Billy at birth. The State Court Action was settled for
approximately $1.9 million.
In March of 1998, William Vreeland moved, in the State Court,
for an order setting the amount, if any, of his medical
insurance company's lien on the proceeds of the settlement.
Thereafter, the insurer (referred to herein as the "Fund"),
citing the Employee Retirement Income Security Act ("ERISA") as
a basis of federal jurisdiction, removed the action to this
court. Presently before the court are the parties' cross-motions
for summary judgment. For the reasons that follow, the motions
I. Factual Background
A. The Birth of Billy Vreeland
Maureen Vreeland, William Vreeland's wife and Billy Vreeland's
mother, was admitted to the Community Hospital of Western
Suffolk on October 27, 1986. At the time, she was thirty-one
weeks pregnant. Two days later, Maureen Vreeland gave birth,
prematurely, to Billy. Billy was born with immature lungs. After
his birth, Billy was transferred to Stony Brook University
Hospital, where he remained for 121 days. For twelve weeks of
his stay, Billy was attached to a respirator. Since birth, Billy
has been hospitalized on several occasions.
Because there is a dispute between the parties regarding the
precise nature and cause of Billy's injuries, the court will not
comment extensively on these issues — they are not necessary to
the disposition of the instant motions. Suffice it to say,
however, that Billy has suffered serious medical complications
since his birth. He has been diagnosed with cerebral palsy and a
variety of lung ailments.
B. The Payment of Billy's Medical Expenses
At all relevant times, William Vreeland has been an employee
of Waldbaums. As such, he has been a participant in the Road
Carriers Local 707 Welfare Fund (the "Fund"). The Fund
reimburses medical expenses of its participants and their
dependants. As dependants of William Vreeland, Maureen and Billy
Vreeland are eligible for such payment. Since Billy's birth, the
Fund has made various payments for his medical expenses. Those
payments were associated with, inter alia, Billy's cerebral
palsy as well as his lung disease.
C. The State Court Action
William Vreeland commenced the State Court Action in 1990.
Named as defendants were Dr. Louis D. Cardi (Mrs. Vreeland's
obstetrician), the Community Hospital of Western Suffolk (the
hospital where Billy was born — the "Hospital"), Michael
Cuccinello, a Registered Nurse Anesthesiologist and his
employer, Community Anesthesia Services. Dr. Cardi was argued to
be liable for failing to have Mrs. Vreeland transferred to a
tertiary care hospital and failure to have a neonatologist
present at the birth. The anesthesiologist and his employer were
alleged to have improperly resuscitated and intubated the child.
The State Court Action was never tried. Instead, Plaintiff
settled with defendants. First, Plaintiff settled with the
Hospital for $10,000. Next, in 1998, Plaintiff settled with the
nurse-anesthesiologist and his employer for $300,000. Finally,
Plaintiff settled with Dr. Cardi for $1.6 million. Upon settling
with the latter three defendants, the settling parties put a
stipulation on the record stating, in pertinent part, that no
part of the settlement was "intended to be for any part of
medical expenses." Instead, it was stated to be the intention of
the parties that the settlement proceeds were intended to settle
for "future specials and including loss of earnings and future
pain and suffering."
D. The Fund's Participation in the State Court Action
While the precise date is in dispute, it is clear that the
Fund became aware of the State Court Action prior to the
settlement. In 1993, while the State Court Action was pending,
the Fund contacted William Vreeland and requested that he sign a
subrogation agreement, assigning to the Fund all rights, to the
extent of the amount paid by the Fund, that he had against any
party that might be liable for Vreeland's loss.
The Vreelands inquired as to the extent of the amount claimed
by the Fund as reimbursement for Billy's medical expenses. The
precise amount claimed by the Fund prior to settlement of the
State Court Action is the subject of a sharp and critical
factual dispute. According to Plaintiff, the Fund never informed
the Vreelands, prior to the settlement of the State Court
Action, that they were claiming any amount in excess of $56,000.
In this lawsuit, however, the Fund claims a right to
reimbursement of over $316,000. The Fund disputes that it ever
limited its claim in any way. Instead, the Fund faults the
Vreelands for keeping the fund "out of the loop" of settlement
discussions and therefore lays the blame for any misconception
as to the amount sought with the Vreelands.
E. The Fund's Contractual Right to Reimbursement
The Fund's right to reimbursement of expenditures for
participant medical expenses is contained in the plan document
governing the Fund (the "Plan"). The reimbursement and
subrogation clause contained in the Plan states, in pertinent
To avoid double payment [most insurers] require
reimbursement of bills paid by the fund, if and when
the participant recovers those same expenses from
another person or organization. For example, if the
fund paid your hospital, medical or similar expenses
and you were to receive those same expenses by way of
a law suit or a settlement from a third party or the
third party's insurance company, then the fund would
have the right to be reimbursed by the third party or
their insurer in the amount of the expenses paid by
the fund on your behalf.
F. The Parties' Cross-Motions
The parties have cross-moved for summary judgment. The Fund
claims that it is clear that the money received by Plaintiff in
settlement of the State Court Action falls clearly within the
reimbursement and subrogation provision of the Plan. Plaintiff
opposes the Fund's motion and seeks summary judgment on his own
First, Plaintiff argues that the equitable doctrines of
estoppel and laches bar the Fund's right to recovery in whole or
in part. The estoppel argument urges that the Fund's recovery
(if any) should be limited to the $56,000 claim that Plaintiff
relied upon when settling the State Court Action. Plaintiff
argues that laches bars the Fund's claim because of the Fund's
undue delay in seeking reimbursement.
Plaintiff also opposes the Fund's claim to reimbursement on
the merits. Relying on the Plan language which gives the Fund
the right to recover "the same" expenses paid by the Fund,
Plaintiff argues that the Fund cannot show that the settlement
proceeds were paid in compensation for the "same" medical
expenses paid by the Fund. Indeed, Plaintiff argues that
summary judgment is proper because the settlement stipulation
entered into in the State Court Action recites that the proceeds
were not intended as compensation for medical expenses. Finally,
Plaintiff argues that even if the Fund's right to the settlement
proceeds is established, summary judgment is improper because
the amount of the lien is a factual matter in dispute.
After outlining the applicable legal principles, the court
will turn to the merits of the parties' motions.
I. Legal Principles
A. Basis for Federal Jurisdiction and Summary Judgment
The Fund is an employee benefit plan and a multi-employer plan
as defined by ERISA. This court has jurisdiction over the claim
asserted by the Fund based upon Section 503(a)(3) of ERISA,
which allows plan fiduciaries to bring suit to enforce the terms
of an ERISA plan. 29 U.S.C. § 1132(a)(3).
The standards for granting summary judgment are familiar. Such
motions are properly granted only where the moving party can
establish the absence of issues of material fact and an
entitlement to judgment as a matter of law. Fed.R.Civ.P. 56(c).
Where the moving party establishes entitlement to relief, the
non-moving party must establish the existence of a material
issue of fact for trial to avoid summary judgment. See Celotex
Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2554, 91
L.Ed.2d 265 (1986).
B. The Right to Reimbursement under ERISA
Various cases have established the right of an entity, such as
the Fund, to reimbursement of medical expenses after a
participant's settlement of a lawsuit stemming from injuries
covered by the Fund. These cases focus not on any federal ERISA
common law, but on subrogation language contained in the
particular plan document at issue. For example, in Mcintosh v.
Pacific Holding Co., 992 F.2d 882 (8th Cir. 1993) and
Singleton v. Board of Trustees of IBEW Local 613, 830 F. Supp. 630
(N.D.Ga. 1993), relied upon heavily by the Fund, the courts
ordered reimbursement of medical expenses paid by an insurer out
of settlement proceeds. In both of those cases, the subrogation
clauses of the relevant plan documents provided for a broad
right of reimbursement out of settlement proceeds, whatever
In McIntosh, the subrogation clause stated that the company
would be reimbursed "to the extent of . . . the amount or
amounts received by the [insured] from [any individual] by way
of settlement. . . ." McIntosh, 992 F.2d at 883. The
subrogation clause was similarly broad in Singleton. There,
the insurer's subrogation clause provided for reimbursement "to
the extent of, but not exceeding, the amount received by the
individual . . . by way of settlement. . . ." Singleton,
830 F. Supp. at 632. Both McIntosh and Singleton, allowed
reimbursement out of settlement proceeds, therefore, because of
the unlimited scope of the subrogation clauses, providing for
repayment of medical expenses from any amount received in
settlement. See also Chitkin v. Lincoln Nat'l. Ins. Co.,
879 F. Supp. 841, 859 (S.D.Ca. 1995) (requiring reimbursement from
settlement proceeds where reimbursement clause required
repayment of "any" amount received from a third party).
In U.S. Healthcare, Inc. v. O'Brien, 868 F. Supp. 607
(S.D.N.Y. 1994), on the other hand, the terms of the relevant
subrogation clause were held not to
require reimbursement of medical expenses out of settlement
proceeds. There, the plan document provided, inter alia, that
the insurer had a right to reimbursement of medical expenses
"only when the amount received by a member is: (i) for hospital,
medical or surgical services; and (2) only to the extent that
those services were provided by [the insurer]." O'Brien,
868 F. Supp. at 609.
In O'Brien, the insured's settlement with various defendants
specifically allocated settlement proceeds to matters other than
medical expenses. The court denied the insurer's request for
reimbursement for payment of such expenses out of the settlement
proceeds on the ground that the insurer had not established that
the settlement proceeds fell within the language of the
The court in O'Brien further rejected the notion that the
insurer was entitled to recover as a matter of unjust
enrichment. Reasoning that such a claim could succeed only to
the extent that the insured received double payment for medical
expenses the court, relying on the parties' allocation of the
settlement, held that no such double payment could be
established and that therefore, no claim of unjust enrichment
could succeed. Id. at 614.
II. Disposition of the Motions
As the above discussion makes clear, the resolution of this
matter depends upon the interpretation of the reimbursement and
subrogation clause contained in the Plan. To reiterate briefly,
the Plan requires reimbursement when settlement proceeds are
payment to the insured for "the same" medical expenses
previously paid by the Fund. The plain and simple interpretation
of this contractual provision requires the Fund to show that the
settlement proceeds received by the Vreelands were meant to
compensate for "the same" medical expenses paid by the Fund. In
the context of this motion for summary judgment, that burden has
not been met.
Unlike McIntosh and Singleton, the Plan here is not so
broad in scope as to require reimbursement out of "any" amounts
received. Instead, the Plan language here is closer to that in
O'Brien, requiring reimbursement only if the insurer can show
that the settlement proceeds constitute payment for the same
money paid by the insurer for medical expenses. To prevail here,
the moving parties must show the absence of any factual question
as to the proper allocation of the settlement proceeds. This,
neither the Fund nor the Vreelands can do. Accordingly, the
court must deny the motions for summary judgment.
The court also denies the summary judgment motions because of
questions of fact regarding the laches and estoppel defenses.
Accepting Plaintiffs version of the facts may well lead to a
finding that the Fund is limited to the reimbursement of
$56,000. Because the Fund disputes the facts upon which
Plaintiffs equitable defenses lie, such defenses cannot be
decided at this juncture.
For the foregoing reasons, the court denies the cross-motions
for summary judgment. The Clerk of the Court is directed to
terminate both motions.
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