The opinion of the court was delivered by: Honorable Thomas L. Ludington
OPINION AND ORDER DENYING STATE FARM'S MOTION FOR DECLARATORY JUDGMENT OR SUMMARY JUDGMENT, GRANTING THE PLAN'S MOTION FOR SUMMARY JUDGMENT, AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
The primary issue raised in this declaratory judgment action is whether Defendant PetSmart Smart Choices Benefit Plan ("the Plan"), is entitled to reimbursement for medical expenses paid on behalf of Plaintiff Kerrie Bash, who sustained catastrophic injuries in an automobile accident, from a tort recovery settlement primarily based on the recovery of non-economic damages. If the Plan is entitled to reimbursement from the tort recovery settlement, the question becomes whether State Farm Mutual Automobile Insurance Company ("State Farm"), as Kerrie Bash's first-party insurer, is in turn obligated to reimburse the Estate of Kerrie Bash for those funds paid to the Plan.
Plaintiffs Kerrie Bash, and Dale Bash, as Conservator of the Estate of Kerrie Bash (collectively, "Plaintiff"), filed an amended complaint [Dkt. # 12] on April 7, 2009, seeking a declaratory judgment against State Farm, the Plan, Francesca Spinelli (the administrator of the Plan), and PetSmart, Inc. (Kerrie Bash's former employer). The Plan filed counterclaims [Dkt. # 16] against Plaintiff for breach of contract and a declaratory judgment on May 15, 2009. On February 2, 2010, Defendants PetSmart, Inc., and Francesca Spinelli, were dismissed without prejudice pursuant to a stipulated order [Dkt. # 29].
Now before the Court are State Farm's motion for declaratory judgment or summary judgment as to Plaintiff's claims [Dkt. # 25], the Plan's motion for summary judgment on Plaintiff's claims and its counterclaims [Dkt. # 27], and Plaintiff's motion for summary judgment on Plaintiff's claims and the Plan's counterclaims [Dkt. # 33]. The Plan filed a response [Dkt. # 31] to State Farm's motion and a response [Dkt. # 36] to Plaintiff's motion. State Farm filed a response [Dkt. # 32] to the Plan's motion. No other responses or replies were filed.
The Court has reviewed the parties' submissions and finds that oral argument will not aid in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the papers submitted. E.D. Mich. LR 7.1(e)(2). For the reasons stated below, State Farm's motion for declaratory judgment or summary judgment [Dkt. # 25] will be denied, the Plan's motion for summary judgment [Dkt. # 27] will be granted, and Plaintiff's motion for summary judgment [Dkt. # 33] will be granted in part and denied in part. The Plan is entitled to reimbursement for medical expenses paid on behalf of Plaintiff and State Farm is obligated to reimburse Plaintiff for the settlement funds that must be used to pay the Plan.
Under Federal Rule of Civil Procedure 56(c), a court must review "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," to conclude that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The Court must view the evidence and draw all reasonable inferences in favor of the non-moving party and determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The party bringing the summary judgment motion has the initial burden of informing the court of the basis for its motion and identifying portions of the record which demonstrate the absence of a genuine dispute over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d 845, 848 (6th Cir. 2002). The party opposing the motion then may not "rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact" but must make an affirmative showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989).
On February 3, 2007, Kerrie Bash was catastrophically injured while a passenger in a vehicle being operated by her stepfather, Thomas Markus, MD. The injuries that Kerrie Bash suffered include a severe traumatic brain injury that required a prolonged hospitalization during which she was comatose and on a ventilator before progressing to a "minimally conscious state." Kerrie Bash also suffered a fractured neck, which ultimately required a surgical fusion. Kerrie Bash currently resides at the Riverside Rehabilitation Center for the Brain Injured in Bay City, Michigan. Kerrie Bash's injuries deprive her of any semblance of a normal life and she is unable to live independently.
At the time of the accident, Kerrie Bash was employed by PetSmart, Inc., and thereby covered by the Plan. At this juncture, the parties do not dispute that the Plan is a self-funded health benefits ERISA plan within the meaning of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq. At all times relevant, both Kerrie Bash and Dr. Markus were Michigan residents. At the time of the accident, the vehicle Dr. Markus was operating was insured under Michigan no-fault policy number G235-507-22D, issued by State Farm. State Farm also issued Michigan no-fault insurance policy number 1057365-C16-22B to Kerrie Bash. Plaintiff reached a settlement agreement with State Farm, as Dr. Markus' insurer, for the sum of $1,100,000. Plaintiff also reached a settlement agreement for the sum of $100,000 with Erie Insurance Company, the insurer of the operator of another vehicle involved in the accident of February 3, 2007.
In a previous lawsuit in this Court, case number 07-14626, to which the parties were State Farm, the Plan, PetSmart, Inc., and Francesca Spinelli, the Court entered a declaratory judgment by consent. The consent judgment provided that the Plan was responsible for "primary coverage, as between the Plan and State Farm, for the benefits of Bash arising out of the Accident under the terms of the Plan, and State Farm shall provide coverage as the secondary/excess insurer, as between the Plan and State Farm, for the benefits of Kerrie Bash arising out of the Accident." See State Farm Mut. Auto. Ins. Co. v. PetSmart, Inc., No. 07-14626 (E.D. Mich. Apr. 13, 2009) (Dkt. # 22). To date, the Plan has paid approximately $475,000 for Kerrie Bash's medical care; and the parties explain that the Plan is not anticipated to have future coverage obligations.
The Plan provisions now at issue in this case provide as follows:
9.1 Benefits Conditioned on Plan's Right of Subrogation/Reimbursement. The provision of benefits under the Plain is subject to the Plan's right to subrogation/reimbursement as set forth in this Article. By electing to participate in the Plan and receiving benefits that are conditioned on the Plan's right to subrogation/reimbursement, Covered Persons agree to abide by the terms and conditions of the Plan in general and this Article in particular.
9.2 Plan's Right to Subrogation/Reimbursement. If a Covered Person is injured or becomes ill as a result of or in connection with the act or omission of a third party ("Third Party Act Injury or Illness"), any benefits provided under the Plan to the Covered Person for the Third Part Act Injury or Illness are conditioned on the Plan's right to subrogation/reimbursement. The Plan's right to subrogation/reimbursement applies to any and all amounts recovered ("Recovery Amount") by the Covered Person (whether by settlement, court order, judgment, or otherwise, and whether or not actually collected) or the Plan (if the Plan elects to exercise its right to pursue recovery directly) from the third party, the third party's personal representative, the third party's insurance carrier(s), or any other source (collectively, "Third Party") for the act or omission of the third party. The Plan's right to subrogation/reimbursement is a right of first recovery from the Recovery Amount, and the Subrogation Amount shall be paid from the Recovery Amount without regard to whether Covered Person will be made whole by the Recovery Amount.
9.3 Subrogation Amount. The amount to which the Plan has a right to subrogation/reimbursement ("Subrogation Amount") is the lesser of (a) the value of the benefits that have been (and will be) provided under the Plan for the Third Party Act Injury or Illness, or (b) the Recovery Amount minus the amount of reasonable attorneys' fees and costs incurred by the Covered Person in obtaining the Recovery Amount. The value of ...