Knolmayer v. McCollum, S-17792

CourtSupreme Court of Alaska (US)
Writing for the CourtBORGHESAN, JUSTICE.
PartiesTHOMAS J. KNOLMAYER, M.D., ALASKA TRAUMA AND ACUTE CARE SURGERY, LLC, Petitioners, v. CHARINA MCCOLLUM, JASON MCCOLLUM, Respondents.
Docket NumberS-17792
Decision Date18 November 2022

THOMAS J. KNOLMAYER, M.D., ALASKA TRAUMA AND ACUTE CARE SURGERY, LLC, Petitioners,
v.

CHARINA MCCOLLUM, JASON MCCOLLUM, Respondents.

No. S-17792

Supreme Court of Alaska

November 18, 2022


Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage No. 3AN-16-04601 CI, Herman G. Walker, Jr., Judge.

Howard Lazar and Whitney L. Wilkson, Delaney Wiles, Inc., Anchorage, for Petitioners.

Margaret Simonian, Dillon & Findley, P.C., Anchorage, and Michael Cohn, Phillip Paul Weidner & Associates, Anchorage, for Respondents.

Christian N. Bataille, Flanigan & Bataille, Anchorage, for Amicus Curiae Alaska Association for Justice. Ian S. Birk, Keller Rohrback L.L.P., Seattle, Washington, and Eva Gardner, Ashburn & Mason P.C., Anchorage, for Amicus Curiae Premera Blue Cross.

Before: Bolger, Chief Justice, Winfree, Maassen, Carney, and Borghesan, Justices.

OPINION

BORGHESAN, JUSTICE.

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I. INTRODUCTION

Alaska Statute 09.55.548(b) provides that when a medical malpractice claimant's losses have already been compensated in part by a collateral source (such as an insurer), the claimant's damages award will be reduced by the value of the collateral source compensation, except when the collateral source is a "federal program that by law must seek subrogation." This case presents the questions of whether and how the statute applies when the claimant's losses are compensated by an employer's self-funded health benefit plan governed by the federal Employee Retirement Income Security Act (ERISA). [1]

We conclude that an ERISA plan does not fall within the statute's "federal program" exception. Therefore AS 09.55.548(b) requires a claimant's damages award to be reduced by the amount of compensation received from an ERISA plan. But we also conclude that the distinction the statute draws between different types of medical malpractice claimants is not fairly and substantially related to the statute's purpose of ensuring claimants do not receive a double recovery-an award of damages predicated on losses that were already compensated by a collateral source. Because insurance contracts commonly require the insured to repay the insurer using the proceeds of any tort recovery, claimants with health insurance are scarcely more likely to receive a double recovery than other malpractice claimants. The statute therefore violates the equal protection guarantee of the Alaska Constitution.

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II. FACTS AND PROCEEDINGS

A. Facts

Plaintiff Charina McCollum alleges that in May 2015 Dr. Thomas Knolmayer, M.D., mistakenly cut the wrong duct during a surgery to remove McCollum's diseased gallbladder. As a result McCollum was medevacked from Anchorage to Seattle, where she was given a drain to evacuate bile from her abdomen until she could have duct repair surgery. Due to problems with bile drainage in June 2015 she was again medevacked from Anchorage to Seattle and the drain was replaced. In August 2015 the duct was surgically repaired.

McCollum's husband Jason McCollum was employed by Lowe's Companies, Inc., and most of McCollum's health care expenses were paid by a health plan administered by Lowe's. The terms of the Lowe's Plan include a right to subrogation, under which the Plan "may, at its discretion,. . . commence a proceeding or pursue a claim against any party" for the recovery of all benefits paid by the Plan. The Plan's terms also give it a right to reimbursement from any damages award McCollum might recover for her injury:

The Plan shall be entitled to recover 100% of the benefits paid, without deduction for attorneys' fees and costs or application of the common fund doctrine, make whole doctrine or any other similar legal theory, without regard to whether the Covered Person is fully compensated by his or her recovery from all sources. The Plan shall have an equitable lien which supersedes all common law or statutory rules doctrines and laws of any State prohibiting assignment of rights which interferes with or compromises in any way the Plan's equitable subrogation lien. The obligation exists regardless of how the judgment or settlement is classified and whether or not the judgment or settlement specifically designates the recovery or a portion of it as including medical, disability or other expenses. If the Covered
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Person's recovery is less than the benefits paid, then the Plan is entitled to be paid all of the recovery achieved.

B. Proceedings

In February 2016 McCollum filed a complaint for medical malpractice against Knolmayer and Alaska Trauma and Acute Care Surgery, LLC.

1. The superior court's first order on preemption

McCollum moved for a ruling of law on the recoverability of her medical expenses that had been paid by the Lowe's Plan. Alaska Statute 09.55.548(b) provides that "a claimant may only recover damages from the defendant that exceed amounts received by the claimant as compensation for the injuries from collateral sources," with the exception of "death benefits paid under life insurance" or collateral sources that are "federal program[s] that by law must seek subrogation." McCollum's motion argued that as an employer-funded benefit plan, the Lowe's Plan is governed by ERISA, which preempts state laws relating to employee benefit plans. McCollum asked the court "to hold that ERISA [preempts] the application of AS 09.55.548(b) in this case, and that [McCollum] is not precluded from requesting medical damages that include the expenditures of the" Lowe's Plan.

Knolmayer opposed McCollum's motion, arguing that ERISA does not preempt AS 09.55.548(b). Knolmayer claimed that although ERISA does preempt some state laws, "state laws that do not affect coverage or impose requirements upon ERISA plans are not preempted."

In reply McCollum argued that AS 09.55.548(b) is preempted because it affects the Lowe's Plan's contractual subrogation and reimbursement rights. To support this argument McCollum pointed to a letter from the Plan's representative, the PHIA Group, to McCollum's counsel stating that "at the time of settlement or resolution of any underlying claims, [the Plan] will seek full reimbursement of all related claims paid by

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the Plan." At oral argument, McCollum explained that because AS 09.55.548(b) limits the amount that McCollum can recover from the defendants, it also potentially limits the amount the Lowe's Plan can recover from McCollum. She argued that because AS 09.55.548(b) would result in the Lowe's Plan recovering less from claimants in Alaska than from claimants in states without similar statutory provisions, the statute impairs ERISA's goal of uniform health plan administration across the country. Knolmayer, on the other hand, argued that AS 09.55.548 "only governs the defendant's liability to the plaintiff. It does not prevent the [P]lan in any way from seeking reimbursement from the plaintiff after this lawsuit has concluded."

On October 1, 2018, the court issued an order holding that ERISA does not preempt AS 09.55.548(b). The order stated that under AS 09.55.548(b), the plaintiffs award is reduced by the amount the insurer paid in medical expenses; that amount is then "set aside by the court to reimburse the insurer." According to the superior court, because the statute did not "prevent the [Plan] from seeking or receiving reimbursement," it did not affect the operation of ERISA plans and therefore was not preempted by ERISA.

2. The superior court's order on partial reconsideration

Knolmayer sought partial reconsideration of the October 1 order. He did not challenge the court's conclusion that ERISA does not preempt AS 09.55.548. But he sought reconsideration of the court's holding that the amount deducted from the plaintiffs recovery would be "set aside" to reimburse the insurer. Knolmayer argued that this "set-aside" would contradict the statute's purpose of reducing the size of medical malpractice awards, as well as contradict the common law by allowing the subrogated insurer to obtain a recovery that the plaintiff herself could not recover. McCollum opposed the motion. She argued that under Knolmayer's interpretation of AS 09.55.548(b), the Lowe's Plan would be able to "seize" her entire recovery, thus

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"eviscerat[ing]" the "basic principle of tor[t] law that individuals have basic interests protected by law in the event of civil wrong."

The court granted partial reconsideration on June 25, 2019. It agreed with Knolmayer that AS 09.55.548(b) "forecloses collection of the Plan's subrogated interest against Defendants by Plaintiff." [2] It therefore vacated "those portions of its Order that set out a post-trial procedure for earmarking covered medical costs and awarding them to the non-party Plan." However, the court noted that "nothing in AS 09.55.548(b) prevents the Plan from recovering on its subrogated interest as a party itself." The court stated that unless the Lowe's Plan joined as a party, McCollum could not "pursue the covered medical costs, regardless of the contract between [McCollum] and the Plan." But the court determined that "[t]he Plan's subrogation right has not been eliminated by the statute," and that the Plan was still free to join the present action or to bring its own action against the defendants.

3. The superior court's clarification order

McCollum then moved for clarification of the court's reconsideration order, asking whether the Lowe's Plan could assign its subrogated claim to her. The defendants opposed, urging the court to find that even if McCollum received an assignment of the Lowe's Plan's subrogated claim, her recovery on the claim would still be limited by AS 09.55.548(b). The court denied the motion as a request for an advisory opinion.

In October 2019 McCollum filed a notice to the court that she had "agreed to an assignment from" the Lowe's Plan and that the "actual assignment w[ould] be completed in the near...

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