Diaz v. State
2013 MT 331
| Mont. | 2013Background
- Plaintiffs (Diaz and Hoffman‑Bernhardt) were covered by Montana’s State employee health Plan under Title 2, ch. 18, MCA; the Plan functions as an employer‑funded benefit program covering >30,000 persons.
- The Plan contained a "coordination of benefits" exclusion that disallowed coverage for medical expenses if they were paid or payable under an automobile, premises, or other liability insurer.
- Both plaintiffs received medical care after automobile accidents; the Plan paid claims but providers returned some payments because third‑party insurers had paid those bills.
- Plaintiffs argued the Plan could not retain returned payments (i.e., effectively subrogate) unless they were first "made whole" under §§2‑18‑901 and 2‑18‑902, MCA.
- The District Court denied the State’s summary‑judgment motion, concluding the Plan’s coordination clause operated as de facto subrogation and therefore the made‑whole requirement applied; the State appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Plan’s coordination‑of‑benefits clause constitutes subrogation | Clause produces de facto subrogation by allowing the Plan to retain refunded payments without ensuring insureds are made whole | Coordination of benefits is not subrogation; it merely determines primary payer and prevents double payment | Court: Clause has the legal effect of subrogation and can operate de facto as subrogation |
| Whether §§2‑18‑901 and 2‑18‑902 (including the made‑whole rule) apply to the State Plan | Insureds: Plan is an insurer for purposes of Title 2 and must comply with subrogation/made‑whole rules | State: Plan is not a conventional insurer subject to the Insurance Code and thus not bound by those statutes | Court: Consistent with Diaz I, the State acts as an "insurer" under Title 2 for the Plan; §§2‑18‑901 & ‑902 apply |
| Whether Plan may retain provider refunds without determining if insureds were made whole | Plaintiffs: Retention without made‑whole analysis violates §2‑18‑902(4) | State: No made‑whole obligation because coordination clause controls payment priority | Court: Insurer’s subrogation rights may not be enforced until insured is fully compensated; retention without made‑whole analysis violates the statute |
| Proper remedy at summary‑judgment stage | Plaintiffs: Summary judgment should be denied to allow proceedings to determine made‑whole status | State: Entitled to summary judgment | Court: Affirmed denial of State’s summary judgment; remand for further proceedings consistent with opinion |
Key Cases Cited
- Diaz v. Blue Cross & Blue Shield, 363 Mont. 151 (2011) (State Plan treated as an insurer for purposes of Title 2)
- Blue Cross & Blue Shield v. State Auditor, 352 Mont. 423 (2009) (coordination‑of‑benefits exclusion found to effect subrogation and violate made‑whole rule)
- Skague v. Mountain States T. & T. Co., 172 Mont. 521 (1977) (explaining subrogation and the insured‑must‑be‑made‑whole principle)