Oetinger By and Through Oetinger v. Polson By and Through Polson, 379

• Decision Date: 09 December 1994
• Docket Number: No. 71594,No. 379,379,71594
• Citation: 885 P.2d 1274,20 Kan.App.2d 255
• Parties: Philip OETINGER, A Minor Child, By and Through His Next Friend, John Arnold OETINGER, Plaintiff/Appellant, v. Aaron POLSON, A Minor Child, By and Through His Next Friend, Joy POLSON; U.S.D.Board of Education, Clay Center, Kansas; Charles Mansfield; Brian Harris; and Tyler Nelson, Defendants, v. MAIL HANDLERS BENEFIT PLAN, Intervenor/Appellee.
• Court: Kansas Court of Appeals

Page 1274

885 P.2d 1274

20 Kan.App.2d 255

Philip OETINGER, A Minor Child, By and Through His Next

Friend, John Arnold OETINGER, Plaintiff/Appellant, v. Aaron POLSON, A Minor Child, By and Through His Next Friend, Joy POLSON; U.S.D. No. 379 Board of Education, Clay Center, Kansas; Charles Mansfield;

Brian Harris; and Tyler

Nelson, Defendants, v. MAIL HANDLERS BENEFIT PLAN, Intervenor/Appellee.

No. 71594.

Court of Appeals of Kansas.

Dec. 9, 1994.

Review Denied Feb. 7, 1995.

Syllabus by the Court

Where a minor receives payment for medical services from an insurer, the child is bound by the subrogation clause of the insurance contract even though the parent, rather than the child, signed the contract.

Robert L. Pottroff of Myers, Pottroff & Ball, Manhattan, for appellant.

J. Roger Hendrix of Hendrix & Wright, Topeka, for intervenor/appellee.

Before BRAZIL, P.J., and RULON and PIERRON, JJ.

RULON, Judge:

This is a subrogation claim for health benefits paid to a minor child under his father's insurance policy. Philip Oetinger, by and through his father, John Arnold Oetinger, plaintiff, appeals from the district court's order of summary judgment in favor of the Mail Handlers Benefit Plan, intervenor. We affirm.

The facts are essentially undisputed and are as follows:

On October 9, 1991, Philip Oetinger was injured in an automobile collision. Plaintiff filed suit against various defendants, alleging the collision was the result of their negligence.

Philip was covered under the Mail Handlers Benefit Plan (Mail Handlers), his father's health benefit plan. Mail Handlers is a federal employee health benefit plan pursuant to the Federal Employees Health Benefits Program. 5 U.S.C. § 8901 et seq. (1988). Plaintiff immediately notified Mail Handlers of the injury and his belief that other parties were responsible. Mail Handlers paid Philip's hospital and medical expenses of $35,430.52.

The subrogation clause of the Mail Handlers contract provided:

"If damages are payable to you or any member of your family as a result of injury or illness for which a claim is made against a third party, the Plan, where cost effective Ultimately, Mail Handlers notified Philip's father of its subrogation interest in the benefits paid and enclosed a subrogation reimbursement agreement for his signature. When Mail Handlers received no response, a follow-up letter was sent, informing plaintiff that benefits would be withheld until the agreement was executed.

will take an assignment of the proceeds of the claim and will assert a lien against such proceeds to reimburse the Plan for the full amount of Plan benefits paid or payable to you or any member of your family. The Plan's lien will apply to any and all recoveries for such claim whether by court order or out-of-court settlement. The Plan will provide the necessary forms and may insist on the assignment before paying any benefits on account of the injury or illness. Failure to notify the Plan promptly of a third party claim for damages on which the Plan has paid or may pay benefits may result in an overpayment by the Plan subject to recoupment."

On July 28, 1992, Philip and his father signed a subrogation reimbursement agreement. They modified the agreement as follows:

"I (We), Phillip [sic ] Ernest Oetinger, hereby agree to prommptly [sic ] reimburse Continental Assurance Company ('CNA'), the underwriter of the Mail Handlers Benefit Plan ('MHBP' or 'Plan') for the full amount of any benefits paid by CNA to me (us) or my (our) assignees for any bills hereafter paid for my accident (describe the illness or injury) sustained on or about October 9, 1991 (date), the City of Clay Center, State of Kansas, out of any settlement, judgment or any other recovery which I (we) make for the above described illness or injury, in accordance with the subrogation provision contained in the applicable Mail Handlers Benefit Plan contract statement of benefits or 'brochure' and in consideration of the amounts paid by the Plan or CNA. I (we) agree that the amount to be reimbursed to CNA shall not be subject to reduction, deduction or offset of any sort for any reason unless approved in writing by the Plan. The applicable Plan brochure shall be the brochure in effect at the time the charges were incurred."

Following execution of the subrogation agreement, Mail Handlers paid benefits of $959.38.

On July 16, 1993, the district court approved a settlement of plaintiff's claim against one of the defendants for $80,000. Mail Handlers claimed a lien of $35,430.52 on the settlement proceeds. Plaintiff claimed Mail Handlers was entitled only to benefits paid since July 28, 1992, the date the subrogation agreement was signed.

Eventually, the district court entered summary judgment in favor of Mail Handlers.

THE SUBROGATION CLAUSE

Plaintiff argues the subrogation clause is ambiguous regarding when Mail Handlers' subrogation rights may take effect. Plaintiff asserts Mail Handlers' right of subrogation is dependent upon the insured executing a subrogation agreement. Plaintiff argues the only amounts Mail Handlers can claim as subrogation interests are those benefits paid after execution of the subrogation reimbursement agreement.

The district court entered summary judgment for Mail Handlers after finding: (1) the Mail Handlers contract was clear and unambiguous; (2) Mail Handlers was not required to immediately advise plaintiff it would seek subrogation; (3) the subrogation reimbursement agreement is not necessary under the contractual provisions; and (4) the right of subrogation cannot be unilaterally changed by plaintiff in executing the subrogation reimbursement agreement.

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. K.S.A.1993 Supp 60-256(c). The parties do not assert any genuine issue of material fact exists. Summary judgment was, therefore, proper.

The benefit plan before us is a federally-authorized contract. The parties, however, agree the contract may be interpreted under Kansas law. Additionally, the parties acknowledge K.A.R. 40-1-20, which prohibits insurance companies from issuing health insurance contracts with certain types of subrogation clauses, is preempted by federal law.

The rules of construction for insurance contracts were recently reviewed in U.S.D. No. 259 v. Sloan, 19 Kan.App.2d 445, 452-53, 871 P.2d 861 (1994):

" 'The construction of a written instrument is a question of law, and the instrument may be construed and its legal effect determined by an appellate court.' [Citation omitted.] 'Whether an instrument is ambiguous is a matter of law to be decided by the court.' [Citation omitted.] This court's review of questions of law is unlimited. [Citation omitted.]

"The terms of an insurance policy are subject to construction by an appellate court only if the terms at issue can be deemed open to different interpretations. [Citation omitted.] However, courts should not strain to create an ambiguity where in common sense there is none. [Citation omitted.] The policy language must be given its plain, ordinary meaning. [Citation omitted.] 'Policies must be construed according to the sense and meaning of the terms used, and if the language is clear and unambiguous, it must be taken in its plain, ordinary and popular sense.' [...