Appeal from the Circuit Court of Cook County. 93 MI 15373. The Honorable William M. Phelan, Judge Presiding.
The Honorable Justice DiVITO delivered the opinion of the court: Hartman and McCORMICK, JJ., concur.
The opinion of the court was delivered by: Divito
JUSTICE DiVITO delivered the opinion of the court:
Plaintiff, Dr. Sidney Weiser, brought this action against defendant, United Food and Commercial Workers Union and Employers Midwest Health Benefits Fund, to recover the cost of medical services provided to one of its former members, Deniece Wood (Wood). Defendant is a multi-employer benefit plan governed by the Employee Retirement Income and Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq. (1988)). On defendant's motion, the circuit court dismissed the action with prejudice based on its conclusion that plaintiff's claims were preempted by section 1144(a) of ERISA. For the following reasons, we reverse the judgment of the circuit court.
Plaintiff, a physician licensed to practice podiatric medicine in Illinois, alleged that Wood sought foot care treatment from him. After determining that Wood required surgery, plaintiff contacted defendant to verify that Wood was insured for the procedure. On February 24, 1993, defendant confirmed that Wood was its insured and advised plaintiff that a second opinion was required to receive coverage. Following plaintiff's instructions, Wood obtained a written verification of defendant's oral response, dated February 24, 1993. A second medical opinion, concurring with plaintiff's diagnosis, was obtained and the procedure was performed. Plaintiff also provided related services to Wood in March 1993.
In a letter dated May 12, 1993, defendant denied plaintiff's claim for services provided in March 1993, because Wood's employment ceased on February 6, 1993, and her coverage terminated on February 28, 1993. In a letter dated May 13, 1993, defendant denied plaintiff's claim for services provided in February 1993, including the surgery, because Wood failed to work the minimum number of hours necessary for coverage in February 1993. When plaintiff sought reconsideration of the denial of coverage, defendant responded by letter that at the time of plaintiff's inquiry, February 24, 1993, it was not aware that Wood had quit her job on February 6; defendant learned this information on approximately March 10, 1993, from Wood's employer; in its May 12 letter, defendant mistakenly assumed that Wood had worked at least 24 hours in February; having not worked the minimum number of hours in February, Wood lost her coverage on January 31, 1993; and defendant had not given plaintiff a guarantee that benefits would be in effect at the time of surgery because, since it was not Wood's employer, such a guarantee would have been impossible.
On September 3, 1993, plaintiff filed a four-count complaint seeking damages of $4,920 under theories of estoppel, guaranty, breach of an oral contract, and negligent misrepresentation. The circuit court dismissed the cause with prejudice, specifically finding that plaintiff's claims were preempted by ERISA.
Plaintiff contends that the circuit court erred in dismissing his claim because a third-party health care provider may pursue a state claim against an ERISA funded insurer. Section 1114(a) of ERISA states that "except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." (Emphasis added.) (29 U.S.C. § 1144(a)(1988).) The Supreme Court has consistently interpreted the preemption clause expansively. ( Pilot Life Insurance Co. v. Dedeaux (1987), 481 U.S. 41, 47, 95 L. Ed. 2d 39, 47, 107 S. Ct. 1549, 1552-53; Ingersoll-Rand Co. v. McClendon (1990), 498 U.S. 133, 139, 112 L. Ed. 2d 474, 484, 111 S. Ct. 478, 484.) "A law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." ( Shaw v. Delta Air Lines, Inc. (1983), 463 U.S. 85, 96-97, 77 L. Ed. 2d 490, 501, 103 S. Ct. 2890, 2899-900.) In the same opinion, the Supreme Court tempered that broad statement by noting that state actions which affect plans in "too tenuous, remote, or peripheral a manner" are not preempted. ( Shaw, 463 U.S. at 100 n.21, 77 L. Ed. 2d at 503 n.21, 103 S. Ct. at 2901 n.21.) ERISA clearly preempts a state cause of action brought by an ERISA plan member or beneficiary against an insurer. ( Memorial Hospital Systems v. Northbrook Life Insurance Co. (5th Cir. 1990), 904 F.2d 236, 245.) However, this appeal is raised by a third party which provided unreimbursed medical services in reliance upon an ERISA insurer's alleged assurance that the services would be covered. The Supreme Court and the seventh circuit have not, as of yet, determined whether a state action arising out of these circumstances would be preempted by ERISA. Three federal circuits have considered this precise question, under similar fact patterns, and reached different conclusions.
The fifth circuit ( Memorial, 904 F.2d 236) and the tenth circuit ( Hospice of Metro Denver, Inc. v. Group Health Insurance of Oklahoma, Inc. (10th Cir. 1991), 944 F.2d 752) ruled that such state claims are not preempted by ERISA, and two northern district of Illinois courts adopted their reasoning. (Rehabilitation Institute v. Group Administrators; Ltd. (N.D. Ill. 1994), 844 F. Supp. 1275; Parkside Lutheran Hospital v. R.J. Zeltner & Associates, Inc. (N.D. Ill. 1992), 788 F. Supp. 1002.) These courts found that third-party provider claims did not "relate to" ERISA plans, did not affect the relationships among ERISA's named entities, did not frustrate congressional intentions, and did implicate important state interests.
Third-party provider actions were found not to relate to ERISA plans because the claims were based upon acts of misrepresentation rather than the terms of a benefit plan. In providing confirmation of insurance coverage, the ERISA insurers created duties apart from and outside of those in the plan contract. ( Parkside, 788 F. Supp. at 1006.) The third-party claims arose from those breached duties and did not seek to modify, expand, or enforce rights under the plan contract. ( Hospice, 944 F.2d at 754; Memorial, 904 F.2d at 246.) The Hospice court stated:
"An action brought by a health care provider to recover promised payment from an insurance carrier is distinct from an action brought by a plan participant against the insurer seeking recovery of benefits due under the terms of the insurance plan. Preemption in this case would stretch the 'connected with or related to' standard too far." ( Hospice, 944 F.2d at 756.)
Additionally, a claim may seek damages based upon the amount of benefits due under the plan without "relating to" the plan. Hospice, 944 F.2d at 755.
The Memorial court noted that the effect of an action on the relations between the principal ERISA entities (the employer, the plan, and its fiduciaries and beneficiaries) is important to determine if the "tenuous, remote, or peripheral" exception should apply. In its analysis, the court focused on the ERISA legislation and the protections which health care plan employees and beneficiaries received in exchange for forfeiting the right to seek certain forms of redress. Third-party health care providers were not part of this "bargain" and, as a result, their ...