Summerlin v. Georgia-Pacific Corp. Life, Health and Acc. Plan
Ray Summerlin was a covered person in the Georgia-Pacific Corporation Life, Health and Accident Plan ("the Plan"). His dependent spouse, Janet, was also covered by the Plan. The Plan was self-funded, and governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA).
In 1999, Mrs. Summerlin incurred medical expenses which were paid by the Plan for $80,597.04.
Mrs. Summerlin filed a malpractice suit against her treatment providers, and the suit was settled for $115,000. In February 2003, after attorney's fees and costs were deducted, Mr. and Mrs. Summerlin received a check for $52,217.23. As you may imagine, the recovery did not fully compensate wife or husband for her injuries, including medical expenses, lost wages, and pain and suffering.
The Plan contends that because it paid benefits of $80,597.04 for expenses arising from the Summerlins' medical malpractice claim and because the Summerlins recovered from a third party on that claim, the Plan should be reimbursed the benefits paid relating to the medical malpractice claim.
The Plan relies upon the following subrogation and reimbursement provisions in the Plan contract: " If you receive any payment (whether or not characterized as reimbursement for a medical expense) as a judgment, settlement or otherwise from any person or entity (including and without limitation to the third party's or your own insurance company) with respect to the sickness, injury or other condition which gives rise to expenses which the Plan pays, including any such payment made as a result of the requirements under a "no-fault" motor vehicle insurance statute or other similar legislation, or under the personal injury projection provision in an automobile insurance policy, you shall reimburse the Plan from such payments to the extent of the expenses paid under the Plan regardless whether the judgment, settlement or other payments allocates any specified amount to reimbursement for medical expenses and regardless whether such expenses are paid prior to or after the date of such judgment, settlement or otherwise. The Plan Administrator has the discretion (but is not required) to estimate the future amount of such expenses in lieu of requiring you to reimburse the Plan as such expenses are incurred."
After being paid funds pursuant to the settlement agreement the Summerlins did not reimburse the Plan for the claims it paid on Mrs. Summerlin's behalf. Based on the reimbursement and offset provisions, the Plan's third-party administrator, Wausau Benefits, notified Plaintiff of its intent to offset future claims for Plaintiff and his dependents until the Plan is reimbursed the $80,597.04 it paid on behalf of Mrs. Summerlin.
Plaintiff has incurred, and continues to incur, medical expenses covered by the Plan that are unrelated to Mrs. Summerlin's 1999 claims, and the Plan's third-party administrator has begun offsetting the amount it contends the Plan is owed for the benefits paid on behalf of Mrs. Summerlin against the amounts due on Plaintiff's claims. She filed suit against the Plan, seeking damages and an injunction against further offsetting by Defendants.
The Plan's third-party administrator, Wausau Benefits, Inc., was originally named as a Defendant in this case. The parties have stipulated that Wausau Benefits should be dismissed with prejudice. Accordingly, Defendant Wausau Benefits, Inc., is dismissed from this action with prejudice. The only remaining Defendant in this case is Georgia-Pacific Corporation Life, Health and Accident Plan.
The Court's discussion is key here.
1. The Georgia Anti-Subrogation Statute Does Not Apply in this Case
Plaintiff contends that he is not obligated to reimburse the Plan because Georgia's anti-subrogation statute, O.C.G.A. § 33-24-56.1, applies and prevents the Plan from requiring reimbursement of *1208 the payments made on behalf of Mrs. Summerlin-and from enforcing the reimbursement claim via setoff-because the settlement did not make Mr. and Mrs. Summerlin whole. O.C.G.A. § 33-24-56.1 provides that benefit providers, including employee benefit plans, may require reimbursement of medical expenses paid on behalf of an injured party in the event of a recovery for that personal injury from a third party. O.C.G.A. § 33-24-56.1(b) (2004). There is a limitation to this rule: reimbursement may be required only if the amount of recovery exceeds the sum of all losses incurred as a result of the injury. Id. Furthermore, under this law, benefit providers may not withhold or set off insurance benefits as a means of enforcing a claim of reimbursement. O.C.G.A. § 33-24-56.1(f).
The parties have stipulated that the settlement was not sufficient to fully compensate Mr. and Mrs. Summerlin for their injuries. Therefore, if the complete compensation rule of O.C.G.A. § 33-24-56.1 applied in this case, Defendants would not be entitled to seek reimbursement from the Summerlins or to set off the amount the Plan paid on behalf of Mrs. Summerlin against Plaintiff's benefits. See O.C.G.A. § 33-24-56.1; Thurman v. State Farm Mut. Auto. Ins. Co., 278 Ga. 162, 164, 598 S.E.2d 448, 451 (2004). But if ERISA preempts O.C.G.A. § 33-24-56.1, the statute would not apply to prevent Defendants from enforcing the reimbursement claim.
ERISA preempts all state statutes that "relate to" employee benefit plans. 29 U.S.C. § 1144(a); see also FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990); Swerhun v. Guardian Life Ins. Co., 979 F.2d 195, 197 (11th Cir.1992). There is an exception to this rule: under ERISA's "saving clause," a state statute that "relates to" an employee welfare plan may escape preemption if it regulates insurance. See 29 U.S.C. § 1144(b)(2)(A); see also Ky. Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, 334, 123 S.Ct. 1471, 155 L.Ed.2d 468 (2003); Swerhun, 979 F.2d at 197. But there is an exception to the exception: even if the state law at issue falls within the saving clause, ERISA's "deemer clause" exempts certain ERISA plans from state regulation. See 29 U.S.C. § 1144(b)(2)(B); Holliday, 498 U.S. at 61, 111 S.Ct. 403; Swerhun, 979 F.2d at 197.
Defendant contends that O.C.G.A. § 33-24-56.1 is preempted by ERISA and therefore does not apply in this case. There is no contention that the Georgia anti-subrogation statute does not "relate to" ERISA covered plans. Therefore, if the statute is not saved by ERISA's saving clause or if the Plan in this case is exempt from the statute by virtue of ERISA's deemer clause, the Georgia anti-subrogation statute does not apply.
Defendant is correct that ERISA preempts O.C.G.A. § 33-24-56.1 in this case. Pretermitting the question whether O.C.G.A. § 33-24-56.1 is saved by ERISA's saving clause, [FN2] the Plan in this case is exempted from the reach of the statute by virtue of ERISA's deemer clause. ERISA's deemer clause exempts *1209 certain ERISA plans from state laws that "regulate insurance" within the meaning of the saving clause. 29 U.S.C. § 1144(b)(2)(B); Holliday, 498 U.S. at 61, 111 S.Ct. 403. The Court in Holliday held that the deemer clause exempts self-funded ERISA plans from state laws that "regulate insurance." Holliday, 498 U.S. at 61, 111 S.Ct. 403. Because the plan at issue in Holliday was a self-funded welfare benefit plan, ERISA preempted the application of Pennsylvania's anti-subrogation statute to the plan. Id. at 65, 111 S.Ct. 403. The Plan at issue in this case, like the plan in Holliday, is a self-funded welfare benefit plan governed by ERISA, so it is exempt from O.C.G.A. § 33-24-56.1 under ERISA's deemer clause. Therefore, the Georgia statute does not apply to prevent Defendants from enforcing the reimbursement claim. See 29 U.S.C. § 1144(b)(2)(B); Holliday, 498 U.S. at 61, 111 S.Ct. 403.
2. The Make-Whole Doctrine Applies in this Case
Plaintiff argues that even if Georgia's anti-subrogation law does not apply, allowing Defendants to demand reimbursement in this case is against public policy because Plaintiff has not been made whole. Under the make-whole doctrine, "an insured who has settled with a third-party tortfeasor is liable to the insurer-subrogee only for the excess received over the total amount of his loss." Guy v. Southeastern Iron Workers' Welfare Fund, 877 F.2d 37, 39 (11th Cir.1989). In the Eleventh Circuit, the make-whole doctrine is the default rule in ERISA cases. Cagle v. Bruner, 112 F.3d 1510, 1521 (11th Cir.1997). The parties can, however, contract out of the doctrine. The make-whole doctrine does not apply if there is "clear language rejecting it" in the insurance contract. Id. at 1521-22. For a plan to escape the doctrine, "it need only include language in the plan explicitly providing the [plan] with the first right of recovery, even when a participant or beneficiary is not made whole." Id. at 1522. The ERISA plan at issue in Cagle did not contain any clear language rejecting the make-whole doctrine, so the doctrine applied to that case, and the plan was not allowed to recover from any third party until the beneficiary was made whole. Id.
The Plan at issue in this case has two relevant reimbursement options: the "Offset Option" and the "Agreement Option." Paragraph 7 contains the Offset Option, which provides that any payments received as judgments or settlements to compensate for expenses which the Plan paid may be offset against future claims the participant makes under the Plan. The Offset Option does not require a written agreement. Paragraph 6 contains the Agreement Option, which requires the participant to sign a written reimbursement agreement establishing a lien on any recovery. If the participant does not sign such an agreement, the Plan may refuse to make benefit payments.
It is clear that the Plan rejects the make-whole doctrine under the Agreement Option because paragraph 6 specifically states that the Plan has the right of first recovery, even when a participant or beneficiary has not been made whole. However, such language does not appear anywhere in the Offset Option-there is no language in paragraph 7 clearly rejecting the make-whole doctrine. Furthermore, there is no language clearly rejecting the make-whole doctrine in paragraph 5, which is referenced in paragraph 7 as describing which payments must be reimbursed to the Plan. Under the Plan's interpretation of the contract, it is immaterial that the Offset Option does not specifically reject the make-whole doctrine. Rather, the Plan asserts that the right of first recovery *1210 language in paragraph 6 should be read into paragraph 7. The Plan further contends that its decision to offset Plaintiff's benefits under this interpretation is entitled to deference.
 The Plan is correct that its decision to offset under this interpretation is subject to the arbitrary and capricious standard of review. A denial of ERISA benefits is subject to de novo review unless the benefit plan gives its administrator discretionary authority to construe the terms of the plan. If the plan does reserve that discretion to the administrator, the arbitrary and capricious standard of review applies unless the administrator's decision creates a conflict of interest. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); Cagle, 112 F.3d at 1516. Section 27 of the Plan provides: "The Plan Administrator has the exclusive responsibility and complete discretionary authority to control the operation and administration of this plan, with all powers necessary to enable it to properly carry out such responsibility, including but not limited to, the power to construe the terms of this plan[.]" (Stipulation of Facts Ex. C at 77.) Plaintiff does not contend that there is a conflict of interest. Therefore, the arbitrary and capricious standard of review applies in this case.
   Under the arbitrary and capricious standard of review, the Court is limited to determining whether "the contested interpretation was made rationally and in good faith." Blank v. Bethlehem Steel Corp., 926 F.2d 1090, 1093 (11th Cir.1991); accord Cagle, 112 F.3d at 1518. There are a number of factors the courts take into account to determine whether an interpretation was arbitrary and capricious, including "the uniformity of the [Plan's] construction, the reasonableness of its interpretation and possible concerns with the way unexpected costs may affect the future financial health of the plan." Blank, 926 F.2d at 1093. The key factor that applies in this case is the reasonableness of the interpretation. The Plan argues that "the circumstances under which the Plan may seek reimbursement are determined by the subrogation language as a whole." The Plan further contends that there is an ambiguity as to whether the make-whole doctrine is rejected across the board and that this ambiguity must be resolved in favor of the Plan administrator's interpretation. But the contract clearly gives the Plan two options for seeking reimbursement. Only one of these options includes the right of first recovery language. The two reimbursement options are separate and distinct. The options do not reference each other, nor do they depend upon each other. Therefore, it would be incongruous to extract a portion of one option and read it into the other. The Plan's interpretation is unreasonable. Consequently, the Court cannot find that it was made rationally and in good faith. Thus, the Plan's interpretation fails because it is arbitrary and capricious. Under the Plan as it is drafted, a reimbursement agreement must be executed for the right of first recovery provision to apply.
The Plan also contends that not reading the right of first recovery language into the Offset Option would lead to inequitable results and create incentives for participants to violate the Plan by not signing reimbursement agreements. These arguments are without merit. The Plan drafted its own contract. If it wanted to escape the make-whole doctrine under the Offset Option, it could have included language in paragraph 7 explicitly providing that the Plan may offset payments received from third parties against future claims even when the participant or beneficiary has not *1211 been made whole. Furthermore, under paragraph 6, the Plan may withhold benefits from those participants who refuse to sign reimbursement agreements. Therefore, it has a remedy under paragraph 6 to assure compliance with the Plan agreement. The Plan's failure to enforce its own Agreement Option should not be remedied, however, by a tortured reading of the Plan contract that arbitrarily extrapolates the "right of first recovery" language from paragraph 6 and deposits it into paragraph 7. Again, under the Plan as it is drafted, a reimbursement agreement must be executed for the right of first recovery provision to apply. Therefore, the Court finds that the Plan does not clearly reject the make-whole doctrine under the Offset Option and that the Plan's interpretation to the contrary was arbitrary and capricious. For these reasons, the Plan is not entitled to offset Plaintiff's claims under paragraph 7.
3. The Reimbursement Agreement
 The Plan contends that even if it is not entitled to offset under paragraph 7, it is still entitled to reimbursement under paragraph 6 because Mr. and Mrs. Summerlin "almost certainly" signed a reimbursement agreement. [FN3] However, despite its "best efforts," the Plan has not been able to locate a copy of the agreement. Plaintiff does not recall signing such an agreement.
FN3. Plaintiff correctly observes that he cannot assign his wife's rights. See Rest.2d of Contracts § 324 (1981); see also Bank of Cave Spring v. Gold Kist, Inc., 173 Ga.App. 679, 680, 327 S.E.2d 800, 802 (1985) (noting that assignor must intend to make the assignment). The Plan's contention, however, is that both Mr. and Mrs. Summerlin signed the agreement, not that Plaintiff signed an agreement purporting to assign his wife's rights.
For the Plan to rely upon a reimbursement agreement, it must prove that such an agreement was executed. The Plan's evidence of this agreement is an affidavit from an employee of its third-party administrator stating that the Summerlins "almost certainly" signed a reimbursement agreement. The employee came to this conclusion for two reasons: 1) letters to the Summerlins regarding their claims specifically reference a reimbursement agreement, and 2) the Summerlins' file did not contain correspondence from the Summerlins indicating that they refused to sign a reimbursement agreement.
Generally, to prove the contents of a writing in federal court, the original writing is required. Fed.R.Evid. 1002. If the original writing cannot be produced because it has been lost or destroyed through no fault of the party seeking to rely upon it, the party may be permitted to introduce secondary evidence of the contents of the writing. Fed.R.Evid. 1004(1); see United States v. Holley, 463 F.2d 634, 637 (5th Cir.1972). It is true that the question whether a writing existed and whether the secondary evidence accurately reflects its terms is a question for a trier of fact rather than the court, but the proponent of the writing must introduce some evidence of the existence and contents of the original to get to the factfinder. See Fed.R.Evid. 1008. The Plan has failed to introduce evidence sufficient to allow a trier of fact to find the existence and contents of a reimbursement agreement between the Summerlins and the Plan. The Plan cannot state with certainty that there actually was a reimbursement agreement. Its third party administrator's employee had no personal knowledge regarding whether Plaintiff signed an agreement. She opined simply that Plaintiff "almost certainly" signed an agreement because under the Plan's administrative procedures, Plaintiff would not have received a letter referencing a reimbursement agreement unless he had signed an agreement. *1212 This is not enough. The Plan has not introduced evidence, e.g., of the terms of the "lost" agreement; it has introduced no evidence that the Plan routinely required every participant and beneficiary to execute an identical reimbursement agreement; and it has offered no evidence that Mrs. Summerlin signed a reimbursement agreement. For these reasons, the Plan has failed to prove that a reimbursement agreement between the Summerlins and the Plan was executed. Therefore, the Plan may not rely upon a reimbursement agreement to seek reimbursement from Plaintiff.
For the foregoing reasons, the Court denies Defendants' motion for summary judgment. Accordingly, per the stipulation of the parties, the Court orders Defendant Georgia-Pacific Corporation Life, Health and Accident Plan to pay all claims that have been, or may be, submitted for payment by Plaintiff or his dependents that would, except for the Plan's claim for reimbursement, otherwise be eligible for payment and payable by the Plan.
366 F.Supp.2d 1203 is the West cite.