Bristol SL Holdings Inc. (“Bristol”), a holding company and successor-in-interest for Sure Haven, a now-bankrupt drug and alcohol treatment center, recently urged a panel of the Ninth Circuit to overturn the trial court’s grant of summary judgment in favor of insurance giant Cigna. Bristol sued Cigna in 2019, claiming that it violated the terms of its health plan when it failed to pay more than $8 million in claims after preauthorizing the substance abuse treatments. The case is Bristol SL Holdings Inc. v. Cigna Health and Life Insurance Co. et al., case number 23-55019, U.S. Court of Appeals for the Ninth Circuit.
In December 2022, a California federal court judge ruled that Cigna was entitled to summary judgment on Bristol’s ERISA claim about denying benefits under the health insurance plan. The judge also granted summary judgment on Bristol’s state law claims, predicated on the same benefit claims preempted under ERISA. In the court ruling, the judge found that Cigna appropriately denied coverage for the claims under the terms of the policies because Sure Haven engaged in so-called “fee-forgiving.” Under this practice, for which Cigna policies excluded coverage, Sure Haven did not require its patients to pay the required out-of-network co-pay, thus discouraging them from using more affordable in-network care.
Nonetheless, on appeal before a panel of the Ninth Circuit, Bristol argued that the company should have paid the claims because Cigna verified coverage, confirmed payment rates, and obtained preauthorization of treatments before Sure Haven provided treatment to patients. Bristol characterized these actions as creating enforceable contracts and quasi-contracts under state law, thus amounting to sufficient evidence to overcome summary judgment. Bristol argued that Cigna had no solid evidence of a company policy of fee-forgiving. Therefore, Bristol asked the panel to reverse the grant of summary judgment and remand the case to the trial court for further proceedings.
Bristol also argued that the federal district court judge applied an improper “highly deferential discretionary authority standard” and disregarded that Cigna provided no proof of the plan other than summary plan documents and excerpts. Nonetheless, U.S. Circuit Judge R. Sidney Thomas noted that Cigna had told the court it produced all records related to the plans.
The U.S. Circuit panel judges appeared skeptical of Bristol’s contentions that out-of-network providers are not part of Cigna’s ERISA plan. At least one judge also pointed out that fee-forgiving, if permissible, likely would undermine the ERISA plan’s goal to contain costs to in-network providers.
For its part, Cigna argued that the fee-forgiving coverage exclusions in the plan documents gave it the right to exclude coverage for these services. Cigna independently verified through investigative techniques, both orally and in writing, that Sure Haven was not requiring its patients to pay the required co-pays for out-of-network services. Lawyers for Cigna also denied that the verification and preauthorization calls between Sure Haven and Cigna constitute an enforceable contract, as no services had been rendered or claims had been submitted for evaluation by Cigna.
This case is on its second journey to the Ninth Circuit. In January 2022, a three-judge panel of the Ninth Circuit revived Bristol’s suit after finding that the company had derivate standing as Sure Haven’s successor-in-interest to file the lawsuit against Cigna. The panel also reversed the trial court’s grant of summary of judgment on Bristol’s state law breach of contract and promissory estoppel claims in a separate unpublished memorandum.
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