Walbro Corp. v. Amerisure Companies

Decision Date16 January 1998
Docket Number96-2192,Nos. 96-2109,s. 96-2109
Citation133 F.3d 961
Parties21 Employee Benefits Cas. 2380 WALBRO CORPORATION, individually and as Subrogee of Dennis Allen Scharich, by Cathy A. Schenk, next friend and as Subrogee of Cathy A. Schenk and Michael Schenk, Plaintiff- Appellee/Cross-Appellant, v. AMERISURE COMPANIES; Thomas D. Scharich, as Co-conservator of the Estate of Dennis Allen Scharich, Defendants-Appellees, Michael Schenk; Cathy A. Schenk, Defendants, Titan Insurance Company, Defendant-Appellant/Cross-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

James F. Troester (argued and briefed), Smith, Bovill, Fisher, Meyer & Borchard, Saginaw, MI, for Defendant-Appellee Thomas D. Scharich in No. 96-2192.

Janet Callahan Barnes (argued and briefed), Mark S. Torigan, Roger F. Wardle, Kohl, Secrest, Wardle, Lynch, Clark & Hampton, Farmington Hills, MI, for Defendant-Appellee Amerisure Companies.

Fred L. Borchard, James F. Troester, Smith, Bovill, Fisher, Meyer & Borchard, Saginaw, MI, for Defendant-Appellant/Cross-Appellee Titan Insurance Company.

Peter S. Shek (argued and briefed), Saginaw, MI, for Plaintiff-Appellee/Cross-Appellant Walbro Corporation.

Before: KENNEDY, JONES, and CLAY, Circuit Judges.

OPINION

KENNEDY, Circuit Judge.

Defendant Titan Insurance Company ("Titan") appeals and plaintiff Walbro Corporation ("Walbro") cross-appeals the District Court's orders granting summary judgment in this insurance coverage dispute. Plaintiff Walbro sued Thomas Scharich, in his capacity as co-conservator of The Estate of Dennis Scharich, Amerisure Insurance Companies ("Amerisure"), and Titan, seeking reimbursement of payments it had advanced to cover the medical expenses of Dennis Scharich, who was injured in a motor vehicle accident. The District Court concluded that defendant Titan was solely responsible for the coverage of these expenses. Walbro and Titan appealed, arguing that the expenses should be shared equally between Titan and Amerisure. Walbro also appeals the District Court's order granting summary judgment against it on its claim for reimbursement from Thomas Scharich, as co-conservator of the Estate of Dennis Scharich. For the following reasons, we find that Titan and Amerisure are equally responsible for Dennis Scharich's medical expenses. Therefore, we reverse the District Court's order granting summary judgment in favor of Amerisure and remand to the District Court for entry of appropriate judgments.

I. Facts

The case originates in a motor vehicle accident in Bay County, Michigan on July 18, 1993 that injured nine-year-old Dennis Allen Scharich. The central question that we consider is which party or parties are responsible for Dennis Scharich's medical bills that resulted from this accident. Dennis Scharich is the son of Thomas Scharich and Cathy Schenk, who were divorced in June of 1990. In its judgment of divorce, the Circuit Court for the County of Saginaw granted Thomas and Cathy joint legal and physical custody of their minor child, required court approval before either parent moved the child's domicile outside the State of Michigan, and gave both parties the legal right to share in any major decisions affecting their child until he reached the age of eighteen years. The father was ordered to pay $20.00 per week in child support and to maintain hospital, medical, and surgical insurance for his son's benefit. Each parent, however, had the right in alternate years to declare their child as a dependant for tax purposes.

The parents shared custody of their son on a flexible basis without a rigid schedule. 1 Thomas Scharich lived in Bay City and Cathy, who married Michael Schenk in September of 1991, lived in Vassar, Michigan. The flexibility of their custodial schedule allowed the parents to accommodate Dennis' participation in sports and school activities, which occurred in Bay City. Thomas Scharich testified at deposition that they "tried to work out an every other weekend thing or every other week." Cathy Schenk testified at deposition that Dennis spent alternating weeks with his mother and father. She also stated that their custody arrangement was "a really open situation," that could change from week to week depending on the families' situations. Both parents maintained a room with toys, clothes, and toiletries for Dennis in their separate homes. In addition, Dennis' paternal grandmother, Dorothy Scharich, often looked after him and kept a bedroom stocked with clothes and toys for her grandchildren. Dennis attended church each week with whoever had custody.

During July of 1993, Dennis' parents were alternating custody on a weekly basis. Cathy Schenk was scheduled to have had custody on the weekend that the accident occurred, but Thomas Scharich had arranged to have custody that weekend because his brother, Timothy Scharich, was visiting from Indiana. Dennis was a passenger in a car driven by Timothy Scharich's wife, Linda Mae Scharich, when the motor vehicle accident occurred at the intersection of Amelith and Mackinaw Roads in Bay County, Michigan. According to the police report, Linda Mae Scharich stopped briefly at a stop sign, but she then pulled in front of an oncoming pick-up truck, causing the collision.

Dennis sustained injuries that required hospitalization and extensive medical treatment. At the time of the accident, Dennis Scharich was potentially covered under three separate insurance policies. Dennis' father, Thomas Scharich, had no-fault coverage through Titan. Cathy and Michael Schenk had no-fault car insurance with Amerisure. Michael Schenk, an employee of Walbro, also was a participant in the Walbro Corporation Employee Benefit Trust (the "Plan"). This self-funded, employee benefits plan was administered by the Provident Life and Accident Insurance Company, provided health and medical insurance coverage, and was qualified under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461. After the accident, Cathy and Michael Schenk submitted claims for Dennis' medical bills to Amerisure and Walbro's Plan. Amerisure refused coverage, instructing Cathy Schenk in a letter dated July 26, 1993, that "bills for all medical expenses must first be submitted to your health insurance carrier for payment. We are only responsible for the portion of those reasonable and necessary expenses denied or partially paid by your health insurer." Cathy and Michael Schenk then submitted a claim for benefits to Walbro's Plan.

The Plan included the following coverage provision relating to injuries and illnesses caused by the acts of third parties:

Medical care benefits are not payable to or for a person covered under this Plan when the injury or illness to the covered person occurs through the act or omission of another person. However, the Company, may elect to advance payment for medical care expenses incurred for an injury or illness in which a third party may be liable. For this to happen, the covered person must sign an agreement with the Company to pay the Company in full any sums advanced to cover such medical expenses from the judgment or settlement he or she receives.

Before Walbro would advance funds to cover Dennis Scharich's medical bills, Provident Life and Accident Insurance Company, the Administrator of the Plan, required Michael and Cathy Schenk to sign the following agreement:

I agree, for myself and on behalf of my dependents, that if Provident advances benefits to or on behalf of me or my dependents, that I will repay Provident or the Plan in full any sums advanced to cover such expenses from any judgment or settlement I or my dependents receive. I further agree that Provident or the Plan may file this instrument as a lien with the person whose act caused the injuries, his agent, the court, or my attorney.

After Michael and Cathy Schenk signed this agreement, Walbro paid medical bills totaling $72,401.26 on behalf of Dennis Scharich.

In June of 1994, Dennis Scharich, a minor, by Thomas Scharich, next friend, and Thomas Scharich and Cathy Schenk, individually, sued Linda Mae Scharich in Bay County Circuit Court, setting forth a claim under Michigan's No-Fault Automobile Insurance Act ("No-Fault Act"), M.C.L. §§ 500.3101--500.3177, for the recovery of non-economic damages resulting from the July 1993 accident. The plaintiffs and Linda Mae Scharich's insurer, the Indiana Insurance Company, settled these claims on August 22, 1994. Walbro, seeking reimbursement for its payment of Dennis Scharich's medical bills, then filed a lien on the settlement with the Indiana Insurance Company.

At this point, litigation concerning the liability for the medical bills was actually proceeding in both state and federal courts. On July 18, 1994, Walbro filed its first complaint in the District Court against Amerisure and Linda Mae Scharich seeking repayment for its advance of the medical expenses. In its first amended complaint, filed on September 6, 1994, Walbro added the following defendants: Michael Schenk, Cathy Schenk, and Dennis Scharich, individually and through Next Friend, Thomas Scharich. Meanwhile, the plaintiffs in the state court litigation filed a motion to quash Walbro's lien, and, on November 1, 1994, the state court entered an order setting aside the lien. Michael and Cathy Schenk never responded to the claims made against them in the district court, and on December 21, 1994 the Clerk of Court entered their default. A default judgment subsequently was entered against Michael and Cathy Schenk.

In August, 1995, Linda Mae Scharich was granted summary judgment against Walbro. Walbro has not appealed that decision and Linda Mae Scharich is no longer a party to this case. On August 31, 1995, Walbro filed a third amended complaint, which forms the basis of the instant litigation. In this, the latest complaint, Walbro sued individually and as subrogee of Dennis Allen Scharich as well as Cathy and Michael Schenk. It...

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