Horrell v. CEC Entm't, Inc.

• Decision Date: 18 October 2011
• Docket Number: Case No. 1:09-cv-951
• Parties: JOHN HORRELL, et al., Plaintiffs, and PRIORITY HEALTH, Intervening Plaintiff, v. CEC ENTERTAINMENT, INC., d/b/a CHUCK E. CHEESE, Defendant.
• Court: U.S. District Court — Western District of Michigan

JOHN HORRELL, et al., Plaintiffs,

and PRIORITY HEALTH, Intervening Plaintiff,

v.CEC ENTERTAINMENT, INC., d/b/a CHUCK E. CHEESE, Defendant.

Case No. 1:09-cv-951

UNITED STATES OF AMERICA UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

Date: October 18, 2011

Honorable Paul L. Maloney

OPINION

This is a diversity action seeking to recover for serious personal injuries suffered by Olivia Horrell, a minor, on December 31, 2006. The defendant is CEC Entertainment, Inc., which owns and operates restaurants under the trade name Chuck E. Cheese. Plaintiffs, who are the duly appointed conservators for their daughter Olivia, assert claims for negligence and premises liability under Michigan law arising from injuries sustained by Olivia when she exited the Chuck E. Cheese restaurant in Grand Rapids, Michigan, and was struck by an automobile. Plaintiffs seek an award exceeding $7 million against defendant.

By order entered July 21, 2011, this court granted Priority Health, a Michigan insurer, leave to intervene in this action to assert an equitable lien against any tort recovery by plaintiff. Priority Health provided group medical insurance coverage for John Horrell and his family pursuantto an employee health and welfare plan established by his employer, Steelcase Inc. The intervenor's complaint seeks to impose a lien in excess of $379,000.00 to reimburse it for medical benefits paid on behalf of Olivia as a result of the injuries she incurred on December 31, 2006. Alternatively, the intervenor's complaint seeks leave to submit proofs by Priority Health, as subrogee of plaintiff, for the medical treatment and related expenses paid on behalf of Olivia. After plaintiff and defendant responded to the intervenor's complaint, the court conducted a case management conference, at which the attorneys agreed that (1) the right of Priority Health to seek reimbursement or subrogation in this action is susceptible to decision on motion for summary judgment on the basis of the plan documents and (2) all parties consent to the dispositive jurisdiction of a magistrate judge to decide the issues arising from Priority Health's intervention in this action. (See Limited Consent and Order of Reference, docket # 84). Pursuant to that agreement, the court entered a scheduling order designed to provide for the expeditious resolution of this issue by summary judgment motion. (docket # 91).

Plaintiffs have moved for summary judgment against Priority Health (Motion, docket # 92) and defendant CEC Entertainment has joined in the motion (docket # 94). Priority Health has filed its response (docket # 95) and plaintiffs have filed their reply brief (docket # 96). The essence of the movants' contention is that the Michigan No-Fault Act precludes Priority Health from seeking reimbursement in this case, because Olivia's injuries were caused by a motor vehicle accident. For the reasons set forth below, I conclude that movants' position is meritorious. The motion for summary judgment will therefore be granted.

Findings of Fact

The facts relevant to the issue now before the court may be simply stated and are not subject to dispute. On December 31, 2006, plaintiffs' minor was a patron at the Chuck E. Cheese restaurant in Grand Rapids, Michigan. Olivia, who allegedly suffers from seizures, left the defendant's premises and found her way to 28th Street, a busy state trunk line, where she was hit by a car and suffered serious and permanent injuries. Priority Health is a Michigan insurer that provided group health insurance coverage to employees of Steelcase Inc. (See Group Agreement No. 104100, effective 3/1/2006, docket # 93, Ex. 2). Plaintiff John Horrell was employed by Steelcase on the date of the accident and was a certificate holder under the Priority Health policy. (See docket # 93, Ex. 1). The group plan covered John Horrell's dependents, including Olivia. Priority Health paid medical and related expenses incurred by Olivia as a result of the December 31, 2006 traffic accident in an amount allegedly exceeding $379,000.00. (See Intervenor's Complaint, docket # 81, Ex. A).

Plaintiffs initiated the present lawsuit in the Kent County Circuit Court on September 14, 2009. Count 1 of the complaint alleges a claim of premises liability arising from Olivia's invitee status and defendant's alleged failure to provide premises that are free from the unreasonable risk of harm to minor patrons. Count 2 asserts a negligence claim alleging breach of the duty to warn and defendant's failure to act in a reasonable manner once an exit door was found to be ajar. The complaint seeks damages exceeding $7 million, including economic and non-economic loss. The complaint, however, does not seek to recover for medical expenses, as those expenses have been covered by Priority Health. By notice of removal filed on October 15, 2009, defendant removed thecase to this court on the basis of complete diversity of citizenship and requisite amount in controversy. 28 U.S.C. § 1332(a)(1).

On July 21, 2011, this court granted Priority Health leave to intervene to assert an equitable claim for reimbursement or subrogation under the terms of its policy. The policy provision that Priority Health seeks to enforce is set forth in the HMO certificate of coverage. It provides as follows:

(13) G. Subrogation and Reimbursement

When you receive payment for Covered Services, you assign (or transfer) to us all of your rights of recovery from any third party, including Group. These rights of recovery include a right to subrogation (which means that we can stand in your or your estate's shoes and sue a third party directly for an Illness or Injury for which we are providing services) and a right of reimbursement (which means that we have a right to be reimbursed out of any recoveries you or your estate receives in the future or may have received in the past from third parties relating to your Illness or Injury for which we are providing services). These rights include recoveries from tort-feasors, underinsured/uninsured motorist coverage, worker's compensation, other substitute coverage, any other group or non-group policy of insurance providing health and/or accident coverage (including, but not limited to, any insurance policy having to do with payment of medical benefits that result from an automobile accident, and any riders or attachments to that policy), or any other right of recovery, whether based in tort, contract, or any other body of law. This assignment is to the fullest extent permitted by law. Our rights of recovery shall not be limited to recoveries from third parties designated for medical expenses, but shall extend to any and all recovered amounts. In the case of both subrogation and reimbursement, we will be permitted to pursue a recovery amount equal to the total amount paid by us, or the cost of services provided by us, as applicable, plus reasonable collection costs, because of an Illness or Injury for which you (or your estate or guardian) have or had a cause of action. You are required, when requested, to acknowledge our rights of recovery in writing. Our right of recovery, however, is not dependent upon this acknowledgement [sic]. You must tell us immediately, in writing, about any situation that might let us invoke our rights under this section.

You must cooperate with us to help protect our rights under this section. You agree that these rights will be considered the first priority claim with afirst priority lien of 100% of the proceeds of any full or partial recovery against anyone else. Our claim will be paid before any other claims are paid, whether or not you have recovered your total amount of damages. We must be reimbursed in full before any amounts (including attorney's fees incurred by you or your guardian or estate) are deducted from the policy proceeds, judgment or settlement.

Neither you, nor anyone acting for you, will do anything to harm our rights under this section. If you settle a claim or action against a third party, you will be considered to have been made whole by the settlement. We expressively reject the application of any "make whole", common fund or other claim or defense to Priority Health's subrogation and reimbursement rights. We will then have the right to immediately collect the present value of our right to reimbursement, as described above. Our claim will be the first priority claim from the settlement fund. If you receive any proceeds of settlement or judgment, and if we have a right of reimbursement in those proceeds, you must hold those proceeds in trust for us. Transfer of such funds to a third party does not defeat our right of reimbursement if the funds were or are intended for your benefit. We can recover from you expenses we incur because you failed to cooperate in enforcing our rights under this section.

For purposes of this subsection 13.G, the term "you" includes you and any person claiming through or on behalf of you, including relatives, heirs, assigns and successors.

(docket # 95-2 at ID #688).

Plaintiffs and defendant have moved for summary judgment, seeking dismissal of the intervenor's complaint. In essence, the motion for summary judgment seeks a declaration that Priority Health's rights under paragraph 13G of the certificate are rendered unenforceable by the Michigan No-Fault Auto Insurance Act, MICH. COMP. LAWS §§ 500.3101-3179. Specifically, plaintiffs and defendant argue that in paying health insurance benefits arising from an automobile accident, Priority Health was providing coverage that would otherwise have been provided by the no-fault carrier and is therefore bound by the provisions of state law that prevent a no-fault carrier from seeking reimbursement of medical expenses paid on behalf of an insured.

Discussion

A. ERISA Preemption

All parties agree that the health care coverage provided by Priority Health to the employees of Steelcase Inc., pursuant to an employer-sponsored health and...