Wendy's Intern., Inc. v. Karsko, 95-3763

• Decision Date: 04 September 1996
• Docket Number: No. 95-3763,95-3763
• Citation: 94 F.3d 1010
• Parties: WENDY'S INTERNATIONAL, INC., as Administrator of Wendy's International, Inc. Employee Benefit Program, Plaintiff-Appellant, v. Linda S. KARSKO; Michael A. Karsko; Nationwide Mutual Fire Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1010

94 F.3d 1010

WENDY'S INTERNATIONAL, INC., as Administrator of Wendy's International, Inc. Employee Benefit Program Plaintiff-Appellant, v. Linda S. KARSKO; Michael A. Karsko; Nationwide Mutual Fire Insurance Company, Defendants-Appellees.

No. 95-3763.

United States Court of Appeals Sixth Circuit.

Argued June 13, 1996.

Decided Sept. 4, 1996.

Algenon L. Marbley (argued and briefed), Brent C. Taggart, Vorys, Sater, Seymour & Pease, Columbus, OH, for Wendy's International, Inc.

Pamela S. Krivda, James Morgan, Hahn, Loeser and Parks, Columbus, OH, for Linda S. Karsko and Michael A. Karsko.

Michael Richard Henry (argued and briefed), Crabbe, Brown, Jones, Potts & Schmidt, Columbus, OH, for Nationwide Mutual Fire Insurance Company.

Before: MERRITT, Chief Judge; KEITH and SUHRHEINRICH, Circuit Judges.

MERRITT, Chief Judge.

Plaintiff Wendy's International appeals from the District Court's grant of summary judgment in favor of the Defendants. Wendy's brought this action on behalf of its Employee Benefit Program Plan under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461 (1988). After one of its plan participants, Linda Karsko, was in an automobile accident caused by an uninsured motorist, Wendy's incurred $66,757.19 in medical expenses on Mrs. Karsko's behalf. In addition, the Nationwide insurance company paid the Karskos the full amount of their coverage under their uninsured motorist policy ($110,000), in settlement of their claim arising from the same accident. Wendy's sued both the Karskos and Nationwide to recoup its $66,757.19 in expenses, arguing that the subrogation provisions of the Plan apply to monies received from uninsured motorist coverage. Wendy's subsequently settled with the Karskos, so this case now involves only Wendy's claim against Nationwide.

The District Court held that, under the language of the relevant plan documents, Wendy's has no right to subrogation of uninsured motorist benefits. We AFFIRM, but for different reasons. We find that Wendy's has no right of action against Nationwide because, even though the subrogation clause does apply to uninsured motorist benefits, Nationwide has fulfilled its obligation by paying the Karskos. We reject the Plaintiff's suggestion that we adopt a common law doctrine with would allow them to collect further against Nationwide, because the doctrine in question applies only against tortfeasors, and Nationwide was not a tortfeasor in this case. In addition, permitting subrogation against Nationwide would violate fundamental principles of restitution or unjust enrichment law on which the doctrine of subrogation rests.

I.

On June 2, 1992, Linda Karsko was injured in an automobile accident caused by an uninsured motorist. At the time of the accident, Ms. Karsko was an employee of Wendy's and was enrolled in their health insurance plan. As a result of the injuries she sustained in the accident, Wendy's incurred $66,757.19 in medical payments on Mrs. Karsko's behalf.

The summary plan description ("SPD") of Wendy's Plan contained the following subrogation clause:

If you or a dependent incurs an injury or illness caused by the negligence or wrong doing of a third party, the plan will cover those medical expenses. However, if you are reimbursed or recover monies from the person responsible for the loss, the plan shall be reimbursed the total amount of the benefits paid by the plan, but such reimbursement shall not exceed the total proceeds of the recovery.

SPD at 12-13, Jt.App. at 174 (emphasis added). The Employee Benefit Program Plan Document (Plan Document) also contained a subrogation clause, which stated:

With respect to benefits payable under this Plan, the Plan reserves the right to be reimbursed if a Participant or a personal representative thereof recovers monies from a third party or a personal representative thereof whether by judgment, settlement or otherwise, on account of such Injury or Illness. Reimbursement to the Plan shall be for the total amount of benefits paid under the Plan but shall not exceed the total proceeds of the recovery.

Plan Document at 55, Jt.App. at 139 (emphasis added). ¹

Mrs. Karsko also had uninsured motorist coverage through the Nationwide insurance company. As a result of this accident, Nationwide paid the Karskos the full amount of their coverage ($110,000). Wendy's concluded that the Plan's subrogation provisions apply to settlements received by participants from uninsured motorist carriers. It therefore sued the Karskos and Nationwide to recover the $66,757.19 it paid out in medical expenses.

The District Court held that Wendy's interpretation of its health insurance subrogation provision was arbitrary and capricious. First, it found that neither the SPD nor the Plan Document explicitly provide a right of subrogation when the covered person recovers monies from her own insurance company. Then, it held that " 'a responsible party ... clearly refers to a party responsible for the insured's injury and not to an insurer providing uninsured motorist coverage to the insured.' " Slip op. at 14 (quoting Employers Health Ins. v. Gen., Casualty Co. of Wis., 161 Wis.2d 937, 469 N.W.2d 172, 177 (1991)). Therefore, the District Court reasoned, Wendy's conclusion that the SPD and Plan Document language reached uninsured motorist coverage is irrational. The District Court then concluded that because the Plan creates no valid subrogation interest in the proceeds of the Nationwide uninsured motorist policy, Wendy's has no right of action against Nationwide. The Karskos have since settled with Wendy's. Wendy's is pursuing its claims against Nationwide in this appeal.

II.

The first issue to be addressed is whether money received by a Plan participant pursuant to an uninsured motorist policy is within the scope of the Wendy's Plan's subrogation provisions. Wendy's, as plan administrator, found that the relevant provisions cover Nationwide's payment to the Karskos. Where an ERISA plan gives the plan administrator discretionary authority to determine benefits or construe the terms of the plan, the administrator's interpretation of Plan language is reviewed under an "arbitrary and capricious" standard. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S.Ct. 948, 954-55, 103 L.Ed.2d 80 (1989). Thus, if Wendy's interpretation of the Plan's subrogation provisions is "reasonable," it must be upheld. Id.; Baker v. UMWA Health and Retirement Funds, 929 F.2d 1140, 1144 (6th Cir.1991). The issue is a question of law which this Court reviews de novo. Waxman v. Luna, 881 F.2d 237, 240 (6th Cir.1989).

In this case, Wendy's determination that the Karskos' uninsured motorist coverage was susceptible to subrogation was based on the language contained in both the SPD and the Plan document itself. Wendy's reasoned that Nationwide was "responsible" for the Karskos' "loss" because of the liability created by the uninsured motorist policy, and thus, the recovery fell within the subrogation provision of the SPD. Similarly, Wendy's interpreted the Plan Document provision which states that,

the Plan reserves the right to be reimbursed if a participant or a personal representative thereof recovers monies from a third party or a personal representative thereof whether by judgment, settlement or otherwise, on account of such Injury....

to reach uninsured motorist coverage, reasoning that Mrs. Karsko's received "monies" from Nationwide "on account of" the injuries she sustained in the accident is question. The District Court held that these interpretations were arbitrary and capricious. We disagree.

An insurance company such as Nationwide is a "person," and it may be "responsible" for a "loss" in the sense that it is legally obligated to the insured under certain circumstances. While this is a rather broad use of the word "responsibility," it is certainly not irrational. Had the SPD said that Wendy's had a right to monies collected only from the person who "caused" the injury, this might be a closer case, since Nationwide certainly did not "cause" the Karsko's loss. The phrase "person responsible for the loss" is much more ambiguous, however, and is therefore subject to a broader range of interpretations.

Defendants argue that this Court must look exclusively to the language contained in the SPD, citing this Court's opinion in Edwards v. State Farm Mutual Auto. Insurance Co., 851 F.2d 134, 136 (6th Cir.1988). In Edwards, however, the SPD and Plan Document contained conflicting language. Id. We held that in such a case, the SPD controls. Id. In this case, however, the SPD and Plan document are entirely consistent. Both documents are susceptible to precisely the same interpretation. The Edwards case is therefore inapposite, and we may look to the Plan Document to inform our interpretation of the SPD.

The language of the Plan document is much less ambiguous than the SPD, and clearly reaches the situation in this case. Mrs. Karsko, the participant, recovered monies from a "third party ... by settlement ... on account of such injury." Thus, when the language of the Plan Document is used to inform the rather ambiguous meaning of the SPD's terms, it becomes apparent that Wendy's interpretation of its subrogation provisions was not arbitrary and...