Cagle v. Bruner

• Citation: 112 F.3d 1510
• Decision Date: 22 May 1997
• Docket Number: No. 95-3659,95-3659
• Parties: 21 Employee Benefits Cas. 1113, 10 Fla. L. Weekly Fed. C 948 Doug CAGLE, Adrian A. DeVogel, Guy Dickenson, Don Hopkins, Henry Jenkins, Lenore Miller, as Trustees and Fiduciaries of the Retail, Wholesale and Department Store International Union and Industry Health and Benefit Fund, Plaintiffs-Counter-Defendants-Appellants, v. Nancy M. BRUNER, Defendant-Counter-Claimant-Cross-Defendant-Appellee, Memorial Hospital Jacksonville, Inc., Defendant-Counter-Claimant-Cross Claimant-Third Party Plaintiff-Appellee, University Medical Center, Inc., Movant-Appellee, Cobbie L. Bruner, Sr., Third Party Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1510

112 F.3d 1510

21 Employee Benefits Cas. 1113, 10 Fla. L.

Weekly Fed. C 948

Doug CAGLE, Adrian A. DeVogel, Guy Dickenson, Don Hopkins Henry Jenkins, Lenore Miller, as Trustees and Fiduciaries of the Retail, Wholesale and Department Store International Union and Industry Health and Benefit Fund Plaintiffs-Counter-Defendants-Appellants, v. Nancy M. BRUNER, Defendant-Counter-Claimant-Cross-Defendant-Appellee Memorial Hospital Jacksonville, Inc. Defendant-Counter-Claimant-Cross Claimant-Third Party Plaintiff-Appellee, University Medical Center, Inc., Movant-Appellee, Cobbie L. Bruner, Sr., Third Party Defendant.

No. 95-3659.

United States Court of Appeals, Eleventh Circuit.

May 22, 1997.

Cindy A. Laquidara, Kenneth B. Jacobs, Jacksonville, FL, Eugene S. Friedman, Bruce S. Levine, Friedman & Levine, New York City, for Plaintiffs-Counter-Defendants-Appellants.

John F. Fannin, Fannin Tyler & Hamilton, P.A., Jacksonville, FL, for Bruner.

Alan M. Fisher, Wendy Ennis-Volcy, Jay M. Levy, Miami, FL, for Memorial Hospital Jacksonville, Inc. et al.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT, DUBINA and CARNES, Circuit Judges.

PER CURIAM:

In this appeal, we decide three issues relating to the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461 ("ERISA"). First, we consider whether a plan beneficiary's assignment of the right to payment of ERISA benefits to a health care provider gives the health care provider standing to sue the plan. We hold that it does, at least where the plan does not forbid such an assignment.

Second, we consider whether an ERISA plan may require a plan participant to sign a subrogation agreement before paying claims submitted by that participant on behalf of a plan beneficiary. We hold that the plan may do so, where the required subrogation agreement does not contain an arbitrary and capricious interpretation of the plan's subrogation rights.

Finally, we consider an issue relating to the "make whole" doctrine of insurance law. Under the "make whole" doctrine, an insurer who pays less than an insured's total loss may not exercise a right of subrogation until the insured is "made whole" for his total loss. We address whether the "make whole" doctrine applies where an ERISA plan neither explicitly adopts nor disavows the doctrine. We conclude that the doctrine applies where the plan does not explicitly disavow it.

I. BACKGROUND

A. FACTS

This action was brought by the trustees of the Retail, Wholesale and Department Store International Union and Industry Health and Benefit Fund. (We will refer to both the trustees and the fund as "the Fund.") The Fund was established pursuant to various collective bargaining agreements between employers and local unions affiliated with the Retail, Wholesale and Department Store International Union to provide benefits for plan participants and beneficiaries. The Fund provides an "employee benefit plan" governed by ERISA.

Nancy Bruner, a defendant in this action, is a plan participant by virtue of her employment with Swisher & Sons, a contributor to the Fund. ¹ Bruner's son, Cobbie Bruner, Jr., is Bruner's dependent and a beneficiary of the Fund. ²

On September 19, 1993, Cobbie Bruner, Jr. was involved in a car accident caused by a third party. Immediately after the accident, Cobbie Jr. received emergency treatment from University Medical Center. On October 18, 1993, Cobbie Jr. was transferred to Genesis Rehabilitation Hospital ("Genesis"), formerly Memorial Hospital of Jacksonville. Cobbie Jr. remained at Genesis for four months, and received outpatient treatment there for an additional four months. When Cobbie Jr. was admitted to Genesis, his father, Cobbie Bruner, Sr., signed a form assigning to Genesis his son's right to payment of medical benefits. Soon after Cobbie Jr.'s accident, the Fund paid an initial claim of $296.00 to Nancy Bruner for Cobbie Jr.'s medical treatment. Yet, approximately one month after Cobbie Jr. had been admitted to Genesis, the Fund refused to pay or process any additional claims for him until Nancy Bruner signed a standard subrogation form provided by the Fund. That agreement provides:

I (we) understand that if payments are made under the Plan for any treatment or services because of injury to, or sickness of, an eligible individual who has a lawful claim, demand or right against a third party or parties (including an insurance carrier) for indemnification, damages or other payment with respect to such injury or sickness, I (we) am (are) required to subrogate to the RWDSU Health and Welfare Fund, the Plan, to the extent of payments made under said plan, my (our) rights to receive or claim such indemnification, damages or other payment.

In consideration thereof, if payments are made under said plan for treatment or service on account of the same injury or sickness and to the extent of such payments made (but not in excess of the proceeds of any recovery),

(a) I (we) agree to reimburse the Plan in full from the proceeds of any recovery received by me (us) because of such injury or sickness, and

(b) The Plan shall be subrogated in full to my (our) rights to such recovery and my (our) interest in the proceeds of such recovery;

if such recovery is based upon the eligible individual's lawful claim, demand or right against a third party or parties (including an insurance carrier).

Nancy Bruner signed the agreement sent by the Fund, but attached an addendum stating that the subrogation agreement does not "in any way expand the subrogation rights" of the Fund. The Fund rejected the amended agreement and sent Bruner an unmodified subrogation agreement to sign, promising to pay benefits if a signed unmodified version was returned. Bruner again returned the agreement with an addendum, stating that the subrogation agreement "does not, in any way, expand the subrogation rights of [the Fund] beyond the rights as provided in the [summary plan description]." That agreement was also rejected by the Fund. Bruner and Genesis threatened to sue the Fund for nonpayment.

B. PROCEDURAL HISTORY

The Fund filed this lawsuit in the Middle District of Florida pursuant to ERISA, 29 U.S.C. § 1132(a)(3) and 28 U.S.C. § 2201, seeking declaratory and injunctive relief. Naming both Nancy Bruner and Genesis as defendants, the Fund asked the district court to declare that Bruner was required to execute the plan's standard subrogation agreement without modification as a condition precedent to the payment of Bruner's claims to Genesis. The Fund also requested that the district court issue an injunction ordering Bruner to execute the subrogation agreement.

Bruner counterclaimed against the Fund for: (1) a declaration that Cobbie Bruner, Jr., is entitled under the plan to be made whole before the Fund may participate in any recovery from an at-fault party; (2) a judgment awarding Bruner an amount equal to the medical expenses covered by the Fund; and (3) attorney's fees and costs.

Genesis cross-claimed against Nancy Bruner for the amount of Cobbie Jr.'s medical bills and asserted four counterclaims against the Fund. Genesis claimed that the Fund had breached a contract with Genesis by denying payment to Genesis after the plan's precertification agent approved Cobbie Jr.'s stay. Second, Genesis claimed that the Fund had breached a contract with Genesis by refusing to pay benefits to which Genesis was entitled as an assignee. Third, Genesis claimed that the Fund had breached its fiduciary duty to Cobbie Jr. by refusing to accept Nancy Bruner's modified subrogation agreement and by refusing to pay Cobbie Jr.'s benefits. Finally, Genesis claimed entitlement to a declaration of its right to be paid by the Fund. The Fund answered Genesis' counterclaims with two affirmative defenses: (1) that Genesis lacks standing to sue the Fund under 29 U.S.C. § 1132(a); and (2) that Genesis' state law claims are preempted by ERISA.

All of the parties moved for summary judgment on the issue of whether the Fund could require Nancy Bruner to execute its standard subrogation agreement before processing her claims. In its motion for summary judgment, the Fund also argued that Genesis did not have standing under ERISA, and that Genesis' state law claims were preempted by ERISA. The district court held that Genesis has standing to sue the Fund under 29 U.S.C. § 1132(a) as an assignee of Cobbie Jr.'s right to medical benefits. The district court also held that Genesis' state law claims are preempted by ERISA. On the requests for declaratory relief, the district court held that the Fund acted arbitrarily and capriciously in requiring Bruner to execute the subrogation agreement prior to processing her claims.

The district court granted Bruner's motion for summary judgment, including her request for declaratory relief. The court denied the Fund's motion for summary judgment and granted summary judgment to Genesis on its claim for declaratory relief, but not on its damages claim. After a trial on damages, the court entered a judgment requiring the Fund to pay Genesis $56,744.57.

II. DISCUSSION

Summary judgment may be granted only when there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. This Court reviews de novo a district court's decision to grant or deny summary judgment. E.g., United States v. Route 2, Box 472, 136 Acres More or Less, 60 F.3d 1523, 1526 (11th Cir.1995).

A. GENESIS' STANDING TO SUE THE PLAN

Before addressing the district court's grant of summary judgment, we must consider the Fund's argument that Genesis lacks standing to counterclaim against the Fund. According to the Fund, the only parties that have standing to sue an ERISA plan, and thus to file counterclaims against it, are those listed in 29 U.S.C. § 1132(a): a "participant," "beneficiary," "fiduciary," or the Secretary of Labor. See id. Because Genesis...