Aрpellant, Employers Health Insurance, is the manager of the Ft. Howard Paper Company’s employee benefit plan. The Plan appeals from an order of the District Court of Wagoner County, Honorable G. Bruce Sewell District Judge, ordering payment of $40,-000.00 held in the registry of the court to Appellee, Yvonne Yоungblood as mother and next friend of Kim Youngblood a minor. 1 The $40,000.00 was paid into court in an interpleader action by two liability insurance companies, Equity Fire and Casualty Company and State Farm Mutual Automobile Insurance Company, under the terms of an automobile liability policy and two uninsured motorist policies.
Kim Youngblood was injured in an automobile accident covered by the two liability insurance companies’ policies. The liability insurance companies were dismissed from the action when they paid the limits of their policies into court. The liability insurance companies are not parties to this appeal. Ft. Howard Paper Company’s self funded insurance benefit plan is covered under ERISA (the Employee Retirement Income Security Act of 1974, 29 U.S.C.A. § 1144(a), (b)(2)(A,B)). The Plan paid Kim Young-blood’s medical expenses arising from the accident, $31,845.14. The Youngbloods allege that Kim Youngblood’s total damages were more than $150,000.00, and the Plan admits this to be true.
Artiсle 11 of the Plan, entitled “Subrogation and Reimbursement,” gives the Plan certain rights to repayment of amounts it has paid on behalf of a “Plan Member.” 2 The *574 Plan Member here was L.C. Youngblood, who is Kim Youngblood’s father, and an employee of Ft. Howard Paper company.
ISSUE
The issue to be resolved is whether ERISA mandates the enforсement of the Plan’s reimbursement provision, despite the fact that Kim Youngblood has received compensation far less than the total amount of her damages. We hold that ERISA does not mandate such a result here, and that the Plan’s reimbursement provision does not apply here.
DISCUSSION
The issue before us subsumes a question of Oklahoma law of first impression: Is a contractual subrogation or reimbursement provision, which contains no priority of payment provision, enforceable under Oklahoma law where the recipient of the benefits sought to be recovered has not been fully compensated by payments from a third pаrty? We answer no.
ERISA and Its Effect On Oklahoma Law
ERISA (the Employee Retirement Income Security Act of 1974, § 514(a), (b)(2)(A, B), as amended 29 U.S.C.A. § 1144(a), (b)(2)(A, B)) contains three provisions regarding preemption of state law. The first provision states that Congress intended ERISA to preempt state laws that relate to self funded employee benefit plans:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....
29 U.S.C. § 1144(a). The general preemptive effect on subsection (a) is specifically limitеd by subsection (b), commonly called the “saving clause”:
Except as provided in subparagraph (B) nothing in this subchapter shall be construed to exempt or relieve any person from- any law of any State which regulates insurance, banking, or securities.
29 U.S.C. § 1144(b)(2)(a). The power that subsection (b) reserves to the states to regulаte insurance, banking, and securities is expressly limited by subparagraph (2)(B) of that subsection, commonly called the “deem-er clause”:
Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.
29 U.S.C. § 1144(b)(2)(B).
In 1990 the United States Supreme Court decided
FMC Corporation v. Holliday,
The terms of the FMC plan’s subrogation and reimbursement provisions were not stated in the opinion. Neither did the court discuss the effect of whether the beneficiary of the payments made by FMC had been fully compensated for her injuries.
Decisions Since FMC Corporation v. Holliday
ERISA as interpreted by FMC Corporation v. Holliday has spawned many opinions, both state and federal. No clear rule can be discerned from these cases. A few guidelines do appear, however. First, state subrogation rules generally are preempted by ERISA. Second, an ERISA plan’s rights to subrogation and reimbursement are governed by the terms of the plan when those terms are unambiguous. The courts have significantly disagreed over the effect of reimbursement language similar to that contained in the Ft. Howard plan when, as is the ease here, the undisputed facts show that the plan beneficiary was not “made whole” by the payments she received. In most states reimbursement is not allowed against one who has not been made whole by the settlement or judgment in which the party seeking reimbursement claims a right. 3
Decisions Construing Genuinely Unambiguous Subrogation of Reimbursement Provisions
We have found only a few cases involving what to our minds were genuinely unambiguous reimbursement provisions. For example, in
Hershey v. Physicians Health Plan,
A Different Result Is Called For Where the Plan’s Terms Do Not Specify Priority of Repayment and Do Not Give Plan Managers the Right to Interpret the Plan
Unlike the examples cited above, most plans’ reimbursement provisions, including the reimbursement provision before us today, are silent as to the priority of payment. We find persuasive the reasoning of a line of eases, representing both state and federal courts, which are similar on their facts to the ease аt bar. Those cases held that if a plan is silent about the priority of payment, does not expressly give its managers the right to resolve ambiguities, and the facts do not clearly show that the beneficiary’s settlement included reimbursement for medical expenses, the plan will not be allowed to recover, despitе ERISA.
*576
In
Sanders v. Scheideler and NEPCO EMBA,
The subrogation clause does not address the priority of the plan’s subrogation rights ... to the undesignated proceeds of a limited insurance settlement. The majority common law rule precludes an insurer from exercising a right of reimbursement unless the insured’s entire loss has been paid.
In holding against the plan, the court first held that a de novo standard of review was appropriate. That is the court ■ would not defer to the judgment of the plan’s managers concerning the plan’s interpretation, but would independently interpret the plan’s terms. The authority of the plan managers to “pass upon all claims by a member against the Association” was deemed insufficient to cause the court to defer to the managers’ interpretation of the plan. 4 The court then adopted as the federal common law Wisconsin’s make whole rule, which prohibits a party seeking subrogation or reimbursement out of recoveries made due to personal injuriеs from recovering until the injured party has been fully compensated.
In
Murzyn v. Amoco Corporation,
Courts from at least four states have reached the same conclusion as
Sanders
and
Murzyn. Schultz v. Nepco Employees Mutual Benefit Association, Inc.,
The Make Whole Rule is the Majority Rule
The cases cited above make clear, and our own research convinces us that the make whole rule is the majority rule. See also Robert E. Keeton and Alan I. Widiss, Insurance Law, § 3.10 at 236 (1988); AHan D. Windt, Insurance Claims and Disputes, § 10.06 at 533 (2d ed. 1992). We adopt the make whole rule in contract subrogation and reimbursement cases where (1) the subrogation or reimbursement contract neither expressly sets priorities for the repayment of benefits, nor otherwise gives a right to sub-rogation or reimbursement before any funds are paid to the beneficiary, nor vests the plan manager’s discretionary authority to interpret ambiguous provisions of the plan; and *577 (2) the compensation received by the beneficiary from settlement -with or judgment against a third party represents less than full compensation. Under such circumstances, the subrogation and reimbursement terms of the contract will be unenforсeable.
Conclusion
In this appeal, the Plan’s managers, in their “sole discretion may permit the Plan Member to reimburse the Plan less than the full recovery amount received....” See note 1, p. 3. The Plan is apparently silent as to who may interpret its provisions with binding effect. Thus, we may review its terms de novo.
The cases cited above demonstrate that applying the Oklahoma make whole rule to this appeal does no violence to ERISA’s preemption of state laws because it is identical to the federal common law applied by several federal courts in similar circumstances. Certainly, our decision contributes to nо more “endless litigation over the validity of State action” feared by the Congress when it passed ERISA than do cases reaching the opposite conclusion. We therefore hold that the Plan is prohibited from sharing in the moneys the trial court ordered paid to Kim Youngblood because (1) the Plan fails to expressly state the priority for repayment of moneys; (2) the Plan’s managers are not expressly vested with authority to bind Plan Members with their interpretation of ambiguous provisions of the Plan; and (3) the $40,000.00 paid to Kim Youngblood’s mother, failed to fully compensate Kim Youngblood for her damages, which admittedly exceeded $150,000.00.
CERTIORARI PREVIOUSLY GRANTED, COURT OF APPEALS’ OPINION VACATED, TRIAL COURT’S JUDGMENT AFFIRMED. ■
Notes
. The insurance companies paid into court a total of $50,000.00. The $10,000.00 not paid to Kim Youngblood are not at issue in this appeal.
. Article 11 of the Plan reads in full as follows:
Subrogation and Reimbursement
11.1 Subrogation.
(a) In General. When charges are incurred by a Plan Member for services relating to Accidental Injury or Illness for which any benefits are payable undеr this Plan, and the Accidental Injury or Illness arises under circumstances which may create a legal liability in another individual or organization, and whenever the Plan pays any Plan benefits to or on behalf of a Plan Member, the Plan Member’s rights with respect to his or her right of recovery (if any) from a third party shall be subrogated to thе Plan to the extent of Plan benefit payments.
(b) Plan Member's Obligations. The Plan Member’s obligations under this Article 11 shall include, but shall not be limited to, the following:
(i) Taking any affirmative action necessary to preserve a Plan Member’s right of recovery and to obtain recovery from such individual or organizations;
(ii) Avoidance of impairing, prejudicing or discharging the Plan's right of subrogation on the Plan Member’s claims;
(iii) Assisting the Plan as necessary to enforce its subrogation rights; and
(iv) Paying to the Plan any amounts received from such individual or organization to the extent of Plan benefits paid; provided, however, that the Committee, at its sole discretion, may permit thе Plan Member to pay to the *574 Plan less than the full amount received from such individual or organization.
11.2 Reimbursement. When any Plan benefits are paid or provided for charges incurred by a Plan Member as a result of an Accidental Injury or Illness and that Plan Member makes a recovery (whether by settlement or judgment or otherwise) from any individuаl or organization equally or financially responsible for such Accidental Injury or Illness, then the Plan shall have a lien upon any such recovery, and the Plan Member shall reimburse the Plan to the extent that benefits were paid hereunder; provided, however, that the Committee, at its sole discretion, may permit the Plan Member to reimburse the Plan less than the full recovery amount received from such individual or organization. Nevertheless, in no event shall the Plan Member be required to make a reimbursement in an amount exceeding the recovery made by the Plan Member against such individual or organization.
. The United States Court of Appeals for the Tenth Circuit reached a conclusion contrary to the conclusion we reach today concerning the make whole rule in
Fields v. Farmers Insurance Company, Inc.,
. This holding was consistent with many other decisions holding that the mere grant of decision making authority does "not necessarily confer discretionary authority to render decisions with regard to ambiguous provisions of the plan.” See
Sanders,
. What the court referred to as a pro rata rule is called the "common fund" rule in some jurisdictions. See
Scholtens v. Schneider,