On October 10, 2014, the Ninth Circuit affirmed a grant of summary judgment in favor of Manatt client The MEGA Life and Health Insurance Company. In an unpublished memorandum opinion, the Ninth Circuit held that a health care provider had no direct cause of action for breach of contract against an insurer because the provider and the insurer had no contract directly with each other. St. Vincent Medical Center v. MEGA Life and Health Ins. Co., __ Fed. Appx. __, 2014 WL 5088884 (9th Cir. Oct. 10, 2014) (mem. op., unpublished). Margaret Levy and Joanna McCallum of Manatt represented MEGA Life in the appeal. St. Vincent Medical Center was represented by the law firm of Stephenson, Acquisto & Colman.
St. Vincent had treated two patients insured by MEGA Life, and MEGA Life had denied payment of both patients’ claims on the ground that the services provided were for preexisting conditions not covered under the terms of the insureds’ policies.
St. Vincent and MEGA Life each had separately contracted with a third-party intermediary, First Health Group. Under MEGA Life’s contract with First Health, MEGA Life could access discounted rates for providers that separately contracted with First Health, such as St. Vincent. Under these agreements, if St. Vincent had rendered services to MEGA Life’s insureds that were covered under their policies, MEGA Life would have paid St. Vincent for those services at discounted rates set forth in the separate contract between St. Vincent and First Health. As noted, however, the reason that MEGA Life did not pay St. Vincent for the services was not because of any issue regarding the rates, but simply because the services were not covered services under the insureds’ policies with MEGA Life.
St. Vincent filed suit in Los Angeles County Superior Court, and MEGA Life removed the case to federal court. St. Vincent’s suit asserted causes of action for breach of written contract, breach of oral contract, and negligent misrepresentation. MEGA Life moved for summary judgment on the grounds that there was no written contract between St. Vincent and MEGA Life and St. Vincent’s claims for relief for breach of oral contract and negligent misrepresentation were barred by the statute of limitations.
United States District Judge Stephen V. Wilson granted the motion on both grounds. The district court found that St. Vincent had no right to sue the insurer for breach of the St. Vincent–First Health contract, to which MEGA Life was not a signatory. The district court also rejected St. Vincent’s argument that MEGA Life was estopped from denying payment because of representations it allegedly had made to St. Vincent. MEGA Life also obtained an award of costs, which was paid by St. Vincent’s counsel.
St. Vincent appealed from the summary judgment with respect to the breach of written contract claim but did not appeal from the summary judgment finding that the claims for breach of oral contract and negligent misrepresentation were barred by the statute of limitations.
The Ninth Circuit unanimously affirmed. The court noted the general rule in California law that “only a signatory to a contract may be liable for any breach.” St. Vincent, 2014 WL 5088884, at *1 (citation omitted). It was undisputed that there was no written agreement between St. Vincent and MEGA Life. The court roundly rejected St. Vincent’s argument that the series of agreements involving St. Vincent, MEGA Life, and First Health must be read as a single contract. The court held that there was no authority to support the contention that the contracts’ use of “similar language” meant they must be read as one contract. Moreover, both contracts contained integration clauses, and the contract between MEGA Life and First Health also contained a clause disclaiming any third-party rights. In addition, neither contract incorporated the other by reference in “clear and unequivocal” language, as California law requires. Id.
The court also rejected St. Vincent’s alternative argument that MEGA Life was estopped from denying payment, observing that St. Vincent had not established the elements necessary for estoppel to apply. Finally, the court held that there were no facts to support the contention that MEGA Life had ratified the St. Vincent–First Health contract and should be estopped from denying payment on that basis.
This opinion confirms that a tripartite relationship between a health insurer, a third-party intermediary, and a health care provider ordinarily will not give rise to direct contractual rights between the insurer and the provider, in the absence of a written contract between the insurer and the provider or language in the contracts supporting an intent to create such rights.