American Manufacturers' Mutual Insurance Company v. Sullivan

PETITIONER: American Manufacturers' Mutual Insurance Company
RESPONDENT: Sullivan
LOCATION: Alden's Workplace

DOCKET NO.: 97-2000
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 526 US 40 (1999)
ARGUED: Jan 19, 1999
DECIDED: Mar 03, 1999

ADVOCATES:
Loralyn McKinley - Argued the cause for the respondents
Michael W. McConnell - Argued the cause for the petitioners
Malcolm L. Stewart - Argued the cause for the United States, as amicus curiae, by special leave of the Court

Facts of the case

Pennsylvania's Workers' Compensation Act (Act) provides that once an employer's liability for an employee's injury has been established, then either the self-insured employer or insurer (collectively insurers) is responsible for paying for the employee's "reasonable" and "necessary" medical treatment. In 1993, this system was amended to allow insurers to withhold payment for disputed treatments, pending the outcome of an independent utilization review. Ten employees and two organizations representing employees that had received benefits under the Act filed suit against state officials, the self-insured school district of Philadelphia, and a number of private insurance companies. Their complaint alleged that the state and private defendants, acting under color of state law, had deprived them of property in violation of due process.

Question

1) Can the private insurers' decision to withhold payment for disputed medical treatment be considered state action, so as to bring them within the reach of the Fourteenth Amendment? (2) Do workers have a constitutionally protected property interest in continuing payment of disputed medical treatment before such treatment is determined to be reasonable and necessary?

Media for American Manufacturers' Mutual Insurance Company v. Sullivan

Audio Transcription for Oral Argument - January 19, 1999 in American Manufacturers' Mutual Insurance Company v. Sullivan

Audio Transcription for Opinion Announcement - March 03, 1999 in American Manufacturers' Mutual Insurance Company v. Sullivan

William H. Rehnquist:

I have the opinion of the Court to announce in No. 97-2000, American Manufacturers Mutual Insurance Company versus Sullivan.

In 1993 Pennsylvania amended its Workmen’s Compensation Laws to allow employers or their insurers to withhold payment for disputed medical treatment pending an independent review to determine whether the treatment was reasonable and necessary, this treatment being received by the injured worker.

The respondents in this case are injured workers who brought suit under 42 U.S.C. §1983 on behalf of themselves and a class of similarly situated plaintiffs challenging the suspension of these payments during the review process and they named it the defendants Pennsylvania officials and some private insurance companies.

They claimed that in withholding medical benefits without any sort of notice and an opportunity to be heard on the part of the workers.

The state and private defendants acting "under color of state laws," to the private defendants deprived them of property in violation of the Due Process Clause.

The District Court ruled against them saying that private insurers are not state actors.

The Court of Appeals for the Third Circuit reversed and said they were state actors.

In an opinion filed with the Clerk of the Court today, we reverse the Court of Appeals and say they are not state actors.

We hold that a private insurer’s decision to withhold payment and seek utilization review under the Act is not fairly attributable to the state so as to subject insurers to the constraints of the Fourteenth Amendment.

Under our state action cases respondents have to show that the state is compelled or coerce the challenge decisions where it is so significantly encouraged that decision as to make state responsible for them.

Respondents simply have not made this showing, the Act merely permits, it does not require an insurer to withhold payment for disputed treatment, nor is the state by amended the Act in one distinct way to favor employers so insignificantly encouraged insurers to withhold payment that the decision to do so must be deemed out of the state.

In holding to the contrary, the Court of Appeals relied heavily on language in one of our earlier cases dealing with state action Burton versus Wilmington Parking Authority.

But later cases including Blum against Yaretsky and Jackson versus Metropolitan Edison had considerably refined the vague joint participation as to embodied in Burton.

Here, Workers’ Compensation insurers are no more extensively regulated than the private entities in Blum and Jackson.

Like those cases though the states can lead the challenge decisions of the judgment of the insurers and therefore there is no state action.

We also hold that the Pennsylvania regime does not deprive respondents of property within the meaning of the Fourteenth Amendment.

This is significant in this case because some of the parties were obvious state actors, state officials.

Under state law respondents are not entitled to payments for all medical treatment if their argument assumes but only for treatments that is reasonable and necessary.

State law requires an employee to establish the reasonableness and the necessity of the particular medical treatment at issue before his property interests in medical benefits attach it.

Respondents haven’t yet made this showing and therefore they don’t have a property interest in the payment of benefits.

Justice Ginsburg has filed an opinion concurring in part and concurring in the judgment; Justice Breyer has filed an opinion concurring in part and concurring in the judgment in which Justice Souter has joined; and Justice Steven has filed an opinion concurring in part and dissenting in part.