Ninth Circuit Vacates ERISA Benefit Denials Where Plan Misapplied “Hospital” Definition

In Delgado, et al. v. ILWU-PMA Welfare Plan, No. 24-1845, 2026 WL 161403 (9th Cir. Jan. 21, 2026) (Before: Wardlaw, N.R. Smith, and Miller, Circuit Judges), the Ninth Circuit held that plan trustees abused their discretion by denying ERISA health benefit claims for facility fees based solely on an accrediting agency’s classification of a surgical clinic, rather than the plan’s actual definition of a “hospital,” and vacated the district court’s judgment for further proceedings.

The plaintiffs were participants in a multiemployer welfare plan who received outpatient surgical treatment at Advanced Pain Treatment Medical Center (APTMC). The Plan denied their claims for facility fees, concluding that APTMC was not a “hospital” eligible to charge such fees under the Plan. The district court upheld the denials under an abuse-of-discretion standard.

On appeal, the Ninth Circuit agreed that abuse-of-discretion review applied, rejecting arguments that procedural irregularities or conflicts of interest warranted heightened scrutiny. The court nevertheless concluded that the district court erred in affirming the trustees’ interpretation of the Plan.

The Plan defined “hospital” to include a “licensed non-Medicare approved ambulatory surgical facility,” but did not define that term or specify the type of license required. California law no longer licenses physician-owned surgical clinics, instead requiring accreditation by an approved agency. Although APTMC was properly accredited to perform outpatient surgery, the trustees denied claims because the accreditor categorized APTMC as an “office-based surgery/procedure center” rather than an “ambulatory surgery center.”

The Ninth Circuit held that even under deferential review, the trustees could not define “ambulatory surgical facility” solely by reference to an accreditor’s internal classification system that had no legal significance under California law and did not mirror the Plan’s language. The court emphasized that plan administrators abuse their discretion when their interpretation conflicts with the Plan’s plain terms.

Because the district court did not address whether APTMC satisfied other elements of the Plan’s definition—such as whether it was operated primarily for outpatient surgery or constituted a physician’s general medical office—the Ninth Circuit vacated the judgment and remanded for further proceedings without expressing a view on those unresolved issues.

Judge N.R. Smith dissented, concluding that the trustees’ interpretation was reasonable and supported by the record, and that the majority improperly substituted its own view for the trustees’ discretionary judgment.