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BELMONT COMMUNITY HOSP. v. LOCAL UNION NO. 9

May 29, 1990

BELMONT COMMUNITY HOSPITAL, Plaintiff,
v.
LOCAL UNION NO. 9, I.B.E.W. & OUTSIDE CONTRACTORS HEALTH & WELFARE FUND, ALICJA BARRY, and DENNIS R. BARRY, Defendants



The opinion of the court was delivered by: NORGLE

 CHARLES RONALD NORGLE, UNITED STATES DISTRICT JUDGE.

 Before the court is the motion of defendant, Local Union No. 9, I.B.E.W. & Outside Contractors Health & Welfare Fund (the "Plan"), to dismiss the complaint of plaintiff, Belmont Community Hospital (the "Hospital"). For the following reasons, the motion is denied.

 On a motion to dismiss, the allegations of the complaint as well as the reasonable inferences to be drawn from them are taken as true. Doe v. St. Joseph's Hospital, 788 F.2d 411 (7th Cir. 1986). Accordingly, the facts are as follows. The Plan is an entity created under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et. seq. Defendant Alicja Barry had health insurance coverage through the Plan. On or about September 16, 1986, Mrs. Barry was admitted to the Hospital and received medical treatment totaling $ 1,912.40. Mrs. Barry executed an assignment of all rights, title and interest to reimbursement of medical costs by the Plan to the Hospital. Mrs. Barry timely filed her insurance claim with the Plan and the Hospital has demanded payment. To this point, the defendant has refused.

 DISCUSSION

 The Plan has moved to dismiss plaintiff's complaint on two grounds: 1) that the Hospital, as an assignee of Mrs. Barry's rights, does not have standing to maintain a suit, under 29 U.S.C. § 1132(a)(1)(B), for benefits due under an ERISA plan; and 2) that the complaint fails to allege that the refusal of the Plan administrators to pay plaintiff was arbitrary and capricious. The court will deal with each issue separately.

 As to the first issue, there is a split of authority as to whether a beneficiary under an ERISA welfare plan can assign his or her rights to health benefits. Defendant relies upon Northeast Dept. ILGWU v. Teamsters Local Union No. 229, 764 F.2d 147 (3rd Cir. 1985) and Nationwide Mutual Insurance Co. v. Teamsters Health and Welfare Fund, 695 F. Supp. 181 (E.D.Penn. 1988) in arguing that health benefits under ERISA cannot be assigned. The holding of the district court in the Nationwide case relies wholly upon the decision of the court in Northeast, which held that a participant or beneficiary under an ERISA welfare plan cannot assign or subrogate his or her rights to ERISA benefits to another party. Northeast, 764 F.2d at 154, n. 6; Nationwide, 695 F. Supp. at 184. As stated by the Northeast court, "Congress simply made no provision in § 1132(a)(1)(B) for persons other than participants and beneficiaries to sue, including persons purporting to sue on their behalf." Northeast, 764 F.2d at 154, n. 6.

 Plaintiff relies primarily on the case of Kennedy v. Deere & Co., 118 Ill. 2d 69, 514 N.E.2d 171, 112 Ill. Dec. 705 (1987) in arguing that ERISA benefits can be assigned. *fn1" In that case, the Illinois Supreme Court held that an assignment of ERISA health care benefits could take place, stating:

 
From the statute's preamble it is clear that the principle concern of Congress in enacting ERISA was "to protect the interests of participants in employee benefit plans and their beneficiaries". Congress did not proscribe any qualifications for a beneficiary. Section 206(d) of ERISA (29 U.S.C. sec. 1056(d) (1982)) prohibits the assignment of pension benefits, but there is nothing in ERISA or in the legislative history showing a congressional intent to prohibit assignments of health care benefits or to limit the class of persons a participant is permitted to designate to receive benefits under a health benefit plan. (Citations omitted).

 Kennedy, 118 Ill.2d at 73-74, 514 N.E.2d at 173.

 The Kennedy court, as well as a number of other courts so holding, rely to a great extent on the Ninth Circuit's decision in Misic v. Building Service Employees Health and Welfare Trust, 789 F.2d 1374 (9th Cir. 1986), in reaching this conclusion. There, a doctor provided dental care to a patient insured under an ERISA health plan and was given an assignment, by the patient, of the patient's rights to reimbursement from the plan. Misic, 789 F.2d at 1376. The Misic court, in holding that the assignment was valid under ERISA, extensively detailed the construction of the statute by Congress. The court first noted the elaborate distinctions in the statute between pension benefit plans and health and welfare benefit plans. Id. After noting that a provision of ERISA, 29 U.S.C. § 1056(d), prohibits assignment of pension plans but specifically excludes welfare benefit plans from that section, the court then stated:

 
"The absence of any reference in the statute to assignment of the right to reimbursement for welfare benefits is in striking contrast to the complex and extensive provision prohibiting assignment of pension benefits, obviously the product of careful consideration. The statute as a whole is 'comprehensive and reticulated.' In these circumstances, 'the assumption of inadvertent omission is rendered especially suspect.' The purpose of the anti-assignment provision [as to pension benefits] is 'to further insure that the employee's accrued benefits are actually available for retirement purposes'. . . Neither the specific purpose of the anti-assignment provision nor the general goal of the statute would be served by prohibiting the type of assignments involved in this case -- assignment to the person who provided the beneficiary with the health care of the beneficiaries' right to reimbursement for the cost of that health care . . . Assignment of trust monies to health care providers results in precisely the benefit the trust is designed to provide and the statute is designed to protect."

 Id. see also, Hermann Hospital v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1289-90 (5th Cir. 1988); Multicare Health Care Services, Inc. v. General American Life Insurance Co., 720 F. Supp. 581, 582 (N.D.Tex. 1989); Wisconsin Department of Health and Social Services v. Upholsterers International Union Health and Welfare Fund, 686 F. Supp. 708, 713-14 (W.D.Wis. 1988) (all holding that ERISA health and welfare benefits can be assigned to third parties).

 Neither party has cited, nor can the court find, any binding authority in this circuit on this issue. *fn2" However, the court believes that, if faced with this issue, this circuit would find ERISA welfare benefits assignable. The court disagrees with the constricted view taken by the Northeast court, and ...


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