Denekas v. Shalala, Civil No. 4-95-CV-30017.
| Decision Date | 10 October 1996 |
| Docket Number | Civil No. 4-95-CV-30017. |
| Citation | 943 F.Supp. 1073 |
| Parties | James M. DENEKAS and Carol R.D. De Jong, Individually and as Co-Executors of the Estate of Raymond D. Denekas, Plaintiffs, v. Donna E. SHALALA, Secretary of the Department of Health and Human Services, and Blue Cross Blue Shield of Iowa, Defendants. |
| Court | U.S. District Court — Southern District of Iowa |
Michael J. Galligan, Galligan Law Firm PC, Des Moines, IA, for James M. Denekas, Carol R.D. De Jong.
John E. Beamer, United States Attorney, Des Moines, IA, for Department of Health and Human Services.
Michael J. Eason, Ahlers Cooney Dorweiler Haynie Smith & Allbee, Des Moines, IA, for Blue Cross Blue Shield of Iowa.
RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT AND ORDER FOR JUDGMENT
This matter is before the Court on cross-motions for summary judgment. On January 11, 1995, plaintiffs filed this action for declaratory relief seeking a determination of the parties' relative rights and interests to funds received under a settlement agreement between plaintiffs and two insurance carriers in connection with a wrongful death action arising out of an automobile accident on August 24, 1990. In that accident another car struck the Denekas automobile head on killing Edith Denekas and seriously injuring her husband, Raymond Denekas. Mr. Denekas was hospitalized for 266 days before dying on May 17, 1991. This case involves only the claims resulting from the death of Mr. Denekas. The principal issue is the extent to which the defendant Secretary may recover Medicare conditional payments from the settlement fund. For ease of reference, the government defendant will be referred to herein as "Medicare." Plaintiffs James Denekas and Carol De Jong are the surviving children of Mr. and Mrs. Denekas and executors of Mr. Denekas' estate.
Medicare and defendant Blue Cross and Blue Shield of Iowa ("BCBS") made substantial payments toward Mr. Denekas' extensive medical expenses. The parties stipulate Medicare made payments for medical expenses in the amount of $106,325.70, and BCBS made payments in the amount of $170,111.55. The Iowa probate court approved a settlement of the wrongful death claim against the other driver for the driver's liability policy limits of $100,000.00, and an underinsurance claim under Mr. Denekas' automobile policy in the additional amount of $25,000.00. There is, therefore, a settlement fund from insurance proceeds in the total amount of $125,000.00 to pay claims arising out of the death of Mr. Denekas.1
Jurisdiction is predicated on 28 U.S.C. § 1331. On July 31, 1995 the parties consented to proceed before a United States Magistrate Judge and the case was referred to the undersigned. See 28 U.S.C. § 636(c). On October 30, 1995, plaintiffs filed a motion for summary judgment. They seek a declaration that the settlement proceeds should be apportioned pro rata with a share distributed to the surviving children of Mr. Denekas for their parental consortium claims free of the reimbursement/subrogation claims of Medicare and BCBS. They propose two alternatives. The first, which plaintiffs prefer, would also apportion a share of the settlement proceeds to the estate for its nonmedical claims free of the Medicare and BCBS claims. The second makes no apportionment for the estate's nonmedical claims. See Plaintiffs' Brief, at 3-4.
On November 30, 1995, defendant BCBS filed a combined resistance to plaintiffs' motion and a cross-motion for summary judgment. BCBS recognizes that as between them, Medicare's claim is primary. As a practical matter, BCBS will realize nothing on its subrogation claim unless Medicare's recovery comes "off the top" of the settlement fund before any apportionment to the consortium claims. If, instead, the children's consortium claims are apportioned free of Medicare's right of reimbursement, Medicare will receive all of the remaining money in the fund. Thus, BCBS joins Medicare in arguing Medicare has a statutory right of reimbursement from funds recovered by the estate, including for loss of parental consortium and nonmedical damages.
Defendant Medicare filed a combined resistance to plaintiffs' motion and a cross-motion for summary judgment on December 1, 1995. Medicare argues its conditional payments for medical expenses may not be reduced by apportionment among competing claims to the estate's recovery and to the extent Iowa law requires apportionment of the parental consortium claims of the surviving children, it is preempted by federal law. Plaintiffs respond that reimbursement of Medicare's medical payments from the children's loss of consortium recovery would amount to an unconstitutional taking of the children's property in violation of the Fifth Amendment to the U.S. Constitution.
Hearing on the motions was held on April 29, 1996. Plaintiffs were represented by Des Moines attorney Richard Doyle. Defendant Medicare was represented by Assistant United States Attorney Gary Hayward and BCBS by Des Moines attorney Michael Eason. The motions are fully submitted.
The standards governing the Court's review of a motion for summary judgment are well-established. A party is entitled to summary judgment only when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Wabun-Inini v. Sessions, 900 F.2d 1234, 1238 (8th Cir.1990) (citing Fed.R.Civ.P. 56(c)); accord Munz v. Michael, 28 F.3d 795, 798 (8th Cir.1994); Woodsmith Publishing Co. v. Meredith Corp., 904 F.2d 1244, 1247 (8th Cir.1990). Here the parties agree that there are no disputed issues of material fact and that the case may be decided on the cross-motions for summary judgment. They also agree a declaratory judgment determining the rights of the parties to the insurance proceeds is appropriate. 28 U.S.C. § 2201(a). Indeed they each ask the Court to determine their rights in the matter.
There is also no dispute about the amount of the claims made by the parties, or the reasonableness of the parental consortium claims. James Denekas and Carol De Jong each claim $37,500.00 for loss of parental consortium. The consortium figures are derived from an arbitrator's finding that the spousal and parental consortium claims in connection with the estate of Edith Denekas totaled $75,000.00. Exhibit I to Plaintiffs' Statement of Facts. In addition to the consortium claims, in the first of plaintiffs' two alternative proposals $125,000.00 is included in the total claims for the estate's nonmedical damages (pre-death physical and mental pain and suffering, loss of accumulation to the estate, and interest on premature funeral and burial expense). There is also no dispute about the reasonableness of this figure, though Medicare and BCBS maintain the estate's nonmedical damages are subject to their claims.2
In plaintiffs' first proposed apportionment, the total claims are:
Medicare $106,325.70
BCBS $170,111.55
Estate's nonmedical claims $125,000.00
James Denekas $ 37,500.00
Carol De Jong $ 37,500.00
TOTAL CLAIMS $476,437.25
The settlement fund is $125,000.00, or about 26.24% of the total claims. If each claim is reduced to 26.24%, the following approximate allocation results (before deduction for attorney fees and costs):3
Medicare ) medical $ 27,896.00
BCBS ) claims $ 44,631.00
Estate's nonmedical claims $ 32,795.00
James Denekas $ 9,839.00
Carol De Jong $ 9,839.00
TOTAL DISTRIBUTION $125,000.00
Because Medicare's claim is primary to BCBS, Medicare would receive the entire total $72,520.00 amount allocated to medical expense claims.
In the second alternative proposed by plaintiffs, the estate's line for nonmedical claims of $125,000.00 is eliminated from the total claims, thus increasing to about 35.57% the amount apportioned to each of the remaining claims as follows:
Medicare ) medical $ 37,818.00
BCBS ) claims $ 60,506.00
James Denekas $ 13,338.00
Carol De Jong $ 13,338.00
TOTAL DISTRIBUTION $125,000.00
Again, Medicare would have priority with respect to the amount allocated to medical expense claims.
BCBS proposes an allocation in which Medicare's $106,325.70 reimbursement claim is taken out and given to Medicare. The remaining $18,674.30 would then be divided proportionately between the parental consortium claims and the BCBS claim. BCBS would include an apportionment to both the estate's nonmedical claims and medical claims and exercise its subrogation rights against both. It maintains the estate's nonmedical claims are subject to its subrogation rights under BCBS coverage provisions. The result weights distribution of the remaining proceeds heavily in BCBS' favor. It would receive $14,939.44 and $3,734.86 would be divided between the two consortium claims. BCBS recognizes it does not have a right to recover its payments out of any amount allocated to the children's loss of consortium.
As noted, BCBS' proposed allocation is based in part on its assertion it has a contractual subrogation right against the estate's recovery for nonmedical items. It relies on paragraph one of the "our right to recover payments" section of the "general provisions" set forth in the benefits certificate for Mr. Denekas' BCBS coverage. That paragraph states:
1. If We pay or can reasonably expect to pay for services provided to You under this Contract, and You have a claim against or a right to recover damages from another person or organization (except insurers on policies in Your name), We expect You to transfer Your rights to Blue Cross and Blue Shield of Iowa so...
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