Hays v. Mo. Highways & Transp. Comm'n

• Decision Date: 30 October 2001
• Docket Number: WD59456
• Parties: Gary L. Hays, Individually and as Next Friend for minor child, Nicholas L. Hays, and as Representative of a Class of Persons Similarly Situated, Appellant, v. Missouri Highways and Transportation Commission, Respondent. WD59456 Missouri Court of Appeals Western District
• Court: Missouri Court of Appeals

Gary L. Hays, Individually and as Next Friend for minor child, Nicholas L. Hays, and as Representative of a Class of Persons Similarly Situated, Appellant v Missouri Highways and Transportation Commission, Respondent

WD59456

Missouri Court of Appeals Western District

10/30/2001

Appeal From: Circuit Court of Cole County, Hon. Byron L. Kinder

Counsel for Appellant: John Beger

Counsel for Respondent: Melinda Grace-Beasley

Opinion Summary:

Hays appeals the court's judgment in favor of Missouri Highways and Transportation Commission (MHTC), which found that insurance benefits under the MHTC group health plan were properly denied to Hays' son based upon Hays' refusal to sign a reimbursement agreement required by MHTC. Hays' son had been injured as the result of an automobile collision due to the alleged negligence of a third party.

Hays argues on appeal that the trial court erred, as the reimbursement agreement is void as an attempted partial assignment of a personal injury claim. MHTC contends that the reimbursement conveyed only a lien interest in favor of the group health plan in any proceeds Hays might obtain from the third-party tortfeasor, and was not an attempted partial assignment of the personal injury claim.

Division holds: 1) The plain language of the reimbursement agreement does not operate to grant a lien in favor of MHTC or the group health plan. Instead, it explicitly provides for an assignment of the proceeds of any claim against a third party tortfeasor.

2) As a partial assignment, the reimbursement agreement is void under ??? and its progeny.

3) MHTC is not entitled to a common law exception to the prohibition of such assignments derived from English Common Law, which permitted certain assignments of certain causes of action to the soverign.

Smith, P.J., and Howard, J., concur.

Ronald R. Holliger, Judge

Appellant Gary Hays (Hays) appeals the trial court's judgment in favor of respondent Missouri Highways & Transportation Commission (MHTC). The trial court granted judgment in favor of MHTC, finding that it properly withheld insurance benefits under a group medical and life insurance plan due to Hays' refusal to execute a reimbursement agreement. Because we hold that the reimbursement agreement is void under public policy grounds, we reverse the judgment of the trial court.

Hays and his son were insured under a group medical and life insurance plan (the Plan) provided by MHTC. Hays' son was seriously injured in an automobile collision in February 1998, incurring approximately $28,000 in medical expenses. Those expenses were subsequently submitted to the Plan's third-party administrator, Westport Benefits, LLC, for payment. In May 1998, Westport Benefits sent Hays a letter indicating that before processing of the claim could continue, it was necessary for Hays to execute a document entitled "Agreement for Reimbursement, Assignment and Lien" (hereinafter "Reimbursement Agreement"). Hays, through counsel, refused to execute the Reimbursement Agreement, believing it to be an improper partial assignment of Hays' (and his son's) personal injury action against the third party tortfeasor. As a result of Hays' refusal, Westport Benefits declined to complete processing of Hays' claim for benefits.

Hays subsequently brought a declaratory judgment action against MHTC, seeking to enforce his rights to benefits under the Plan, contending that those benefits were improperly denied upon his refusal to execute the Agreement. MHTC argued that requiring execution of the Reimbursement Agreement was authorized under the provisions of the Plan, and that Hays' refusal to execute the Reimbursement Agreement constituted a breach of contract relieving MHTC of providing benefits under the Plan.

Hayes argued that the language of the Plan and Reimbursement Agreement violated public policy which prohibits assignment of a personal injury claim. MHTC contended that the language of the Reimbursement Agreement and the Plan did not constitute a partial assignment of Hays' personal injury action, which would be void under Missouri public policy. Instead, it argued that those documents merely provided MHTC with a lien against any potential recovery Hays might realize from a personal injury action against the third party tortfeasor.

The case was submitted to the trial court upon stipulated facts. After review of those facts, the trial court found in favor of MHTC on the basis that the Plan and Reimbursement Agreement granted MHTC a lien on proceeds of any possible judgment or settlement involving the third party tortfeasor and that such a lien was not violative of public policy. Hays now appeals the trial court's judgment in favor of MHTC.

Hays challenges the trial court's judgment that the sole effect of the Plan and the Agreement was to grant MHTC a lien on the proceeds of a potential settlement or judgment. That challenge is premised upon three interrelated arguments. First, Hays contends that a lien is a charge on property for the purposes of securing payment of a debt, and Hays was not indebted to MHTC. Second, Hays argues that the plain language of the Plan attempts to grant an impermissible subrogation interest in a plan participant's personal injury claim against a third party tortfeasor. Third, Hays argues that the Agreement he refused to execute attempts a similar grant of a subrogation interest.

It is well settled that in Missouri, a claim for personal injury cannot be assigned, in whole or in part. Freeman v. Berberich, 60 S.W.2d 393, 401 (Mo. 1933) (citing Remmers v. Remmers, 217 Mo. 541, 117 S. W. 1117 (1909); Beechwood v. Railroad, 173 Mo. App. 371, 158 S. W. 868 (1913); Smith v. Kennett, 18 Mo. 154, 155-56 (1853)). This prohibition was adopted by the courts of this state to prevent the "trafficking of lawsuits for pain and suffering." Ford Motor Credit Co. v. Allstate Ins. Co., 2 S.W.3d 810, 813 (Mo. App. 1999) (citing Marshall v. N. Assurance Co. of Am., 854 S.W.2d 608, 610 (Mo. App. 1993)). Insurers paying benefits to insureds as a result of injuries caused by third persons claim an interest in recovering those costs if the insured obtains a settlement or collects upon a judgment against the third party. To that end, insurers have repeatedly attempted to draft policy provisions or establish other requirements for the purposes of seeking reimbursement from the insured in such situations.

Such provisions or other requirements have been regularly invalidated by the appellate courts. For example, an attempt by an insurer providing medical pay coverage in an automobile insurance policy to obtain a subrogation interest in the insured's personal injury claim against a third party tortfeasor was held void as against public policy. Travelers Indem. Co. v. Chumbley, 394 S.W.2d 418, 424 (Mo. App. 1965). An insurer providing health and medical insurance could not require the insured to grant the insurer an equitable interest in the insured's personal injury claim. Jones v. Aetna Cas. & Sur. Co., 497 S.W.2d 809, 813 (Mo. App. 1973). An assignment of the potential proceeds of a personal injury claim has likewise been held invalid. Schweiss v. Sisters of Mercy, St. Louis, Inc., 950 S.W.2d 537, 538 (Mo. App. 1997). Further, this court has held that an insurer cannot require an insured to sign an agreement under which the insured agrees to reimburse the insurer if the insured obtains a settlement or judgment against a third party tortfeasor. See Waye v. Bankers Multiple Line Ins. Co., 796 S.W.2d 660, 661 (Mo. App. 1990). Each of these holdings was premised upon the longstanding policy prohibiting the assignment, forced or otherwise, of a personal injury claim whether denominated an assignment, subrogation interest, or agreement to reimburse.

Several exceptions exist to this general rule. First, the Uninsured Motorist statutes contain a provision authorizing the assignment to the insurer of an insured's personal injury claim against an uninsured motorist. See section 379.203, RSMo (2000). MHTC does not contend that this first exception applies to the case at bar. It has also been held that the Employees Retirement Security Act of 1974 (ERISA), 29 U.S.C. section 1001, et seq., permits employers with self-insurance plans that fall within the Act to obtain subrogation rights in a personal injury claim by an insured against a third party, provided the plan documents explicitly grant such a right. See McIntosh v. Pac. Holding Co., 992 F.2d 882, 883 (8th Cir. 1993); Baxter ex rel. Baxter v. Lyons, 886 F.2d 182, 186 (8th Cir. 1989). This exception is based upon specific language within the ERISA code that expressly preempts state law in this area. See FMC Corp. v. Holliday, 498 U.S. 52, 56-58 (1990). MHTC does not claim that the group plan in the case at bar is a plan governed by ERISA that would qualify for this latter exception.

Instead, MHTC looks to an exception announced relatively recently to support its claim that the Reimbursement Agreement does not violate public policy. MHTC relies upon this court's holding in Ford Motor Credit Co. v. Allstate Insurance Co., 2 S.W.3d 810 (Mo. App. 1999), that a consensual lien by a creditor on the proceeds of the debtor's anticipated settlement of a personal injury action did not violate public policy. MHTC places great reliance upon this holding, arguing that the Group Health Plan and the Reimbursement Agreement it demanded Hays execute granted MHTC only a lien on the proceeds of any settlement or judgment Hays might obtain against the third party tortfeasor that caused his son's injuries.

To decide the ultimate question of whether the Group Health Plan or the Agreement are void on public policy grounds, we look to the documents themselves. In that process, the general rules of construction apply. We look first to the plain language of those documents. See Parker v. Pulitzer Publ'g. Co., 882 S.W.2d 245, 249 (Mo. App. 1994). If we find that a provision in those...