Managed Care Outlook 2024

Litigation trends icon - scales of justice icon

Read time: 6 minutes

Personal jurisdiction challenges are a useful but sometimes overlooked strategy to secure early dismissals in managed care litigation. Given that health plans typically provide coverage for health services rendered to members in any state, insurers and claim administrators routinely find themselves haled into distant and frequently unfriendly courts by providers seeking to challenge claim and payment decisions. In recent years, many courts have been reluctant to force nonresident insurers and claim administrators to defend payment disputes in the providers’ home states, where there is little connection to the forum state beyond the place where the provider rendered the services or where the member resides.

Following the landmark decision by the U.S. Supreme Court in Daimler AG v. Bauman, 571 U.S. 117, 139 (2014), it is exceedingly difficult, if not impossible, for providers to establish general or all-purpose jurisdiction over nonresident insurers and claim administrators. Companies are subject to general jurisdiction only where they are “essentially at home in the forum state.” As a general matter, for a corporation to be sufficiently “at home,” it must be incorporated in the state or have its “principal place of business” in the state. Thus, unless the company is domiciled in the forum state or has expressly consented to general jurisdiction as a condition of doing business, any jurisdictional challenge will likely turn on specific or limited jurisdiction.

Specific jurisdiction exists when a nonresident defendant (1) purposefully avails itself of the privilege of conducting activities within the forum state and (2) the plaintiff's claims arise out of or relate to the defendant’s contacts with the forum.

Purposeful availment

Over the past few years, a good-sized body of case law has emerged rejecting the premise that an out-of-state insurer or claims administrator purposefully avails itself of the privileges of the forum state by preauthorizing, processing or paying claims for health care services rendered in the forum state. See, e.g., Beverly Hills Reg’l Surgery Ctr., L.P. v. Grp. Hospitalization & Med. Servs., Inc., 2022 WL 1909550, at *5 (C.D. Cal. June 3, 2022) (a nonresident defendant’s role in administering claims for a self-funded health plan with California-based members and phone calls with a California provider were not sufficient evidence of purposeful availment); Physicians’ Med. Ctr. v. Caresource, 2020 U.S. Dist. LEXIS 39737, at *13 n. 7 (S.D. Ind. Mar. 6, 2020) (an insurer or third-party administrators (TPAs) does not avail itself of the privilege of doing business in a particular state simply because the insured chose a provider in that particular forum and the insurer or TPA preauthorized treatment and paid claims); and Matthews v. United Healthcare Servs., 2020 U.S. Dist. LEXIS 164082, at *13 (N.D. Tex. Sep. 9, 2020) (in which a nonresident insurer’s processing of a patient’s claims for treatment by Texas providers and communications with a Texas hospital that arose from the member’s unilateral decision to seek medical treatment in Texas was not sufficient to show that the insurer purposefully directed its activities toward Texas).

‘Arising out of’ and ‘relating to’

Previously, a strict causal relationship between the defendant’s in-state activities and the litigation was required to satisfy this second prong. In 2021, the U.S. Supreme Court in Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S. Ct. 1017 (2021), held in a products liability case that a strict causal connection was not required, so long as the defendant’s activities in the forum relates to the plaintiff’s claim. In Ford, the deciding factor for the Court was the extensive level of the defendant’s marketing, sales and advertising in the forum state that led it to conclude that its forum-related activities were sufficiently “related to” the plaintiffs’ claims. Although Ford’s reach outside of products liability context is open to debate, its focus on an out-of-state company’s ongoing activities within the forum state reinforces the broader point that a company’s overall activities within the forum state is critical to the jurisdictional analysis and will be scrutinized on a case-by-case basis.

So, when should an insurer or claim administrator consider challenging personal jurisdiction? That depends on the facts and the nature of the claims in the complaint.

To start, if a provider pursues an ERISA claim under an assignment of the member’s benefits, personal jurisdiction challenges are not a good option because ERISA provides for nationwide service of process and personal jurisdiction exists so long as the insurer or plan has sufficient minimum contacts with the United States.

For cases not brought under ERISA, however, challenges based on personal jurisdiction should be considered as part of the initial defense strategy, as such challenges are waived if not raised before the responsive pleading is filed. Fed. R. Civ. P. 12(b).

Key takeaways
  • Recent court decisions in provider reimbursement cases give health insurers and TPAs a significant degree of protection when defending out-of-state lawsuits by dissatisfied providers
  • With the right facts, seeking early dismissal of an out-of-state lawsuit on personal jurisdiction grounds may be a valuable tool for reducing defense costs and minimizing the risk of litigating in unfriendly forums
  • As part of their defense strategy, insurers and TPAs should assess their contacts with the forum state and consider challenging personal jurisdiction
Download full report
Download full report