Jennings v. Rapid City Regional Hospital, Inc.
2011 SD 50
S.D.2011Background
- Pope & Talbot maintained a self-insured health plan for its employees and their dependents, funded in part by paycheck deductions.
- In January 2000, Pope & Talbot contracted with First Choice of the Midwest (FCM) to administer the self-insured plan, using a PPO Network.
- In March 1998, FCM contracted with Regional to participate in the PPO Network through a Hospital Agreement.
- Regional would bill FCM for services to Pope & Talbot employees; FCM would process claims and forward them for Pope & Talbot payment; employees were not to be charged for covered services under the agreements.
- Pope & Talbot filed for Chapter 11 in November 2007, continued payroll deductions but stopped paying Regional for some charges; Pope & Talbot sold the business in May 2008; Regional began directly billing employees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Employees are third-party beneficiaries of the Payer and Hospital Agreements | Employees are intended beneficiaries under the contracts | Only Pope & Talbot or FCm benefit; employees lack third-party status | Employees are third-party beneficiaries; have standing to enforce |
| Whether Regional could bill Employees for covered services | Regional cannot bill for covered services; obligations lie with Pope & Talbot | Under contract, Regional may bill for non-covered charges; but not for covered services | Employees not liable for covered services; Regional cannot collect from employees for those charges |
| Effect of Pope & Talbot's bankruptcy on employees’ rights | Bankruptcy did not terminate the Agreements or employees’ status as beneficiaries | Bankruptcy or nonpayment terminated obligations | Agreements remained in effect; employees retained beneficiary status |
| Whether the Consent to Treatment/Admission forms create adhesion contracts affecting liability | Consent forms could impose liability on employees for non-covered charges | Issue not properly before court; not raised below | Not addressed on the record; kept for remand |
| Whether Pope & Talbot’s failure to pay affects Regional’s rights under the Agreements | Failure to pay by Pope & Talbot does not transfer liability to employees | Nonpayment may allow Regional to seek payment from employees under separate contracts | Regional may seek payment from employees under separate contracts; not barred by beneficiary status |
Key Cases Cited
- Masad v. Weber, 2009 S.D. 80 (S.D. 2009) (test for determining third-party beneficiary intent; primary benefit test)
- Reisch v. State, 2008 S.D. 72 (S.D. 2008) (contract intended to benefit a class; third-party beneficiary rights)
- Sisney v. Reisch, 2008 S.D. 71 (S.D. 2008) (identifiable class benefits; beneficiary status)
- Johnson v. Coss, 2003 S.D. 86 (S.D. 2003) (definition of condition precedent and contract rights)
- Weitzel v. Sioux Valley Heart Partners, 2006 S.D. 45 (S.D. 2006) (interpretation of conditions; not necessarily a condition precedent triggering forfeiture)
- First Dakota National Bank v. Performance Engineering & Manufacturing, Inc., 2004 S.D. 26 (S.D. 2004) (third-party beneficiary rights and enforceability)