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ERISA: Subrogation, Sereboff, and the “Make Whole” Doctrine: The D.C. Circuit Defines Ambiguity in ERISA Subrogation Clauses—Moore v. Capital Care, Inc.
Published online by Cambridge University Press: 01 January 2021
Extract
On August 29, 2006, the United States Court of Appeals for the District of Columbia Circuit held that an injured ERISA plan beneficiary need not be “made whole” by any injury-related recovery from a third party in order for her ERISA plan to assert subrogation or reimbursement rights if the plan's terms either 1) “unambiguously establish a plan priority” to any funds a beneficiary recovers from a third party, or 2) are reasonably interpreted to establish such a priority by an ERISA plan fiduciary clearly authorized to do so.
In 1991, appellants William and Judith Moore (the Moores) purchased an ERISA health insurance policy (the plan) from Blue Cross Blue Shield of the National Capital Area and its wholly-owned subsidiary CapitalCare (CC/BCBS). On September 10, 1992, the Moores’ daughter Alistaire, a plan beneficiary, was seriously injured in an automobile accident.
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References
2006 U.S. App. LEXIS 22075 (Aug. 29, 2006) [hereinafter Moore].Google Scholar
Moore, 2006 U.S. App. LEXIS 22075 at *17 – *19.Google Scholar
Id., at *20 – *23.Google Scholar
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Id., at *1; See 29 U.S.C. § 1132(a)(1)(B) (2005) (authorizing an ERISA beneficiary to “recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”); Moore, U.S. App. LEXIS 22075 at *4.Google Scholar
Id. at *3, n. 1.Google Scholar
Id. at *5.Google Scholar
29 U.S.C. § 1132(a)(3) (2005).Google Scholar
Moore, , 2006 U.S. App. LEXIS 22075 at *5.Google Scholar
Id., at *6–*7 (quoting Moore v. Capital-Care, Inc., No. 94-1326, slip op. at 1-2 (D.D.C. July 20, 2004)).Google Scholar
Id., at *7.Google Scholar
Sereboff v. Mid Atlantic Medical Services, LLC, 126 S. Ct. 1869 (May 15, 2006) [hereinafter, Sereboff].Google Scholar
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Id., at 1875 (quoting Barnes v. Alexander, 232 U.S. 117, 121 (1914).Google Scholar
Id., at 1874. The Sereboffs had kept the contested portion of their settlement in an investment account—rendering it both “specifically identifiable” and in their pos-session—and the respondent insurer was able to base its claim on the familiar rule of equity that “a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets a title to the thing.” Id., at 1875 (quoting Barnes, 232 U.S. at 121).Google Scholar
Moore, , 2006 U.S. App. LEXIS 22075 at *12 (quoting Appellants' Supplemental Br. 3).Google Scholar
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Id., at *13 (quoting 16 Lee Russ, R. et al., Couch on Insurance § 223:134 [3d ed. 2000]).Google Scholar
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Id., at *14 -*15 (citing Copeland Oaks v. Haupt, 209 F.3d 811, 813 (6th Cir. 2000), Cagle v. Bruner, 112 F.3d 1510, 1521–22 (11th Cir. 1997) [hereinafter, Cagle], Barnes v. Indep. Auto. Dealers Ass'n of Cal. Health & Welfare Benefit Plan, 64 F.3d 1389, 1394–95 (9th Cir. 1995).Google Scholar
Id., at *19, n. 12 (quoting Sunbeam-Oster Co. Group Benefits Plan for Salaried & Non-Bargaining Hourly Employees v. Whitehurst, 102 F.3d 1368, 1376 (5th Cir. 1996) [hereinafter, Sunbeam-Oster Co.]); contra Cagle, 112 F.3d at 1521–22 (holding that the “make whole” doctrine applies unless the plan language “specifically allows” the plan the right of first recovery whether beneficiary's recovery was partial or full).Google Scholar
Id., at *19, n. 12. The court noted that the CC/BCBS subrogation provision's silence with respect to the make whole doctrine and its failure to lay out specific terms for situations of partial versus full recovery “may signify nothing more than that…the rule [requiring reimbursement] is the same for partial and total recoveries.” Id. (quoting Sunbeam-Oster Co., 102 F.3d at 1376).Google Scholar
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Firestone, , 489 U.S. at 111.Google Scholar
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See, e.g. Harris v. Harvard Pilgrim Health Care, Inc. 208 F.3d 274, 277 (1st Cir. 2000) (citing Firestone to justify de novo review of subrogation provision where plan did not give administrator authority to interpret it. No explanation or acknowledgement of Firestone's expanded application); Cagle, 112 F.3d at 1516–17 (citing Firestone to justify application of the arbitrary and capricious standard of review to administrator's interpretation of subrogation clause. No explanation or acknowledgement of Firestone's expanded application); Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1298–99 (7th Cir.), cert. denied, 510 U.S. 916 (1993) (appellant “concedes” that “make whole rule can be overridden with clear language,” Court relies implicitly on Firestone to justify application of reasonableness standard of review to administrator's interpretation of subrogation provision. No explanation or acknowledgement of Firestone's expanded application); Baxter ex. rel. Baxter v. Lynn, 886 F.2d 182, 187 (8th Cir. 1989) (citing Firestone to justify holding that “if the…plan gives its trustee the discretion to interpret the meaning of the subrogation clause…this interpretation is subject the arbitrary and capricious standard of review.” No explanation or acknowledgment of Firestone's expanded application).Google Scholar
Moore, , 2006 U.S. App. LEXIS 22075 at *21 (citing Id.; Sanders v. Scheideler, 816 F.Supp. 1338, 1342 (W.D. Wis., 1993) (Firestone cited to justify de novo review of subrogation provision where plan did not give administrator authority to interpret it because, while the “case does not involve a denial of benefits, the Court's reliance on general principles of trust law in establishing the standard of review of a trustees' plan interpretation supports the applicability of Firestone to this case.”); contra Dugan v. Mikla, 763 F.Supp. 981, 984 (N.D. Ill. 1991), [“this is not a case of appeal from a denial of benefits and, therefore, Firestone is inapplicable.”]).Google Scholar
Moore, , 2006 U.S. App. LEXIS 22075 at *21–*23 (citing Wagener v. SBC Pension Benefit Plan-Non Bargained Program, 407 F.3d 395, 402 (D.C. Cir. 2005) for the “reasonableness” standard).Google Scholar
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See, e.g. Sereboff, , 126 S.Ct. at 1878 n. 2 (noting that the Sereboffs made this argument, but that the Court found no need to decide it at the time); Moore, 2006 U.S. App. LEXIS 22075 at *16 (noting that the Moores attempted to make this argument to the appellate court).Google Scholar
The Sereboff Court explicitly declined to decide the issue as petitioner raised it for the first time on appeal. Sereboff, 126 S. Ct. at 1878, note 2.Google Scholar
Footnote 9 reads, in relevant part: “In their supplemental brief the Moores claim…that CC/BCBS's claim is not “appropriate because Alistaire was not made whole—and thus Sereboff is not dispositive…[CC/BCBS] contend[s] that…the Moores waived the assertion that the equitable lien was not appropriate equitable relief. We need not decide the waiver issue because even assuming the Moores presented the issue on appeal, CC/BCBS are nonetheless entitled to reimbursement.” Moore, 2006 U.S. App. LEXIS 22075 at *16, n. 9.Google Scholar