Steffens v. Bluecross Blueshield of Ill.

• Decision Date: 08 July 2011
• Docket Number: No. 2009AP1558.,2009AP1558.
• Citation: 2011 WI 60,335 Wis.2d 514,804 N.W.2d 196
• Parties: John R. STEFFENS, Plaintiff–Appellant,v.BLUECROSS BLUESHIELD OF ILLINOIS, Defendant–Respondent–Petitioner,v.Wesley D. Dishno, AIG National Insurance Company, Inc., BlueCross BlueShield of Wisconsin and The Farmers Automobile Insurance Association, Defendants.
• Court: Wisconsin Supreme Court

335 Wis.2d 514

804 N.W.2d 196

2011 WI 60

John R. STEFFENS, Plaintiff–Appellant,

v.BLUECROSS BLUESHIELD OF ILLINOIS, Defendant–Respondent–Petitioner,

v.Wesley D. Dishno, AIG National Insurance Company, Inc., BlueCross BlueShield of Wisconsin and The Farmers Automobile Insurance Association, Defendants.

No. 2009AP1558.

Supreme Court of Wisconsin.

Argued March 1, 2011.Decided July 8, 2011.

For the defendant-respondent-petitioner there were briefs by Sheila M. Sullivan, Sarah Germonprez and Bell, Moore, and Richter, S.C., Madison, and oral argument by Ms. Germonprez.For the plaintiff-appellant there was a brief by Amy M. Risseeuw, John C. Peterson, and Peterson, Berk, and Cross, S.C., Appleton, and oral argument by Ms. Risseeuw.PATIENCE DRAKE ROGGENSACK, J.

We review an unpublished opinion of the court of appeals ¹ reversing the circuit court's order ² granting BlueCross BlueShield of Illinois' (BlueCross) motion for declaratory judgment. BlueCross is a subrogated party in plaintiff John R. Steffens' (Steffens) lawsuit based on a June 2005 car accident. BlueCross's motion requested a declaration that Steffens reimburse BlueCross $67,477.57, the amount BlueCross paid pursuant to BlueCross's ERISA benefits plan (the Plan) that covered Steffens for accident-related injuries. The issues presented to this court are: (1) whether the Plan administrator's determination that under the Plan BlueCross is entitled to reimbursement is arbitrary and capricious; and (2) whether Steffens' prior representations that the surgery-necessitating injuries arose out of the automobile accident judicially estop him from now claiming that a degenerative condition caused the injuries for which surgery was performed.

We conclude that the Plan administrator's determination that BlueCross is entitled to reimbursement was not arbitrary and capricious. The Plan states that BlueCross is entitled to reimbursement from the beneficiary of the Plan for “expenses incurred as the result of, or that arose out of, an accident” when a third party “may be liable” for the payment of those expenses and the beneficiary obtains a settlement from the third party. The Plan gives the Plan administrator discretion to interpret the clause.

¶ 3 Prior to settlement, Steffens consistently asserted that the surgery-necessitating injuries arose out of a June 2005 automobile accident. Consequently, it was not arbitrary and capricious for the Plan administrator to interpret the Plan and conclude that BlueCross is entitled to reimbursement because the expenses that BlueCross paid arose from an accident for which a third party may be liable.

¶ 4 Our conclusion that the Plan administrator's determination that BlueCross is entitled to reimbursement is not arbitrary and capricious is dispositive of the case. We, therefore, do not reach the judicial estoppel issue.

I. BACKGROUND

A. The Accident

¶ 5 On June 29, 2005, Steffens was involved in an automobile accident in Outagamie County. According to Steffens, he was stopped at a traffic light when Wesley Dishno's (Dishno) vehicle hit him from behind. This pushed Steffens into the van in front of him. Steffens suffered injuries as a result of the accident.

¶ 6 Steffens visited the emergency room approximately two hours after the accident. He complained of a headache, as well as shoulder and neck pain. No significant procedures were performed during this visit. Various doctors' notes from July of 2005 to March of 2006 indicate that Steffens continued to suffer from pain and stiffness in his neck, upper back, thorax, and shoulders. Moreover, in the months immediately following the accident, Steffens suffered from headaches.

¶ 7 In early March of 2006 Steffens was beginning to experience lower back pain with intermittent radiation to his lower extremities. This low back pain continued throughout 2006. In December of 2006, Steffens had a Magnetic Resonance Imaging (MRI) of his spine. The MRI revealed that at vertebrae L5–S1, Steffens had a grade-one spondylolisthesis.³ On May 22, 2007, Steffens underwent L5–S1, lumbosacral fusion surgery.

¶ 8 The medical notes indicate that Steffens' pain improved following the surgery. Moreover, Steffens had asserted that he did not have any back pain prior to the June 2005 accident.

B. The Plan

¶ 9 As aforementioned, Steffens was a beneficiary under an ERISA ⁴ plan provided by BlueCross. BlueCross paid for a significant portion of Steffens' back and neck related medical expenses, including the lumbosacral fusion surgery, as it was required to do under the Plan. The Plan has a “Reimbursement, Subrogation, and/or Right of Reduction” clause. The clause gives the administrator discretion to interpret its terms. It states: “The Plan/Plan administrator has sole discretion to interpret the terms of this provision in its entirety....”

¶ 10 The clause details when BlueCross is entitled to subrogation:

If any benefits payable under the Plan to you or your dependents were for expenses incurred as the result of, or that arose out of, an accident or other situation such that other party or parties, may be liable for the payment of expenses and you subsequently obtain a settlement from or a judgment against such other party or parties, you or your dependents are obligated to reimburse the Plan. The Plan's right to reduction, reimbursement and subrogation apply regardless of whether the settlement or award is designated as payment for, but not limited to pain and suffering, wage loss, loss of consortium, medical benefits, and other specified damages. The Plan has first priority with respect to its right to reduction, reimbursement and subrogation.

¶ 11 In addition, the clause explicitly gives BlueCross a right of first priority, notwithstanding the make-whole doctrine:

The Plan's right to reduction, reimbursement and subrogation will not be reduced even if the recovery does not fully compensate you or your dependents, or you or your dependents were not made whole, for all losses sustained or alleged, or the recovery is not described as being related to medical costs. The amount the Plan is entitled to will also not be reduced by legal fees or court costs incurred in seeking the recovery. Any so-called “make-whole” or “full-compensation” rule or doctrine is hereby explicitly rejected and disavowed.

C. Pre–Settlement Litigation

¶ 12 On January 2, 2008, Steffens filed a complaint against Dishno demanding compensatory damages for the accident. The complaint was later amended on February 25, 2008. According to the amended complaint, the accident caused Steffens severe, permanent, and costly injuries:

As a direct and proximate consequence of the negligence of the defendant, Wesley D. Dishno, the plaintiff, John R. Steffens, was severely and permanently injured, has been unable to undertake his usual activities and occupations for a sustained period of time, has incurred significant expenses for the care and treatment of his injuries, and has been otherwise permanently injured and damaged.⁵

¶ 13 In addition to Dishno, Steffens named AIG National Insurance Company (AIG), BlueCross, and the Farmers Automobile Insurance Association (Farmers) as defendants. AIG was named as a defendant because Dishno carried AIG's automobile liability insurance. Steffens named both BlueCross and Farmers ⁶ due to their potential rights of subrogation. According to the complaint, both insurers “paid some of the medical bills incurred by John R. Steffens as a result of injuries sustained in the collision.” ⁷ Despite naming them as subrogated parties, Steffens asked in the complaint for a “judgment against [BlueCross and Farmers], foreclosing any claim they may have for subrogation.”

¶ 14 Subsequent to the amended complaint, on March 17, 2008, BlueCross filed a cross-claim against Dishno and AIG, and a counterclaim against Steffens. BlueCross's cross-claim alleged that it “has paid medical bills on behalf of John R. Steffens for treatment of injuries suffered in the accident of June 29, 2005, in the amount of $67,477.57.” ⁸ Moreover, BlueCross asserted that because the Plan is an ERISA plan, BlueCross's subrogated interest is not subject to the “make-whole” doctrine.⁹ BlueCross's counterclaim alleged that under the Plan, Steffens is obligated to reimburse BlueCross, out of any recovery in the action for the $67,477.57 paid by BlueCross.¹⁰ BlueCross attached a “Medical Itemization Report” stating the amounts billed for injuries related to the accident and the lien amounts held by BlueCross. Steffens' surgery was listed.

¶ 15 On April 10, 2008, Steffens replied to BlueCross's counterclaim, asserting that “BlueCross ... is entitled to no reimbursement for medical expenses paid in this matter until and unless Plaintiff is made whole.” ¹¹ This was the only assertion Steffens made in his reply. Notably, Steffens did not contest the dollar amount, i.e., the $67,477.57 that BlueCross claimed it had paid “for treatment of injuries suffered in the accident of June 29, 2005.” ¹² To the contrary, throughout the first year of litigation, Steffens asserted that BlueCross had paid $67,477.57 and that the surgery-necessitating injuries arose out of the accident.

In particular, Steffens responded to interrogatories in April of 2008. Steffens described the extent of his injuries from the accident:

I sustained a back injury that resulted in a lumbosacral fusion surgery. Initially, following the accident, I primarily had pain that radiated down my leg all the way to my toes. After the surgery, my pain was primarily isolated in my low back at the surgery site. The injuries have affected, impaired and changed my life in numerous ways. For example, prior to the accident I enjoyed golfing, snowboarding and snowmobiling, however, since the accident I have not been able to participate in those activities. Additionally, normal day-to-day activities have been difficult for me since the accident. Specifically, activities that require bending over...