Nevils v. Grp. Health Plan, Inc.

• Decision Date: 04 February 2014
• Docket Number: No. SC 93134.,SC 93134.
• Citation: 418 S.W.3d 451
• Court: Missouri Supreme Court
• Parties: Jodie NEVILS, Nevils, v. GROUP HEALTH PLAN, INC., and ACS Recovery Services, Inc., Respondents.

418 S.W.3d 451

Jodie NEVILS, Nevils,

v.GROUP HEALTH PLAN, INC., and ACS Recovery Services, Inc., Respondents.

No. SC 93134.

Supreme Court of Missouri, En Banc.

Feb. 4, 2014.

Blake P. Green, Mitchell L. Burgess and Keith C. Lamb of Burgess & Lamb PC, Don P. Saxton of Saxton Law Firm LLC, Ralph K. Phalen of Ralph K. Phalen, Attorney at Law, Kansas City, John Campbell and Erich Vieth of The Simon Law Firm PC, St. Louis, for Nevils.

Thomas M. Dee, Mark G. Arnold, Melissa Z. Baris and Elizabeth A. Mushill, Husch Blackwell LLP, St. Louis, for GHP.

Winthrop B. Reed III, Richard A. Ahrens, Steven D. Hall, Neal F. Perryman, R. Bradley Ziegler, Lewis Rice Fingersh, St. Louis, for ACS.

Stuart F. Delery Acting Assistant Attorney General, Richard G. Callahan U.S. Attorney, Nicholas P. Llewellyn Assistant U.S. Attorney, U.S. attorney's office, St. Louis, Alisa B. Klein and Henry C. Whitaker, appellate staff attorneys for the U.S. Department of Justice civil division, Washington, D.C., for two parties submitted briefs as friends of the Court.

David M. Ermer, Ermer Law Group, Washington, D.C., Christopher O. Bauman, Blitz, Bardgett & Deutsch, St. Louis, for the Association of Federal Health Organizations.

RICHARD B. TEITELMAN, Judge.

Jodie Nevils (Appellant) filed suit against Group Health Plan, Inc., (GHP) and ACS Recovery Services, Inc., (ACS) (collectively Respondents) after Respondents enforced a subrogation lien against Nevils's settlement of a personal injury claim. The trial court, consistent with Buatte v. Gencare Health Sys., Inc., 939 S.W.2d 440 (Mo.App.1996), entered summary judgment in favor of Respondents on grounds that 5 U.S.C. section 8902(m)(1) of the Federal Employee Health Benefits Act (“FEHBA”) preempts Missouri law prohibiting subrogation. Nevils asserts that FEHBA does not preempt state law barring subrogation of personal injury claims because subrogation does not “relate to the nature, provision, or extent of coverage or benefits.” This Court holds that FEHBA does not preempt Missouri law barring subrogation of personal injury claims. The judgment is reversed, and the case is remanded.

I. Facts

GHP entered into contracts with the federal Office of Personnel Management (OPM) to provide health insurance to federal employees pursuant to FEHBA. The contract directs GHP to seek reimbursement or subrogation when an insured obtains a settlement or judgment against a tortfeasor for payment of medical expenses. Nevils was a federal employee with medical insurance offered through a federal employee health benefit plan carried by GHP.

Nevils was injured in an automobile accident. GHP paid Nevils's resulting medical bills. Nevils then recovered a personal injury settlement from the tortfeasor responsible for the accident. GHP, through its agent ACS, asserted a lien against Nevils' settlement in the amount of $6,592.24, seeking reimbursement or subrogation for its payment of Nevils' medical bills resulting from the accident. Nevils satisfied the lien.

Nevils filed a class action petition for damages on behalf of himself and others similarly situated against GHP alleging violation of the Missouri Merchandising Practices Act; unjust enrichment; conversion; and seeking injunctive relief. All claims were based on the premise that Missouri law does not permit the subrogation of tort claims. GHP removed the case to federal court. Nevils filed a motion to remand the case to state court. The federal district court sustained Nevils' motion on the ground that there was no federal jurisdiction because Buatte held that the FEHBA preempts Missouri law barring subrogation.

Following remand to the state court, ACS intervened in the case. Respondents filed a motion for summary judgment. Respondents, relying on Buatte, asserted that FEHBA preempted Missouri's anti-subrogation law. The trial court entered judgment for Respondents. This appeal followed.

II. Standard of Review

Nevils' sole point on appeal asserts that the trial court erred in entering summary judgment in favor of Respondents because FEHBA does not preempt Missouri law barring subrogation of personal injury claims. This Court's standard of review for an appeal of a summary judgment regarding a legal issue is de novo. ITT Commercial Fin. Corp. v. Mid–America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993).

III. Analysis

Missouri law generally prohibits subrogation in personal injury cases by barring insurers from obtaining reimbursement from the proceeds an insured obtains following a judgment against a tortfeasor. See Benton House, LLC v. Cook & Younts Ins., Inc., 249 S.W.3d 878, 882 (Mo.App.2008). Subrogation in personal injury cases is considered to be against public policy because it amounts to an impermissible assignment of the insured's right to a cause of action for suffering a personal injury. See Hays v. Mo. Highways & Transp. Comm'n, 62 S.W.3d 538, 540 (Mo.App.2001). Therefore, insurance policies with reimbursement or subrogation clauses are invalid under Missouri law. Buatte, 939 S.W.2d at 442.

Although Missouri law generally prohibits subrogation of personal injury claims, FEHBA's preemption clause, 5 U.S.C. section 8902(m)(1), applies to this case and provides:

The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

Resolution of the issue in this case requires this Court to determine whether Respondents' asserted right to subrogation “relate[s] to the nature, provision or extent of coverage or benefits.”

The Supremacy Clause of the United States Constitution provides that state laws and constitutional provisions are preempted when in conflict with federal laws. See Johnson v. State, 366 S.W.3d 11, 26–27 (Mo. banc 2012). Consideration of issues arising under the Supremacy Clause “start[s] with the assumption that the historic police powers of the States [are] not to be superseded by ... Federal Act unless that [is] the clear and manifest purpose of Congress.” Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992). When a federal statute regulates an area that is traditionally subject to state authority, courts “should be reluctant to find preemption.” CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993). Preemption analysis, therefore, “is informed by two presumptions about the nature of preemption.” City of Belton v. Smoky Hill Ry. & Historical Soc., Inc., 170 S.W.3d 429, 434 (Mo.App.2005), quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). First, it is presumed that the states' historic police powers are not preempted unless it is the clear intent of Congress. Id. Second, a court's analysis of the scope of a statute's preemption is determined by the congressional purpose in enacting the statute. Id. When two plausible readings of a statute are possible, “we would nevertheless have a duty to accept the reading that dis-favors preemption.” Bates v. Dow AgroSciences, LLC, 544 U.S. 431, 449, 125 S.Ct. 1788, 161 L.Ed.2d 687 (2005).

In Buatte, the Missouri court of appeals held that FEHBA preempted Missouri's law against subrogation because the insurer's right to reimbursement of paid medical bills relates to the “nature, provision, or extent of coverage or benefits.” Buatte, 939 S.W.2d at 442. The Buatte court reasoned that “prohibiting [the carrier] from seeking reimbursement would clearly differ the extent of coverage or benefits.” Id.Buatte rested on the premise that subrogation “relates to” the insurance coverage and benefits. Other jurisdictions have followed the Buatte rationale. See, e.g., Thurman v. State Farm Mut. Auto. Ins. Co., 278 Ga. 162, 598 S.E.2d 448, 451 (2004); Aybar v. New Jersey Transit Bus Operations, Inc., 305 N.J.Super. 32, 701 A.2d 932, 937 (1997) N.J.App.Div.

The continued validity of Buatte is called into question by the United States Supreme Court's decision in Empire Healthchoice Assurance Inc. v. McVeigh, 547 U.S. 677, 698, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). In Empire, the Supreme Court held that the FEHBA preemption provision did not provide for complete preemption of state law so as to confer federal jurisdiction and, as a result, an insurance carrier's claims raised only state law issues. Id. The issue in Empire was whether FEHBA completely preempted state law in all insurance carrier disputes arising under the statute. Although the Supreme Court expressly declined to determine whether the statute preempts state subrogation laws two aspects of the Supreme Court's analysis are relevant to Nevils' claim.

First, Empire recognized that the FEHBA preemption clause is subject to plausible, alternate interpretations. Id. at 697, 126 S.Ct. 2121. The Supreme Court noted that the clause “was open to more than one construction” and its “words may be read to refer to contract terms relating to the beneficiary's entitlement (or lack thereof) to [the insurance plan's] payment for certain health-care services [the beneficiary] has received, and not to terms relating to the carrier's post-payments right to reimbursement.” Id. at 698, 126 S.Ct. 2121. The Supreme Court also noted that the “choice-of-law prescription is unusual in that it renders [superior] preemptive contract terms in health insurance plans, not provisions enacted by Congress [ ]” and that such an “unusual order warrants [a] cautious interpretation.” Id.Empire establishes that the FEHBA preemption clause is susceptible to reasonable, alternate interpretations. The fact that the preemption clause is susceptible to alternate interpretations implicates the presumption against preemption noted in Bates, in which the Supreme Court noted that when two plausible readings of a statute are possible, “we would nevertheless...