ERISA Preemption

The Federal ERISA law as embodied in U.S.C. §502(a)(1)(B) states that only Federal Courts can consider actions brought under certain portions of the Federal Employee Retirement Income Security Act (ERISA). Since many HMOs provide coverage to employees through this act, that preemption section is extremely important. A medical malpractice action, which alleges vicarious responsibility of an HMO for the actions of its doctors if restricted to an ERISA claim, would provide only damages for the cost of the treatment and nothing else. Thus, any plaintiff injured as a result of an HMO physician’s negligence who seeks to hold the HMO responsible wants, at all costs, to avoid Federal preemption.

The Florida Supreme Court has recently held in Villazon v Prudential Health Care Plan, Inc., 28 F.L.W. S267 (Fla. March 27, 2003) that Federal preemption does not apply to an action brought against an ERISA HMO when the cause of action is based on vicarious liability. That decision resolved the conflict between Villazon v Prudential Health Care Plan, Inc., 794 So.2d 625 (Fla. 3rd DCA 2001) and In Re: Estate of Frappier, 678 So.2d 884 (Fla. 4th DCA 1996). The issue in those two cases boiled down to whether an action bottomed on vicarious liability of an HMO physician sufficiently “relates to” the administration of an ERISA plan to require preemption.

The ERISA law was designed to prevent State Court actions when an HMO consumer complained of the HMO’s refusal to provide benefits. Broad preemption language was contained within the law so that only Federal Courts could determine those claims and to prevent consumer actions for damages beyond the value of the benefits. Numerous Federal appellate decisions have turned on the question of whether a vicarious liability action brought against an HMO for one of its physicians was sufficiently connected to a claim for benefits to invoke the preemption language. The Frappier Court, in reviewing those Federal cases, concluded that there was a distinction between lawsuits based upon an HMO having withheld benefits from the consumer and an action based upon the quality of the HMO benefits provided. It concluded that a malpractice action falls in the latter category and, as such, would not relate to the administration of the plan and would, thus, avoid preemption.

The Villazon Court drew the opposite conclusion. The Supreme Court sided with the Frappier Court.

However, Villazon directly conflicts with Frappier

in its determination of whether a state law

wrongful death claim by a deceased patient

member’s estate against a health maintenance

organization (HMO) based upon vicarious

liability for asserted medical malpractice of its

member physicians ‘relates to’ administration

of the ERISA plan and is therefore preempted.

In Villazon, the district court below incorrectly

concluded that it did. See Villazon, 794 So.2d

at 627 (determining that Villazon’s claims

‘directly relate to the health plan as they arise

from the denial of medical care and treatment

benefits’). In Frappier, in contrast, the district

court correctly determined that ERISA does

not preempt such vicarious liability claims.

(emphasis by the Court).


The key case analyzed by virtually every jurisdiction on this issue is Dukes v US Healthcare, Inc., 57 F.3d 350 (3d Cir. 1995). The analysis of the Frappier Court stated it as follows:

Accordingly, Dukes considered and rejected the

line of cases cited and relied upon by the lower

court in determining that ERISA preempts the

instant vicarious liability claim. We agree with

the factual dichotomy expressed in Dukes that

is critical for this analysis:

[T]here is no allegation here that

the HMOs denied anyone any

benefits that were due under the

plan. Instead the plaintiffs here

are attempting to hold the HMOs

liable for their role as the arrangers

of their decedents’ medical


Id. at 361.

Thus where, as here, an ERISA is implicated by a

complaint for failing to provide, arrange for, or

supervise qualified doctors to provide the actual

medical treatment for plan participants,

federal preemption is inappropriate. (Citing

numerous cases.) Therefore, even if Health

Options is an ERISA subject to federal

preemption, we must conclude that the trial

court erred in dismissing the vicarious liability

count of the instant complaint. Frappier, 678

So.2d at 887.


The Supreme Court in Villazon cites with approval the above section of the Frappier opinion and concludes that it is the correct interpretation of the law as it applies to actions brought in State Court against HMOs based upon allegations of either direct or vicarious liability for negligence of a physician who provides services to an HMO consumer.

In Villazon, the plaintiff had also alleged that the HMO had assumed a nondelegable duty to render medical care when it agreed to provide health care to the plaintiff’s decedent. That allegation was bottomed on Fla. Stat. 641.17-641.3923, the “Health Maintenance Organization Act.” The Supreme Court rejected that allegation and concluded that the statute did not provide for a cause of action for that theory of liability, however, the Court did not preclude an allegation of that theory based upon common law and left that question for a later determination.

The Villazon case is also important on the issue of what proof is required to go to the jury on the question of actual agency. The Third District found as a matter of law that the physician in question was an independent contractor and not an actual agent of the HMO because there was no evidence of control by the HMO over the physician. The Supreme Court reversed, pointing out that it is not actual control that is important but rather the right of control which is determinative. See Nazworth v Swire Fla., Inc., 486 So.2d 637, 648 (Fla. 1st DCA 1986). The language utilized by the Court seems to create a new view as to the relationship between an HMO and a physician.

While physicians of the past in the traditional

pattern of American life may have constituted

distinct independent entities and independent

centers of occupation and profession, that

model has been dramatically altered through

the HMO concept in a significant manner

which a legal system cannot simply ignore.

The thought of visiting a private and

independent office of a totally independent

physician may now be one more of history

and cultural conditioning than current

reality. The economic structures alone may

so impact the relationships that the prism

through which we consider and evaluate

issues of control must be honed for this

current reality.


The Supreme Court then goes on to express the view that this new way of looking at the relationship between an HMO and a physician creates a jury question as to actual agency.

These contractual provisions, along with

the contractual provisions between the

HMO and the physicians, and the totality

of the circumstances operating within the

current reality of the interaction within the

decision-making process, create genuine

issues of material fact sufficient to withstand

a motion for summary judgment with

respect to the question of whether PruCare

can be held vicariously liable for the

alleged medical negligence of its member

physicians when providing service pursuant

to the PruCare health plan under theories

of actual agency. PruCare has not

conclusively demonstrated the absence of

genuine issues of material fact.


It appears that in any case involving an HMO, this opinion provides the key to creating a cause of action against the HMO and this landmark case may well revolutionize the ability to sue HMOs for the acts of its physicians.

Originally published in June 2003

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