Kobold v. Aetna Life Insurance
233 Ariz. 100
| Ariz. Ct. App. | 2013Background
- In October 2006, federal employee Kobold, covered under an FEHBA plan administered by Aetna, was injured in a motorcycle accident; Aetna paid $24,473.53 in medical bills.
- Kobold settled his negligence claim for $145,000; Aetna asserted a contractual subrogation/reimbursement lien and claimed reimbursement from settlement proceeds.
- Tortfeasors paid Kobold $120,526.40 and deposited $24,473.53 with the superior court; they filed an interpleader action naming Kobold and Aetna.
- The superior court granted summary judgment to Kobold, holding Arizona’s anti-subrogation law controlled and that 5 U.S.C. § 8902(m)(1) did not preempt it; Aetna appealed.
- The core dispute: whether FEHBA’s preemption clause (§ 8902(m)(1)) covers contract-based subrogation/reimbursement provisions in FEHBA plans, thereby overriding Arizona law that bars subrogation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 5 U.S.C. § 8902(m)(1) preempts Arizona law barring subrogation, making Aetna’s contractual reimbursement right enforceable | Kobold: McVeigh forecloses FEHBA preemption here; Arizona anti-subrogation law applies, voiding Aetna’s contractual claim | Aetna: Plan terms relate to "coverage or benefits (including payments with respect to benefits)" and thus fall within § 8902(m)(1)’s preemption, entitling Aetna to reimbursement | The court held § 8902(m)(1) does not preempt Arizona law for contract-based subrogation/reimbursement; Aetna’s provision falls outside the preemption clause and Arizona law governs. |
Key Cases Cited
- Empire Health-choice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006) (FEHBA’s preemption clause ambiguous; did not decide whether contract-based reimbursement is preempted)
- Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005) (when statute is susceptible to competing readings, courts favor the reading that disfavors preemption)
- Roach v. Mail Handlers Benefit Plan, 298 F.3d 847 (9th Cir. 2002) ("relate to" should be read to require a direct and immediate relationship)
- Blue Cross Blue Shield of Ill. v. Cruz, 495 F.3d 510 (7th Cir. 2007) (distinguishing plan-determined benefits from state doctrines that affect distribution of third-party recoveries)
- Botsford v. Blue Cross & Blue Shield of Mont., Inc., 314 F.3d 390 (9th Cir. 2002) (interpretive guidance on FEHBA preemption language)