Scroggins v. Interpleader, SD 30214.

• Decision Date: 06 August 2010
• Docket Number: No. SD 30214.,SD 30214.
• Citation: 325 S.W.3d 389
• Parties: Pamela SCROGGINS, Plaintiff-Respondent, v. RED LOBSTER, et al., Defendants-Interpleader Plaintiffs, and Sisters of Mercy Health System, Interpleader Defendant-Appellant.
• Court: Missouri Court of Appeals

325 S.W.3d 389

Pamela SCROGGINS, Plaintiff-Respondent,

v. RED LOBSTER, et al., Defendants-Interpleader Plaintiffs,andSisters of Mercy Health System, Interpleader Defendant-Appellant.

No. SD 30214.

Missouri Court of Appeals, Southern District,Division Two.

Aug. 6, 2010.

Stanley G. Schroeder, Whitney D. Pile, St. Louis, for Appellant.

Roger Johnson, Joplin, for Respondent.

NANCY STEFFEN RAHMEYER, Judge.

Pamela Scroggins (“the Participant”) was seriously injured in a non-work-related trip and fall accident at a Red Lobster on February 17, 2007, while employed at St. John's Hospital in Springfield, Missouri. The Participant's medical expenses were covered by an employee contributory self-funded health plan (“the Plan”) that provided benefit coverage for employees of St. John's Hospital, a subsidiary of Sisters of Mercy (“the Insurer”) which is a non-profit corporation. ¹ As a result of the trip and fall, the Participant sued Red Lobster, Inc., which is a subsidiary of GMRI, Inc. (“GMRI”), and the manager of the Red Lobster, Gary Rush. The lawsuit resulted in a settlement. One of the Plan's provisions purports to grant the Insurer a lien upon the proceeds of the Participant's tort recovery, and a right to payment from any recovery, to the extent of the sum that the Insurer paid for injuries the Participant suffered. The trial court found the lien to be a veiled partial assignment of the Participant's personal injury claim and, as such, invalid as contrary to longstanding Missouri public policy. We agree.

Section 5.02(h) of the Plan provides that

Notwithstanding the foregoing subsections of this Section 5.02 ... with respect to a Covered Individual whose coverage relates to a Participating Employer located in the State of Missouri, if a Covered Individual sustains an injury or sickness and a third party is or may be liable for compensating the Covered Individual for such injury or sickness ... the Plan shall have a lien on the proceeds recovered by or on behalf of the Covered Individual from the Third Party, to the extent of the amount of Covered Expenses that are paid or payable with respect to the sickness or injury.

(emphasis added). The Plan also contains the following provisions: (1) Section 5.02(g)(4) requires the Participant to “[a]gree not to settle a claim against the Third Party without the consent of the Plan.”; (2) Section 5.02(a)(i) gives the Plan a “right to be reimbursed for Covered Expenses paid with respect to the injury or sickness for which the Third Party is liable, from any judgment, award, formal or informal settlement, contract or any other payment of any kind, paid to ... the Covered Individual by such Third Party.”; (3) Section 5.02(a)(iii) gives the Plan “the right of subrogation to assert the Covered Individual's right to recover against such Third Party.”; and (4) Section 10.09 contains this severability clause: “If any provision of this Plan shall be held illegal or invalid, the remaining provisions of this Plan shall be construed as if such provision had never been included.”

Before the final settlement payment was made, the Insurer advised GMRI's insurer, Liberty Mutual, of its alleged lien upon the settlement proceeds to the extent of the Plan's $151,323.83 in payments of medical expenses incurred as a result of the accident. GMRI, concerned about the potential for double liability that could result if it paid the Participant and was later found liable to the Insurer, filed a motion for leave to add the Insurer to the underlying action the Participant brought against GMRI, and sought a declaration of ownership of the $151,323.83 in dispute. The trial court, acting on cross-motions for summary judgment, found the lien was, in substance, a partial assignment of the Participant's personal injury claim and sustained summary judgment in favor of the Participant.

We review a summary judgment de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Summary judgment is proper where the motion, response, reply, and sur-reply “show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law[.]” Rule 74.04(c)(6). ² Under de novo review of a summary judgment, this Court will review the record from the trial court and independently decide whether there were no genuine issues of material fact and that the successful party was entitled to judgment as a matter of law. In re Gene Wild Revocable Trust, 299 S.W.3d 767, 773-74 (Mo.App. S.D.2009). We review the record in the light most favorable to the party whom judgment was entered against, and draw all reasonable inferences in that party's favor. ITT, 854 S.W.2d at 376. In this case, the facts are not contested. It is an issue of law whether the trial court reached a proper conclusion based upon the facts. Schroeder v. Horack, 592 S.W.2d 742, 744 (Mo. banc 1979).

Missouri public policy prohibits the transfer of a personal injury claim, in whole or part. Travelers Indem. Co. v. Chumbley, 394 S.W.2d 418, 423-25 (Mo.App.Spfld.D.1965). This rule holds except in the limited circumstance when the transfer is of the proceeds of a potential claim and is granted to an existing creditor. Ford Motor Credit Co. v. Allstate Ins. Co., 2 S.W.3d 810, 812-13 (Mo.App. W.D.1999). This has been Missouri's policy since at least 1913 and, in all likelihood much longer, as the prohibition against the assignment of personal tort claims dates back to English common law and the Middle Ages. ³ In 1913, this Court explained that “[t]here is every reason for holding that a cause of action for personal injuries, where the gist of the damages recovered is physical pain and mental anguish, should not be the subject of barter or trade, or a matter of profit to the creditors of the injured party.” Beechwood v. Joplin-Pittsburg Ry. Co., 173 Mo.App. 371, 158 S.W. 868, 870 (Mo.App.Spfd.D.1913). The Western District of this Court, contributed this brief history concerning insurers in Hays v. Missouri Highways and Transp. Comm'n, 62 S.W.3d 538 (Mo.App. W.D.2001):

Insurers paying benefits to insureds as a result of injuries caused by third persons claim an interest in recovering those costs if the insured obtains a settlement or collects upon a judgment against the third party. To that end, insurers have repeatedly attempted to draft policy provisions or establish other requirements for the purposes of seeking reimbursement from the insured in such situations.

Such provisions or other requirements have been regularly invalidated by the appellate courts.

Id. at 540.

In Schweiss v. Sisters of Mercy, St. Louis, Inc., 950 S.W.2d 537 (Mo.App. E.D.1997), for example, the court held that a reimbursement provision in a health plan was unenforceable and that the insurer could not refuse to pay medical expenses based on the insured's refusal to sign a reimbursement agreement. Id. at 538-39. The rationale of the public policy is simple, Missouri court's have long felt it is outside the province of our courts to coin into money an injured party's pain and suffering for the profit of others. Forsthove v. Hardware Dealers Mut. Fire Ins. Co., 416 S.W.2d 208, 216 (Mo.App.St.L.D.1967). In short, allowing the assignment of claims would lead to a secondary market where speculators would profit off of the pain and suffering of others. ⁴

In Jones v. Aetna Cas. & Sur. Co., 497 S.W.2d 809 (Mo.App.K.C.D.1973), the Kansas City District of this Court, dealing with similar facts as those here and a substantially identical insurance policy provision, settled the issue at hand. In Jones, the insured was injured in an automobile collision, suffered medical damages which the insurer paid, and then settled with the tortfeasor that negligently caused the collision. Id. at 810-11. In Jones' policy, the insurer attempted to obtain a lien over the proceeds of any claims it had paid that the insured later recovered from the third-party tortfeasor. Id. Specifically, the language of the policy required the insured to agree that:

[T]he Company shall be entitled to the extent of such payment to the proceeds of any settlement or judgment that may result from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury because of which such payment is made; and the Company shall have a lien to the extent of such payment[.]

Id. at 811 (emphasis added). Under Jones' policy, the insured was also purportedly required to hold the proceeds of any settlement or judgment “in trust for the benefit of the Company all rights of recovery which he shall have against such other person or organization because of such bodily injury [.]” Id. The court noted there was no statute authorizing the insurer “to preserve its right in equity to recover under its trust theory amounts paid to or on behalf of [the insured] for her medical expenses.” Id. at 813. The court found the lien/trust theory tantamount to a subrogation right because, if valid, the lien/trust provisions “could only give rise to a right in equity to enforce it[.]” Id. Ruling in favor of the insured, the court concluded that “[t]he trust theory is similar to a subrogation right, which under the law of this state, absent a statute, is invalid as amounting to an assignment of a claim for personal injuries.” Id.

We find Jones to be persuasive. In Jones, the policy required the insured to agree that the insurer “ shall have a lien to the extent of such payment” received by the insured from “any person or organization legally responsible for the bodily injury because of which such payment is made [.]” Id. at 811. (emphasis added). Correspondingly, the policy issued in this case, specifically section 5.02(h) of the Plan, required the Participant to agree that the Insurer “ shall have a lien on the proceeds recovered by or on behalf of the Covered Individual from the Third Party, to the...