The court ruled that the Employee Retirement Income Security Act (ERISA) does not preempt certain state statutory and common law claims for negligent misrepresentation and other unfair deceptive practices.
In an action filed in 2009 in the Southern District of Texas, AMQ alleged that defendant United Healthcare Insurance Co., in spite of making such assurances, had refused to pay AMQ over $20,000,000 for devices it had purchased on behalf of United’s insured. AMQ alleged violations of ERISA and state common and statutory law. The 5th Circuit held that the district court had misread its precedent on the issue and had improperly found that AMQ’s state law claims depended on or were derived from the rights of the patients to recover benefits under their ERISA plans, thus requiring preemption. Instead, the Circuit Court held, “[c]onsultation of the plans’ terms is…not necessary to evaluate whether United’s agents’ statements [promising AMQ it could bill United] were misleading” and that “[AMQ]’s alleged right to reimbursement does not depend on the terms of the ERISA plans.”
In the $22 million lawsuit, Access Mediquip L.L.C. (AMQ), which provides medical devices and device management services to hospitals, ambulatory surgery centers and insurers, sued United Healthcare for failing to reimburse AMQ for equipment United had promised it would cover.
“The decision is significant not only for Access Mediquip, but also for many other providers who frequently are confronted with denials by insurers after obtaining assurances that payment will be provided,” says D. Brian Hufford of Pomerantz Haudek Grossman & Gross LLP, who argued the appeal.
AMQ purchases the devices from manufacturers after verifying coverage and receiving assurance from the insurer that it can bill the insurer directly for the device.
In July 2010, United—focusing on three patients' exemplar claims—asked the district court to rule solely on the question of whether ERISA preempted AMQ's state law claims. In October 2010, the court entered summary judgment against AMQ, holding that ERISA preempted the claims because, in the court's view, they related to the extent, rather than the existence, of an insured's coverage and were therefore subject to preemption.
According to the 5th Circuit decision, the district court's differentiation between extent and existence of coverage in determining preemption was incorrect, and ERISA did not preempt the claims because "[t]he merits of Access's misrepresentation claims do not depend on whether its services were or were not fully covered under the patients' plans." The Court further noted that preventing third parties such as AMQ from pursuing remedies under state law for such misrepresentations frustrates rather than promotes the goals of ERISA.
The Court affirmed summary judgment in favor of United to the extent it agreed that ERISA preempted AMQ's state law claims for unjust enrichment and quantum meruit. The case will now proceed in the district court on the ERISA and three state law claims.
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