Wausau Benefits v. Progressive Ins. Co.

• Decision Date: 09 July 2003
• Docket Number: No. CIV.A. 2:02-CV-107.,CIV.A. 2:02-CV-107.
• Citation: Wausau Benefits v. Progressive Ins. Co., 270 F.Supp.2d 980 (S.D. Ohio 2003)
• Parties: WAUSAU BENEFITS, et al., Plaintiffs, v. PROGRESSIVE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

270 F.Supp.2d 980

WAUSAU BENEFITS, et al., Plaintiffs, v. PROGRESSIVE INSURANCE COMPANY, et al., Defendants.

No. CIV.A. 2:02-CV-107.

United States District Court, S.D. Ohio, Eastern Division.

July 9, 2003.

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Daran P. Kiefer, Kreiner & Peters Co., Cleveland, OH, for Plaintiffs.

Jeffrey J. Madrzykowski, Ted B. Riley, Manahan, Pietrykowski, Bamman & Delaney, Toledo, OH, Joel S. McPherson, Hyatt Legal Services, Springfield, OH, J. Richard Brown, Office of J. Richard Brown—2, Dublin, OH, Rudy A. Bisciotti, Edward M. Ryder, Mazanec Raskin & Ryder Co. LPA, Columbus, OH, Steven D. Christopher, Findlay, OH, for Defendants.

OPINION AND ORDER

KING, United States Magistrate Judge.

This is an action for a constructive trust and equitable lien to restore assets to the Kohl's Department Stores Employee Benefit Plan (hereinafter "Plan") in connection with benefits paid on behalf of the participant insureds, defendants Carrie and Bradford Miller (hereinafter "the Millers"), for injuries allegedly caused by defendant Driggers' negligence, for which defendant Progressive Insurance Company (hereinafter "Progressive") provided insurance coverage. Plaintiffs also seek subrogation directly from defendant Driggers. With the consent of the parties, 28 U.S.C. § 636(c), this matter is before the Court on the various motions of the parties.

I. Background

Plaintiffs, Wausau Benefits and Kohl's Department Stores (hereinafter collectively "plaintiffs") are fiduciaries/administrators of the Plan, a self-funded plan allegedly governed by the provisions of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq., (hereinafter "ERISA"). Complaint, at ¶¶ 1, 7. The Millers are covered by this Plan through Carrie Miller's employment at the Kohl's operations in Findlay, Ohio. Id., at ¶ 8.

On June 1, 2001, the Millers were injured in an accident resulting from defendant Driggers' alleged negligent operation of a motor vehicle. Id., at ¶¶ 5, 10, 25. As a result of this accident, the Millers incurred medical expenses in excess of $735,000. Affidavit of Carrie Miller, at ¶ 6, attached as Exhibit A to Defendants' Reply and Motion for Summary Judgment. See also Complaint, at ¶ 10. Plaintiffs have paid $486,529.12 of the Millers' medical and hospital expenses. Id., at ¶¶ 11-12, 24.

The Millers allege that they remain jointly liable for the amount of medical expenses not paid by the Plan. Affidavit of Carrie Miller, at ¶ 6. Progressive had issued an insurance policy to defendant Diggers, which provided for a maximum payout of $100,000 per person. Complaint, at ¶ 13. See also Affidavit of Carrie Miller, at ¶ 8. Two hundred thousand dollars ($200,000) is allegedly being held by defendants Driggers and Progressive in connection with Millers' claims against Driggers. Complaint, at ¶ 13; Affidavit of Carrie Miller, at ¶ 10.

Plaintiffs allege that, at least a portion of the money held by defendants Driggers and Progressive relates to the medical and hospital expenses incurred by the Millers. Complaint, at ¶ 14. Plaintiffs argue that the Plan contains a subrogation clause which grants plaintiffs a priority interest in these funds. Id., at ¶¶ 15-20, 31-33.

The Plan's subrogation clause provides: When an associate or dependent receives a benefit from the plan:

(A) For an illness; and

(B) Is entitled to recover payment from any party who may be obligated to pay for such Illness; then

We are subrogated to all rights to recover:

(A) Any payments which the associate or dependent or any other person or organization is entitled to on account of such Illness; and

(B) To the extent that we paid a benefit.

The associate or dependent or other person receiving such payment from us shall:

(A) Sign and deliver all necessary papers;

(B) Do whatever else is necessary to protect our rights; and

(C) Shall not do anything before or after our payment which would prejudice our rights.

Our rights of full recovery may be from a third party, any liability or other insurance covering a third party, the associate's or dependent's own uninsured motorist insurance, underinsured motorist insurance, any medical payments, no fault insurance or school insurance coverages that are paid or payable.

Our right to subrogate will apply even if the associate or dependent has not been made whole for the loss. Our right of subrogation shall be, in first priority, to the extent of any and all benefits paid. We will not pay fees or costs associated with any claim/lawsuit without express written consent. We reserve the right to independently pursue and recover paid benefits.

Plan, at p. 37, attached as Exhibit 1 to Plaintiffs' Motion for a Determination of the Subrogation Priority of the Plaintiffs.

For their part, the Millers argue that the money held by defendants Driggers and Progressive is insufficient to cover the medical expenses not paid by the Plan. See Affidavit of Carrie Miller, at ¶¶ 8-9. Additionally, the Millers allege that, as a result of the accident, Carrie Miller has been rendered totally and permanently disabled, resulting in an estimated $450,000 in lost wages. Id., at ¶¶ 4, 7. The Millers also allege that Bradford Miller has suffered lost wages in the amount of $19,000. Affidavit of Bradford Miller, at ¶ 4, attached as Exhibit F to Defendants' Reply and Motion for Summary Judgment. The Millers take the position that, because they have not been made whole, they have priority over the funds held by defendants Driggers and Progressive, therefore precluding any recovery by plaintiffs.

II. Discussion

A. Plaintiffs' Motion to Strike

In a motion for summary judgment filed on November 13, 2002, the Millers argue, inter alia, that this Court is without jurisdiction to hear this case and that venue is improper. Plaintiffs moved to strike those portions of the Millers' motion for summary judgment, arguing that these arguments are untimely, see Preliminary Pretrial Order, at p. 2 (June 6, 2002), and that the Court has in fact already ruled on those issues. See Continued Preliminary Pretrial Order (September 13, 2002).

Motions to strike are generally disfavored, and the resolution of such motions is reserved to the sound discretion of the trial court. Watkins & Son Pet Supplies v. Iams Co., 107 F.Supp.2d 883 (S.D.Ohio 1999). Moreover, with regard to subject matter jurisdiction, "[w]henever it appears by suggestion of the parties ... that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Fed.R.Civ.P. 12(h)(3). The defense of lack of subject matter jurisdiction therefore cannot be waived. In the interest of justice, this Court will deny this portion of plaintiffs' motion to strike and will revisit the issue of subject matter jurisdiction.

The defense of improper venue, on the other hand, can be waived if not timely asserted. See Fed.R.Civ.P. 12(h)(1). See also Centerville ALF, Inc. v. Balanced Care Corp., 197 F.Supp.2d 1039, 1047 (S.D.Ohio 2002). Motions regarding venue were to be filed no later than July 30, 2002. Preliminary Pretrial Order, at p. 2 (June 6, 2002). The Millers raised this issue for the first time in their November 13, 2002, motion for summary judgment. Defendants have thereby effectively waived the issue of venue. Therefore, to the extent that plaintiffs seek to strike those portions of the Millers' motion relating to venue, the motion to strike will be granted.¹

B. Subject Matter Jurisdiction

Plaintiffs allege that the Plan at issue in this case is governed by ERISA. Questions concerning the construction of ERISA qualified plans arise under the federal common law; federal courts therefore have jurisdiction to consider such claims pursuant to § 1331. Walbro Corp. v. Amensure Companies, 133 F.3d 961, 965-66 (6th Cir.1998). The Millers take the position, however, that plaintiffs have not established that the Plan is ERISA-qualified. In particular, the Millers argue that plaintiffs have failed to comply with 29 U.S.C. §§ 1022(a), 1023(a)(1)(A).²

An "employee welfare benefit plan" is defined by ERISA as "any plan, fund, or program ... established or maintained by an employer ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment ...." 29 U.S.C. § 1002(1). The United States Court of Appeals for the Sixth Circuit has developed a three-step factual analysis for determining whether a benefit plan satisfies the statutory definition set out in § 1002(1). Thompson v. American Home Assurance Co., 95 F.3d 429 (6th Cir.1996). See also Agrawal v. Paul Revere Life Ins. Co., 205 F.3d 297, 299-300 (6th Cir.2000). First, a court must apply the Department of Labor "safe harbor" regulations to determine whether the program is exempt from ERISA. Thompson, 95 F.3d at 434. Second, a court should determine whether, from the surrounding circumstances, a reasonable person could ascertain the intended benefits, the class of beneficiaries, the source of financing, and procedures for obtaining benefits. Id., at 435. Finally, a court should determine whether the employer established or maintained the plan with the intent of providing benefits to its employees. Id.

First, it does not appear that the Plan is exempt under the Department of Labor's "safe harbor" regulations. The Department of Labor regulations provide that the term "employee welfare benefit plan"

shall not include a group or group-type insurance program offered by an insurer to employees ... under which

(1)No contributions are made by an employer or employee organization;

(2)Participation in the program is completely voluntary for employees or members;

(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the...