Sec. Health Plan of Wis. Inc. v. Am. Standard Ins. Co. of Wis.

Decision Date25 October 2018
Docket NumberAppeal No. 2017AP1914
Citation384 Wis.2d 545,920 N.W.2d 340,2018 WI App 68
Parties SECURITY HEALTH PLAN OF WISCONSIN INC., Plaintiff-Respondent, v. AMERICAN STANDARD INSURANCE COMPANY OF WISCONSIN and American Family Mutual Insurance Company, Defendants-Appellants.
CourtWisconsin Court of Appeals

On behalf of the defendants-appellants, the cause was submitted on the briefs of John A. Kramer and Michael J. Roman of Klinner Kramer Shull LLP, Wausau.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Brenda K. Sunby of Sunby Law Office, Wausau.

Before Sherman, Kloppenburg and Fitzpatrick, JJ.

FITZPATRICK, J.

¶ 1 Security Health Plan of Wisconsin Inc. issues group health insurance plans, and American Family1 issues automobile insurance policies, in Wisconsin. Forty-two persons who were insured by both Security Health and American Family were involved in separate auto accidents and, as a result, each incurred medical expenses. Security Health paid for most of those medical expenses and sued American Family in the Portage County Circuit Court requesting the following relief: a declaratory judgment that American Family rather than Security Health is required to pay for those medical expenses; and a money judgment for the total amount allegedly owed by American Family to Security Health. American Family filed a motion for summary judgment, and Security Health filed a motion for declaratory judgment.

The circuit court granted declaratory judgment in favor of Security Health and a money judgment in the principal amount of $165,799.30 against American Family. American Family appeals and argues that it owes nothing to Security Health for those medical expenses paid by Security Health. We agree with American Family, reverse the order of the circuit court, and remand the matter for judgment to be granted in favor of American Family.

BACKGROUND

¶ 2 The parties do not dispute the following material facts.

¶ 3 Security Health is a health insurance company that issues group health insurance plans in Wisconsin. American Family issues automobile insurance policies in this state, and each of the pertinent American Family policies includes coverage for the payment of medical expenses.

¶ 4 This lawsuit concerns forty-two separate claims regarding the payment of medical expenses. Each of the claims is a separate reimbursement demand made by Security Health against American Family.

¶ 5 Each claim involves a different motor vehicle accident and a separate injured person who was, at all relevant times, insured by both Security Health and American Family. Each insured obtained medical treatment for his or her injuries and incurred bills for that medical treatment. For a few of the insureds, both Security Health and American Family paid for incurred medical expenses but, for the most part, only Security Health made payments for the medical expenses incurred by the parties' insureds.

¶ 6 Although each of the insureds was enrolled in a separate Security Health group health plan, each Security Health plan used the same Security Health plan form which contains identical, applicable language. Similarly, while each insured was covered through a separate American Family policy, the pertinent language in each American Family policy is identical.

¶ 7 Security Health and American Family have stipulated to the date of each loss, the amounts paid, and the net amount of Security Health's forty-two claims against American Family, $165,799.34. No party disputes the necessity of the medical treatment or the reasonableness of amounts charged for the medical treatment.

¶ 8 Security Health commenced this action requesting declaratory relief that American Family rather than Security Health was required to pay the medical bills for each of the forty-two claims. Related to that request for declaratory relief was Security Health's demand for a money judgment against American Family for the $165,799.34 net amount paid by Security Health for the medical expenses. For its part, American Family denies that it owes any amount to Security Health for any of the medical expenses paid by Security Health related to these forty-two claims.

¶ 9 American Family filed a motion for summary judgment seeking denial of Security Health's requests for relief. Security Health filed a motion for declaratory judgment in support of its requests for relief. The circuit court granted Security Health's motion for declaratory judgment, denied American Family's motion for summary judgment, and entered judgment against American Family in the principal amount of $165,799.30. American Family appeals.

¶ 10 We will mention other pertinent facts in the Discussion that follows.

DISCUSSION

¶ 11 The parties concur that the question of whether American Family is required to reimburse Security Health for the amounts Security Health paid for medical expenses of the insureds is controlled by WIS. ADMIN. CODE § INS 3.40 (Dec. 2017) and WIS. STAT. § 632.32(4) (2015-2016).2

¶ 12 WISCONSIN ADMIN. CODE § INS 3.40 regulates how a health insurance plan may interact with other insurance policies, such as automobile insurance, regarding the payment of a common insured's medical bills.3 Section INS 3.40(1) states that the "purpose" of the administrative rule is to avoid "claim payment delays," provide "authority for the orderly transfer of information needed to pay claims promptly," and contain "health care costs."

Sec. INS 3.40(1)(b), (c). Section INS 3.40(1) also observes that, in the area of insurance regulation, "uniformity [is] needed" to protect the interests of the insureds and the interests of the public, and to reduce litigation. Sec. INS 3.40(1)(a), (c).

¶ 13 To achieve those goals, the "coordination of benefits" terms of WIS. ADMIN. CODE § INS 3.40 govern which plan is "primary" (pays first) and which plan is "secondary" (pays after the primary policy limits are exhausted) when there are two sources of insurance available to pay an insured's medical expenses. Sec. INS 3.40(2), (3)(j)-(k), and (11). Also, § INS 3.40(16) contains a "Right of Recovery" that Security Health is attempting to invoke against American Family in this lawsuit. That provision states that, if an insurer pays "more than it should have paid" under the coordination of benefits provision just mentioned, the insurer then has the right to recover the excess paid from an insurance company that was required to pay the amount. Sec. INS 3.40(16)(b).

¶ 14 The provisions of WIS. ADMIN. CODE § INS 3.40 apply only if the coverage provided by the health insurer, here Security Health, and by the automobile insurer, here American Family, is each a "plan" as defined in § INS 3.40. See § INS 3.40(3)(i) and (8)(a). The parties agree that the coverage provided by Security Health is a "plan," and Security Health contends that the medical expense coverage in the American Family policies is a "plan," pursuant to § INS 3.40. The parties do not dispute that our determination of whether the American Family auto insurance policy's medical expense coverage is a "plan" is the initial step in our analysis and may be dispositive; that is, if the American Family medical expense coverage in its policies is not a "plan," then Security Health has neither the right to a declaratory judgment nor a money judgment against American Family for the net amounts Security Health paid for medical expenses for the forty-two common insureds of Security Health and American Family.

¶ 15 Security Health contends that American Family's medical expense coverage in its auto insurance policies is a "plan" under WIS. ADMIN. CODE § INS 3.40 for two separate reasons, either of which is sufficient for Security Health to prevail on that issue. First, according to Security Health, American Family's medical expense coverage is "required by law" and, second, the medical expense coverage in the American Family policies is a "medical expense benefit" in an "individual automobile ‘no-fault’ contract."

¶ 16 For the reasons discussed below, we reject Security Health's arguments and conclude that American Family's medical expense coverage in its policies is not a "plan" as defined in WIS. ADMIN. CODE § INS 3.40. Therefore, Security Health has no right of reimbursement against American Family for the medical expenses Security Health paid for the parties' mutual insureds.

I. Standard of Review and Interpretation of Statutes and Administrative Regulations.

¶ 17 Summary judgment must be granted when there is no genuine issue of material fact and a party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2). "We review de novo the grant or denial of summary judgment and apply the same methodology and standards as the circuit court." Town of Grant v. Portage Cty. , 2017 WI App 69, ¶ 8, 378 Wis.2d 289, 903 N.W.2d 152. In this case, because there are no disputed material facts, we must determine which party is entitled to judgment as a matter of law. Sec. 802.08(2) ; Town of Grant , 378 Wis.2d 289, ¶ 12, 903 N.W.2d 152.

¶ 18 Security Health's request for declaratory relief presents a question of law regarding the interpretation of insurance policies in this regulatory context. Olson v. Farrar , 2012 WI 3, ¶ 24, 338 Wis.2d 215, 809 N.W.2d 1 (citing Estate of Sustache v. American Family Mut. Ins. Co. , 2008 WI 87, ¶ 18, 311 Wis.2d 548, 751 N.W.2d 845 ); see also Fontana Builders, Inc. v. Assurance Co. of Am. , 2016 WI 52, ¶ 48, 369 Wis.2d 495, 882 N.W.2d 398. We review these questions about insurance coverage independent of the circuit court's analysis. Olson , 338 Wis.2d 215, ¶ 24, 809 N.W.2d 1 (citing Bellile v. American Family Mut. Ins. Co. , 2004 WI App 72, ¶ 6, 272 Wis.2d 324, 679 N.W.2d 827 ).

¶ 19 Our analysis depends on the proper interpretation of a statute, and that presents a question of law. Town of Grant , 378 Wis.2d 289, ¶ 9, 903 N.W.2d 152. An issue of law, such as the interpretation of a statute, is reviewed de novo. Bass v....

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