skip navigation


Nealy v. U.S. Healthcare, 1999 N.Y. Int. 0035 (Mar. 25, 1999).




Whether the ERISA preemption clause, barring claims that "relate to" employee benefit plans, applies to medical malpractice, breach of contract, breach of fiduciary duty, and negligence claims against the HMO primary care physician who delayed referral of Plaintiff's deceased husband to a specialist?


No. Plaintiff's claims do not conflict with ERISA nor operate to frustrate the objectives of ERISA. Moreover, Plaintiff's claims are consistent with ERISA's "principal object": the protection of plan participants and beneficiaries. Therefore, Plaintiff's claim is not preempted by ERISA and is reinstated.


Plaintiff's husband, Glenn Nealy, was 37 years old when he was diagnosed with coronary arteriosclerosis and a coronary lesion in 1992. Mr. Nealy took disability leave from his employer in order to undergo treatment by his cardiologist, Dr. Green. The employer's then medical insurance carrier, Blue Cross/Massachusetts Mutual, largely covered the March 1992 angioplasty preformed by Dr. Green. Shortly thereafter, Nealy's employer announced it would replace the Blue Cross/Massachusetts Mutual coverage with three HMO coverage options, effective April 1, 1992. US Healthcare was one of the three new options. Nealy promptly enrolled in US Healthcare Versatile Plus HMO, which allowed members to see non-participating physicians, and paid his first monthly premium.

On April 2 and April 3, 1992, Mr. Nealy visited the office of Defendant Dr. Yung, his chosen primary care provider under the US Healthcare HMO. He was turned away on both occasions, first for lacking a US Healthcare identification number, and then due to an incorrect primary physician number on his enrollment form. On April 9, 1992, Mr. Nealy received his US Healthcare identification card and Dr. Yung performed a routine new-patient physical examination on April 10. At Dr. Yung's request, he returned on April 13 to provide samples for laboratory analysis. During one or both of these latter appointments, Mr. Nealy was told to see a cardiologist, and Mr. Nealy requested a referral to Dr. Green.

Dr. Yung submitted a form to get this out-of-plan referral approved, but on May 4, 1992, Mr. Nealy received notice that the request had been denied. Deciding to accept a referral to Dr. Spivak, a participating provider, Mr. Nealy made an appointment for May 18, just one day after obtaining the referral. Tragically, however, Mr. Nealy died on May 18 after suffering a massive myocardial infarction.

Plaintiff, seeking to recover damages for her husband's death, commenced an action in state Supreme Court asserting breach of contract, breach of fiduciary duty, wrongful death, and negligence claims against Dr. Yung and US Healthcare. In addition, Plaintiff asserted medical malpractice claims against Dr. Yung and Dr. Bernstein, Vice President and Director of US Healthcare. Dr. Bernstein and US Healthcare successfully sought removal to the Federal District Court for the Southern District of New York which dismissed all claims against these defendants on the ground that the claims were preempted by ERISA. Because Dr. Yung did not participate in the removal action, the federal district court remanded the case against him to the Supreme Court. The Supreme Court denied Defendant Yung's motion to dismiss based on ERISA preemption. The Appellate Division reversed and dismissed concluding that ERISA preempted Plaintiff's claims. The Court of Appeals reversed and reinstated Plaintiff's claim against Dr. Yung.

The Court of Appeals considered whether Dr. Yung's required timely completion and submission of a referral form to US Healthcare causes the law (1) to treat him as an ERISA plan administrator, and (2) to categorize the plaintiff's claims against him as claims that "relate to" ERISA plan administration and are therefore preempted by ERISA. Considering the objectives and purpose of the ERISA statute, the Court determined that Dr. Yung's submission of referral-related forms to US Healthcare does not transform Dr. Yung into a plan administrator for ERISA purposes. Therefore, Plaintiff's claims against Dr. Yung are not barred by ERISA's preemption provision.

Prepared by the liibulletin-ny Editorial Board.