Zurich American v. Wis. Physicians Serv.

• Decision Date: 14 November 2007
• Docket Number: No. 2006AP2320.,2006AP2320.
• Citation: 743 N.W.2d 710,2007 WI App 259
• Parties: ZURICH AMERICAN INSURANCE COMPANY, Plaintiff-Respondent-Cross-Appellant, Michels Corporation, Involuntary-Plaintiff, v. WISCONSIN PHYSICIANS SERVICES INSURANCE CORPORATION, Defendant-Appellant-Cross-Respondent.
• Court: Wisconsin Court of Appeals

743 N.W.2d 710

2007 WI App 259

ZURICH AMERICAN INSURANCE COMPANY, Plaintiff-Respondent-Cross-Appellant Michels Corporation, Involuntary-Plaintiff, v. WISCONSIN PHYSICIANS SERVICES INSURANCE CORPORATION, Defendant-Appellant-Cross-Respondent.

No. 2006AP2320.

Court of Appeals of Wisconsin.

Submitted on Briefs August 7, 2007.

Opinion Filed November 14, 2007.

On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of Beth Ermatinger and David J. Turek of Gass Weber Mullins LLC, of Milwaukee.

On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Christine M. Witherill of Wisconsin Physicians Service Insurance Corporation, of Madison.

Before CURLEY, P.J., WEDEMEYER and FINE, JJ.

¶ 1 WEDEMEYER, J

Wisconsin Physicians Services Insurance Corporation ("WPS") appeals from a summary judgment granted in favor of Zurich American Insurance Company on its subrogation claim. WPS claims that the trial court erred in ruling that WPS must pay Zurich the $350,000 Zurich paid to settle a health insurance dispute. Zurich cross-appeals from the trial court's order denying its request for 12% prejudgment interest and optical imaging costs. Because the trial court did not err in ruling on the issues contained in both the appeal and cross-appeal, we affirm.

BACKGROUND

¶ 2 This case involves the medical costs incurred by Troy Beebe, who was employed at Michels Corporation through November 21, 2000. At the conclusion of his employment, Beebe moved to Colorado. At all times relevant to this dispute, Michels was self-insured for purposes of health coverage for its employees up to $40,000 per participant. Michels contracted with WPS through a "Stop-Loss Policy" where WPS insured any health-related costs incurred above the $40,000 amount. In addition, WPS acted as the third-party administrator of Michels' self-insured health plan. Michels also carried liability insurance through Zurich.

¶ 3 The pertinent facts in this case are undisputed. Beebe's last day of employment with Michels was November 21, 2000. Due to an administrative error, however, Michels did not terminate his health care insurance coverage with WPS. Rather, Michels continued to pay monthly health care insurance premiums for Beebe to WPS for stop-loss coverage.

¶ 4 Approximately six months later, on May 5, 2001, Beebe was catastrophically injured in a single-car accident in Colorado. He did not have any automobile insurance. Beebe spent the first month following the accident in the trauma center of a hospital. On June 6, 2001, Beebe was transferred to Craig Hospital Rehabilitation Center in Colorado. Before admission, Craig Hospital contacted Michels to confirm that Beebe had health insurance.

¶ 5 On September 18, 2001, while in the midst of processing the medical bills submitted by Craig Hospital for Beebe's care, Michels discovered that it failed to terminate Beebe's medical coverage and give him notice of his COBRA right to continuation of health care coverage. Thus, on September 21, 2001, Michels sent a letter containing the COBRA election form to Beebe. The letter stated:

On September 18, 2001, it came to our attention that due to an administration error your health care coverage was not appropriately cancelled when you terminated your employment. As a result you have enjoyed the benefit of coverage at no expense to yourself since December 2000. Please note on page two, paragraph one, your coverage expires October 1, 2001; however, a Federal law commonly referred to as COBRA allows you to extend Health Care coverage at your own expense....

On the same date, Michels instructed WPS to terminate Beebe's regular health care plan coverage effective October 1, 2001. On October 16, 2001, Beebe elected COBRA coverage and the premium for two months of coverage was paid for by Craig Hospital on Beebe's behalf.

¶ 6 On November 2, 2001, WPS denied coverage for Beebe's hospital bills, stating that because Michels was delinquent in providing Beebe with his COBRA continuation rights, no coverage existed under the stop-loss policy. On November 7, 2001, Beebe was released from Craig Hospital. The total hospital bill was approximately $355,000, which no one paid.

¶ 7 On December 1, 2001, Beebe's COBRA coverage lapsed as no further premium payments were made. In December 2002, Craig Hospital sued Michels, alleging causes of action for promissory estoppel and violations of the Colorado Consumer Protective Act — seeking payment for the unpaid hospital bills. Michels submitted the suit to its liability insurer, Zurich, who agreed to defend Michels in the suit.

¶ 8 On July 8, 2003, Zurich settled the Craig Hospital suit by paying $350,000. On November 10, 2004, pursuant to the subrogation clause in the liability policy, Zurich filed suit against WPS, alleging breach of contract and seeking payment of the $350,000 plus interest. Both Zurich and WPS filed motions seeking summary judgment. The motions were heard by the trial court in October 2005. On December 14, 2005, the trial court granted Zurich's motion for summary judgment, denied WPS's motion for summary judgment and awarded Zurich 12% prejudgment interest pursuant to WIS. STAT. § 628.46(1) (2003-04).¹ Because the record did not contain the date that Zurich gave WPS notice of Beebe's claims, the trial court ordered Zurich to supply that information and submit a proposed order for judgment.

¶ 9 On January 27, 2006, WPS objected to Zurich's bill of costs and its submissions regarding prejudgment interest. In response, the trial court ordered additional briefing. By order dated May 15, 2006, the trial court ruled that Zurich was not entitled to recover $248.50 for "Imaging: PDF Files" as a photocopying expense.² The trial court again invited additional briefing on the prejudgment interest issue, noting that it had reconsidered its earlier conclusion that Zurich was entitled to 12% statutory prejudgment interest. Additional briefs were submitted to the trial court on the interest issue in June 2006. On August 4, 2006, the trial court issued its order, granting WPS's objection to Zurich's proposed order for judgment and vacating that portion of the trial court's earlier order awarding 12% prejudgment interest. The trial court concluded that Zurich was not entitled to the statutory 12% interest, but rather, ordered WPS to pay prejudgment interest at the rate of 5% from the date of notice to WPS, which was November 10, 2004. Judgment was granted. WPS appealed the $350,000 subrogation award and Zurich cross-appealed on the issue of interest and photocopying costs. The appeal and cross-appeal are now before this court.

DISCUSSION

¶ 10 In reviewing a grant of summary judgment, we employ the same methodology as the trial court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987). We first examine the pleadings and affidavits to determine whether a claim for relief has been stated. Id. If a claim for relief has been stated, we then determine whether any factual issues exist. Id. If there is no genuine issue as to any material fact, and if the moving party is entitled to judgment as a matter of law, we will affirm the trial court's decision granting summary judgment. Id. We independently examine the record to determine if the party is entitled to judgment as a matter of law, but do value the analysis set forth by the trial court. See Streff v. Town of Delafield, 190 Wis.2d 348, 353, 526 N.W.2d 822 (Ct.App. 1994). As here, when both sides have filed cross-motions for summary judgment, the parties concede there are no issues of material fact, waive trial, and stipulate to the court's resolution of the legal issues. Precision Erecting, Inc. v. AFW Foundry, Inc., 229 Wis.2d 189, 197, 598 N.W.2d 614 (Ct.App.1999) ("reviewing court may still decide, as a matter of law, that there are indeed material facts in dispute").

APPEAL

¶ 11 The issue on appeal is whether WPS is obligated to reimburse Zurich for the $350,000 it paid to settle the Craig Hospital suit against Michels related to its ex-employee's medical expenses. This issue requires interpretation of the insurance policies contractual language, which presents a question of law reviewed independently by this court. See Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597 (1990). To the extent the policy's language is plain and unambiguous, it is dispositive on the coverage question. See Allstate Ins. Co. v. Gifford, 178 Wis.2d 341, 346, 504 N.W.2d 370 (Ct.App. 1993).

¶ 12 Thus, we examine first the pertinent language of the insurance contracts at issue. The health plan at Michels is contained within a document entitled "Group Master Plan Document." According to the terms of that document, Michels' health plan provides coverage to three groups: (1) current, full-time employees; (2) retired employees who meet age and years of service requirement; and (3) individuals who elect "continuation coverage."

¶ 13 Coverage ends under the Plan "on the earliest of the following dates" as pertinent here: "The day immediately following the last day of the calendar month a covered employee isn't a full-time employee or is not within the class of employees eligible under the Plan."

"Continuation coverage" is located in Section 11 of the Plan and provides in pertinent part:

All participants covered under the Plan who would otherwise lose coverage as the result of a "qualifying event" have the right to elect continued health care coverage.

A qualifying event is any one of the following events which, but for continuation of coverage, would result in the loss of health care coverage:

....

2. the termination of the covered employee (other than by the employee's gross misconduct);

....

No employee, spouse or child will be considered a participant unless, on the date before the qualifying event, that individual was covered under the Plan.

¶ 14 The Plan next sets forth the...