pursuant to ERISA section 502(a)(1)(B); and in the instant case, at least some of plaintiff's claims for reimbursement were completely preempted by federal law. The court also held that the remaining state law claims were properly subject to the district court's supplemental jurisdiction.

The company purchased a disability benefits plan, regulated by the Employee Retirement Income Security Act. A part-owner and employee of the company received benefits for about four years before the insurer terminated benefits because her non-salary income was higher than her salary income had been. The plan defines "pre-disability earnings" as: "your monthly rate of earnings from the employer in effect just prior to the date disability begins" and "basic annual earnings" as the amount reported by the policyholder on a W-2, excluding commissions. The company argued that a provision allowing termination of benefits when "current earnings" reach a percentage of pre-disability earnings referred to earnings from all sources. The district court held that the employee was not entitled to benefits but denied the insurer reimbursement. The First Circuit reversed, in favor of the employee, finding that the insurer's interpretation of the plan was unreasonable.