Siho v. George

696 N.E.2d 476, 1998 Ind. App. LEXIS 1104, 1998 WL 345412

Opinions

OPINION

RUCKER, Judge.

This case involves the interpretation of an employment benefit plan (“Plan”) regulated under ERISA. Appellant-Defendant Southern Indiana Health Operations, Inc. (“SIHO”) appeals from the trial court’s grant of summary judgment in favor of Appellee-Plaintiff Alice G. George, executrix and personal representative of Vernon L. George’s estate (“Representative”). SIHO raises six issues for our review, two of which are dis-positive. We consolidate and rephrase the issues as follows: (1) did the trial court err by not deferring to the Plan Administrator’s interpretation of the Plan, and (2) was the Plan Administrator’s interpretation of the Plan arbitrary or capricious?

In July 1996 Vernon George was severely injured in an automobile collision caused by an uninsured motorist. George, a retiree, was a participant in a self-funded group benefit plan (“Plan”) provided by his former employer, the Cummins Engine Company. The Plan is regulated by the Employee Retirement Income Security Act (ERISA)¹ and Cummins Engine is the Plan Administrator (“Administrator”). Pursuant to the Plan SIHO, as the Claims Administrator, paid medical expenses on George’s behalf totaling $70,820.00. At the time of the collision George also carried uninsured motorist coverage with American States Preferred In-' surance Company. At some point George settled his uninsured motorist claim and received $145,000.00 from American States. SIHO asserted a subrogation hen' against the settlement proceeds in the amount of $46,426.00 which represented the amount of medical payments it made on behalf of George less its share of attorneys fees and expenses.² SIHO based its claim on the Third Party Recovery Provision contained in the Plan which dictates in pertinent part:

You may claim benefits under this Plan for covered expenses incurred by you or a dependent which are due to injury or sickness caused by the negligence or wrong of a third party.

However, if there is a recovery (by you, your dependent, or personal representative) from the third party or his personal representative — whether by judgement, settlement, or otherwise — -for the illness or injury, you must reimburse the Plan.

The amount of reimbursement will be equal to the lesser of:

a. the amount of benefits paid under this Plan for the illness or injury or

b. the recovered amount, less any necessary and reasonable expenditures (including attorney fees) you incur in effecting the recovery.

R. at 114-15. In response George filed a two-count Complaint for Declaratory Judgment. Count I sought a declaration that SIHO had “no interest” in the settlement between George and his insurance carrier. Count II sought an alternative declaration of the amount by which SIHO’s claim should be reduced because of comparative fault. Thereafter George filed a motion for summary judgment related to count I only. SIHO filed a cross-motion for summary judgment. After conducting a hearing, the trial court granted George’s motion and denied SIHO’s motion. This appeal followed.³

We first observe that federal law controls the outcome of this case. ERISA comprehensively regulates employee pension and welfare plans. Title 29 U.S.C § 1002(1) defines an employee welfare benefit plan as any fund or program through which an employer provides employees with “medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment.” Section 514(a) of ERISA preempts “any and all State laws in so- far as they .may now or hereafter relate to any employee benefit plan” covered by ERISA. 29 U.S.C. § 1144(a). . The United States Supreme Court has affirmed the, broad preemptive scope of ERISA and the prohibition of even indirect state action relating to self-funded employee benefit plans. See, e.g., Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525, 101 S.Ct. 1895, 1907, 68 L.Ed.2d 402 (1981). “The express preemption provision of ERISA is deliberately expansive, and it is designed to ‘establish pension plan regulation as exclusively a federal concern.’ ” Baxter By and Through Baxter v. Lynn, 886 F.2d 182, 185 (8th Cir.1989) (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987)).

SIHO contends the trial court erred' in failing to defer to its interpretation of the Plan, namely: that SIHO was entitled to subrogation from the monies George received in settlement of his uninsured motorist claim. In Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989) the Supreme Court established the rule that courts must apply a de novo standard of review in actions brought by ERISA plan participants to challenge the denial of benefits unless the plan vests the plan administrator with discretionary authority to make eligibility determinations or construe the plan’s terms. When the plan so endows its administrator, the decision of the administrator must stand unless there is an abuse of discretion. Bruch, 489 U.S. at 115, 109 S.Ct. 948. It is only in those cases involving plans that have not vested their administrator with such authority that the court must follow traditional principles of trust law and construe a participant’s claim “as it would have any other contract claim— by looking to the terms of the plan and other manifestations of the parties’ intent.” Id. at 112-13, 109 S.Ct. 948.

Federal courts have consistently applied the Bruch deference principles to actions concerning benefit determinations and in particular “claims involving ERISA plans’ assertions of purported reimbursement and subrogation rights.” Sunbeam-Oster Co., Group Ben. Plan v. Whitehurst, 102 F.3d 1368, 1373 (5th Cir.1996). Accordingly, as applied to the facts in this case, if the Plan gives the administrator the discretion to interpret the meaning of the subrogation clause, then SIHO’s interpretation is subject to an arbitrary and capricious standard of review. However, if no such authority is provided for in the Plan, then the dispute must be resolved by a de novo review of the Plan’s terms and other manifestations of. the parties’ intent. See Bruch, 489 U.S. at 111—13, 109 S.Ct. at 955.

In this case the Plan provides in part: To administer claims, the Claims Administrator, without the consent of any person, will have the right:

a. to give or to get any data needed to determine benefits under this provision.

b. to recover any sum paid above required by this provision.

c. to reimburse an organization the sum it paid, but which should have been paid by the Claims Administrator. Amounts so reimbursed will be deemed benefits paid under this Plan, and to the extent so paid there will be no more liability under this Plan.

R. at 112 (emphasis added). The Plan also requires participants to provide SIHO with information necessary to process claims: “[c]laim forms must be completed in full and submitted along with satisfactory evidence (i.e. doctor bill, hospital bill, outpatient diagnostic X-ray and laboratory).” R. at 126. Because federal law controls the outcome of this case we rely on authority from the Seventh Circuit to inform our judgment concerning whether the foregoing language confers on SIHO a grant of discretion. It is clear the Plan language does not contain an express grant of discretion to SIHO to determine eligibility or to construe Plan terms. However, “ ‘magic words (such as ‘the ■ committee has discretion to ... ’)’ ” are unnecessary to determine whether a plan’s language constitutes a grant of discretion to the administrator. Petrilli v. Drechsel, 910 F.2d 1441, 1447 (7th Cir.1990). Rather, a grant of discretion can be implied from the plan language. Bollenbacher v. Helena Chemical Co., 926 F.Supp. 781, 786 (N.D.Ind.1996). For example, in Patterson v. Caterpillar, Inc., the plan at issue provided that “ ‘benefits will be payable only upon receipt .by the Insurance Carrier or Company of such notice and such due proof, as shall be from time to time required, of such disability.’ ” 70 F.3d 503, 505 (7th Cir.1995). The court found that such language afforded the administrator discretion sufficient to justify an arbitrary and capricious standard of review. Id. In Dona-to v. Metropolitan Life Ins. Co., the court also applied the arbitrary and capricious standard. 19 F.3d 375, 380 (7th Cir.1994). The plan in that case provided that the administrator .will pay disability benefits upon receipt of proof of claim and that “ ‘[a]ll proof must be satisfactory to us.’” Id. at 377. The court held that such language supported a discretionary standard of review. In so doing, the court rejected the contention that a plan’s language must contain an explicit grant of discretionary authority to justify a review under the arbitrary and capricious standard. Id. at 379.

In this case the Plan language affords SIHO the authority to “give or get any data needed to determine benefits ...” and “to recover any sum paid.... ” R. at 112. Such language does not mandate the acquisition of data or the recovery of sums paid. Rather, it gives SIHO the discretionary authority to obtain data or to recover benefits paid. Further, Plan language requiring participants to submit “satisfactory evidence” for payment of medical claims necessarily implies that SIHO must determine‘whether the evidence is in fact, “satisfactory” and thus whether claims for benefits will be accepted or rejected.

Because the Plan affords the Administrator with discretion to determine eligibility benefits, we will reverse the trial court only if SIHO’s decision to assert subrogation was arbitrary and capricious. “Before concluding that a decision was arbitrary and capricious, a court must be very confident that the decision maker overlooked something important or seriously erred in appreciating the significance of the evidence.’’ Patterson, 70 F.3d at 505. Questions of judgment are left to the administrator of the plan. Trombetta v. Cragin Fed. Bank Ownership Plan, 102 F.3d 1435, 1438 (7th Cir.1996), reh’g denied. Absent special circumstances such as fraud or bad faith; SIHO’s decision “may not be deemed arbitrary and capricious so long as it is possible to offer a reasoned explanation, based on the evidence, for that decision.” Id.

The question in this case is' whether the Plan’s language can reasonably be construed to include a participant’s uninsured motorist coverage. Representative argues that SIHO’s decision fails to give éffect to the clear language of the Plan which “permits subrogation only when a member is injured by a third party and subsequently makes a recovery from ‘the third party ” who actually caused the injury. Brief of Appellee at 12. According to Representative the arbitrary and capricious standard does not permit SIHO to subrogate recoveries from anyone other than the person who actually caused the injury. We disagree given the nature of the standard of review in this case. The arbitrary and capricious standard of review is one which allows us to come to a different, yet altogether reasonable, conclusion. See Van Boxel v. Journal Co. Employees’ Pension Trust, 836 F.2d 1048, 1052 (7th Cir.1987) (stating that “the arbitrary and capricious standard may be a range, not a point”). Thus, it may be true that we would reach a conclusion different than the one reached here if the standard of review were de novo. However, we need not and do not reach such a conclusion given the standard before us.

A number of eases have addressed plans with language sufficiently similar to the one here such that we conclude that SIHO’s interpretation of the Plan was reasonable. The cases have held that subrogation may include recovery from a plan participant’s uninsured motorist coverage. See, e.g., Wendy’s Int'l Inc. v. Karsko, 94 F.3d 1010 (6th Cir.1996); Rhodes, Inc. v. Morrow, 937 F.Supp. 1202 (M.D.N.C.1996); Harmond v. Teamsters Joint Council No. 83, 795 F.Supp. 783 (E.D.Va.1992), aff'd, 1 F.3d 1233 (4th Cir.1993). The court in Wendy’s also addressed language comparable to that found in SIHO’s plan stating in pertinent part: “Had the [summary plan description] said that Wendy’s has a right to monies collected only from the person who ‘caused’ the injury, this might be a closer ease, since Nationwide certainly did not ‘cause’ the Karsko’s loss.” Wendy’s, 94 F.3d at 1013. In such a scenario, the Wendy’s court did not rule out subro-gation. Rather, the court merely concluded that ..the case may have been a closer one if the language of the plan were otherwise. Even plans which contain less ambiguous terms are subject to a range of interpretations which would not be ruled out as completely unreasonable. Here, we find the range of possible interpretations sufficient enough to warrant affirmance of SIHO’s interpretation of the Plan. Accordingly, summary judgment entered in favor of George is erroneous. We therefore reverse the trial court’s judgment and remand this cause with instructions that summary judgment be entered in SIHO’s favor.⁴

Judgment, reversed and cause remanded.

GARRARD, J., concurs. SHARPNACK, C.J., dissents with opinion.

Footnotes

1

. 29 U.S.C. § 1001 et seq.

2

. Pursuant to an agreement with Cummins Engine Co., SIHO is empowered to pursue subrogation where it deems appropriate. R. at 141.

3

. George died during the pendency of this appeal. His wife Alice G. George was appointed as Personal Representative of her husband’s estate.

4

. Representative also contends that in the alternative this cause should be remanded for trial on Count II of the complaint. We decline to ad.dress the merits of Representative's contention for two reasons. First, although the complaint was filed in two counts, the motion for summary judgment addressed only Count I. A party may . not assert one theory at the summary judgment stage of the proceeding and assert another theory on appeal, Brougher Agency, Inc. v. United Home Life Ins. Co., 622 N.E.2d 1013, 1018 (Ind.Ct.App.1993), trans. denied. Second, because the parties argued and the trial court addressed only Count I of the complaint, we must presume Count II is still pending before the trial court.