Blue Cross and Blue Shield of Alabama v. Cooke

Citations: 3 F. Supp. 2d 668; 1997 U.S. Dist. LEXIS 22489; 1997 WL 875666Docket: 4:97-cv-00030

Court: District Court, E.D. North Carolina; December 10, 1997; Federal District Court

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Blue Cross and Blue Shield of Alabama (BCBSA) filed a lawsuit against Rick H. Cooke, Christine Cooke, and their minor children seeking reimbursement for $113,760.15 in medical expenses paid from the Frit Industries Employees' Health Care Benefit Plan. The Cooke family sustained serious injuries from a car accident on July 15, 1995, for which the Plan covered their medical bills. In February 1996, they settled a personal injury lawsuit against Kenneth Nozawa for $150,000 but did not forward any of the settlement proceeds to BCBSA. The Plan includes a subrogation provision that entitles BCBSA to reimbursement from any third-party payments received by plan members. The Plan stipulates that BCBSA has the right to collect amounts paid for benefits from any recovery the insured receives, including from their own insurance, and that this right applies to all family members, including minors. The court is considering BCBSA's motion for summary judgment in this matter.

BCBSA became aware in fall 1995 that the Cookes were pursuing a liability claim for injuries from a July 15 collision. BCBSA sent six letters to the Cookes' attorney, Larry Wagner, regarding their subrogation rights and requested additional information about the accident. Wagner did not respond to any correspondence. Subsequently, BCBSA filed a complaint on February 18, 1997, seeking to recover $113,760.15, asserting that under ERISA, it is entitled to joint and several liability due to the Cookes' settlement receiving less than the Plan benefits. BCBSA also sought attorney's fees and costs based on a provision in the Plan that imposes such obligations if the parties fail to cooperate with BCBSA's subrogation rights. In response, the defendants argued that BCBSA's claim is barred by laches, despite being filed within the statutory limitations, and contended that the Cookes' children, being minors, have no contractual liability.

The court's discussion on summary judgment clarifies that it is appropriate under Fed. R. Civ. P. 56 when no genuine issue of material fact exists, shifting the burden to the non-moving party to show specific facts that necessitate a trial. Summary judgment is not intended to resolve factual disputes but to identify genuine issues for trial, with all inferences favoring the non-moving party. Only factual disputes that could influence the case's outcome will prevent summary judgment.

Plaintiff seeks summary judgment affirming BCBSA's right to subrogation and reimbursement under its health plan with Frit Industries. The plan mandates that the Cookes must surrender any third-party payments received for injuries from a July 15 accident. The clarity of the contractual terms should have resolved any uncertainties for the Cookes and their attorney, especially in light of six reminder letters from BCBSA. The court dismisses the defendants' argument for barring BCBSA's reimbursement claim based on laches, viewing it as an attempt to evade obligations under the plan. The court cites Fourth Circuit precedent supporting the enforcement of subrogation rights in ERISA plans, emphasizing that state laws altering these rights interfere with ERISA's preemptive scope. The court also rejects the argument that the Cookes' minor children should be exempt from reimbursement obligations, noting that the plan explicitly applies to all family members, including minors. The court finds no merit in the claim that minors are only contractually bound for necessaries under North Carolina law, stating that such a doctrine would conflict with ERISA's goals of uniformity and effective plan administration. Thus, it concludes that the North Carolina necessaries doctrine does not apply to this ERISA plan.

Defendants claim they should deduct attorney's fees paid to Wagner from their settlement amount in personal injury claims, thereby reducing their reimbursement obligation to BCBSA. However, the Plan's language explicitly states that if BCBSA is notified before a suit or settlement, it may participate and negotiate attorney's fees. If BCBSA does not hire the attorney, defendants cannot subtract these fees from the amount owed. The court notes that had the defendants or their attorney communicated with BCBSA, they might have avoided this issue. Consequently, the court grants BCBSA's motion for summary judgment, confirming its right to reimbursement of $113,760.15. 

Regarding BCBSA's request for attorney's fees, the court may award these at its discretion in ERISA cases, guided by five factors: the opposing party's culpability, their ability to pay, deterrent effect on others, the benefit to all ERISA plan participants, and the merits of both parties' positions. The court requires documentation of BCBSA's attorney's fees and costs to assess these factors and orders the plaintiff to submit this information within 20 days. The court concludes by affirming BCBSA's entitlement to reimbursement and the need for documentation on attorney's fees.