New York Joins Ranks of Courts Holding Erisa Not a Bar to Medical Malpractice Suits against Physician in Hmo That Is Part of Employer-Provided Health Benefits

By Stempel, Jeffrey W.; Boyd, William S. | Journal of Risk and Insurance, September 1999 | Go to article overview

New York Joins Ranks of Courts Holding Erisa Not a Bar to Medical Malpractice Suits against Physician in Hmo That Is Part of Employer-Provided Health Benefits


Stempel, Jeffrey W., Boyd, William S., Journal of Risk and Insurance


Nealy v. US Healthcare, 93 N.Y.2d 209, 711 N.E.2d 621, 689 N.Y.S. 2d 406 (New York Court of Appeals, Mar. 25, 1999).

In a case of the sort that has been raised in Congress as grounds for passage of legislation to protect HMO patient's rights, New York's highest court has ruled that doctors working for an HMO are not immune from malpractice suits based on state law even where the doctor's services are rendered for an HMO operating pursuant to an employer-provided plant subject to the Employee Retirement Income Security Act (ERISA). The federal ERISA statute contains a broad preemption clause (see the discussion of the UNUM v. Ward case above) that makes state law inapplicable to ERISA-sponsored employee benefit plans except to the extent that the state law is one regulating insurance. Although a medical malpractice action is not insurance regulation, the New York Court of Appeals still found no bar to the litigation. The plaintiff's suit, which arose out of alleged nontreatment or inferior treatment, was against the physician and not against the insurer or plan administrator. Consequently, even if ERISA's pre-emption clause operated to prevent state law-based suits directly against the an ERISA plan, the preemption clause did not apply to bar suits against agents of the plan, particularly when the doctor/agent was being sued for medical malpractice rather than for implementation of the plan.

Plaintiff alleged that her husband sought treatment for coronary artery disease from Dr. Ralph Yung and that as a result of Dr. Yung's failure to provide adequate treatment, including prompt examination by a specialist, her husband died of a massive myocardial infarction nearly six weeks after first approaching Dr. Yung. The decedent patient had a history of heart disease and had previously been treated with angioplasty by a specialist when the decedent had been covered by a Blue Cross plan prior to his switch to an employer-provided HMO. The allegations of negligence against Dr. Yung at least touched upon delays induced by Dr. Yung's following of HMO-mandated procedures governing referral to specialists and use of physicians that were not part of the Aetna/U.S. Healthcare HMO which had designed Dr. Yung as the decedent's primary physician. Notwithstanding this brooding omnipresence of the issue of the HMO's possible negative effect on Dr. Yung's delivery of medical services, the Court characterized the actio n as one sounding in medical malpractice rather than a suit against the HMO for breach of contract, fraud, or bad faith.

Here, plaintiff alleges that Dr. Yung, as a direct provider of medical services, violated the duties and standard of care owed to his patient by improperly assessing the nature and extent of his condition and by failing to take reasonable steps to provide for his timely treatment by a specialist. Plaintiff does not allege that Dr. Yung is responsible for delay caused by US Healthcare's decision-making process with respect to coverage or benefits. Her claim against Dr. Yung is that he failed to take timely action to treat her husband.

See 93 N.Y.2d at 219-20, 711 N.E.2d at 625.

In rendering its decision, which predated by a month the UNUM v. Ward case in the U.S. Supreme Court, the New York Court took a similar approach to interpreting ERISA and arguably focused even more on the purpose of the statute rather than the literal text of the law, which preempts state law that "relates to" an employee benefit plan. Rather, the New York Court read Supreme Court precedent (accurately in light of the Court's subsequent approach and holding in Ward) as moving away from textual literalism (the words "relate to" can be stretched to a near-infinite point) to "a more pragmatic approach" since the Court's decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed. 2d 695 (1995). Blue Cross v. Travelers found no ERISA preemption of New York's law that exempted Blue Cross and Blue Shield from a surcharge on hospital bills paid by other employee benefit plans to fund state-sponsored insurance coverage goals. …

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