Kobold v. Aetna Life Insurance
239 Ariz. 259
| Ariz. Ct. App. | 2016Background
- Kobold was injured in a 2006 motorcycle accident; Aetna paid ~ $25,000 in medical bills and the plaintiff later settled with third parties for $145,000.
- Aetna’s FEHBA plan included subrogation/reimbursement provisions and asserted a lien against Kobold’s settlement proceeds.
- The tortfeasors interpleaded the disputed funds and Kobold and Aetna cross-moved for summary judgment on whether 5 U.S.C. § 8902(m)(1) preempts state anti‑subrogation law.
- The Arizona superior court awarded summary judgment to Kobold, and the court of appeals initially affirmed in Kobold I, holding subrogation provisions not covered by § 8902(m)(1).
- After the OPM adopted 5 C.F.R. § 890.106 (requiring FEHB contracts to provide subrogation/reimbursement rights), the U.S. Supreme Court vacated and remanded Kobold I; this panel reconsidered and applied Chevron deference to the OPM regulations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 5 U.S.C. § 8902(m)(1) preempts state anti‑subrogation law | Kobold: statute does not unambiguously cover subrogation/reimbursement; state law should govern | Aetna: OPM regulations interpret § 8902(m)(1) to include subrogation and are entitled to Chevron deference, so FEHBA preempts state law | Held: OPM regulation is reasonable and entitled to Chevron deference; FEHBA preempts Arizona anti‑subrogation law |
| Whether OPM’s new rulemaking is procedurally eligible for Chevron deference | Kobold: prior judicial interpretation (Kobold I) controls | Aetna: OPM acted under delegated authority via notice-and-comment rulemaking | Held: OPM had statutory rulemaking authority and followed notice-and-comment, so procedurally eligible for Chevron |
| Whether the statute is ambiguous as to "relate to" subrogation rights | Kobold: "relate to" should not reasonably reach subrogation; Kobold I followed text | Aetna: "relate to" is broad; connection between benefits and subrogation is reasonable | Held: Supreme Court precedent recognizes ambiguity (McVeigh); "relate to" can reasonably encompass subrogation/reimbursement |
| Remedy on remand given no genuine factual dispute | Kobold: summary judgment for plaintiff was correct in Kobold I | Aetna: court should grant summary judgment for Aetna given controlling regulation | Held: Reverse superior court; direct entry of summary judgment for Aetna; deny attorney’s fees to Kobold |
Key Cases Cited
- Kobold v. Aetna Life Ins. Co., 233 Ariz. 100 (Ariz. Ct. App. 2013) (initial appellate decision on FEHBA preemption)
- Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006) (recognized multiple plausible constructions of § 8902(m)(1))
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (framework for judicial deference to agency interpretations)
- National Cable & Telecommunications Ass'n v. Brand X Internet Servs., 545 U.S. 967 (2005) (prior judicial construction does not bar later reasonable agency interpretation)
- United States v. Mead Corp., 533 U.S. 218 (2001) (when agency action is procedurally entitled to Chevron deference)
- FMC Corp. v. Holliday, 498 U.S. 52 (1990) ("relate to" can be read broadly in preemption contexts)