## Facts

- Metropolitan Life Insurance Company (MetLife) operated preferred provider lists and entered a nonexclusive agreement with Dr. Louis E. Potvin.
- Under the agreement, Potvin was included on two preferred provider lists and accepted set fees for treating MetLife-insured patients.
- The contract permitted either party to terminate Potvin’s preferred provider status on 30 days’ written notice, without cause.
- MetLife terminated Potvin’s preferred provider status; after Potvin sought an explanation, MetLife cited his malpractice history.
- Potvin had four prior malpractice suits before contracting with MetLife; three were dismissed and one settled.
- Potvin alleged his removal significantly reduced his patient base and harmed his practice and reputation, and that MetLife refused to provide a hearing or review.
- The trial court granted summary judgment for MetLife; the Court of Appeal reversed; the California Supreme Court granted review.

## Issues

1. Whether a private health insurer must provide common-law fair procedure (notice and an opportunity to be heard) before removing a physician from preferred provider lists when the insurer’s market power makes removal significantly impair the physician’s practice.
2. Whether an at-will termination clause in the insurer-physician contract precludes a fair-procedure claim.

## Decision

- The California Supreme Court held that, in appropriate circumstances, the common-law doctrine of fair procedure applies to an insurer’s removal of a physician from preferred provider lists.
- The Court rejected limiting fair procedure to formal “membership” expulsions and focused on the insurer’s practical power and the economic effect of exclusion.
- The Court held that Potvin’s allegations were sufficient to state a fair-procedure claim based on MetLife’s alleged market power and the asserted impact on his practice.
- The Court affirmed the Court of Appeal’s reversal of summary judgment and remanded for further proceedings.

## Legal Principles

- Common-law fair procedure restricts arbitrary exclusion by a private entity when the entity’s decision substantially affects an individual’s professional or economic interests.
- The doctrine may apply when a private entity has substantial market power such that exclusion can realistically destroy or significantly impair a person’s ability to practice a lawful profession.
- Required protections are minimal and flexible, generally including reasonable notice of the reasons for exclusion and a fair opportunity to respond, not a full adjudicatory hearing.
- A contractual at-will termination provision does not necessarily eliminate fair-procedure limits where the terminating entity’s market power makes exclusion function as a significant professional barrier.

## Conclusion

The court held that a private insurer with substantial market power may be required to provide notice and a fair opportunity to respond before removing a physician from preferred provider lists when removal significantly impairs the physician’s ability to practice, and it allowed Potvin’s fair-procedure claim to proceed on that theory.


Potvin v. Metro. Life Ins. Co., 22 Cal. 4th 1060, 997 P.2d 1153 (Cal. 2000)