Rudel v. Haw. Mgmt. Alliance Ass'n, Civ. No. 15-00539 JMS-RLP
| Decision Date | 31 October 2017 |
| Docket Number | Civ. No. 15-00539 JMS-RLP |
| Parties | RANDY RUDEL, Petitioner, v. HAWAII MANAGEMENT ALLIANCE ASSOCIATION, Respondent. |
| Court | U.S. District Court — District of Hawaii |
On December 29, 2014, Petitioner Randy Rudel ("Rudel") crashed his motorcycle into a vehicle allegedly making an illegal left turn in front of him. ECF No. 1-2 at 7. He suffered catastrophic injuries, resulting in multiple surgeries and partial amputations of his left leg and forearm. Id. Because of the accident, Respondent Hawaii Management Alliance Association ("HMAA") paid $400,779.70 in health-insurance benefits under Rudel's HMAA benefit plan ("the Plan"). ECF No. 49-6 at 1-5. Rudel also received a $1.5 million third-party tort settlement from the vehicle-driver's liability insurance carrier. ECF No. 1-2 at 14. HMAA then claimed a lien against Rudel, seeking reimbursement of the $400,779.70 from his $1.5 million settlement, based on a reimbursement provision in the Plan. ECF No. 49-6 at 1. Rudel filed this action to determine the validity of HMAA's claim of lien.
The court faces two Motions. Rudel filed a "Motion for Determination of Validity of Claim of Lien of [HMAA]," ECF No. 38, ultimately arguing that HMAA is not entitled to any reimbursement. HMAA responded with a Motion for Partial Summary Judgment, ECF No. 40, contending that Rudel's action is preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., and that its lien is valid under the Plan. The Motions raise complex and important questions involving two distinct ERISA-preemption doctrines as applied to two interrelated Hawaii statutory provisions, Hawaii Revised Statutes ("HRS") §§ 431:13-103(a)(10) and 663-10.
Based on the following, Rudel's Motion is GRANTED in part, and HMAA's Motion is DENIED.
///
///
///
The circumstances of the December 29, 2014 accident, as well as the severe nature of Rudel's injuries, are not at issue in these Motions. For present purposes, it is undisputed that Rudel was a member of an ERISA plan — an HMAA employee-sponsored health benefits plan that provided him certain insurance benefits, including medical care, treatment, and services for injuries resulting from the accident. ECF No. 49-3 at 2.1 Nor is it disputed that HMAA eventually paid $400,779.70 in accident-related expenses (at least as of November 16, 2015) out of total charges of $634,839.03.2 ECF No. 49-6. The Petition alsoestablishes that, on August 17, 2015, Allstate Insurance Company (which covered the driver of the other vehicle) paid Rudel $1.5 million under a settlement that Allstate represented was "the total applicable available policy limits." ECF No. 1-2 at 54. The settlement agreement includes a clause stating:
The consideration paid herein constitutes general damages incurred on the account of personal injury or sickness and/or emotional distress resulting therefrom, as defined by IRS Code Section 104(a)(2) and does not duplicate medical payments, no-fault payments, wage loss, temporary disability benefits or other special damages previously received by Randy Rudel.
Id. at 52. The Petition contends that the value of Rudel's claim against the driver/tortfeasor exceeded $5.9 million, including $4 million in general damages. Id. at 11. Finally, the record establishes that on November 16, 2015, HMAA claimed (and still claims) a lien of $400,779.70 against Rudel's $1.5 million settlement. ECF No. 49-6.
The Hawaii Insurance Code, subject to certain exceptions, defines "unfair methods of competition and unfair or deceptive acts or practices in the business of insurance" as including the following:
In turn, HRS § 663-10, entitled "Collateral sources; protection for liens and rights of subrogation," provides:
(a) In any civil action in tort, the court, before any judgment or stipulation to dismiss the action is approved, shall determine the validity of any claim of a lien against the amount of the judgment or settlement by any person who files timely notice of the claim to the court or to the parties in the action. The judgment entered, or the order subsequent to settlement, shall include a statement of the amounts, if any, due and owing to any person determined by the court to be a holder of a valid lien and to be paid to the lienholder out of the amount of the corresponding special damages recovered by the judgment or settlement. In determining the payment due the lienholder, the court shall deduct from the payment a reasonable sum for the costs and fees incurred by the party who brought the civil action in tort. As used in this section, lien means a lien arising out of a claim for payments made or indemnified from collateral sources, including health insurance or benefits, for costs and expenses arising out of the injury which is the subject of the civil action in tort. If there is a settlement before suit is filed or there is no civil action pending, then any party may petition a court of competent jurisdiction for a determination of the validity and amount of any claim of a lien.
HRS § 663-10 (emphases added).4
With §§ 431:13-103(a)(10) and 663-10, "the [Hawaii] legislature intended to limit a health insurer's right of subrogation[.]" Yukumoto v.Tawarahara, 140 Haw. 285, 291, 400 P.3d 486, 492 (2017).5 The legislative history and intent behind both provisions becomes critically important in resolving the Motions. As explained to follow, resolution ultimately turns on whether this Hawaii law is "specifically directed toward entities engaged in insurance," Kentucky Ass'n of Health Plans v. Miller, 538 U.S. 329, 342 (2003), such that it is — or parts of it are — "saved" from preemption for purposes of ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). The court thus explains relevant aspects of this history in detail, and as set forth in Yukumoto.
In invalidating a contractual subrogation clause in a non-ERISA health insurance plan, Yukumoto recognized that:
[s]ituations involving tort recovery in personal insurance contexts, like the instant case [of health insurance], often include payment by the tortfeasor for intangible losses such as life, death, health, pain and suffering, and physical well being, where it is difficult to ascertain exact measurements of loss. In this way, recovery for medical insurance benefits and tort damages . . . does not necessarily produce a windfall or duplicative recovery to the insured.
140 Haw. at 294, 400 P.3d at 495. And after analyzing the statutory language of both provisions and the legislative history, Yukumoto concluded that Id. at 295, 400 P.3d at 496. Rather, § 663-10 provides that "the amount due and owing to any holder of a valid lien, [is] to be paid to the lienholder from 'special damages recovered by the judgment or settlement.'" Id. The idea is that an injured person should not receive a "windfall" — if someone recovers damages from a tortfeasor for medical costs that were already (or will be) paid by a health insurer, the insured should not be entitled to double-recovery. A health insurer should be entitled to (and limited to) reimbursement from "special damages" obtained from a tort judgment or settlement.
"[T]he legislative history of HRS §§ 663-10 and 431:13-103(a)(10) demonstrates that a health insurer's sole rights to reimbursement and subrogation are provided for in those statutes, and that a health insurer's right to subrogation is therefore limited." Id. at 295-96, 400 P.3d at 496-97 (emphasis added). The statutory regime "allow[s] for collateral sources to be reimbursed when specialdamages recovered in a judgment or settlement duplicate[] the amounts they had paid." Id. at 296, 400 P.3d at 497.
In particular, the Hawaii legislature passed Act 29 in 2000, "to 'make it an unfair or deceptive act to limit or withhold coverage under insurance policies because a consumer may have a third-party claim for damages.'" Id. .6 "Act 29 made clear that collateral sources were required to pay benefits, and were limited to reimbursement under [§ 663-10] in third-party personal injury situations." Id. ).
And in 2001, "the legislature considered and subsequently passed [Senate Bill ("S.B.")] 940, which amended . . . HRS [§] 431:13-103(a)(10) to expressly make it an unfair insurance practice for a health insurer to limit or exclude insurance coverage to an insured who has a third-party claim for damages." Id. at 297, 400 P.3d at 498 (emphasis added) . "The purpose of S.B. 940 was to 'make mutual benefit societies (societies) and health maintenance organizations (HMOs)subject to the unfair methods of competition and unfair and deceptive acts and practices of the business of insurance, for refusing to provide or limiting coverage to an individual having a third-party claim for damages." Id. ).
That is, S.B. 940 ()...
To continue reading
Request your trial