Blue Cross and Blue Shield v. Dailey

• Decision Date: 22 October 2004
• Docket Number: No. S-03-394.,S-03-394.
• Citation: 687 N.W.2d 689,268 Neb. 733
• Parties: BLUE CROSS AND BLUE SHIELD OF NEBRASKA, INC., appellee and cross-appellant v. Lemoyne E. DAILEY, appellant and cross-appellee, and Union Pacific Railroad Company, appellee and cross-appellee.
• Court: Nebraska Supreme Court

687 N.W.2d 689

268 Neb. 733

BLUE CROSS AND BLUE SHIELD OF NEBRASKA, INC., appellee and cross-appellant v. Lemoyne E. DAILEY, appellant and cross-appellee, and Union Pacific Railroad Company, appellee and cross-appellee.

No. S-03-394.

Supreme Court of Nebraska.

October 22, 2004.

Todd R. McWha and Keith A. Harvat, of Waite, McWha & Harvat, North Platte, for appellant.

John F. Thomas and Michael T. Eversden, of McGrath, North, Mullin & Kratz, P.C., Omaha, for appellee Blue Cross and Blue Shield of Nebraska, Inc.

HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

WRIGHT, J.

NATURE OF CASE

Blue Cross and Blue Shield of Nebraska, Inc. (Blue Cross), sued Lemoyne E. Dailey, who was insured by Blue Cross, and the Union Pacific Railroad Company (Union Pacific). Blue Cross sought reimbursement of medical payments it had made on behalf of Dailey due to the alleged negligence of Union Pacific. The Douglas County District Court sustained Blue Cross' motion for summary judgment and overruled the motions for summary judgment filed by Dailey and Union Pacific. Dailey appeals, and Blue Cross cross-appeals.

SCOPE OF REVIEW

Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it. Central Neb. Pub. Power v. Jeffrey Lake Dev., 267 Neb. 997, 679 N.W.2d 235 (2004).

When reviewing questions of law, an appellate court has an obligation to resolve questions independently of the conclusion reached by the trial court. Mogensen v. Board of Supervisors, 268 Neb. 26, 679 N.W.2d 413 (2004).

Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Keys v. Guthmann, 267 Neb. 649, 676 N.W.2d 354 (2004).

In reviewing a summary judgment, an appellate court views the evidence in a light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Id.

FACTS

On February 9, 1999, a prairie fire occurred in Lincoln County, Nebraska. The fire was allegedly caused by sparks emitting from a Union Pacific train. While attempting to put out the fire, Dailey incurred second- and third-degree burns over a significant portion of his body. He required extensive treatment in a hospital burn unit for a number of months.

In December 1999, Dailey entered into a settlement with Union Pacific. He signed a release and settlement agreement which provided that Union Pacific was released from liability for all claims for injuries, including those unknown at the time the document was signed. Union Pacific agreed to pay a lump sum of $1,225,000 to Dailey and $10,000 per month for 10 years or the remainder of his life, beginning February 1, 2000. The agreement stated that "if Blue Cross ... is subrogated under any rights whatsoever against [Dailey, then Union Pacific] will negotiate the subrogation lien of Blue Cross" and pay all costs and attorney fees incurred by Dailey.

Blue Cross sued Dailey and Union Pacific for recovery of the medical expenses it had paid on behalf of Dailey. Blue Cross alleged two theories of recovery: subrogation and contractual right of recovery. On the subrogation claim, Blue Cross alleged that it had paid $794,329.08 in medical expenses under an insurance contract with the Nebraska Association of County Officials that covered Dailey. The petition asserted that Blue Cross had made demand on Union Pacific for $720,000 as settlement for the medical bills incurred by Dailey and that the demand was not accepted. Blue Cross asked for judgment against Union Pacific in the full amount of its expenses.

As to the contractual right of recovery claim, Blue Cross alleged that Dailey and Union Pacific had entered into a settlement of Dailey's claims against the railroad under which he was to receive payments from Union Pacific for his injuries. Blue Cross claimed that pursuant to its contract with the Nebraska Association of County Officials, Blue Cross had a contractual right to collect from the proceeds Dailey recovered for his injuries the amount of medical benefits it had paid on Dailey's behalf, regardless of whether Dailey had been fully compensated. Blue Cross asserted that either Dailey or Union Pacific was obligated to reimburse Blue Cross for the medical expenses it had paid for the treatment of Dailey's injuries.

In his answer, Dailey also asserted a cross-claim against Union Pacific. Union Pacific filed an answer to Blue Cross' petition, in which it asserted a number of affirmative defenses.

The district court granted Blue Cross' motion to bifurcate, agreeing to first hear the contractual right of recovery claim, which, if resolved in favor of Blue Cross, would eliminate the need for the subrogation action against Union Pacific.

The district court subsequently granted Blue Cross' motion for summary judgment and entered judgment against Dailey for $801,485.70. The order overruled the motions for summary judgment filed by Dailey and Union Pacific. The court deferred action as to the enforcement of rights between Dailey and Union Pacific and as to Blue Cross' claim under Dailey's indemnity agreement with Union Pacific.

The district court found that the subrogation provision of the insurance policy allowed Blue Cross to recover regardless of whether the insured had been made whole and that the policy created a contractual right that was different from Blue Cross' equitable right to subrogation. The court concluded that the subrogation provision did not violate public policy, the subrogation provision was not void as a unilateral amendment, there was no conflict of interest in the insurance policy, the policy was not an unconscionable contract of adhesion, and there was no lack of consideration in the policy. The court also found that the "made whole" doctrine of equitable subrogation did not apply because the subrogation provision was a distinct contractual undertaking that was more than a mere restatement of Blue Cross' equitable rights.

Blue Cross' motion for prejudgment interest was denied, and the district court filed a second order, stating that its previous order granting summary judgment to Blue Cross was "amended" to reflect that it was "the entry of a final judgment and [that] there is no just reason for delay in the entry of that order." Dailey timely appealed, and Blue Cross cross-appeals.

ASSIGNMENTS OF ERROR

Dailey assigns the following restated errors: (1) The district court erred in determining that Blue Cross is entitled to full recovery of all medical expenses that it paid on behalf of Dailey, despite the fact that he was not made whole, and (2) the court erred in sustaining Blue Cross' motion for summary judgment and denying Dailey's motion for summary judgment.

On cross-appeal, Blue Cross assigns as error the district court's failure to award Blue Cross prejudgment interest.

JURISDICTION

Before reaching the legal issues presented for review, it is the duty of an appellate court to determine whether it has jurisdiction over the matter before it. Central Neb. Pub. Power v. Jeffrey Lake Dev., 267 Neb. 997, 679 N.W.2d 235 (2004). Blue Cross asserts that we do not have jurisdiction over this appeal because the order from which Dailey appeals is not a final order under Neb.Rev.Stat. § 25-1315 (Cum.Supp.2002). Dailey responds that the district court amended its original order to make it clear that the judgment was final pursuant to § 25-1315.

Section 25-1315(1) states in relevant part:

[W]hen multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment.

In Keef v. State, 262 Neb. 622, 634 N.W.2d 751 (2001), we noted that a claim for relief under § 25-1315(1) is equivalent to a separate cause of action, not a separate theory of recovery. Therefore, the statute "is implicated only where multiple causes of action are presented or multiple parties are involved, and a final judgment is entered as to one of the parties or causes of action." Keef, 262 Neb. at 627-28, 634 N.W.2d at 757.

More recently, we considered § 25-1315 in Bailey v. Lund-Ross Constructors Co., 265 Neb. 539, 657 N.W.2d 916 (2003). We noted that § 25-1315(1) is substantially similar to Fed.R.Civ.P. 54(b), and we reviewed federal cases for guidance.

We therefore determine that for purposes of Nebraska law, the term "final judgment" as used in § 25-1315(1) is the functional equivalent of a "final order" within the meaning of Neb.Rev.Stat. § 25-1902 (Reissue 1995). Thus, a "final order" is a prerequisite to an appellate court's obtaining jurisdiction of an appeal initiated pursuant to § 25-1315(1).... With the enactment of § 25-1315(1), one may bring an appeal pursuant to such section only when (1) multiple causes of action or multiple parties are present, (2) the court enters a "final order" within the meaning of § 25-1902 as to one or more but fewer than all of the causes of action or parties, and (3) the trial court expressly directs the entry of such final order and expressly determines that there is no just reason for delay of an immediate appeal.

Bailey, 265 Neb. at 546-47, 657 N.W.2d at 923-24.

In the present case, there are multiple parties and the district court's order provided that there was no just reason for delay of an appeal. Thus, we must determine whether the order was a final order pursuant to Neb.Rev.Stat. § 25-1902 (Reissue 1995).

Under § 25-1902, an order is final for purposes of appeal if it affects a substantial right and (1) determines the action and...