A. Copeland Enterprises, Inc. v. Slidell Memorial Hosp.

• Decision Date: 30 June 1995
• Citation: 657 So.2d 1292
• Parties: 94-2011 La
• Court: Louisiana Supreme Court

Page 1292

657 So.2d 1292

94-2011 La. 6/30/95

A. COPELAND ENTERPRISES, INC., et al., v. SLIDELL MEMORIAL HOSPITAL, et al.

No. 94-C-2011.

Supreme Court of Louisiana.

June 30, 1995.

Charles T. Williams, Jr., Blue Williams, Metairie; John Elliott Baker, Metairie, for applicant.

Margaret Hamersly Kern, Jones, Fussell, Buras, Schoen, Kern & Crain, Covington; Robert Angelle, Metairie, for respondent.

[94-2011 La. 1] JOHNSON, Justice ^*.

We granted defendant's writ of certiorari to determine whether, under La.R.S. 40:1299.43(C) ¹ of the Louisiana Medical Malpractice Act, an employee's health care provider is entitled to reimbursement of future medical expenses through subrogation from the Louisiana Patient's Compensation Fund (PCF) where the employer, through its Health Care Administrators, paid the employee's medical expenses in the amount of $731,602.57 under the employer's health plan. The trial court found that the A. Copeland Enterprises, Inc. and its Employee Welfare Benefits Plan (collectively Copeland) obtained a right of subrogation in favor of Copeland from their employee insured, Donna Wallace, which allowed Copeland to assert the medical expenses claim of the deceased employee and her family. The court of appeal affirmed. It determined that subrogation results in no greater liability to the PCF than would have occurred had the patient asserted the claim herself. Therefore, according to the court of appeal, Copeland could be reimbursed directly from the PCF for medical expenses incurred on behalf of Mrs. Wallace. We disagree and for the reasons assigned, the judgment of the court of appeal is reversed.

[94-2011 La. 2] FACTS AND PROCEDURAL HISTORY

On July 12, 1988, Donna Wallace underwent a mastectomy at Slidell Memorial Hospital in Slidell, Louisiana. Immediately following the surgery, Mrs. Wallace awakened in the recovery room and complained of pain. Julie Joyce, the nurse anesthetist, injected Mrs. Wallace with a narcotic analgesic for her pain. Shortly thereafter, Mrs. Wallace lapsed into a coma where she remained until her death on August 22, 1990.

On February 16, 1989, Mrs. Wallace and her husband, individually and on behalf of their three minor children, filed a medical malpractice suit, naming Slidell Memorial Hospital, Dr. Luis Hernandez, the anesthesiologist, and Julie Joyce, the nurse anesthetist, among others, as defendants. Pursuant to La.R.S. 40:1299.47, ² the matter was submitted to a medical malpractice review panel. During the review panel proceedings, Copeland, Mrs. Wallace's employer, intervened seeking reimbursement of medical expenses paid on her behalf. Copeland, through its Health Care Administrators, Travelers Insurance Company and Provident Insurance Company, paid a total of $731,602.57 in medical expenses for Mrs. Wallace's alleged medical malpractice injuries under its employee benefit plan from July 12, 1988 until August 1990, the month of her death.

Sometime in August 1990, the Wallaces settled their medical malpractice claim against the named defendants and received payment from the PCF in the amount of $500,000.00, plus legal interest, along with other medical expenses incurred after the date of settlement. The receipt and release agreement specifically stated that the settlement "represents general damages only and does not include any amount as compensation for medical expenses incurred prior to the date of Judgment authorizing and approving this settlement." In addition, the receipt and release agreement [94-2011 La. 3] provided that PCF

will indemnify, protect and hold harmless Charles Wallace ... from all liability ..., from any and all claims ... which has been or may ever be asserted by A. Copeland Enterprises, Inc., ... concerning the terms and conditions of any ERISA plan and/or subrogation rights, or reimbursements, ... and all related issues raised thereby and/or by the "subrogation recovery agreement " dated July 19, 1988....

(emphasis in original).

The "subrogation recovery agreement" executed by Charles Wallace on behalf of his wife, Donna Wallace, on July 19, 1988, provided as follows:

SUBROGATION RECOVERY AGREEMENT

In order for our claims department to process any charges incurred in connection with your recent accident, we must have this statement signed by you, The Eligible Covered Employee.

This agreement will allow payment for benefits under the A. Copeland Entp., Inc. plan based on the understanding that any money collected from a Third Party for the same expenses will be returned to A. Copeland Enterprises, Inc.

AGREEMENT

If I, Donna G. Wallace recover money from a Third Party for negligently injuring me, I agree to reimburse A. Copeland Entp., Inc. any money it has paid for such injuries.

I also agree to supply any information or assistance asked by the claims department which it needs to enforce the Plan's recovery rights.

Copeland filed suit against Slidell Memorial Hospital and its insured, the Louisiana Hospital Association Trust Fund, Dr. Hernandez, Julie Joyce, C.R.N.A., and the PCF on April 9, 1991, seeking reimbursement of medical expenses paid under Copeland's employee benefit plan on behalf of Mrs. Wallace. The Louisiana Hospital Association Fund and Dr. Hernandez were later dismissed from this litigation. During the trial of this matter, the parties agreed to stipulate to the following pertinent uncontested facts:

1) the qualified health-care provider status of two defendants, Slidell Memorial Hospital and Julie Joyce;

2) the liability of Slidell Memorial Hospital and Julie Joyce;

3) the payment of Mrs. Wallace's medical expenses in the amount of $731,602.57 by Travelers Insurance Company and Provident Insurance Company from money funded by A. Copeland Enterprises, Inc.;

4) that coverage for medical expenses was provided to Mrs. [94-2011 La. 4] Wallace under the A. Copeland Enterprises Employee Benefit Plan;

5) that Mr. Wallace executed a subrogation agreement in favor of Copeland in regard to the medical payments; and

6) the authenticity of certain depositions and documents.

The parties submitted their legal arguments on briefs for the trial court's determination.

The sole issue before the lower courts was whether Copeland, as subrogee of Mrs. Wallace, was entitled to reimbursement of medical expenses directly from the PCF.

The trial court, relying on Lamark v. NME Hospitals, Inc., 522 So.2d 634 (La.App. 4 Cir.1988), ³ found that Copeland had been subrogated to assert its claim against the PCF for the stipulated medical expenses paid by Copeland on behalf of Donna Wallace. Accordingly, the trial court rendered judgment in favor of Copeland and against Slidell Memorial Hospital and Julie Joyce, C.R.N.A., as nominal defendants, and the PCF for $731,602.57, plus legal interest from August 22, 1990, as stipulated by the parties.

The court of appeal affirmed. 637 So.2d 1087 (La.App. 1st Cir.1994). It held that the Louisiana Medical Malpractice Act, La.R.S. 40:1299.43(C), which allows a patient who has settled a medical malpractice action to make a claim to the PCF for future medical care and related benefits, ⁴ would also permit recovery by the patient's self-insured employer as the patient's subrogee.

We granted the PCF's application for certiorari, 94-C-2011, 644 So.2d 661 (La.1994), to determine whether Copeland is entitled to reimbursement through subrogation directly from the Patient's Compensation Fund for medical expenses paid on behalf of the patient under its employee benefit plan.

[94-2011 La. 5] LAW AND DISCUSSION

I. LEGAL SUBROGATION

The PCF argues that the "subrogation recovery agreement" between Mrs. Wallace and Copeland does not allow Copeland to recover money directly from the PCF. Relying on Martin v. Louisiana Farm Bureau Casualty Insurance Company, 94-C-0069, 638 So.2d 1067 (La.1994), the PCF argues that legal subrogation, pursuant to La.C.C. art. 1829, does not occur in favor of a health insurer simply because the insurer has paid the medical expenses of an insured.

Subrogation is the substitution of one person to the rights of another. La.C.C. art. 1825. When subrogation results from a person's performance of the obligation of another, that obligation subsists in favor of the person who performed it, who may avail himself of the action and security of the original obligee against the obligor, but is extinguished for the original obligee. An original obligee who has been paid only in part may exercise his rights for the balance of the debt in preference to the new obligee. La.C.C. art. 1826.

In other words, subrogation is the legal fiction established by law whereby an obligation, extinguished with regard to the original creditor by payment which he has received from a third person, or from the original debtor but with funds that a third person has provided, is regarded as substituting in favor of this third person who in essence steps into the shoes of the original debtor and is entitled to assert, in the measure of what he has paid, the rights and actions of the former creditor. 4 C. Aubry & C. Rau, Droit Civil Francais § 321 (6th ed. Bartin) in A. Yiannopoulos, 1 Civil Law Translations 187 (1965). See also 2 M. Planiol, Civil Law Treatise pt. 1, nos. 474, 475 at 271 (11th ed. La.St.L.Inst. trans.1959); Comment, The Role of Subrogation by Operation of Law and Related Problems in the Insurance Field, 22 La.L.Rev. 225 (1961); Comment, Fundamental Principles and Effects of Subrogation in French and Louisiana Law, 25 Tul.L.Rev. 358 (1951). Subrogation thus gives an advantage to the third person by [94-2011 La. 6] assuring him of reimbursement in a way considerably more effective than the personal action that arises from just his act of performing. Litvinoff, The Law of Obligations 5, § 11.2 (1992); See 7 Planoil et Ripert, Traite pratique de droit civil francais 626 (2d ed. 1954).

Subrogation, as a manner of effecting a transfer of an obligation at the time a creditor received payment from a person...