ERISA-Seventh Circuit Rules That Plaintiffs Are Not Beneficiaries Under ERISA, And Thus Cannot Enforce ERISA Claims Procedure

In Pennsylvania Chiropractic Association v. Independence Hospital Indemnity Plan, Inc., Nos.14-2322, 14-3174 and 15-1274 (7th Cir. 2015), two chiropractors and an association of chiropractors filed suit against an insurance company. They contend that, when determining how much to pay for services rendered to patients, the insurer failed to use the procedures required by the ERISA claims procedure, found at 29 U.S.C. § 1133. However, the plaintiffs’ ability to invoke ERISA depends on their being “beneficiaries” of a plan established under that law. See 29 U.S.C. § 1132(a)(1)(B). The district court concluded that plaintiffs are in fact beneficiaries, and awarded damages plus injunctions requiring the insurer to follow § 1133 and the Department of Labor’s regulation, 29 C.F.R. § 2560.503-1, when making decisions about coverage and level of payment under insurance policies. The insurance company appeals.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) noted that the term “beneficiary” is defined in 29 U.S.C. § 1002(8) as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” Here, the plaintiffs are not designated as beneficiaries by any participant or plan. Plaintiffs do not rely on a valid assignment from any patient. Nor do they rely on a designation in a plan. Instead they rely on their contracts with an insurer, and the insurer is not a plan. That does not meet the definition in § 1002(8). Since the plaintiffs are not beneficiaries, they cannot enforce the ERISA claims procedure, or receive damages for violations of the procedure. As such, the Court reversed the decision of the district court.

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