248 F.3d 206 (3rd Cir. 2001), 00-3412, Bill Gray Enterprises Inc. v. Gourley

Docket Nº:Ronald L. Gourley, Appellant at No. 00-3412;
Citation:248 F.3d 206
Party Name:BILL GRAY ENTERPRISES, INCORPORATED EMPLOYEE HEALTH AND WELFARE PLAN, by Bill Gray Enterprises, Inc., in its fiduciary capacity as plan administrator v. RONALD L. GOURLEY; JUDITH L. GOURLEY; ERIE INSURANCE EXCHANGE;
Case Date:April 26, 2001
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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248 F.3d 206 (3rd Cir. 2001)

BILL GRAY ENTERPRISES, INCORPORATED EMPLOYEE HEALTH AND WELFARE PLAN, by Bill Gray Enterprises, Inc., in its fiduciary capacity as plan administrator

v.

RONALD L. GOURLEY; JUDITH L. GOURLEY; ERIE INSURANCE EXCHANGE;

Ronald L. Gourley, Appellant at No. 00-3412;

Bill Gray Enterprises, Incorporated Employee Health and Welfare Plan, by Bill Gray Enterprises, Inc., in its fiduciary capacity as plan administrator, Appellant at No. 00-1400

Nos. 00-3412 & 00-1400

United States Court of Appeals, Third Circuit

April 26, 2001

Argued October 24, 2000

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ROGER L. WISE, ESQUIRE (ARGUED), Heintzman, Warren, Weis & Fornella, Pittsburgh, Pennsylvania, Attorney for Ronald L. Gourley and Judith L. Gourley.

RICHARD B. TUCKER, III, ESQUIRE (ARGUED), Tucker Arensberg, Pittsburgh, Pennsylvania, Attorney for Bill Gray Enterprises, Incorporated Employee Health and Welfare Plan, by Bill Gray Enterprises, Inc., in its fiduciary capacity as plan administrator.

SUSAN H. MALONE, ESQUIRE (ARGUED), RICHARD DiSALLE, ESQUIRE, Rose, Schmidt, Hasley & DiSalle, Pittsburgh, Pennsylvania, Attorneys for Erie Insurance Exchange.

Before: BECKER, Chief Judge, SCIRICA and FUENTES, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

The principal issue on appeal is whether a self-funded employee benefit plan which purchases stop-loss insurance from a third party insurance provider is subject to Pennsylvania laws governing the enforcement of anti-subrogation clauses in insurance contracts. We join our sister circuits in holding a self-funded employee benefit plan with stop-loss insurance is not deemed an insurance provider under the Employee Retirement Income Security Act. Therefore, the plan is not subject to state laws regulating insurance contracts.

I.

A.

Bill Gray Enterprises, Incorporated Employee Health and Welfare Plan, a self-funded welfare plan operated and administered by plaintiff Bill Gray Enterprises, Inc., is a welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 ("ERISA"). Funded by contributions from employers and covered employees, the Plan is designed, in part, to provide medical benefits for catastrophic health care expenses for covered persons and their dependants. The Plan engaged Diversified Group Administrator, Inc. to process certain claims. It also purchased stop-loss insurance1 from the Insurance Company of North America to cover benefit payments exceeding $ 40,000. Through a subrogation and reimbursement clause in

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the Plan document, the Plan retained rights of subrogation and reimbursement against all Plan participants and third parties for medical benefits paid by the Plan. The Plan document's subrogation clause provides in part:

RIGHT OF SUBROGATION AND REIMBURSEMENT

When this provision applies. The Covered Person may incur medical or other charges due to Injuries for which benefits are paid by the Plan. The Injuries may be caused by the act or omission of another person. If so, the Covered Person may have a claim against that other person or third party for payment of the medical or other charges. The Plan will be subrogated to all rights the Covered Person may have against that other person or third party and will be entitled to reimbursement.

The Covered Person must:

(1) assign or subrogate to the Plan his or her rights to recovery when this provision applies;

(2) authorize the Plan to sue, compromise and settle in the Covered Person's name to the extent of the amount of medical or other benefits paid for the Injuries under the Plan and its expenses incurred by the Plan in collecting this amount;

(3) reimburse the Plan out of the Recovery made from the other person, the other person's insurer or the third party the amount of medical or other benefits paid for the Injuries under the Plan and the expenses incurred by the Plan in collecting this amount; and

(4) notify the Plan in writing of any proposed settlement and obtain the Plan's written consent before signing any release or agreeing to any settlement.

Amount subject to subrogation or reimbursement. All amounts recovered will be subject to subrogation or reimbursement. In no case will the amount subject to subrogation or reimbursement exceed the amount of medical or other benefits paid for the Injuries under the Plan and the expenses incurred by the Plan in collecting this amount.

When a right of recovery exists, the Covered Person will execute and deliver all required instruments and papers, including a subrogation agreement provided by the Plan, as well as doing whatever else is needed, to secure the Plan's rights of subrogation and reimbursement, before any medical or other benefits will be paid by the Plan for the Injuries. If the Plan pays any medical or other benefits for the Injuries before these papers are signed and things are done, the Plan will still be entitled to subrogation and reimbursement. In addition, the Covered Person will do nothing else to prejudice the right of the Plan to subrogate and be reimbursed.

Defined Terms:

"Recovery" means monies paid to the Covered Person by way of judgment, settlement, or otherwise to compensate for all losses caused by, or in connection with, the Injuries.

"Subrogation" means the Plan's right to pursue the Covered Person's claims for medical or other charges paid by the Plan against the other person, the other person's insurer and the third party.

"Reimbursement" means repayment to the Plan for medical or other benefits that it has paid toward care and treatment of the Injury and for the expenses incurred by the Plan in collecting this benefit amount.

Recovery from another plan under which the Covered Person is covered. This right of reimbursement also applies

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when a Covered Person recovers under an uninsured or underinsured motorist plan, homeowner's plan, renter's plan or any liability plan.

B.

On January 23, 1995, defendant Ronald. L. Gourley was severely injured when his automobile was struck by an uninsured drunk driver operating a stolen vehicle. Employed by Massey Buick, GMC, Inc. in Pittsburgh, Mr. Gourley was a participant in the Bill Gray Plan. The Plan, through its claims processor Diversified Group Administrator, Inc., paid $ 141, 401.35 to medical providers for Mr. Gourley's entire medical expenses. Through its own funds, the Plan paid the first $ 40,000; under the Plan's stop-loss policy, the Insurance Company of North America provided the Plan the remainder of the funds.

Mr. Gourley sued the tavern that served alcoholic beverages to the drunk driver. A jury awarded him $ 1,182,500 for his injuries and his wife, Judith Gourley, $67,500 for loss of consortium. But the tavern did not have Dram Shop insurance and filed for bankruptcy after the verdict. It is uncontested that the Gourleys have been unable to collect this judgment.

The Gourleys submitted a claim for uninsured motorist benefits to their personal automobile insurance carrier, Erie Insurance Exchange. After executing a release representing that none of the payment was for accident incurred medical expenses, the Gourleys received $ 300,000 in uninsured motorist benefits, the maximum under their joint policy. But prior to payment, the Plan notified the Gourleys and Erie Insurance Exchange of its claim for subrogation and reimbursement. Neither the Gourleys nor Erie Insurance Exchange reimbursed the Plan by any amount.

C.

Through its fiduciary, Bill Gray Enterprises, the Plan filed suit under its subrogation/reimbursement clause to recoup the $ 141, 401.35 in medical benefits it paid Mr. Gourley. The Gourleys maintained the Plan was ineligible for reimbursement because the Pennsylvania Motor Vehicle Financial Responsibility Law bars insurance carriers from obtaining reimbursement or subrogation payments in suits arising from motor vehicle accidents.2 Contending it was not an insurance carrier but a self-funded employee benefit plan, the Plan maintained the Pennsylvania Motor Vehicle Financial Responsibility Law was preempted by ERISA. Furthermore, it argued that under the Plan document's unambiguous language, as interpreted by the administrator, it was entitled to reimbursement from all recoveries obtained from third parties.

To the extent the Plan had a right to subrogation, Erie Insurance Exchange argued the right was subject to the defenses it could raise against the subrogors (the Gourleys). Because Erie Insurance Exchange had paid the maximum contractual benefits to the Gourleys, it maintained it had a complete defense to the Plan's suit.

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In addition, Mrs. Gourley maintained she was not required to reimburse the Plan for the uninsured motorist benefits she received under her Erie Insurance Exchange policy which jointly covered both her and her husband.

The District Court held the Plan was an uninsured employee benefit plan and under ERISA was not subject to the Pennsylvania insurance anti-subrogation law. Because the Plan document, as interpreted by the Plan administrator, was unambiguous and reasonable, the District Court held the Plan was entitled to reimbursement from payments received from third parties.3 The District Court also held Mrs. Gourley was not covered under the Plan document's reimbursement clause and therefore was not personally liable to reimburse the Plan from the joint benefits received under the Erie Insurance Exchange policy. Finally, it held the Plan could not seek payments under its subrogation clause from Erie Insurance Exchange because Erie had already paid its...

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