Cramer v. John Alden Life Ins. Co.

• Decision Date: 04 February 2011
• Docket Number: No. CV 10–77–M–DWM–JCL.,CV 10–77–M–DWM–JCL.
• Citation: 763 F.Supp.2d 1196
• Parties: Stefanie CRAMER, Plaintiff,v.JOHN ALDEN LIFE INSURANCE COMPANY, d/b/a Assurant Health, and Ingenix, Inc., Defendants.
• Court: U.S. District Court — District of Montana

763 F.Supp.2d 1196

Stefanie CRAMER, Plaintiff,

v.JOHN ALDEN LIFE INSURANCE COMPANY, d/b/a Assurant Health, and Ingenix, Inc., Defendants.

No. CV 10–77–M–DWM–JCL.

United States District Court, D. Montana,Missoula Division.

Feb. 4, 2011.

Amy Eddy, Joe R. Bottomly, Bottomly Law Offices, Kalispell, MT, John M. Morrison Morrison Motl and Sherwood Helena, MT, Lawrence A. Anderson, Anderson Law Office, Great Falls, MT, for Plaintiff.Noah G. Lipschultz, Littler Mendelson, Minneapolis, MN, Perry J. Schneider, Milodragovich Dale Steinbrenner & Nygren, Missoula, MT, Brian P. Perryman, Frank G. Burt, Jorden Burt, Washington, DC, Mark D. Parker, Parker Law Firm, Billings, MT, for Defendants.

ORDER

DONALD W. MOLLOY, District Judge.

Plaintiff Stefanie Cramer (“Cramer”) brings this putative class action under the Employee Retirement Income Security Act, seeking damages for wrongful denial of benefits, breach of fiduciary duty, and declaratory relief. Defendants moved to dismiss arguing, among other things, that Cramer failed to state a claim upon which relief can be granted. Defendants' argument is straightforward: Cramer's complaint alleges Defendants violated the Plan by “asserting” a subrogation claim, but the Plan's subrogation provision prohibits enforcement, not assertion of such a right, prior to her being made whole.

On December 3, 2010, United States Magistrate Judge Jeremiah Lynch entered Findings and Recommendation on Defendants' motions. Judge Lynch found that an assertion of an equitable subrogation lien is distinct from the enforcement of such a lien, and Defendants' alleged actions did not amount to enforcement. Accordingly, he recommended granting the motions to dismiss. Cramer timely objected and is therefore entitled to de novo review of those portions of the Findings and Recommendation to which she objected. 28 U.S.C. § 636(b)(1). The portions of the Findings and Recommendation not specifically objected to will be reviewed for clear error. McDonnell Douglas Corp. v. Commodore Bus. Mach., Inc., 656 F.2d 1309, 1313 (9th Cir.1981). Because I agree with Judge Lynch's analysis and conclusions, I adopt his Findings and Recommendation in full. The parties are familiar with the factual background of this case, so it will not be restated here.

Cramer brings two objections. First, she insists Judge Lynch incorrectly determined that Defendants' actions did not constitute enforcement of the subrogation claim. Relying on a dictionary definition, she notes “enforce” means “to compel observance of or obedience.” Pl.'s Objections (dkt. # 53 at 3). She contends Defendants' sending a “notice of subrogation claim” to the auto insurer and letters to her counsel amounts to enforcement. The objection comes up short. As Judge Lynch explained, Defendants' letters to counsel “reflect an ongoing discussion as to whether Cramer had been made whole, and whether the Defendants would have the right to subrogate against Cramer's recovery from [the auto insurer].” Findings and Recommendation at 32 (dkt. # 52). As for the letter to the auto insurer, it only provided “notice” of subrogation and included no lien. Cramer persists, and argues that providing such notice achieves the same result as enforcing it: the proceeds are not distributed until the claim has been satisfied. Prudent action, however, is not the same thing as “compelled ... obedience.” I agree with Judge Lynch that Cramer's expansive reading of the word “enforced” is unreasonable.

Second, Cramer objects that the natural extension of Judge Lynch's findings is “plaintiff's counsel can now ignore the routine notice of subrogation sent in cases like this, safe in their knowledge that these notices have no legal effect.” Pl.'s Objections at 6. This collateral objection misses its mark. Even though a notice of subrogation is not an enforcement of a subrogation claim, prudent counsel will still consider what could happen in a future enforcement action.

I find no clear error in Judge Lynch's remaining findings and recommendations.

Accordingly, IT IS HEREBY ORDERED that Judge Lynch's Findings and Recommendation (dkt. # 56) is adopted in full.

IT IS FURTHER ORDERED that Defendants' motions to dismiss (dkt. # 31, 33) are GRANTED, and Defendants' motion to deny class certification (dkt. # 38) is DENIED as moot.

FINDINGS & RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

JEREMIAH C. LYNCH, United States Magistrate Judge.

Plaintiff Stefanie Cramer (“Cramer”) brings this putative class action under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. (“ERISA”), alleging claims for wrongful denial of benefits, breach of fiduciary duty, and declaratory relief. Defendant John Alden Life Insurance Company d/b/a Assurant Health (“Assurant”) and its subrogation administrator, Ingenix, Inc. (“Ingenix”) have moved to dismiss under Federal Rule of Civil Procedure 12(b) for lack of subject matter jurisdiction and failure to state a claim upon which relief may be granted.

For the reasons stated below, Cramer fails to state a claim for relief under ERISA and the Defendants' motions to dismiss should be granted.

I. Background

On December 4, 2009, Cramer was injured in a car accident when an oncoming driver crossed the centerline and collided with the vehicle in which she was a passenger. Cramer subsequently settled with the tortfeasor's liability insurance carrier for the $100,000 policy limits. Cramer also recovered $100,000 in underinsured motorist (“UIM”) benefits and $5,000 in medical pay coverage from her own insurance carrier, Farmers Insurance Exchange (“Farmers”).

At the time of the accident and for a few weeks thereafter, Cramer had health insurance coverage with Blue Cross Blue Shield of Michigan as a dependent under her parents' policy. From January 1, 2010 to the present, however, Cramer has had health insurance coverage through an ERISA-governed health insurance plan (“Plan”) sponsored by her employer, Dental Distinctions, PC. Assurant is the Plan's insurer, and has paid accident-related medical expenses on Cramer's behalf.

The Plan provides for the following right of subrogation with respect to benefits paid to or on behalf of “Covered Persons”:

To the extent necessary for reimbursement of benefits paid to or on behalf of the Covered Person, We are entitled to subrogation against a judgment or recovery received by the Covered Person from a third party found liable for a wrongful act or omission that caused the injury necessitating benefit payments. Our right of subrogation may not be enforced until You have been fully compensated for Your injuries.

Dkt. 1–4, at 22.

Ingenix administers the subrogation and recovery rights under the Plan. Dkt. 34–1. On March 23, 2010, Ingenix Subrogation Analyst Peggy Roff sent Farmers a “Notice of Subrogation by the Plan” and asked Farmers to “please consult with [Ingenix] prior to settlement to verify the final lien amount.” Dkt. 48–2. Approximately two weeks later, Ingenix advised Cramer's counsel that Assurant had paid $1,900.92 in medical benefits, requested “a status update on this loss,” and similarly asked counsel to contact Ingenix “prior to settlement to confirm our final lien amount.” Dkt. 9–2, at 6. In response, Cramer's counsel wrote a letter asking for copies of the relevant plan documents and advising Ingenix that under Montana law an insurer is not entitled to subrogation or reimbursement until the insured has been made whole. Dkt. 9–2, at 8. In late April 2010, Ingenix provided Cramer's counsel with a copy of the Plan's subrogation provision, and reiterated its request that she “contact us prior to settlement to confirm our final lien amount.” Dkt. 9–2, at 9.

On May 11, 2010, Farmers advised Cramer's counsel that it had agreed to pay the $100,000 policy limits, but indicated “there [was] a medical lien from Ingenix that [would] need to be resolved prior to payment.” Dkt. 9–2, at 12. Farmers asked how the lien would be resolved, and how counsel “would like the check(s) made payable.” Dkt. 9–2, at 12. Cramer's counsel responded later that day, advising Farmers that although they did not have a lien from Ingenix, they did have “a notice of subrogation claim” and asked that the check be made out to the firm's trust account. Dkt. 9–2, at 13. Counsel stated that it was the firm's practice to “withhold the total amount of medical expenses incurred until the subrogation claim [was] resolved,” and indicated it was their intent to do the same “in this case.” Dkt. 9–2, at 13.

On May 12, 2010, Cramer's counsel advised Ingenix of her opinion that Cramer had not yet been made whole and requested “written confirmation that Assurant Health is not seeking subrogation in this case, and is withdrawing the $1,900.92 ‘lien’ it asserted on April 8, 2010.” Dkt. 9–2, at 14. Alternatively, counsel asked Ingenix to authorize Farmers to release the full amount of the policy limits and stated that she would withhold the alleged subrogation amount in trust pending a declaratory action. Dkt. 9–2, at 14. Cramer's counsel followed up with another letter on May 13, 2010, detailing the basis of her opinion that Cramer had not been made whole and requesting written confirmation that Assurant was not seeking subrogation and was “withdrawing the $1,900.92 ‘lien’.” Dkt. 9–2, at 15–16.

On May 14, 2010, Farmers sent Cramer's counsel the $100,000 in policy limits in exchange for her assurance that they not distribute $1,900.92 out of the proceeds until Assurant's subrogation claim was resolved. Dkt. 48–1, ¶ 6. On May 24, 2010, Cramer's counsel advised Ingenix that she was in receipt of the settlement proceeds and stated that if she did not hear back from Ingenix by May 28, 2010, she would go ahead and file a declaratory judgment action against Assurant. Dkt. 9–2, at 17. On May 25, 2010, Cramer's counsel gave Cramer all of the policy proceeds except for the $1,900.92. Dkt. 48–1, ¶ 7.

Ingenix responded in writing on June 1, 2010, stating that...