Bureau of National Affairs, Inc. v. Chase et al
Filing
34
MEMORANDUM OPINION. Signed by Judge Ellen L. Hollander on 8/24/12. (bmhs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
BUREAU OF NATIONAL AFFAIRS,
INC.,
Plaintiff,
v.
Civil Action No. ELH-11-1641
MARCIA CHASE and
PATRICK CHASE,
Defendants.
MEMORANDUM OPINION
In this case, I must consider whether a health benefits plan is entitled to reimbursement of
medical expenses from the proceeds of a tort settlement received by its beneficiary from a third
party. Bureau of National Affairs, Inc. (“BNA”), plaintiff, as fiduciary of the Bureau of National
Affairs, Inc. Welfare Benefit Plan (the “Plan”), sued Marcia Chase and her husband, Patrick
Chase, defendants, to recover for expenses that the Plan paid for Ms. Chase‟s medical care.1
The parties agreed to defer expert discovery until the completion of factual discovery and
the resolution of any dispositive pretrial motions. See Scheduling Order at 2 (ECF 12). After the
completion of factual discovery, the parties filed cross-motions for summary judgment, which
are now pending.2 No hearing is necessary to resolve the motions. See Local Rule 105.6. For
the reasons that follow, I will deny both motions.2
1
Mr. Chase was not sued in his capacity as Ms. Chase‟s husband, but rather as her
attorney. See Complaint ¶ 3 (ECF 1). As a member of this Court‟s bar, Mr. Chase has
represented himself and his wife in this litigation. He negotiated the settlement with FMH, and
BNA alleges that Mr. Chase holds the disputed funds in his client trust account. Id. ¶ 12.
2
I have considered BNA‟s motion for summary judgment (ECF 18-1) (collectively with
its supporting memorandum, ECF 18-2, “BNA Motion”); the Chases‟ combined opposition to
the BNA Motion and cross-motion for summary judgment (ECF 21) (collectively with its
supporting memorandum, ECF 21-1, “Chase Motion”); BNA‟s combined opposition to the
Factual Background
The Plan is a health benefit plan governed by the Employee Retirement Income Security
Act (“ERISA”), 29 U.S.C. §§ 1001 et seq. The Plan is self-funded by BNA for the benefit of its
employees and their spouses and dependents, but is administered on BNA‟s behalf by Aetna Life
Insurance Company (“Aetna”). See BNA Motion at 2-3. Ms. Chase is a beneficiary of the Plan.
A. Ms. Chase‟s Medical Care
In December 2009, Ms. Chase was diagnosed with two separate and primary cancers: a
“stage 2b” malignant breast tumor and a “stage 3b” malignant rectal tumor. At around the same
time, she was also diagnosed with a sixteen centimeter fibrous tumor of the uterus. See Chase
Motion at 2; BNA Motion at 7. In the early months of 2010, Ms. Chase underwent a course of
radiation and chemotherapy treatment in preparation for surgeries to remove the rectal and
uterine tumors. Chase Motion at 2.
Both surgeries were performed on May 5, 2010, at the Washington Hospital Center (the
“Hospital”). The first surgery, performed by Dr. Abbie Fields, was a complete hysterectomy for
the purpose of removing the fibrous uterine tumor. The rectal tumor was removed in the second
surgery, performed by Dr. Jennifer Ayscue. In order to remove the rectal tumor, Dr. Ayscue
performed an abdominal perineal resection. See Chase Motion at 2. Defendants described this
procedure in their motion, id. at 2-3:
An abdominal perineal resection of the rectum is a major healthcare operation that
involves removal of a patient‟s lower bowels and rebuilding a new passage route
for bodily waste with the remaining colon. The new passage route for bodily
waste is created from the remaining portion of the colon to an opening in the
abdominal wall (colostomy).[3]
Chase Motion and reply in support of the BNA Motion (“BNA Reply”) (ECF 25); and the
Chases‟ reply (“Chase Reply”) (ECF 29), as well as the parties‟ exhibits.
3
The Chases‟ description of the procedure is consistent with the description of an
abdominoperineal resection as provided in STEDMAN‟S MEDICAL DICTIONARY, at 1673 (28th
-2-
As a result of the surgeries, Ms. Chase had two separate surgical closures: a lower
abdominal wound closed with sutures, and a perineal wound closed with sutures and an omental
flap. Chase Motion at 3. Ms. Chase spent eight days in the Hospital, recovering from the
surgeries, and was discharged on May 13, 2010. Id.
Over the next two weeks, nurses employed by Frederick Memorial Hospital Home Health
Care (“FMH”)4 came to the Chases‟ home on five occasions (May 15, 18, 21, 24, and 27, 2010)
to provide wound care and pain management, to change Ms. Chase‟s colostomy appliance, and
to educate the Chases in the care of the wounds. Id. According to the Chases, the FMH
employees committed “several lapses in providing an acceptable standard of care” during these
visits. Id. For instance, on one occasion, an FMH nurse did not change the colostomy appliance,
although the previous nurse had specifically stated that it needed to be changed. Id. More
important, the nurses allegedly failed to note that Ms. Chase‟s perineal wound opened and
became infected. Her condition deteriorated during this period, to the point that she was “very
ill” by the end of the two-week period. Id. Ms. Chase was experiencing “pressure” in her rectal
area and a foul odor emanated from the changed wound dressing. Id. On May 27, 2010, Mr.
Chase asked the FMH nurse about the odor and the nurse responded that “everything is ok.” Id.
Everything was not “ok,” however. The next day, May 28, 2010, Ms. Chase became
extremely ill, experiencing severe dizziness and vomiting.
That afternoon, she went to a
previously scheduled appointment with her rectal surgeon, Dr. Ayscue, who determined that Ms.
ed.): “[A] surgical cancer treatment involving r[esection] of the lower sigmoid colon, rectum,
anus, and surrounding skin and formation of a sigmoid colostomy; performed as a synchronous
or sequential transabdominal and perineal procedure.”
4
Apparently, FMH Home Health Care is a subsidiary of Frederick Memorial Hospital,
Inc. I refer to Frederick Memorial Hospital, Inc. and FMH Home Health Care collectively as
“FMH.”
-3-
Chase had a “breakdown of her perineal wound, as well as a foul smelling drainage.” Id. Ms.
Chase was admitted to the Hospital for “urgent debridement of the perineal wound.” Id.
During the debridement procedure, Dr. Ayscue discovered that “the perineal wound had
opened at the superficial level, where sutures had come undone.” Id. at 4. Dr. Ayscue removed
the remaining sutures, opened the perineal wound, and discovered “a deep abscess cavity,” in
which the tissue was infected and “grey in color and with a foul smell.” Id. The “posterior
vaginal closure was also noted to be interrupted and infected.” Id. After the wound was
adequately debrided, a “large Kerlix packing was placed in the wound,” but the wound was
otherwise left open to heal. Id. Four days later, on June 1, 2010, Ms. Chase underwent yet
another surgical procedure to “close the vaginal wall.” Id. She was discharged from the
Hospital on June 2, 2010, id., and underwent a lengthy, months-long recovery during which,
pursuant to the standard of care for treatment of her perineal wound infection, her wound was
“left open to heal from the inside out.” Id. at 5.
B. Coverage by the Plan
The Plan paid claims associated with Ms. Chase‟s second round of surgeries and
subsequent medical treatment for the infection to the perineal wound site, in the amount of
$47,246.10. See BNA Motion at 7; see also Ex.5C to BNA Motion (ECF 32-1). However, the
Plan did not pay for any of the care provided by FMH. See Ex.8 to Chase Motion (ECF 21-9);
Ex.5C to BNA Motion.5
The parties agree that the Plan provides benefits subject to the provisions of a document,
submitted as Exhibit 5A to the BNA Motion (ECF 18-8), which the parties sometimes refer to as
the Summary Plan Description (“SPD”), and sometimes refer to as the Plan itself. I will refer to
5
The parties have not indicated the cost of FMH‟s care or who paid for it.
-4-
the document as the SPD.6
“Summary Plan Description” is a term of art under ERISA. Every benefits plan governed
by ERISA is required to provide a “summary plan description” to each beneficiary. See 29
U.S.C. §§ 1021(a)(1), 1022(a).
A summary plan description is not the written instrument
establishing the plan itself. See id. § 1102(a)(1) (requiring that “[e]very employee benefit plan
shall be established and maintained pursuant to a written instrument”). Rather, the summary
plan description, as its name suggests, is a summary of certain plan provisions, which must “be
written in a manner calculated to be understood by the average plan participant, and shall be
sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries
of their rights and obligations under the plan.” Id. § 1022(a). Among other things, a summary
plan description must contain “the plan‟s requirements respecting eligibility for participation and
benefits”; the “procedures to be followed in presenting claims for benefits under the plan”; and
“the remedies available under the plan for the redress of claims which are denied.”
Id.
§ 1022(b).
Although the summary plan description is not the written instrument that establishes the
plan, the Fourth Circuit has held that the “representations in a SPD control over inconsistent
provisions in an official plan document,” because “the SPD is „the statutorily established means
of informing participants of the terms of the plan and its benefits,‟ and the „employee‟s primary
source of information regarding employment benefits.‟” Aiken v. Policy Mgmt. Sys. Corp., 13
F.3d 138, 140 (4th Cir. 1993) (quoting Pierce v. Security Trust Life Ins. Co., 979 F.2d 23, 27 (4th
Cir. 1992)).
6
The parties agree that BNA‟s Exhibit 5A is the SPD for the Plan. However, BNA‟s
Exhibit 5A is not titled as an SPD. Rather, its title is “Benefit Plan: What Your Plan Covers and
How Benefits are Paid.” See ECF 18-8 at i. In addition, the document refers to itself as the
“Booklet,” and states: “This Booklet is part of the Contract between Aetna and the Customer.
The Contract determines the terms and conditions of coverage.” Id. at 1 (italics in original).
-5-
The parties have not submitted any other written instrument governing the Plan, and they
agree that the language in the SPD is controlling. See BNA Motion at 3; Chase Motion at 7.
Their dispute turns on the proper interpretation of the SPD‟s language.
The language at issue is contained in a section of the SPD entitled “Subrogation and
Right of Recovery Provision.” In relevant part, it provides as follows, SPD at 50-52 (underline
emphasis added):
Subrogation and Right of Recovery Provision
Definitions
As used throughout this provision, the term “Responsible Party” means any party
actually, possibly, or potentially responsible for making any payment to a
Covered Person due to a Covered Person‟s injury, illness, or condition. The term
“Responsible Party” includes the liability insurer of such party or any insurance
coverage.
* * *
For purposes of this provision, a “Covered Person” includes anyone on whose
behalf the plan pays or provides any benefit including, but not limited to, the
minor child or dependent of any plan member or person entitled to receive any
benefits from the plan.
Subrogation
Immediately upon paying or providing any benefit under this plan, the plan shall
be subrogated to (stand in the place of) all rights of recovery a Covered Person
has against any Responsible Party with respect to any payment made by the
Responsible Party to a Covered Person due to a Covered Person‟s injury, illness,
or condition to the full extent of benefits provided or to be provided by the plan.
Reimbursement
In addition, if a Covered Person receives any payment from any Responsible
Party or Insurance Coverage as a result of an injury, illness, or condition, the plan
has the right to recover from, and be reimbursed by, the Covered Person for all
amounts this plan has paid and will pay as a result of that injury, illness, or
condition, from such payment, up to and including the full amount the Covered
Person receives from any Responsible Party.
Constructive Trust
By accepting benefits (whether the payment of such benefits is made to the
Covered Person or made on behalf of the Covered Person to any provider) from
the plan, the Covered Person agrees that if he or she receives any payment from
any Responsible Party as a result of an injury, illness, or condition, he or she will
-6-
serve as a constructive trustee over the funds that constitutes such payment.
Failure to hold such funds in trust will be deemed a breach of the Covered
Person‟s fiduciary duty to the plan.
Lien Rights
Further, the plan will automatically have a lien to the extent of benefits paid by
the plan for the treatment of the illness, injury, or condition for which the
Responsible Party is liable. The lien shall be imposed upon any recovery whether
by settlement, judgment, or otherwise, including from any Insurance Coverage,
related to treatment for any illness, injury, or condition for which the plan paid
benefits. The lien may be enforced against any party who possesses funds or
proceeds representing the amount of benefits paid by the plan including, but not
limited to, the Covered Person, the Covered Person‟s representative or agent;
Responsible Party; Responsible Party‟s insurer, representative, or agent; and/or
any other source possessing funds representing the amount of benefits paid by the
plan.
First-Priority Claim
By accepting benefits (whether the payment of such benefits is made to the
Covered Person or made on behalf of the Covered Person to any provider) from
the plan, the Covered Person acknowledges that this plan‟s recovery rights are a
first priority claim against all Responsible Parties and are to be paid to the plan
before any other claim for the Covered Person‟s damages. This plan shall be
entitled to full reimbursement on a first-dollar basis from any Responsible Party‟s
payments, even if such payment to the plan will result in a recovery to the
Covered Person which is insufficient to make the Covered Person whole or to
compensate the Covered Person in part or in whole for the damages sustained.
The plan is not required to participate in or pay court costs or attorney fees to any
attorney hired by the Covered Person to pursue the Covered Person‟s damage
claim.
Applicability to All Settlements and Judgments
The terms of this entire subrogation and right of recovery provision shall apply
and the plan is entitled to full recovery regardless of whether any liability for
payment is admitted by any Responsible Party and regardless of whether the
settlement or judgment received by the Covered Person identifies the medical
benefits the plan provided or purports to allocate any portion of such settlement or
judgment to payment of expenses other than medical expenses. The plan is
entitled to recover from any and all settlements or judgments, even those
designated as pain and suffering, non-economic damages, and/or general damages
only.
Cooperation
The Covered Person shall fully cooperate with the plan‟s efforts to recover its
benefits paid. It is the duty of the Covered Person to notify the plan within 30
days of the date when any notice is given to any party, including an insurance
-7-
company or attorney, of the Covered Person‟s intention to pursue or investigate a
claim to recover damages or obtain compensation due to injury, illness, or
condition sustained by the Covered Person. The Covered Person and his or her
agents shall provide all information requested by the plan, the Claims
Administrator or its representative including, but not limited to, completing and
submitting any applications or other forms or statements as the plan may
reasonably request. Failure to provide this information may result in the
termination of health benefits for the Covered Person or the institution of court
proceedings against the Covered Person.
The Covered Person shall do nothing to prejudice the plan‟s subrogation or
recovery interest or to prejudice the plan‟s ability to enforce the terms of this plan
provision. This includes, but is not limited to, refraining from making any
settlement or recovery that attempts to reduce or exclude the full cost of all
benefits provided by the plan.
The Covered Person acknowledges that the plan has the right to conduct an
investigation regarding the injury, illness, or condition to identify any Responsible
Party. The plan reserves the right to notify responsible Party and his or her agents
of its lien. Agents include, but are not limited to, insurance companies and
attorneys.
Interpretation
In the event that any claim is made that any part of this subrogation and right of
recovery provision is ambiguous or questions arise concerning the meaning or
intent of any of its terms, the Claims Administrator for the plan shall have the sole
authority and discretion to resolve all disputes regarding the interpretation of this
provision.[7]
C. Settlement of Claim Against FMH
The Chases concluded that the FMH nurses were negligent in their care of Ms. Chase. In
particular, the Chases believed that the nurses should have noticed that the perineal wound had
opened and that the wound had become infected. In their view, this negligence caused Ms.
Chase to suffer two weeks of excruciating pain leading up to Dr. Ayscue‟s discovery of the
infection. Initially, the Chases also believed that FMH‟s failure to discover the infection earlier
necessitated the second round of surgeries in late May and early June 2010, as well as Ms.
7
“Claims Administrator” is not defined in the SPD, and so it is unclear whether the term
refers to Aetna, to The Rawlings Company, LLC (Aetna‟s subcontractor for subrogation and
reimbursement recovery), or to another person or entity. The parties have not submitted any
information pertaining to review by a Claims Administrator.
-8-
Chase‟s painful, long recovery from these surgeries. Moreover, Ms. Chase‟s lengthy recovery
from the second round of surgeries resulted in a delay in beginning her post-surgical
chemotherapy, which caused the Chases to worry that “the delay [might] cause [Ms. Chase‟s]
cancer to return.” ECF 18-17 at 13.
In December 2010, the Chases submitted a demand letter to Barbara Stanley, the Director
of Risk Management for FMH, seeking to recover $53,624 in medical bills, $37,036 in lost
wages, $859 for travel expenses, and $550,000 for pain and suffering, for a total demand of
$641,519. See ECF 33-1 at 3; see also Affidavit of Barbara McClellan Stanley ¶¶ 2-6 (“Stanley
Aff.”), Ex.5 to Chase Motion (ECF 21-6). In February 2011, the Chases submitted a revised
demand letter seeking additional lost wages, for a revised total demand of $647,442.20. See ECF
33-1 at 1.
Because the Chases sought recovery for medical bills on the basis of their belief that the
FMH nurses‟ alleged negligence had necessitated the second round of surgeries, in February
2011, they also notified Aetna, the Plan‟s administrator, of their claim against FMH. See Chase
Motion at 5.
In turn, Aetna alerted its subcontractor, The Rawlings Company, LLC
(“Rawlings”), regarding the Chases‟ claim.
Rawlings is retained by Aetna to protect its
subrogation and reimbursement rights under the Plan. See BNA Motion at 3. On February 17,
2011, Michelle McDonald, a Senior Recovery Analyst for Rawlings, wrote to Mr. Chase,
asserting a “lien/claim for medical benefits paid on behalf of MARCIA CHASE,” and requesting
further information from the Chases. Ex.5D to BNA Motion (ECF 18-11). On February 24,
2011, and March 1, 2011, Ms. McDonald sent follow-up letters to Mr. Chase and to Ms. Stanley
of FMH, notifying them of updates to the amount of the asserted lien. See Ex.5E & Ex.5F to
-9-
BNA Motion (ECF 18-12 & 18-13).8
In the meantime, pursuant to medical records authorizations provided by the Chases, a
general surgeon retained by FMH reviewed Ms. Chase‟s medical records. See Stanley Aff. ¶¶ 47. Ms. Stanley of FMH and the Chases met on or about March 2, 2011, to discuss settlement of
the Chases‟ claim against FMH. Notably, at that meeting, Ms. Stanley informed the Chases that
FMH‟s surgeon had concluded that the care rendered by FMC did not cause or contribute to the
medical injuries claimed by the Chases because, even if the infection had been detected earlier,
the same subsequent surgical care would have been required, including extensive debridement
and “packing” of the wound and leaving the wound open to heal. However, FMH‟s surgeon also
concluded that, if the FMH nurses had detected the infection earlier, they might have prevented
Ms. Chase from experiencing several additional days of severe physical pain before the infection
was discovered. See Stanley Aff. ¶ 7; see also Ex.6 to BNA Motion at 3 (ECF 32-2) (responses
to interrogatories by Mr. and Ms. Chase).9 Ms. Stanley communicated the findings of FMH‟s
surgeon to the Chases and, on that basis, stated that FMH denied their demand for compensation
8
The letter of March 1, 2011 asserted a lien amount of $48,771.73, see Ex.5F to BNA
Motion, and the letter of February 24, 2011 asserted a lien amount of $49,518.67. See Ex.5E to
BNA Motion. Exhibit 5C to BNA‟s motion, which is an itemization of the claims paid by the
Plan in connection with the care of Ms. Chase‟s wound infection, supports the figure of
$49,518.67. However, in this lawsuit, BNA has only sought to recover $47,246.10 from the
Chases. See Complaint ¶¶ 9, 23. This slight discrepancy has not been explained by either side.
However, as far as I can determine, the $47,246.10 sought by BNA corresponds to expenditures
in connection with Ms. Chase‟s second set of surgeries and related care. It does not appear that
BNA seeks to recover for expenses related to the first set of surgeries.
9
BNA objects on hearsay grounds to consideration of Ms. Stanley‟s report of the
findings of FMH‟s surgeon. However, at this juncture, the evidence is not being offered or
considered “to prove the truth of the matter asserted” by the surgeon, and thus is not hearsay
within the meaning of F.R.E. 801(c). As noted, the parties agreed to postpone expert discovery
until after resolution of the pending motions. Therefore, the issue of whether the delay in
detecting Ms. Chase‟s infection actually altered the course of her surgical treatment is beyond
the scope of the present motions. I have considered Ms. Stanley‟s report as to the findings of
FMH‟s surgeon only as background information explaining the actions taken by the Chases and
FMH.
- 10 -
for medical treatment and other economic damages as a result of the infection itself. However,
Ms. Stanley offered on behalf of FMH to compensate the Chases for Ms. Chase‟s severe physical
pain during the two-week period during which she was receiving care from the FMH nurses. See
Stanley Aff. ¶ 8; Ex.6 to BNA Motion at 3.
At the meeting with Ms. Stanley, the Chases initially declined FMH‟s settlement offer,
stating that they intended to discuss FMH‟s surgical review with Ms. Chase‟s surgeon, Dr.
Ayscue. See Stanley Aff. ¶ 9; Ex.6 to BNA Motion at 3. When the Chases discussed the matter
with Dr. Ayscue, the doctor agreed with FMH‟s surgeon that the debridement surgery was
“probable anyway.” Ex.6 to BNA Motion at 3. Mr. Chase also performed some research into
the medical literature concerning abdominal perineal resection, and learned that “there is a
significantly higher incident [sic] of wound failure when a patient has neo-adjuvent
chemotherapy/radiation,” as Ms. Chase underwent. Id.10
Accordingly, on March 21, 2011, the Chases agreed to FMH‟s settlement offer and
executed a “General Release of All Claims” prepared by FMH. See Release, Ex.5I to BNA
Motion (ECF 18-16). In relevant part, the Release states:
The Undersigned Releasors, MARCIA JOANN CHASE AND PATRICK E.
CHASE, in consideration of the payment of Three Hundred Thousand dollars
and no cents ($300,000.00), in compensation for pain and suffering only, receipt
of which is hereby acknowledged, do hereby release and forever discharge the
Releasees, Frederick Memorial Hospital, Inc., and FMH Home Health Care,
their heirs, principals, agents, employees, employers, executors, administrators,
insurers, successors and assigns, of and from all actions, causes of action,
damages, or demands of whatsoever kind or character which the Releasors now
have or may hereafter have, foreseen and unforeseen, known or unknown,
asserted or unasserted, on account of all injuries, or injurious result, direct or
indirect. arising or to arise, and caused by or resulting from care and services
10
The Chases have submitted as exhibits some of the medical literature that Mr. Chase
reviewed. See Ex.6 to Chase Motion (ECF 21-7). I have not considered this literature because,
as discussed, the question of the actual precipitating cause of the debridement surgery is beyond
the scope of the issues presently before me.
- 11 -
rendered to Marcia Joann Chase from May 15 through May 27, 2010 (hereafter
“the Incident”).
* * *
The Releasors further understand and agree that this settlement is the compromise
of a doubtful and disputed claim, and that the payment made is not to be
construed as an admission of liability on the part of the Releasees by whom
liability is expressly denied.
The Parties (the Releasors and the Releasees) agree and acknowledge that the
terms and conditions of the settlement and this General Release are confidential
and are not to be disclosed by the Parties to any person or entity. Further, the
Parties agree not to divulge, discuss or comment regarding any fault or lack of
fault of any of the Parties, hereto. The only permissible disclosure concerning the
disposition of the claim shall be limited to the fact that a settlement was reached
between the parties, and then only in response to a direct inquiry.[11]
Pursuant to the settlement, the Chases received payment of $300,000 from FMH, which
remains in the Chases‟ possession. In subsequent correspondence between Mr. Chase and Ms.
McDonald of Rawlings, Mr. Chase provided Rawlings with a copy of the Release and other
documentation relating to the settlement, but maintained that the Plan was not entitled to a lien
over the proceeds of the settlement, because the settlement was for pain and suffering only,
rather than reimbursement for medical expenses paid by the Plan, and that “it was clear [that Ms.
Chase‟s] infection was not caused by FMH Home Health Care.” Ex.5B to BNA Motion (ECF
18-9) (letter from Mr. Chase to Ms. McDonald, dated April 12, 2011). It is undisputed, however,
that the Chases did not involve Rawlings, Aetna, or any other agent of the Plan in the negotiation
of the settlement with FMH.
The parties have not submitted any documentation as to the basis for the Plan‟s
administrative determination that it is entitled to reimbursement. The Chases assert: “At no time
has Aetna provided the Chases with any administrative record or any affidavit stating what
11
In a previous ruling, see ECF 30, the Court held that, despite the confidentiality
provision of the Release, the Release could not be kept under seal in this proceeding under
applicable law.
- 12 -
documents comprise the administrative record, other than medical bills, despite the request of the
Chases.” Chase Motion at 6.
BNA filed this lawsuit on June 16, 2011, two months after Mr. Chase‟s letter to Ms.
McDonald of Rawlings on April 12, 2011.
Discussion
A. Standard of Review
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is
appropriate only “if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” A fact is “material” if it “might affect the
outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986).
In resolving a summary judgment motion, the court must view all of the facts, including
reasonable inferences to be drawn from them, in the light most favorable to the non-moving
party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); see also
Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002). “A party
opposing a properly supported motion for summary judgment „may not rest upon the mere
allegations or denials of [its] pleadings,‟ but rather must „set forth specific facts‟” showing that
there is a triable issue. Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th
Cir. 2003) (quoting former Fed. R. Civ. P. 56(e)), cert. denied, 541 U.S. 1042 (2004). See
Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). The “judge‟s function” in reviewing a
motion for summary judgment is not “to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for trial.” Liberty Lobby, 477 U.S. at
- 13 -
249. If “the evidence is such that a reasonable jury could return a verdict for the nonmoving
party,” there is a dispute of material fact that precludes summary judgment. Id. at 248.
When, as here, the parties have filed cross-motions for summary judgment, the court
must consider “each motion separately on its own merits „to determine whether either of the
parties deserves judgment as a matter of law.‟” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th
Cir. 2003) (citation omitted), cert. denied, 540 U.S. 822 (2003). “Both motions must be denied
if the court finds that there is a genuine issue of material fact. But if there is no genuine issue
and one or the other party is entitled to prevail as a matter of law, the court will render
judgment.” 10A WRIGHT, MILLER & KANE, FEDERAL PRACTICE & PROCEDURE § 2720, at 336-37
(3d ed. 1998, 2012 Supp.).
Both sides agree that the conventional summary judgment standard of review set forth
above is appropriate here. See BNA Motion at 10-12; Chase Motion at 7. I note, however, that
the Plan gives the “Claims Administrator” discretion over the interpretation of the subrogation
and reimbursement provision. See page 8, supra. When an ERISA benefits plan gives its
administrator such discretion, a court ordinarily must review the plan administrator‟s
interpretation under an abuse of discretion standard. See Carden v. Aetna Life Ins. Co., 559 F.3d
256, 260 (4th Cir. 2009); see also Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109-10
(1989); Booth v. Wal-Mart Stores, Inc. Associates Health & Welfare Plan, 201 F.3d 335, 342-43
(4th Cir. 2000) (synthesizing factors for evaluating an ERISA plan administrator‟s exercise of
discretion.
In this case, however, I have not been provided with any information pertaining to a
review or decision by the Plan‟s administrator. Nor has BNA suggested that its interpretation of
the SPD is entitled to deferential review. In any event, an “administrator‟s discretion never
- 14 -
includes the authority „to read out unambiguous provisions‟ contained in an ERISA plan.”
Blackshear v. Reliance Standard Life Ins. Co., 509 F.3d 634, 639 (4th Cir. 2007) (quoting
Colucci v. Agfa Corp. Severance Pay Plan, 431 F.3d 170, 176 (4th Cir. 2005)). Indeed, to ignore
the plain language of the plan “constitutes an abuse of discretion.” Blackshear, 509 F.3d at 639;
accord Day v. AT&T Disability Income Plan, 685 F.3d 848, 853 (9th Cir. 2012) (“„ERISA plan
administrators abuse their discretion if they . . . construe provisions of the plan in a way that
conflicts with the plain language of the plan.‟”) (citation and some internal quotations marks
omitted); Edwards v. Briggs & Stratton Retirement Plan, 639 F.3d 355, 362 (7th Cir. 2011)
(“„[U]nambiguous terms of a[n] [ERISA] plan leave no room for the exercise of interpretive
discretion by the plan‟s administrator.‟”); Admin. Cmte. of Wal-Mart Stores, Inc. Assocs.’ Health
& Welfare Plan v. Gamboa, 479 F.3d 538, 542 (8th Cir. 2007) (“An interpretation that conflicts
with the plain language of a health and welfare plan is an abuse of discretion . . . .”).
Thus, even if BNA‟s position in this litigation is the product of a determination made by
the Plan‟s administrator, no deference is owed to that determination if it contradicts the
unambiguous language of the SPD.
B. ERISA
BNA filed suit pursuant to Section 502(a)(3) of ERISA, which is codified as amended at
29 U.S.C. § 1132(a)(3). ERISA is a “„comprehensive and reticulated statute,‟ the product of a
decade of congressional study of the Nation‟s private employee benefit system,” which governs
most employee benefit plans in the United States. Mertens v. Hewitt Assocs., 508 U.S. 248, 251
(1993) (quoting Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361 (1980)). A
primary purpose of ERISA is to “ensure the integrity of written, bargained-for benefit plans.”
United McGill Corp. v. Stinnett, 154 F.3d 168, 172 (4th Cir. 1998). “To achieve this objective,
- 15 -
the plain language of an ERISA plan must be enforced in accordance with its literal and natural
meaning.” Mid Atl. Med. Servs., LLC v. Sereboff, 407 F.3d 212, 220 (4th Cir. 2005) (internal
quotation marks omitted) aff’d, 547 U.S. 356 (2006).
Included within ERISA‟s “carefully crafted and detailed enforcement scheme,” Mertens,
508 U.S. at 254, is the private right of action contained in Section 502(a)(3) of ERISA. That
provision authorizes a civil action “by a participant, beneficiary, or fiduciary” of an employee
benefit plan “(A) to enjoin any act or practice which violates any provision of [ERISA] or the
terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations
or (ii) to enforce any provisions of [ERISA] or the terms of the plan[.]” 29 U.S.C. § 1132(a)(3).
In a series of cases, the Supreme Court has “interpreted the term „appropriate equitable
relief‟ in § 502(a)(3),” holding that it refers “to „those categories of relief‟ that, traditionally
speaking (i.e., prior to the merger of law and equity) „were typically available in equity.‟”
CIGNA Corp. v. Amara, ___ U.S. ___, 131 S. Ct. 1866, 1878 (2011) (emphasis in original)
(citations and some internal quotation marks omitted). In Mertens, supra, 508 U.S. at 255-58,
the Supreme Court held that § 502(a)(3) does not authorize a suit seeking an award of money
damages. And, in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002),
the Court concluded that § 502(a)(3) permits a suit seeking restitution by imposition of a
constructive trust or equitable lien; however, recovery in such an action is limited to “particular
funds or property in the defendant‟s possession,” rather than “imposition of personal liability for
the benefits . . . conferred,” which would constitute legal relief akin to money damages, not
equitable relief. Id. at 214. More recently, in Sereboff v. Mid Atlantic Medical Services, Inc.,
547 U.S. 356 (2006), the Court held that, where the fiduciary of a benefit plan seeks to impose an
equitable lien on funds in a beneficiary‟s possession pursuant to an express provision in the plan
- 16 -
establishing the lien, the fiduciary may recover under Section 502(a)(3), even if the plaintiff
cannot establish through strict tracing that the funds in the plaintiff‟s possession were the specific
funds to which the plan was entitled. See id. at 364-69.
In this case, BNA asserts two counts against the Chases: (1) “Violation of ERISA” and
(2) “Right of Reimbursement.” Complaint at 4. Both claims arise under Section 502(a)(3). See
Complaint ¶¶ 14, 23. With respect to both counts, BNA asks the Court to “impose a constructive
trust and equitable lien in favor of Plaintiff against the settlement proceeds,” declare that BNA is
the owner of the settlement proceeds up to the amount of its lien, order the Chases to “turn over
the settlement proceeds up to the amount of Plaintiff‟s lien,” and to award judgment, with costs,
in its favor. Id. ¶ 24.
The parties do not dispute that the SPD contains a provision establishing a lien over sums
that a beneficiary recovers from third parties in certain circumstances, so as to permit the Plan to
assert a cause of action for an equitable lien by agreement, pursuant to Sereboff. The parties also
agree that the disputed funds are in the Chases‟ possession, and therefore can be reached by the
remedies of constructive trust or equitable lien, pursuant to Great-West and Mertens. In sum,
there is no dispute that this suit is a proper action for “appropriate equitable relief” under
Section 502(a)(3) of ERISA. But, the parties dispute whether the proceeds of the settlement
from FMH are, in fact, subject to the Plan‟s lien and right of reimbursement. Resolution of this
dispute turns on interpretation of the language of the SPD.
C. BNA‟s Motion
According to BNA, the SPD entitles it to a lien over the proceeds of the Chases‟
settlement with FMH. As BNA sees it, due to the broad language of the SPD, it is of no
consequence that the settlement was designated exclusively for pain and suffering, and the
- 17 -
question of whether the alleged injuries to Ms. Chase were caused by FMH‟s conduct is also of
no consequence. Plaintiff points to language in the SPD providing that the Plan “is entitled to
recover from any and all settlements or judgments, even those designated as pain and suffering,
non-economic damages, and/or general damages only.” SPD at 51 (emphasis added). Plaintiff
articulates the reason for inclusion in the SPD of such broad subrogation language: if a plan were
limited to reimbursement from settlements specifically designated as compensation for medical
expenses,
“plan
participants
and
beneficiaries
could
easily
circumvent
a
plan‟s
subrogation/reimbursement rights by negotiating with the tortfeasor so as to label all of the
damages received as „pain and suffering,‟ even when they are actually intended to compensate
for medical expenses.” BNA Motion at 17. It adds: “Such a scheme would severely undercut an
ERISA plan‟s interest, indeed its duty, in keeping it perpetually solvent.” Id.
One of the cases cited by plaintiff, G.R. Herberger’s, Inc. v. Erickson, 17 F. Supp. 2d 932
(D. Minn. 1998), provides a paradigmatic example of the type of mischief such plan provisions
are intended to preclude. In Herberger’s, a plan beneficiary suffered a severe spinal cord injury
in a bicycle accident that occurred on the property of a school. Id. at 933. The beneficiary sued
the school and obtained a $1.2 million settlement. Id. The settlement agreement “specifically
stated that the monetary recovery precluded any past or future medical expenses.”
Id.
Nonetheless, the plan sought to be reimbursed out of the settlement proceeds for the medical
expenses it had paid on behalf of the beneficiary. Id. The plan‟s subrogation clause entitled the
plan to “„be subrogated and succeed to the Covered Person‟s right of recovery for medical
expenses incurred against any third-party, and the Covered Person shall pay over to the Plan
Administrator all sums recovered, by suit, settlement, or otherwise, on account of such medical
expenses incurrred,‟” up to the amount of benefits paid by the plan. Id. (quoting plan). The
- 18 -
beneficiary argued that because her settlement agreement specifically excluded medical
expenses, her plan had no entitlement to the proceeds. The court rejected the beneficiary‟s
reliance “on artful language insinuated into her settlement agreement,” holding that the
plaintiff‟s argument would result in “unjust enrichment to a party whose attorneys use
lexicological legerdemain to avoid ERISA Plan reimbursement.” Id. at 936.
Steffens v. BlueCross BlueShield of Illinois, supra, 804 N.W.2d 196 (Wis. 2011), another
case upon which BNA relies, is also noteworthy. In Steffens, the Wisconsin Supreme Court held
that a plan administrator did not abuse its discretion in determining that the plan was entitled to
reimbursement from a beneficiary‟s settlement arising out of the beneficiary‟s injuries in a car
accident. In the litigation against the alleged tortfeasor, the beneficiary had averred under oath
on several occasions, both before and after the plan administrator made its determination as to
reimbursement, that the back injury the beneficiary sustained in the car accident necessitated his
lumbosacral fusion surgery.
Id. at 212.
After he obtained the settlement, however, the
beneficiary “did an about-face and claimed that the surgery did not arise out of the accident.” Id.
at 213. The Steffens Court stated: “[B]ecause Steffens himself averred both before and after
BlueCross‟s counterclaim for reimbursement under the Plan that the surgery-necessitating
injuries arose out of the accident, it is reasonable for the Plan administrator to have reached the
same conclusion.” Id.
In support of its position, BNA cites several other cases in which courts have stated that
an ERISA plan was not required to prove that a tortfeasor caused the beneficiary‟s injuries in
order to be reimbursed from the beneficiary‟s settlement with the tortfeasor. See, e.g., McIntosh
v. Pac. Holding Co., 992 F.2d 882 (9th Cir. 1993); Brown & Williamson Tobacco Corp. v.
Collier, Civ. No. 5:09-cv-00125, 2010 WL 1487772, at *6 (M.D. Ga. Apr. 13, 2010); Essex v.
- 19 -
Randall, Civ. No. DKC-03-3276, 2005 WL 600335, at *6 (D. Md. Mar. 15, 2005); Steffens, 804
N.W.2d at 210 n.22.
Moreover, it is clear that the mere designation of settlement proceeds for “pain and
suffering” (or failure specifically to designate the settlement proceeds for medical expenses) does
not defeat a plan‟s right to reimbursement. See, e.g., Mid Atl. Med. Servs., Inc. v. Do, 294 F.
Supp. 2d 695, 698, 701 (D. Md. 2003) (holding that, where beneficiary was injured in car
accident and obtained a settlement “in a manner that does not specify the nature of
compensation, it may be presumed that said recovery is intended to cover medical expenses”);
see also Primax Recoveries, Inc. v. Young, 83 F. App‟x 523, 525-26 (4th Cir. 2003) (holding, in
case where beneficiary was injured in car accident, that plan was entitled to recover where the
settlement proceeds were not designated); Singleton v. Bd. of Trs. of IBEW Local 613 &
Contributing Emp’rs Health & Welfare Fund, 830 F. Supp. 630, 631 (N.D. Ga. 1993) (holding,
where beneficiary was injured in car accident, that plan was entitled to recover from settlement
proceeds that were specifically designated for pain and suffering); Travitz v. N.E. Dept. ILGWU
Health & Welfare Fund, 818 F. Supp. 761, 770 & n.11 (M.D. Pa. 1993) (same).
In each of the cases above, cited by plaintiff, the beneficiary suffered a physical injury
which resulted in the plan‟s payment of medical expenses. The beneficiary then reached a
settlement with the alleged tortfeasor.
In each case, the settlement came in lieu of a
determination or admission of whether the tortfeasor actually caused the injury to the
beneficiary. But, there was no serious dispute in any of the cases that the beneficiary‟s injury,
allegedly caused by the tortfeasor, had resulted in the payment of medical expenses by the plan.12
12
It is noteworthy that almost all of the cases cited by plaintiff arose from vehicular
accidents, which typically present a relatively uncomplicated causal relationship between the
injury allegedly caused by the tortfeasor and the resulting medical treatment. In Do, for instance,
Judge Marvin J. Garbis of this court held that a plan was entitled to recover, from the proceeds of
- 20 -
Arguably, though, this is not a case in which the beneficiary is engaged in the obvious
“lexicological legerdemain” of designating a settlement for physical injuries as a settlement only
for “pain and suffering,” in order to obtain a double recovery from both the tortfeasor and her
health insurer. Herberger’s, 17 F. Supp. 2d at 936. In contrast to the beneficiary in Herberger’s,
the Chases contend that FMH‟s alleged negligence in actuality caused no injury other than pain
and suffering. Based on the alleged review by the surgeons for both Ms. Chase and FMH, the
Chases assert that the second round of surgeries and post-surgical care resulted from Ms. Chase‟s
infection, which was unrelated to FMH‟s care. Put another way, according to the Chases, the
alleged negligence of FMH did not cause the infection or contribute to the necessity or scope of
the second round of surgeries. Rather, FMH failed to discover the existing infection, thus
delaying the surgical care that Ms. Chase inevitably would have needed. So, the delay caused
unnecessary pain and suffering, but had nothing to do with the need for the second round of
surgeries.
In the light most favorable to the Chases, this case is akin to Administrative Committee v.
Kern, 72 F. Supp. 2d 1051 (W.D. Ark. 1999), the leading case on which the Chases rely. In that
case, a beneficiary with a chronic rash was treated by her doctors by intravenous administration
of a steroid. Id. at 1051. She suffered congestive heart failure, and later “developed avascular
necrosis necessitating replacement of both hip [joints] and both shoulder joints.” Id. at 1052.
She sued her doctors, alleging that they had administered excessive doses of the steroid, which
had caused both the congestive heart failure and the necrosis. Id. Subsequently, she reached a
settlement with the doctors, from which her benefit plan sought reimbursement for all amounts it
a settlement arising from injuries the beneficiary sustained in a car accident, for medical
expenses the plan had paid. But, he expressly declined to endorse a plan fiduciary‟s argument
that “a lien . . . could attach to a third party recovery that was not paid for medical expenses.”
Do, 294 F. Supp. 2d at 701.
- 21 -
had paid for her medical care for both conditions, pursuant to plan provisions that gave the plan
the right to reimbursement from any payment “„made by person(s) considered responsible for the
condition giving rise to the medical expense.‟” Id. at 1054 (quoting plan). The beneficiary
argued, however, that the plan was only entitled to recover for the amounts it had paid for care
for her congestive heart failure, because “although she initially alleged the [steroid] caused the
avascular necrosis which necessitated the joint replacements, she was unable to prove this” in the
medical malpractice suit. Id. Indeed, before the settlement negotiations in the malpractice suit
began, her own experts had opined that the necrosis could not have resulted from the doctors‟
alleged malpractice. Id.
The Kern Court held that, in making its determination as to reimbursement, the plan‟s
administrator was required to consider whether the beneficiary‟s doctors were responsible for her
necrosis. Id. at 1055. In reasoning that is persuasive here, the Kern Court said, id. at 1054-55
(internal citations omitted):
The Plan argues it is not required to prove the negligence of the
malpractice defendants before it can assert a valid claim to the settlement money.
As a general proposition, the court agrees with this statement.
However, the Plan seeks to [oversimplify] the issues in this case. Were
Kern arguing that an ERISA Plan must always bear the burden of proving the
alleged tortfeasor‟s fault before it could collect under a reimbursement provision,
we would reject this argument out of hand. If a Plan participant prevails on a
claim against a third party based on an assertion of fault either through trial or
settlement, the participant cannot avoid the reimbursement provision by arguing
the Plan must fend for itself. Thus in the majority of cases, the Plan need not
separately prove that the tortfeasor was at fault and his or her conduct proximately
caused the injuries resulting in the need for medical treatment.
However, where, as here, the Plan participant seeks damages for multiple
medical conditions and is forced to abandon a portion of her claim because she
finds herself unable to prove the tortfeasor‟s fault proximately caused one of her
medical conditions, in this case the avascular necrosis which resulted in the need
for joint replacements, the Plan may not, without establishing a connection
between the tortfeasor‟s conduct and the medical condition, seek reimbursement
- 22 -
for medical expenses incurred as a result of that condition. Here, there is no
evidence Kern dropped her claim that the malpractice defendants caused her
avascular necrosis to avoid her reimbursement obligation. Rather, the evidence
indicates she was, because of a lack of supporting evidence, forced to abandon
this portion of her malpractice claim.
BNA maintains that the SPD “does not set forth any requirement that the injury giving
rise to the bills for which BNA seeks reimbursement be causally related to the actions and/or
omissions of FMH.” BNA Motion at 19. The plain language of the SPD dispels BNA‟s
contention, however. The “Reimbursement” provision of the SPD states that, “if a Covered
Person receives any payment from any Responsible Party . . . as a result of an injury, illness, or
condition, the plan has the right to recover from, and be reimbursed by, the Covered Person for
all amounts this plan has paid and will pay as a result of that injury, illness, or condition, from
such payment.” SPD at 51 (emphasis added). This language requires a causal relationship
between the injury, illness, or condition caused by the Responsible Party and the amounts paid
by the Plan that are subject to reimbursement. Similarly, the “Lien Rights” provision of the SPD
states that “the plan will automatically have a lien to the extent of benefits paid by the plan for
the treatment of the illness, injury, or condition for which the Responsible Party is liable.” Id.
(emphasis added).
To be sure, the SPD expressly provides that it does not matter whether the Responsible
Party admits liability, nor does it matter how the settlement is labeled: the Plan “is entitled to full
recovery regardless of whether any liability for payment is admitted by any Responsible Party,”
and “is entitled to recover from any and all settlements or judgments, even those designated as
pain and suffering, non-economic damages, and/or general damages only.” Id. Moreover, the
Plan does not have to establish a tortfeasor‟s actual liability: “the term „Responsible Party‟
- 23 -
means any party actually, possibly, or potentially responsible for making any payment due to a
Covered Person‟s injury, illness, or condition.” Id. at 50 (emphasis added).
Thus, the Plan is not obligated to establish that the Responsible Party caused the
beneficiary‟s injury. But, the Plan is obligated to establish that the medical care for which the
Plan provided coverage arose from an injury for which the Responsible Party is “actually,
possibly, or potentially responsible.” Id. An example provided by the Wisconsin Supreme Court
in Steffens, on which BNA relies, illustrates this distinction. The Steffens Court rejected the
beneficiary‟s argument that the plan was required to “prove causation.” Steffens, 804 N.W.2d at
210 n.22. But, the Steffens Court continued, id. (emphasis added):
Pursuant to the terms [of the plan], the question is whether the administrator‟s
determination that the surgery-necessitating injuries arose from the accident was
arbitrary and capricious, not whether BlueCross must prove the accident caused
the injuries.
An example provided by Steffens illustrates his error in grounding his
argument in tort law. In an attempt to argue that BlueCross must prove causation,
he contends: “For instance, if an insured injures his arm in a car accident and
subsequently has an unrelated surgery on his toe, the insurer would be able to take
money out of a settlement regarding the arm for bills the insurer paid on the toe
surgery, if not required to prove causation.” . . . [T]his example reaches an
erroneous conclusion. Under the Plan, the insurer would not be capable of
reimbursement from the settlement money unless the Plan administrator
reasonably determined that the toe surgery arose from the car accident. Such a
determination would be arbitrary and capricious since the example explicitly
states that the two events were unrelated.
Here, the Chases argue that they are in the same position as the arm and toe surgery
patient in Steffens‟s example. According to the Chases, Ms. Chase‟s second round of surgeries
(like the toe surgery in the Steffens example) was unrelated to the alleged negligence of FMH
(analogous to the arm injury in the Steffens example). Defendants maintain that, even if the
FMH nurses had timely detected the infection of the perineal wound at the outset, Ms. Chase still
would have required the second round of surgeries.
- 24 -
McIntosh v. Pacific Holding Co., supra, 992 F.2d 882, another case on which BNA
relies, also illustrates this principle. In McIntosh, the Eighth Circuit concluded that a benefits
plan was entitled to recover from a beneficiary‟s settlement with the parties who allegedly
caused her car accident, “because the medical expenses received by [the beneficiary] arose out of
the physical injury from which all of her claims against third parties are derived.” Id. at 885
(emphasis added).
In sum, BNA‟s interpretation of the SPD is contrary to the SPD‟s plain meaning, and this
conclusion is bolstered by the case law interpreting analogous plan language. Although the
Plan‟s entitlement to reimbursement does not depend on proving that FMH actually caused
injury to Ms. Chase, or upon the particular language used in artful drafting of the settlement
agreement between FMH and the Chases, the Plan‟s entitlement does depend on whether the
Plan paid benefits for Ms. Chase “as a result of that injury, illness, or condition” for which FMH
was allegedly liable. SPD at 51. Put another way, in the words of Steffens and McIntosh, the
Plan‟s entitlement to reimbursement from the settlement depends on whether the medical
expenses it paid “arose out of” the injury on which the settlement was based.
BNA‟s motion is predicated on the proposition that, as a matter of law, the SPD does not
require the establishment of such a connection. That proposition contradicts the plain language
of the SPD. See Blackshear, supra, 509 F.3d at 639. Accordingly, I will deny BNA‟s summary
judgment motion.
D. Chase Motion
The Chases‟ motion must also be denied. The Chases claim that they are entitled to
summary judgment because FMH‟s negligence did not result in the second round of surgeries,
the expenses of which were paid by the Plan. However, at this juncture, the Chases have offered
- 25 -
no admissible evidence to prove that contention. To be sure, BNA has not propounded any
evidence to the contrary. But, as noted, the parties expressly agreed to delay expert discovery
until after the pending motions were resolved. See Scheduling Order at 2.
More important, I am not convinced that it is this Court‟s role, in the first instance, to
make the determination as to whether the medical expenses paid by the Plan resulted from
FMH‟s alleged negligence. The SPD reserves to the Plan the “right to conduct an investigation
regarding the injury, illness, or condition to identify any Responsible Party.”
SPD at 52.
Moreover, the SPD grants to the Plan‟s “Claims Administrator” the “sole authority and
discretion to resolve all disputes regarding the interpretation” of the Subrogation and Right of
Recovery Provision. Id. It is apparent that the SPD vests the Plan or its administrator with the
authority to make the initial determination of the Plan‟s right to subrogation and reimbursement.
This is consistent with the cases discussed above, which have reviewed for abuse of discretion
such a determination by a plan. See, e.g., Kern, 72 F. Supp. 2d at 2053-54; Steffens, 804 N.W.2d
at 209-10.
Nevertheless, the Plan or its administrator must make its determination in accordance
with a permissible interpretation of the SPD. Although the SPD vests interpretive authority with
the Claims Administrator, that authority extends only to resolving ambiguity in the SPD
language.
In Kerns, the court directed a remand to the Plan for a determination as to reimbursement
and subrogation on the basis of the correct standard under the SPD. It said:
From the materials submitted to the court, it does not appear that the Plan
administrator has considered the specific issue on which this case turns. That is,
whether [the beneficiary‟s doctors] were “responsible for the condition [avascular
necrosis] giving rise to the medical expense.” Instead, it appears the Plan has
merely totaled all medical expenses it paid on Kern‟s behalf after the March of
1992 hospitalization without regard to whether those expenses arose as a result of
- 26 -
the fluid overload and congestive heart failure or as a result of the avascular
necrosis. Neither party has submitted any materials indicating the Plan considered
this specific issue.
Accordingly, this matter is not ready for review by the court. Instead, the
administrator must first be given the opportunity to determine what portion of the
[medical expenses paid by the plan] it believes is subject to the reimbursement
provision. In making this determination, the administrator must determine
whether [the beneficiary‟s doctors] were responsible for the avascular necrosis
which necessitated the joint replacements.
Kerns, 72 F. Supp. 2d at 1055 (some alterations in original). Accordingly, the court issued an
order directing that the case be “stayed and administratively terminated for the [plan] to
determine what portion of the . . . medical expenses it paid is subject to the reimbursement
provision,” and stated: “At the conclusion of the administrative proceedings, either party may, if
necessary, file a motion to reopen the case.” Id. at 1055-56.
As noted, neither side has provided any evidence documenting a decision by the Plan‟s
administrator regarding the Plan‟s entitlement to reimbursement. Moreover, neither side has
requested a remand to the Plan. Nevertheless, a district court has discretion to remand an ERISA
dispute to a plan claims administrator for redetermination under a proper standard.
See
Champion v. Black & Decker (U.S.) Inc., 550 F.3d 353, 362-63 (4th Cir. 2008); see also Smith v.
Continental Cas. Co., 369 F.3d 412, 421 (4th Cir. 2004) (“If the district court concludes that
Continental Casualty failed to consider this Plan language, it can remand the case to Continental
Casualty for further administrative review.”); Evans v. Metropolitan Life Ins. Co., 358 F.3d 307,
312 (4th Cir. 2004) (“Because MetLife abused its discretion . . . , we vacate the judgment of the
district court and direct the district court to remand this case for further administrative review by
MetLife consistent with this opinion.”).
To be sure, “„remand should be used sparingly.‟” Champion, 550 U.S. at 362 (quoting
Elliott v. Sara Lee Corp., 190 F.3d 601, 609 (4th Cir. 1999)). However, remand is appropriate
- 27 -
when a case involves “complex medical issues crucial to the interpretation and application of
plan terms,” Quesinberry v. Life Ins. Co. of North America, 987 F.2d 1017, 1025 (4th Cir. 1993).
If a court “believes the [plan] administrator lacked adequate evidence on which to base a
decision, „the proper course [is] to remand to the [administrator] for a new determination, not to
bring additional evidence before the district court.‟” Elliott, 190 F.3d at 609 (quoting Berry v.
Ciba-Geigy Corp., 761 F.2d 1003, 1007 (4th Cir. 1985)).
In my view, a remand to the Plan may be appropriate in this instance. 13 Because the
parties have not addressed the propriety of remand to the Plan, in the Order that accompanies this
Memorandum Opinion, I will direct the parties to submit letter briefs as to whether a remand,
such as was ordered in Kerns, is appropriate in this case. In the meantime, I will stay the
commencement of expert discovery.
Conclusion
For the foregoing reasons, the summary judgment motions submitted by both sides will
be denied. An appropriate Order follows.
Date: August 24, 2012
/s/
Ellen Lipton Hollander
United States District Judge
13
BNA has argued that the Chases breached their responsibilities under the SPD by
failing to involve a representative of the Plan in the settlement negotiations with FMH. Because
the amount of the settlement exceeds the amount that the Plan seeks to recover, the Plan is not
harmed by that alleged breach, so long as it has the opportunity to make a determination as to
reimbursement and subrogation on the basis of a complete record as to Ms. Chase‟s condition
and treatment. A remand would afford the Plan that opportunity.
- 28 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?