OVERVIEW OF:
N. Buckeye Edn. Council Grp. Hlth. Bene. Plan
v. Lawson, 103 Ohio St.3d 188, 2004-Ohio-4886
Robert W. Kerpsack, Esq.
ROBERT W. KERPSACK CO., L.P.A.
21 East State Street, Suite 300
Columbus, OH 43215
Telephone: (614) 242-1000
Facsimile: (614) 242-4180
Email: bob@rwklaw.com
October 19, 2004
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LAWSON TOPICS:
• REVIEW OF LAWSON SYLLABUS LAW
– NO MAKE-WHOLE RULE IN OHIO RE: SUBRO
• REVIEW OF OH SUBRO LAW AFTER LAWSON
• REVIEW OF CURRENT FEDERAL SUBRO LAW
• SUBRO MANAGEMENT AFTER LAWSON
– ERISA v. NON-ERISA PLANS
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LAWSON FACTS
•
NON-ERISA PLAN (SELF-INSURED GOV’T EMPLOYER):
– PLAN MUST BE “REIMBURSED” (FIRST PRIORITY)
– PLAN IS “SUBROGATED” (STANDS IN SHOES)
– NO PLAN PAYMENT UNTIL SUBRO/REIMBURS
AGREEMENT SIGNED
•
CERTIFIED QUESTION: IS A SUBROGATION AND
REIMBURSEMENT CLAUSE WHICH ATTEMPTS TO GIVE
AN INSURER CLAIM PRIORITY OVER THE INSURED’S
CLAIM AGAINST A THIRD PARTY OR OTHER INSURER,
REGARDLESS OF WHETHER THE INSURED HAS
RECEIVED FULL COMPENSATION FOR HER INJURIES,
AGAINST PUBLIC POLICY AND UNENFORCEABLE?
•
ANSWER: NO
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LAWSON SYLLABUS
1. A provider of health-insurance benefits and an insured who has been
injured by an act of a third party may agree prior to payment of
medical benefits that the insured will reimburse the insurer for any
amounts later recovered from that third party, third party’s insurer, or
any other person through settlement or satisfaction of judgment upon
any claims arising from the third party’s act. A clear and
unambiguous agreement so providing is not unenforceable as
against public policy, irrespective of whether the settlement or
judgment provides full compensation for the insured’s total damages.
2. A reimbursement agreement between an insured and a healthbenefits provider clearly and unambiguously avoids the make-whole
doctrine if the agreement establishes both (1) that the insurer has a
right to a full or partial recovery of amounts paid by it on the insured’s
behalf and (2) that the insurer will be accorded priority over the
insured as to any funds recovered.
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LAWSON DICTA
• AFFIRMANCE OF JAMES V. MICHIGAN MUT. INS. CO. (1985),
18 Ohio St.3d 386, 481 N.E.2d 272: The make-whole doctrine
applies by default where an insurer’s subrogation/reimbursement
is by contract, but the contract does not specify whether the
insurer or the insured has priority to the recovered funds.
• ADOPTION OF STANDARD APPLIED IN COPELAND OAKS V.
HAUPT (C.A.6, 2000), 209 F.3d 811: The make-whole doctrine is
not applicable to a reimbursement agreement between an insured
and a health-benefits provider that establishes both 1) that the
insurer has a right to a full or partial recovery of amounts paid by it
on the insured’s behalf and 2) that the insurer will be accorded
priority over the insured as to any funds recovered.
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LAWSON DICTA (con’t)
• LIMITATION OF SYLLABUS OF BLUE CROSS & BLUE
SHIELD V. HRENKO (1995), 72 Ohio St.3d 120, 647
N.E.2d 1358: “Pursuant to the terms of an insurance
contract, a health insurer that has paid medical benefits to
its insured and has been subrogated to the rights of its
insured may recover from the insured after the insured
receives full compensation by way of settlement with the
insured’s uninsured motorist carrier.”
• LAWSON HOLDING: “We reject the proposition that this
[Hrenko] syllabus language should be construed as
modifying our prior holdings.” Lawson, at ¶19
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FEDERAL SUBROGATION LAW
Great West Life & Annuity v. Knudson (2002),122 S.Ct.708:
• Employee Retirement Income Security Act ("ERISA") of
1974 permits a self-funded health benefits plan to seek only
equitable relief (i.e. constructive trust or equitable
restitution), not legal relief (i.e. enforcement of contractual
subrogation/reimbursement).
• Federal courts maintain exclusive jurisdiction over actions
by self-insured ERISA Plan’s to recover money.
• See, also, Boerger v. Davis, Franklin App. No. 03AP805, 2004-Ohio-3882
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NON-ERISA POLICY SUBRO MGT.
• IS IT AN ERISA PLAN OR NON-ERISA PLAN?
– WHO IS PAYING THE BILLS?
• INSURANCE COMPANY = NON-ERISA, STATE LAW APPLIES
• SELF-FUNDED PLAN = ERISA, FEDERAL LAW APPLIES
• READ THE POLICY! (NOT JUST SUBRO SUMMARY)
– DOES INSURER HAVE PRIORITY TO RECOVERED FUNDS
• SIGN REIMBURSEMENT AGREEMENT ONLY IF:
– 1) REQUIRED BY POLICY AND/OR 2) SUBJECT TO
EXPRESS RESTRICTION THAT POLICY PROVISIONS
AND/OR OH LAW PREVAIL OVER ANY CONFLICTS OR
ADDITIONAL RIGHTS AND RESPONSIBILITIES
ESTABLISHED BY REIMBURSEMENT AGREEMENT
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NON-ERISA POLICY SUBRO MGT. (con’t)
• OFFER TO SETTLE NON-ERISA SUBROGATION
CLAIM FOR PRO-RATA SHARE OF RECOVERY
– NATIONAL SUBROGATION COLLECTORS ARE
FREQUENTLY UNAWARE OF OHIO SUBRO LAW
• JOIN SUBROGATED INTEREST-HOLDER IN
ACTION AGAINST TORTFEASOR/UM CARRIER AS
PARTY-DEFENDANT, PER CIV. R. 19(A)(3)
– FORCE SUBROGATED INTEREST-HOLDER (REAL
PARTY IN INTEREST) TO PROVE ITS PRIMA FACIE
CASE OF DAMAGES
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ERISA SUBRO MANAGEMENT
•
•
IS IT REALLY AN ERISA PLAN?
– SELF-FUNDED EMPLOYER BENE. PLAN PAYING BILLS
– SELF-FUNDED GOV’T/CHURCH PLANS NOT ERISA
OFFER TO SETTLE ERISA SUBROGATED INTEREST FOR
PENNIES ON THE DOLLAR
–
•
NATIONAL ERISA SUBROGATION COLLECTORS ARE
TERRIFIED OF KNUDSON
JOIN SUBROGATED INTEREST-HOLDER IN ACTION
AGAINST TORTFEASOR/UM CARRIER AS PARTYDEFENDANT, PER CIV. R. 19(A)(3)
–
MOVE TO DISMISS COUNTERCLAIM FOR SUBRO/REIMB,
ARGUING STATE COURT HAS NO JURISDICTION
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LIFE AFTER LAWSON
•
MORE OF THE SAME!
•
MOST HEALTH INSURANCE POLICIES/PLANS
ALREADY INCLUDE CONTRACTUAL RIGHTS OF
REIMBURSEMENT GIVING THE INSURER/PLAN
FIRST PRIORITY TO RECOVERED FUNDS
•
WE NEED TO CREATE A DIALOGUE WITH
SUBROGATED INTEREST HOLDERS
– DON’T JUST “LET THE SLEEPING DOGS LIE!”
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LIFE AFTER LAWSON (con’t)
• UPCOMING OATL SEMINARS RE: LAWSON
– Friday, November 12, 2004 (half-day)
Holiday Inn Select, Strongsville
(near Cleveland - at I-71 & Route 82)
– Friday, November 19, 2004 (half-day)
Holiday Inn West, Columbus
(near Hilliard - at I-270 and Roberts Road)
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