Appeals Court Dismisses Chiropractor’s Class Action Lawsuit Against Insurer for Alleged Underpayment and Breach of Contract


In a proposed class-action insurance fraud lawsuit, the Illinois Third District Court of Appeal has ruled that a chiropractor may not sue a workers’ compensation insurer. In Martis v. Grinnell Mutual Reinsurance Company, No. 3-08-0004 (Ill. 3rd March 27, 2009), chiropractor Richard Martis sued Grinnell Mutual Reinsurance Company after Grinnell’s billing employees incorrectly paid Martis too little for treating an injured worker.

In February of 2006, Martis began treating an employee of Water Management Corp. of Illinois who had been injured on the job. He was to be paid by Water Management’s workers’ compensation policy, issued by Grinnell. When he submitted his bills to Grinnell, the insurer’s outside billing firm applied PPO discounts to those bills even though Martis did not have a PPO agreement with Grinnell. Thus, Grinnell underpaid Martis. He responded with a proposed class-action lawsuit encompassing all Illinois health care providers who had been underpaid by Grinnell in the same way, through incorrect PPO discounts.

The complaint by Martis alleged conspiracy, unjust enrichment, breach of contract and violations of the Illinois Consumer Fraud Act. The trial court granted Grinnell’s motion to dismiss the conspiracy and unjust enrichment counts. However, it certified the class of health-care providers as to the breach of contract claim. Grinnell appealed the denial of its motion to dismiss the breach of contract claim and the class certification to the Third District.

The appeals court reversed those decisions. In its opinion, the court said Martis is not a party to the contract between Grinnell and Water Management. Nor is he a third-party beneficiary to the contract, the court said — the employee Martis treated is such a person, but Martis himself is not. Because this is an issue of first impression in Illinois, the court cited cases from states including Hawaii, Mississippi, Indiana and Texas in which state courts held that medical providers are not intended third-party beneficiaries. It also pointed to decisions in other states holding that medical providers are only incidental beneficiaries of auto insurance policies. And in federal cases, they wrote, courts have found that medical providers are intended beneficiaries only when the insurance policy requires direct payment to the medical provider.

From this, the court concluded that medical providers like Martis are third-party beneficiaries of workers’ compensation insurance policies only when the insurance policy specifically says so. It found that the policy did not, despite a clause saying Grinnell is liable to “any person entitled to benefits payable by this insurance.” The language does not identify third parties, the court wrote, and medical providers are not among those entitled to benefits under the Illinois Workers’ Compensation Act. Thus, Martis cannot enforce the contract and has no breach of contract claim. For the same reasons, the court next found, it was inappropriate of the trial court to certify a class action of other providers who are also not parties to the Grinnell contract. Thus, it reversed and remanded the trial court’s decisions.

Justice Mary McDade dissented from the ruling. She concurred that Martis is not a third-party beneficiary, as the majority found, but disagreed with its choice to reverse certification of a class action. Class actions must be based on a valid cause of action, she wrote — but the analysis the majority used to decide whether there is a valid cause of action for breach of contract was wrong. McDade wrote that the issue is not whether Martis is a valid third-party beneficiary to the contract, but whether there was a breach of contract against Martis. And because Grinnell failed to pay Martis for services rendered, there was. The plaintiff’s breach of contract complaint does not rely on being a third-party beneficiary to Grinnell’s contract. Thus, McDade wrote, she would affirm.

The national consumer rights and class action law firm of Lubin Austermuehle with offices in Chicago and Oak Brook, IL handles all types of consumer fraud and class-action litigation, including Illinois insurance bad faith lawsuits. If you have made an insurance claim, but the company refuses to pay some or all of the benefits it owes you under its own contract, you may be a victim of insurance bad faith. Our Chicago consumer rights and class action lawyers can help. To learn more about how you can protect your rights at a free consultation, please contact us through the Internet or call toll-free at 630-333-0333.

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