Medical Providers Have Standing to Sue under ERISA in Ninth Circuit

Medical Providers Have Standing to Sue under ERISA in Ninth Circuit cover

The Ninth Circuit recently held that medical providers have standing to sue under the Employment Retirement Income Security Act of 1974 (ERISA) even though they are not plan participants or beneficiaries, as long as there is a valid assignment of benefits from the beneficiary to the provider.

Case Background

South Coast Specialty Surgery Center operates an ambulatory surgery center in California, and some of its patients are insured under ERISA-government health benefits plans. As a condition of treatment, South Coast requires patients to sign an “assignment of benefits” form, in which the patient authorizes “my insurance company to pay by check made payable and mailed directly to [South Coast] for the medical and surgical benefits allowable, and otherwise payable to me under my current insurance policy, as payment toward the total charges for services rendered…” Per the assignment, South Coast submits claims to patients’ insurance companies and claim administrators for reimbursement for medical services rendered.

South Coast sued Blue Cross of California for non-payment of benefits. While South Coast, as neither a plan participant nor a beneficiary, could not bring a direct enforcement action under ERISA, the provider argued that it could enforce ERISA’s protections directly because its patients had assigned it the right to sue for non-payment via the “assignment of benefits” form. The district court sided with Blue Cross and dismissed the lawsuit, holding that South Coast lacked standing to bring a suit since it was neither a plan participant nor a beneficiary. South Coast appealed to the Ninth Circuit, which reversed the decision.

Ninth Circuit Ruling

In weighing South Coast’s appeal, the Ninth Circuit considered two questions: 1.) Does a healthcare provider have derivative authority to enforce ERISA’s protections if it has received a valid assignment of rights? and 2.) Did South Coast’s patients effectuate such an assignment, permitting the medical provider to sue the insurer under ERISA?

The court cited longstanding circuit precedent in answering yes to the first question. Though South Coast clearly lacks direct authority to enforce protections under ERISA’s terms, ERISA does permit the assignment of health benefits to a healthcare provider, and it allows such a provider to bring derivative claims on behalf of its patients. In Misic, the Ninth Circuit held, “ERISA does not forbid assignment by a beneficiary of his right to reimbursement under a health care plan to the health care provider.” 1 And in Spinedex, the court found that patients may assign their right to benefits under ERISA and that the assignees may bring derivative actions. 2

In answer to the second question, the Ninth Circuit applied contract law principles to conclude that the “assignment of benefits” form signed by the patient validly assigned the right to South Coast to sue for non-payment. “If a contract is clear and unambiguous, [the court] must determine the intention of the parties ‘solely from the plain language of the contract,’” the court stated, quoting MJ & Partners. 3 The court held, “The form’s wording clearly conveys that South Coast and its patients intended that it operate as a valid assignment for the payment of insurance benefits.” The court acknowledged that the form did not explicitly state that South Coast may sue insurers on a patient’s behalf. But an assignment of the right to benefits generally includes the right to sue for non-payment of benefits, the court stated, rejecting the insurer’s argument that the form only assigned the right to direct payment and did not encompass a legal right to sue for non-payment. “Indeed, permitting Sun Coast to recover plan benefits, but precluding it from suing for the non-payment of those benefits by a single insurer, leaves South Coast with little legal recourse after ‘fronting’ the costs of care,” the court stated.


The Ninth Circuit concluded that recognizing derivative authority to sue serves the purpose of ERISA by making it unnecessary for health care providers to evaluate the solvency of patients before treating them and by preventing beneficiaries from having to pay potentially large medical bills and await compensation. Thus, construing an assignment of benefits as including the right to sue for non-payment “increases patient access to healthcare and transfers any responsibility of litigating unpaid claims to the provider – an entity that is much better positioned to pursue those claims in the first place,” the court stated.

Schwartz, Conroy & Hack, PC represents individual insurance policyholders, medical providers and other businesses in claims and litigation, including ERISA litigation, against insurance companies. If you are involved in a dispute with your insurance company, contact us. We have the expertise, experience, and tenacity to make insurance companies keep their promises to policyholders like you.

1 Misic v. Building Service Employees Health, 789 F.2d at 1377 (9th Cir. 1986)

2 Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc.770 F.3d 1282, 1289 (9th Cir. 2014)

3 MJ & Partners Rest. Ltd. P’ship v. Zadikoff, 995 F. Supp. 929, 930–31 (N.D. Ill. 1998).