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HEALTH SERVICES PROVIDERS’ COMPLAINT AGAINST HEALTH PLAN STATED CAUSES OF ACTION FOR BREACH OF AN IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING AND VIOLATION OF PUBLIC HEALTH LAW 4406-D (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the cause of action alleging breach of an implied covenant of good faith and fair dealing should not have been dismissed.  Plaintiffs (heath services providers, hereinafter “the PC”) sued defendant health plan (Fidelis) alleging the health plan did not have grounds for terminating the PC’s contract. The court held the complaint stated a cause of action for breach of the implied covenant of fair dealing, as well as a cause of action alleging a violation of Public Health Law 4406-d:

Even if a party is not in breach of its express contractual obligations, it may be in breach of the implied covenant of good faith and fair dealing when it exercises a contractual right as part of a scheme to deprive the other party of the benefit of its bargain … . Technically complying with the terms of a contract while depriving the plaintiff of the benefit of the bargain may constitute a breach of the covenant of good faith and fair dealing … . Further, “[w]here the contract contemplates the exercise of discretion, this pledge includes a promise not to act arbitrarily or irrationally in exercising that discretion”… .

… The allegations in the complaint that the defendants acted in bad faith by terminating the agreement without justification and by fabricating information to try to justify the termination because the plaintiffs “were determined to be outliers’ with regard to the number and cost of those medical services provided by Plaintiffs to Defendants’ members” were sufficient to state a cause of action to recover damages for breach of contract based upon the alleged breach of the implied covenant of good faith and fair dealing. * * *

… [T]he PC stated a cause of action to recover damages for violation of Public Health Law § 4406-d. The PC is a health care professional that contracted with a health care plan and, therefore, falls within the purview of Public Health Law § 4406-d(2)(a). In addition, the PC is a member of the class for whose particular benefit the statute was enacted. The statute provides for enhanced health care provider protections … . Moreover, a private right of action would be consistent with the legislative scheme, since the statute offers no other practical means of enforcement such that a private right of action is necessary to trigger the protections intended to be afforded to health care providers … . Ahmed Elkoulily, M.D., P.C. v New York State Catholic Healthplan, Inc., 2017 NY Slip Op 06242, Second Dept 8-23-17

CONTRACT LAW (HEALTH SERVICES PROVIDERS’ COMPLAINT AGAINST HEALTH PLAN STATED CAUSES OF ACTION FOR BREACH OF AN IMPLIED COVENANT OF FAIR DEALING AND VIOLATION OF PUBLIC HEALTH LAW 4406-D (SECOND DEPT))/COVENANT OF GOOD FAITH AND FAIR DEALING (CONTRACT LAW, HEALTH SERVICES PROVIDERS’ COMPLAINT AGAINST HEALTH PLAN STATED CAUSES OF ACTION FOR BREACH OF AN IMPLIED COVENANT OF FAIR DEALING AND VIOLATION OF PUBLIC HEALTH LAW 4406-D (SECOND DEPT))/PUBLIC HEALTH LAW (HEALTH SERVICES PROVIDERS’ COMPLAINT AGAINST HEALTH PLAN STATED CAUSES OF ACTION FOR BREACH OF AN IMPLIED COVENANT OF FAIR DEALING AND VIOLATION OF PUBLIC HEALTH LAW 4406-D (SECOND DEPT))

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