A recent appellate decision has brought renewed attention to the legal boundaries of mandatory arbitration clauses in health insurance agreements, after a customer discovered her hospital bills were not covered as expected and challenged the enforceability of such provisions. The ruling addresses whether parties involved in marketing and administering health plans can require disputes to be resolved through arbitration, or if state law preserves customers’ rights to pursue claims in court.
The complaint was filed by Darlene Reeves on March 1, 2024, in the Circuit Court of New Kent County against Adroit Health Group, LLC; American Business Association; National Congress of Employers, Inc.; Diana Gavin; Top Healthcare Options Insurance Agency; and American Financial Security Life Insurance Company. Reeves alleges that Adroit Health Group and related entities misrepresented the nature and coverage of her health plan, leading to significant uncovered medical expenses.
According to court documents, Reeves and her husband sought a comprehensive health insurance plan online in September 2022. After speaking with a sales agent from Top Healthcare Options Insurance Agency, they purchased what they believed was full-coverage insurance through Adroit’s online platform. However, the plan obtained—known as the Impact 750 Plan—was actually supplemental coverage underwritten by American Financial Security Life Insurance Company (AFSLIC) and issued through membership in a group policy held by National Congress of Employers (NCE). The plan included disclaimers indicating it was not major medical coverage.
When Reeves required inpatient hospital care in early 2023, she learned that anticipated reimbursements under her Impact 750 Plan were denied by her treating hospital, which she had been told was an in-network provider. Seeking better coverage, her husband upgraded to another plan—the Impact 1000 Plan—but this too failed to provide major medical benefits. As a result, Reeves faced over $75,000 in medical bills.
Reeves’s lawsuit alleges fraud, constructive fraud, civil conspiracy, breach of contract, unjust enrichment, and violation of the Virginia Consumer Protection Act. She claims that Adroit orchestrated a “sales scheme” requiring consumers to join multiple third-party organizations like ABA and NCE without receiving meaningful insurance-related benefits.
Central to the dispute is an arbitration clause found on the twelfth page of Reeves’s enrollment agreement for both Impact plans. This provision states: “Member and the Company and its affiliates agree that any claim, dispute, or controversy (‘Claim’) between them . . . shall be resolved by binding arbitration by the American Arbitration Association (‘AAA’), pursuant to the Commercial Arbitration Rules of the AAA.” On August 29, 2024, Adroit Health Group along with NCE and ABA moved to compel arbitration based on this clause.
Reeves opposed their motion by arguing that Virginia Code § 38.2-312 prohibits enforcement of such arbitration provisions within insurance contracts against insurers because it would deprive Virginia courts of jurisdiction over actions against insurers. During a hearing on November 19, 2024, both sides presented arguments about whether Adroit acted as an insurer or merely as an administrative service provider.
In its December 6 letter opinion and subsequent January 8 order denying arbitration enforcement, the circuit court concluded that all defendants were sufficiently involved in the insurance transaction such that Code § 38.2-312 applied. However, it did not make specific factual findings about whether Adroit Health Group or its co-appellants qualified as “insurers” under state law—a key requirement for applying this statutory protection.
On appeal before Judges Beales, Ortiz (authoring), and Chaney at the Court of Appeals of Virginia (Record No. 0095-25-2), appellants argued that neither they nor their agreement fell within Code § 38.2-312’s scope because they are not insurers nor was their contract strictly an “insurance contract.” The appellate panel found that while Reeves’s enrollment agreement does constitute an “insurance contract,” there remains insufficient evidence on record regarding whether Adroit Health Group LLC; National Congress of Employers Inc.; or American Business Association meet Virginia’s definition of “insurer.”
The opinion explains: “Given the record before this Court, it is impossible to know whether to label Adroit, NCE,
and ABA as ‘insurers.’ In the absence of any findings of fact to the contrary,
we are unable to determine whether arbitration should be denied.” As such,
the appellate court reversed the circuit court’s denial of arbitration enforcement solely as it relates
to non-insurer parties and remanded for further factual determinations about each appellant’s status under state law.
Reeves seeks relief including damages for uncovered medical costs exceeding $75,000,
alleging deceptive practices around health plan marketing and administration.
Attorneys representing appellants include Noah J. DiPasquale and David N. Anthony from Troutman Pepper Locke LLP;
counsel for appellee is Beth A. Norton from Norton Health Law P.C.
The case was heard before Judge B. Elliott Bondurant at trial level,
and bears Case ID Record No. 0095-25-2.
