JEANETTE DIAZ аnd LEAH HOFFMANN-BERNHARDT, Individually and on Behalf of Others Similarly Situated, Plaintiffs and Appellees, v. STATE OF MONTANA, Defendant and Appellant.
No. DA 12-0654.
Supreme Court of Montana
Decided November 6, 2013.
2013 MT 331 | 372 Mont. 393 | 313 P.3d 124
Submitted on Briefs August 28, 2013.
For
For Appellees: Erik B. Thueson, Scott L. Peterson, Thueson Law Office, Helena; James G. Hunt, Jonathan McDonald, Dix, Hunt & McDonald, Helena.
CHIEF JUSTICE McGRATH delivered the Opinion of the Court.
¶1 The State of Montana appeals from the Distriсt Court‘s Order filed June 19, 2012, denying the State‘s motion for summary judgment. We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶2 Plaintiffs Diaz and Hoffman-Bernhardt were covered by the State of Montana‘s employee healthcare benefit program established under Title 2, chapter 18, MCA (referred to as the Plan). The Plan is nоt subject to the insurance code,
¶3 The District Court applied Diaz I and Blue Cross & Blue Shield v. State Auditor, 2009 MT 318, 352 Mont. 423, 218 P.3d 475 and concluded that the State, operating the Plan, is an insurer for purposes of Title 2, chapter 18, MCA, and that a “coordination of benefits” provision in the Plan contravened the “made whole” requirement of
¶4 For a period of years the Plan has contained the following provision:
The following services and expenses are not covered:
...
5. Expenses that a member is entitled to have covered or that are paid under an automobile insurance policy, a premise liability policy, or other liability insurance policy. This includes but is not limited to
a homeownеr‘s policy or business liability policy, or expenses that a member would be entitled to have covered under such policies if not covered by the State Plan.
The State refers to this as a “coordination of benefits” provision, designed to determinе which is the primary and which is the secondary payer as between insurers. The intent of the provision is to have only one insurer pay any given claim such as a medical expense, so as to “exclude double payment.”
¶5 Diaz was injured in an automobile accident in December 2006, and her medical expenses were covered by the Plan. The Plan paid her medical claims, one of which was a $195 claim paid to a naturopathic physician. The physician returned the payment to the Plan because the charge had been paid by the insurer of the other driver in the accident that injured Diaz. Hoffman-Bernhardt was injured in an automobile accident in September 2005 and her medical claims were covered by the Plan. In her case a medical сare provider returned a claim payment to the Plan because the claim had been paid by another insurer. There is no dispute that all of the medical bills of both plaintiffs were paid by either the Plan or by third-party insurers. Diaz and Hoffman-Bernhardt assert thаt the Plan should not have retained the payments returned by the medical providers, but should have paid those amounts to them and was required to do so unless they had been made whole or fully compensated for all losses they incurred as a result of the аutomobile accidents.
¶6 While the Plan did not assert express subrogation rights as against any other person or entity, the issue before the District Court was whether the Plan violated the provisions of
STANDARD OF REVIEW
¶7 The parties agree that this Court reviews a summary judgment ruling de novo to determine whether it is correct. Citizens for Responsible Dev. v. Sanders County, 2009 MT 182, ¶ 7, 351 Mont. 40, 208 P.3d 876.
DISCUSSION
¶8 The issue on appeal is whether the District Court properly denied the State‘s motion for summary judgment.
¶9
Subrogation Rights. A disability insurance poliсy subject to this chapter may contain a provision providing that, to the extent necessary for reimbursement of benefits paid to or on behalf of the insured, the insurer is entitled to subrogation as provided for in
2-18-902 , against a judgment or recovery receivеd by the insured from a third party found liable for a wrongful act or omission that caused the injury necessitating benefit payments.
Notice-shared costs of third-party action-limitation. (1) If an insured intends to institute an action for damages against a third party, the insured shall give the insurer reasonable notice of the intention to institute the action.
(2) The insured may request that the insurer pay a proportionate share of the reasonable costs of the third-party action, including attorney fees.
(3) An insurer may elect not to participate in the cost of the action. If an еlection is made, the insurer waives 50% of any subrogation rights granted to it by
2-18-901 .(4) The insurer‘s right of subrogation granted in
2-18-901 may not be enforced until the injured insured has been fully compensated for the insured‘s injuries.
“Disability insurance” is defined in
¶10 The issue on appeal is whether the made-whole requirement of
¶11 Subrogation is a substitution of the legal right of one for another. Skague v. Mtn. States T & T Co., 172 Mont. 521, 526, 565 P.2d 628, 630-31 (1977). In the case of insurance relationships, an insurer who pays for a loss incurred by the insured might have a subrogation claim against a recovery that the insured makes from a third party. This is provided for in
[W]hen the insured has sustained a loss in excess of the reimbursement by the insurer, the insured is entitled to be made whole for his entire loss and any costs of recovery, including attorney‘s fees, before the insurer can assert its right of legal subrogation against the insured or the tortfeasor.
Skague, 172 Mont. at 528, 565 P.2d at 632.
¶12 In the present case the plaintiffs assert that the Plan was obligated to pay the amount of their medical expenses even if those expenses have already been paid by a third party. Plaintiffs contend that withholding payment for a medical expense because it has been paid by a third party amounts to de-facto subrogation, especially when the Plan did not undertake any analysis of whether the beneficiaries had been made whole for their loss. Diaz I, ¶¶ 4-6. The State asserts that utilization of a coordination of benefits provision does not constitute subrogation, and therefore does not require any made-whole analysis. Further, the State contends that the Plan should not be subject to the same rules as a traditional insurer.
¶13 In Blue Cross, this Court addressed a similar issue. In that case, coordination of benefits language in a Blue Cross and Blue Shield policy excluded coverage for any health care costs incurred by its insureds if they received or were entitled to receive payment of those costs from a third party‘s automobile or premises liability policy. The issue in that case was whether the coordination of benefits provision violated the made-whole requirement found in
¶14 The same analysis applies tо the present case. The coordination of benefits provision allows the Plan to exercise de facto subrogation by allowing the Plan to avoid payment for covered medical expenses without making any determination as to whether the beneficiaries have been made whole for their loss. The critical factor is the effect of the coordination of benefits provision, and the fact that it is not expressly referred to as “subrogation” is not determinative.
¶15 The next issue is whether the provisions of
¶16 Title 2, chapter 18, MCA, specifically provides for establishment of the Plan as an alternative to conventional insurance for
¶17 The issues in this case are governed by settled Montana law, which the District Court properly applied. The decision оf the District Court is affirmed and this matter is remanded for further proceedings consistent with this Opinion.
JUSTICES COTTER, MORRIS and RICE concur.
JUSTICE COTTER, concurring.
¶18 I concur in the Court‘s Opinion. I write separately to state that my initial misgivings with Diaz‘s arguments were quelled by the fact that the Legislature was lobbied in both 2011 and 2013 to repeal
¶19 We have stated: “As a general rule, the Montana public policy is prescribed by the legislature through its enactment of statutes.” Fisher v. State Farm Mut. Auto. Ins. Co., 2013 MT 208, ¶ 25, 371 Mont. 147, 305 P.3d 861 (citing Hardy v. Progressive Specialty Ins. Co., 2003 MT 85, ¶ 32, 315 Mont. 107, 67 P.3d 892). Particularly apropos here, we have also held that “when an amendment is offered to a pending bill and rejected, the intention of the legislature is manifest that the law shall not read as it would if the amendment had been accepted, and the courts cannot do ‘by construction what thе legislature refused to do by enactment.‘” Murray Hosp. v. Angrove, 92 Mont. 101,1 116, 10 P.2d 577, 583 (1932) (On Motion for Rehearing) (citations omitted).
¶20 I therefore concur.
JUSTICE RICE, concurring.
¶21 I disagree that the coordination of benefits provision constitutes subrogation, see Opinion, ¶ 14, for the reasons set forth in my dissenting opinion in Blue Cross regarding the exclusion clause there at issue. See Blue Cross, ¶¶ 22-30 (Rice, J., dissenting). Specifically:
[S]ubrogation arises only when there is a ‘substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor.’ Thayer [v. Uninsured Employers’ Fund, 1999 MT 304, ¶ 17, 297 Mont. 179, 991 P.2d 447 (citation omitted)]. Here, subrogation never occurs because BCBS lacks any authority to substitute itself for the insured. BCBS has merely used the freedom of contract to exclude any coverage and thereby refuse to assume a risk. The provisions are clear and unambiguous: under the proposed policy, BCBS would be contracting with a customer for a single recovery, and basing the customer‘s premium thereon.
Blue Cross, ¶ 27. Again, another decision by this Court must be counted among the factors driving up the cost of health insurance, as the Court continues to ignore the design and structure of the insurance contract, and the premium upon which the contraсt was based, to redefine the subject provision as subrogation. This decision will have the effect of invalidating any number of additional setoffs and provisions by which the insurer avoids making double payments to providers of medical services. Premiums will have to be inсreased accordingly to account for the increased costs of payouts occasioned by this decision and by the additional setoffs that may be invalidated under this decision.
¶22 My dissenting opinion in Diaz I criticized the Court for issuing a “hidden holding,
¶23 I made these arguments in the cited prior cases and lost the arguments each time. Because those holdings are now the governing authority, and only for that reason, I concur in the outcome the Court has ordered herein, and have signed the opinion.
JUSTICE McKINNON joins in the concurring Opinion of JUSTICE RICE.