Case Title: Steffens v. BlueCross BlueShield

Citation: 2011 WI 60

Docket Number: 2009AP001558

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2011-07-08T00:00:00Z

Document:
2011 WI 60 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2009AP1558 
COMPLETE TITLE: 
John R. Steffens, 
          Plaintiff-Appellant, 
     v. 
BlueCross BlueShield of Illinois, 
          Defendant-Respondent-Petitioner, 
     v. 
Wesley D. Dishno, AIG National Insurance 
Company, Inc., BlueCross BlueShield of Wisconsin 
and The Farmers Automobile Insurance 
Association, 
          Defendants. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at 329 Wis. 2d 710, 790 N.W. 2d 543 
(Ct. App. 2010-Unpublished) 
 
 
OPINION FILED: 
July 8, 2011   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
March 1, 2011 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit 
 
COUNTY: 
Outagamie 
 
JUDGE: 
Dee R. Dyer 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
ABRAHAMSON, C. J. dissents (Opinion filed). 
BRADLEY, J. joins dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendant-respondent-petitioner there were briefs 
by Sheila M. Sullivan, Sarah Germonprez and Bell, Moore, and 
Richter, S.C., Madison, and oral argument by Ms. Germonprez. 
For the plaintiff-appellant there was a brief by Amy M. 
Risseeuw, John C. Peterson, and Peterson, Berk, and Cross, S.C., 
Appleton, and oral argument by Ms. Risseeuw. 
 
 
 
 
2011 WI 60
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.   2009AP1558 
(L.C. No. 
2008CV16) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
John R. Steffens, 
 
          Plaintiff-Appellant, 
 
     v. 
 
BlueCross BlueShield of Illinois, 
 
          Defendant-Respondent-Petitioner, 
 
     v. 
 
Wesley D. Dishno, AIG National Insurance 
Company, Inc., BlueCross BlueShield of 
Wisconsin and The Farmers Automobile Insurance 
Association, 
 
          Defendants. 
 
FILED 
 
JUL 8, 2011 
 
A. John Voelker 
Acting Clerk of Supreme 
Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed.   
 
¶1 
PATIENCE 
DRAKE 
ROGGENSACK, 
J.   We 
review 
an 
unpublished opinion of the court of appeals1 reversing the 
circuit court's order2 granting BlueCross BlueShield of Illinois' 
                                                 
1 Steffens v. BlueCross BlueShield of Ill., No. 2009AP1558, 
unpublished slip op. (Wis. Ct. App. Aug. 3, 2010).  
2 The Honorable Dee R. Dyer of Outagamie County presided.   
No.  2009AP1558   
 
2 
 
(BlueCross) motion for declaratory judgment.  BlueCross is a 
subrogated party in plaintiff John R. Steffens' (Steffens) 
lawsuit based on a June 2005 car accident.  BlueCross's motion 
requested 
a declaration that Steffens reimburse BlueCross 
$67,477.57, the amount BlueCross paid pursuant to BlueCross's 
ERISA benefits plan (the Plan) that covered Steffens for 
accident-related injuries.  The issues presented to this court 
are:  (1) whether the Plan administrator's determination that 
under the Plan BlueCross is entitled to reimbursement is 
arbitrary and capricious; and (2) whether Steffens' prior 
representations that the surgery-necessitating injuries arose 
out of the automobile accident judicially estop him from now 
claiming that a degenerative condition caused the injuries for 
which surgery was performed.  
¶2 
We 
conclude 
that 
the 
Plan 
administrator's 
determination that BlueCross is entitled to reimbursement was 
not arbitrary and capricious.  The Plan states that BlueCross is 
entitled to reimbursement from the beneficiary of the Plan for 
"expenses incurred as the result of, or that arose out of, an 
accident" when a third party "may be liable" for the payment of 
those expenses and the beneficiary obtains a settlement from the 
third party.  The Plan gives the Plan administrator discretion 
to interpret the clause.   
¶3 
Prior to settlement, Steffen consistently asserted 
that the surgery-necessitating injuries arose out of a June 2005 
automobile accident.  Consequently, it was not arbitrary and 
capricious for the Plan administrator to interpret the Plan and 
No.  2009AP1558   
 
3 
 
conclude that BlueCross is entitled to reimbursement because the 
expenses that BlueCross paid arose from an accident for which a 
third party may be liable.   
¶4 
Our 
conclusion 
that 
the 
Plan 
administrator's 
determination that BlueCross is entitled to reimbursement is not 
arbitrary and capricious is dispositive of the case.  We, 
therefore, do not reach the judicial estoppel issue. 
I.  BACKGROUND 
A.  The Accident 
¶5 
On 
June 29, 
2005, 
Steffens 
was 
involved 
in 
an 
automobile accident in Outagamie County.  According to Steffens, 
he was stopped at a traffic light when Wesley Dishno's (Dishno) 
vehicle hit him from behind.  This pushed Steffens into the van 
in front of him.  Steffens suffered injuries as a result of the 
accident.  
¶6 
Steffens visited the emergency room approximately two 
hours after the accident.  He complained of a headache, as well 
as shoulder and neck pain.  No significant procedures were 
performed during this visit.  Various doctors' notes from July 
of 2005 to March of 2006 indicate that Steffens continued to 
suffer from pain and stiffness in his neck, upper back, thorax, 
and shoulders.  Moreover, in the months immediately following 
the accident, Steffens suffered from headaches.   
¶7 
In early March of 2006 Steffens was beginning to 
experience lower back pain with intermittent radiation to his 
lower extremities.  This low back pain continued throughout 
2006.  In December of 2006, Steffens had a Magnetic Resonance 
No.  2009AP1558   
 
4 
 
Imaging (MRI) of his spine.  The MRI revealed that at L5-S1, 
Steffens had a grade-one spondylolisthesis.3  On May 22, 2007, 
Steffens underwent L5-S1, lumbosacral fusion surgery.   
¶8 
The 
medical 
notes 
indicate 
that 
Steffens' 
pain 
improved following the surgery.  Moreover, Steffens had asserted 
that he did not have any back pain prior to the June 2005 
accident. 
B.  The Plan 
¶9 
As aforementioned, Steffens was a beneficiary under an 
ERISA4 plan provided by BlueCross.  BlueCross paid for a 
significant portion of Steffens' back and neck related medical 
expenses, including the lumbosacral fusion surgery, as it was 
required to do under the Plan.  The Plan has a "Reimbursement, 
Subrogation, and/or Right of Reduction" clause.  The clause 
gives the administrator discretion to interpret its terms.  It 
states:  "The Plan/Plan administrator has sole discretion to 
interpret the terms of this provision in its entirety . . . ."   
¶10 The clause details when BlueCross is entitled to 
subrogation: 
If any benefits payable under the Plan to you or 
your dependents were for expenses incurred as the 
result of, or that arose out of, an accident or other 
situation such that other party or parties, may be 
                                                 
3 Spondylolisthesis is a "[f]orward movement of the body of 
one of the lower lumbar vertebrae on the vertebra below it, or 
upon the sacrum."  Stedman's Medical Dictionary 1678 (27th ed. 
2000). 
4 ERISA is the acronym for the Employee Retirement Income 
Security of Act of 1974. 
No.  2009AP1558   
 
5 
 
liable 
for 
the 
payment 
of 
expenses 
and 
you 
subsequently obtain a settlement from or a judgment 
against such other party or parties, you or your 
dependents are obligated to reimburse the Plan.  The 
Plan's 
right 
to 
reduction, 
reimbursement 
and 
subrogation apply regardless of whether the settlement 
or award is designated as payment for, but not limited 
to pain and suffering, wage loss, loss of consortium, 
medical benefits, and other specified damages.  The 
Plan has first priority with respect to its right to 
reduction, reimbursement and subrogation. 
¶11 In addition, the clause explicitly gives BlueCross a 
right 
of 
first 
priority, 
notwithstanding 
the 
make-whole 
doctrine: 
The Plan's right to reduction, reimbursement and 
subrogation will not be reduced even if the recovery 
does not fully compensate you or your dependents, or 
you or your dependents were not made whole, for all 
losses sustained or alleged, or the recovery is not 
described as being related to medical costs.  The 
amount the Plan is entitled to will also not be 
reduced by legal fees or court costs incurred in 
seeking the recovery.  Any so-called "make-whole" or 
"full-compensation" 
rule 
or 
doctrine 
is 
hereby 
explicitly rejected and disavowed.  
C.  Pre-Settlement Litigation 
¶12 On January 2, 2008, Steffens filed a complaint against 
Dishno demanding compensatory damages for the accident.  The 
complaint was later amended on February 25, 2008.  According to 
the amended complaint, the accident caused Steffens severe, 
permanent, and costly injuries: 
As a direct and proximate consequence of the 
negligence of the defendant, Wesley D. Dishno, the 
plaintiff, 
John 
R. 
Steffens, 
was 
severely 
and 
permanently injured, has been unable to undertake his 
usual activities and occupations for a sustained 
period of time, has incurred significant expenses for 
No.  2009AP1558   
 
6 
 
the care and treatment of his injuries, and has been 
otherwise permanently injured and damaged.5          
¶13 In addition to Dishno, Steffens named AIG National 
Insurance Company (AIG), BlueCross, and the Farmers Automobile 
Insurance Association (Farmers) as defendants.  AIG was named as 
a defendant because Dishno carried AIG's automobile liability 
insurance.  Steffens named both BlueCross and Farmers6 due to 
their potential rights of subrogation.  According to the 
complaint, both insurers "paid some of the medical bills 
incurred by John R. Steffens as a result of injuries sustained 
in the collision."7  Despite naming them as subrogated parties, 
Steffens asked in the complaint for a "judgment against 
[BlueCross and Farmers], foreclosing any claim they may have for 
subrogation."   
¶14 Subsequent to the amended complaint, on March 17, 
2008, BlueCross filed a cross-claim against Dishno and AIG, and 
a 
counterclaim 
against Steffens.  BlueCross's cross-claim 
alleged that it "has paid medical bills on behalf of John R. 
Steffens for treatment of injuries suffered in the accident of 
June 29, 2005, in the amount of $67,477.57."8  Moreover, 
BlueCross asserted that because the Plan is an ERISA plan, 
BlueCross's subrogated interest is not subject to the "make-
                                                 
5 Am. Compl., ¶8.   
6 The Farmers policy does not come within ERISA. 
7 Id., ¶¶4-5. 
8 BlueCross's Cross-cl. & Countercl., ¶2b. 
No.  2009AP1558   
 
7 
 
whole" doctrine.9  BlueCross's counterclaim alleged that under 
the Plan, Steffens is obligated to reimburse BlueCross, out of 
any 
recovery 
in the action for the $67,477.57 paid by 
BlueCross.10  BlueCross attached a "Medical Itemization Report" 
stating the amounts billed for injuries related to the accident 
and the lien amounts held by BlueCross.  Steffens' surgery was 
listed.  
¶15 On April 10, 2008, Steffens replied to BlueCross's 
counterclaim, asserting that "BlueCross . . . is entitled to no 
reimbursement for medical expenses paid in this matter until and 
unless Plaintiff is made whole."11  This was the only assertion 
Steffens made in his reply.  Notably, Steffens did not contest 
the dollar amount, i.e., the $67,477.57 that BlueCross claimed 
it had paid "for treatment of injuries suffered in the accident 
of June 29, 2005."12  To the contrary, throughout the first year 
of litigation, Steffens asserted that BlueCross had paid 
$67,477.57 and that the surgery-necessitating injuries arose out 
of the accident. 
                                                 
9 Id., ¶2e-f. 
10 Id., ¶3.  Farmers filed a similar response, however, 
Farmers alleged that it had only paid $2,000 to or on behalf of 
Steffens for medical expenses incurred as a result of the 
accident.  Farmers is no longer involved in this lawsuit. 
11 Steffens' Reply to Countercl. 
12 BlueCross's Cross-cl. & Countercl., ¶2b. 
No.  2009AP1558   
 
8 
 
¶16 In particular, Steffen responded to interrogatories in 
April of 2008.  Steffens described the extent of his injuries 
from the accident: 
I sustained a back injury that resulted in a lumbo-
sacral fusion surgery.  Initially, following the 
accident, I primarily had pain that radiated down my 
leg all the way to my toes.  After the surgery, my 
pain was primarily isolated in my low back at the 
surgery site.  The injuries have affected, impaired 
and changed my life in numerous ways.  For example, 
prior to the accident I enjoyed golfing, snowboarding 
and snowmobiling, however, since the accident I have 
not been able to participate in those activities.  
Additionally, normal day-to-day activities have been 
difficult for me since the accident.  Specifically, 
activities that require bending over are difficult and 
I have pain even when I try to tie my shoes.  Standing 
for prolonged periods of time is painful as well. 
¶17 Steffens 
made 
other 
relevant 
assertions 
in 
his 
responses to interrogatories.  First, he averred that his back 
injury was permanent and that his surgeon, Dr. Randall Johnson, 
M.D. (Dr. Johnson), "ha[s] or will" diagnose the permanent 
injury.  Second, he asserted that he made a claim for medical 
coverage to BlueCross "arising out of the incident," and 
specifically, 
that 
BlueCross 
has 
made 
"payments 
totaling 
$64,751.40."  Finally, Steffens claimed that he was entitled to 
medical expenses totaling $130,712.19.  
¶18 In addition to his April 2008 interrogatory answers, 
on May 9, 2008, Steffens sent a request for admissions to all 
counsel of record. In his request, he asked that all parties 
admit that the surgery expense "was necessary . . . to provide 
the essential care and treatment for injuries sustained by . . . 
No.  2009AP1558   
 
9 
 
Steffens, which were caused by the June 29, 2005 automobile 
accident."  
¶19 Likewise, on May 13, 2008, Steffens filed a scheduling 
conference statement with the court that reiterated that he was 
seeking the cost of his surgery as damages.  Namely, in the 
statement, when asked to "itemize claimed special damages," 
Steffens stated:  "The plaintiff incurred medical expenses in 
the amount of $132,282.19."  On the same day, Steffens filed a 
"Disclosure of Expert Witnesses" list with the court.  In this 
disclosure, Steffens listed Dr. Johnson as his expert witness. 
D.  The Settlement and Post-Settlement Litigation 
¶20 In January of 2009, Steffens reached a settlement 
agreement with Dishno and AIG.  Under the settlement, AIG was to 
pay Steffens $100,000, the AIG policy limits.  BlueCross was not 
advised of the settlement negotiations. 
¶21 Subsequently, on February 9, 2009, Steffens mailed 
BlueCross amended answers to the interrogatories.  In the 
amended answers Steffens no longer claimed that the surgery-
necessitating injuries arose out of the accident.  Steffens, 
instead, described the extent of his injuries from the accident 
as follows: 
I sustained injuries to my upper back and neck which 
resulted in what the records describe as occipital 
headaches. 
 
The 
injuries 
caused 
me 
substantial 
discomfort, and I had multiple visits to my doctor as 
well as prescribed physical therapy.  I subsequently, 
in the following year, developed a serious problem 
with my low back.  I subsequently received the 
evaluation 
of 
Independent 
Medical 
examiner, 
Dr. 
William T. Monacci, which I am attaching to these 
No.  2009AP1558   
 
10 
 
amended answers and incorporating by reference.  I now 
have learned that my low back pain and surgery was not 
related to the accident. 
With regard to the specific treatment that Steffens received for 
the accident related injuries, he stated, "I was seen at the 
emergency room of Appleton Medical Center on the day of the 
accident.  I was subsequently treated by my family doctor, Dr. 
John Ganser, and his associates.  Finally, in January and 
February, 2006, I received physical therapy at Appleton Medical 
Center."   
¶22 Steffens' 
amended 
answers 
to 
the 
interrogatories 
included these additional distinctions from his first answers: 
• The accident did not result in any permanent 
injury. 
• BlueCross made payments totaling only $1,934.50 
for medical expenses arising out of the accident. 
• The total amount of medical expenses to which 
Steffens was entitled because of the accident was 
$2,441.50. 
• Dr. William T. Monacci was listed as Steffens' 
expert witness.  Dr. Johnson was no longer listed 
as a treating physician or an expert. 
¶23 Notably, Dr. Monacci had performed an independent 
medical evaluation of Steffens on October 2, 2008.  In his 
report, filed with the circuit court on October 13, 2008, Dr. 
Monacci concluded that the L5-S1 spondylolisthesis was a 
progressive degenerative condition unrelated to the accident.  
Prior to the settlement, Dr. Monacci had been named as the 
defendant tortfeasor Dishno and his insurer AIG's expert 
No.  2009AP1558   
 
11 
 
witness.  Dr. Monacci was not listed as a witness on an amended 
expert witness list Steffens filed in December of 2008.  
¶24 In response to Steffens' changed position regarding 
the cause of the surgery-necessitating injuries, BlueCross moved 
for declaratory judgment to determine its rights under the Plan.  
BlueCross 
requested 
a 
declaration 
that 
Steffens 
had 
an 
obligation to reimburse BlueCross the $67,477.57 "it paid to 
treat injuries Steffens claimed he suffered in the car accident 
of June 29, 2005" and that under the Plan, Steffens owed 
BlueCross attorney fees.  BlueCross argued that it is entitled 
to reimbursement before Steffens is made whole because the Plan 
is an ERISA plan that explicitly disavows the make-whole 
doctrine.   
¶25 Next, BlueCross argued that the doctrine of judicial 
estoppel barred Steffens from now asserting that the surgery-
necessitating injuries did not arise out of the accident.  
BlueCross listed the three elements of judicial estoppel as set 
forth in Salveson v. Douglas County, 2001 WI 100, 245 Wis. 2d 
497, 630 N.W.2d 182, and argued that all elements had been met 
in this case.  The elements are:  "(1) the later position must 
be clearly inconsistent with the earlier position; (2) the facts 
at issue should be the same in both cases; and (3) the party to 
be estopped must have convinced the first court to adopt its 
position."  Id., ¶38. 
¶26 Finally, BlueCross argued that it is not required to 
prove that the surgery-necessitating injuries were caused by the 
accident.  Specifically, BlueCross underscored the language of 
No.  2009AP1558   
 
12 
 
the Plan that states, "[t]he Plan's right to reduction, 
reimbursement and subrogation will not be reduced even if . . . 
the recovery is not described as being related to medical 
costs."  Therefore, BlueCross argued that "the only facts 
required to trigger BlueCross's right to reimbursement are (1) 
that it paid for medical benefits and (2) that the medical 
benefits were used to invoke a settlement."  Finally, BlueCross 
contended that the Plan gives the Plan administrator "sole 
discretion" to interpret the relevant terms of the Plan, and 
that the Plan administrator's interpretation of BlueCross's 
rights under the Plan was not arbitrary and capricious. 
¶27 In his response, Steffens argued that the doctrine of 
judicial estoppel did not apply to this case because he had not 
taken inconsistent positions.  In particular, he argued that he 
changed his position after he received the independent medical 
evaluation of Dr. Monacci and that his interrogatories were 
amended in accordance with Wisconsin's discovery statutes.  
¶28 Steffens acknowledged in his response that the Plan 
trumps the Wisconsin make-whole doctrine.  He argued, however, 
that BlueCross is entitled to reimbursement only if BlueCross 
can prove that the accident caused the surgery-necessitating 
injuries.    
¶29 The 
circuit court ordered Steffens to reimburse 
BlueCross $64,751.40,13 plus attorney fees and costs.  The court 
                                                 
13 Prior to the order, the parties debated whether the 
amount BlueCross paid for the accident-related injuries was 
$66,353.57 or $64.751.40.  BlueCross agreed to the $64.751.40 
figure for the sake of getting the matter resolved quickly.  
No.  2009AP1558   
 
13 
 
concluded that, based on Steffens' previous assertions that the 
surgery-necessitating injuries arose from the accident, he was 
judicially estopped from now arguing that the injuries were the 
result of a degenerative condition.  In its oral decision, the 
court opined: 
[T]o not find today that the ERISA plan is entitled to 
their payment from this plaintiff would be essentially 
the plaintiff perpetrating a fraud on the Court.  
This plaintiff said in answers sworn under oath 
that the medical bills that Blue Cross paid were 
related to his accident.  He stated that in the 
accident I sustained a back injury that resulted in a 
lumbosacral fusion surgery.  Under oath he stated, 
yes, I have made a claim for injuries arising out of 
the accident.  According to the records of my 
attorneys, 
[BlueCross] 
made 
payments 
totalling 
$64,751.40.  He said when asked about injuries 
received as a result of the accident, he said, on 
May 22, 2007, I had a lumbosacral fusion surgery; and 
he further said my medical expenses resulting from the 
accident total $130,712.19. 
I 
realize 
that 
he 
changed 
his 
letter——his 
responses 
to 
his 
interrogatories 
after 
he 
made 
settlement in this case.  And it's got to be noted 
that 
the 
total 
medical 
expense 
for 
which 
the 
settlement of $100,000 was paid is now over $2,000.  
It just bears no credibility to say that this did not 
have some relatedness, that is, the surgery had some 
relatedness to this settlement.  There's no question 
about that.  The fact that, of course, there was only 
$100,000 available——That's a fact of this case and 
that's perhaps why the case was settled for that.  
Still we know that ERISA trumps everything. 
So in this case this party, [BlueCross], is 
entitled to their money back under all of the 
circumstances here.  Not to do so I find that——that 
Mr. Steffens is judicially estopped from taking a 
contrary position because he played it for all it was 
worth in the settlement of this case; and it's the 
same, you know, had no action even been started and he 
No.  2009AP1558   
 
14 
 
settled for that amount.  ERISA would still have a 
claim back, and it's clear here that we have the 
testimony of the very person himself linking it to 
those very expenses. 
¶30 Steffens appealed.  In an unpublished opinion, the 
court of appeals reversed the circuit court's order.  Steffens 
v. BlueCross BlueShield of Ill., No. 2009AP1558, unpublished 
slip op. (Wis. Ct. App. Aug. 3, 2010).  First, with regard to 
judicial estoppel, the court concluded that, while there was no 
question that Steffens took inconsistent positions, the third 
element of judicial estoppel had not been met because Steffens 
had "never convinced any court to adopt his position that the 
surgery was related to the accident."  Id., ¶9.  The court noted 
that no Wisconsin court has ever construed a position taken at 
settlement as satisfying the third element.  Id., ¶10. 
¶31 The court of appeals also held that BlueCross must 
prove that the surgery-necessitating injuries were related to 
the accident.  Id., ¶¶11-15.  The court acknowledged that it 
owed substantial deference to BlueCross's interpretation.  Id., 
¶15.  Nonetheless, the court concluded that nothing in the Plan 
authorized reimbursement for benefits BlueCross paid that were 
not related to the accident.  Id.  Therefore, the court reversed 
and remanded the declaratory judgment to give BlueCross an 
opportunity to prove that it is entitled to reimbursement.  Id., 
¶16. 
¶32 We granted review and now reverse the court of 
appeals. 
No.  2009AP1558   
 
15 
 
II.  DISCUSSION 
A.  Standard of Review 
¶33 We review the court of appeals decision regarding the 
Plan administrator's interpretation of rights and obligations 
under BlueCross's ERISA plan documents.  In turn, our review 
encompasses a review of the Plan administrator's interpretation 
and application of the Plan in regard to whether Steffens was 
required to reimburse BlueCross for the cost of his back 
surgery.  Summers v. Touchpoint Health Plan, Inc., 2008 WI 45, 
¶¶16-17, 309 Wis. 2d 78, 749 N.W.2d 182.   
¶34 As discussed in-depth below, when an ERISA plan gives 
the plan administrator the discretion to interpret and apply the 
plan, 
we 
review 
the 
administrator's 
decisions 
under 
a 
discretionary standard.  Firestone Tire & Rubber Co. v. Bruch, 
489 U.S. 101, 111 (1989); Summers, 309 Wis. 2d 78, ¶16.  Under 
the discretionary standard of review, we will not reverse a 
decision of a plan administrator unless the decision was not 
reasonable.  Firestone, 489 U.S. at 111; Cutting v. Jerome 
Foods, Inc., 993 F.2d 1293, 1299 (7th Cir. 1993).  A plan 
administrator's discretionary decision is not reasonable if it 
is "arbitrary and capricious."  Firestone, 489 U.S. at 114-15; 
Summers, 309 Wis. 2d 78, ¶16.   
¶35 However, 
whether 
the 
plan 
at 
issue 
gives 
the 
administrator interpretive discretion, such that his decision 
will be reviewed under a discretionary standard, requires us to 
construe the written plan documents to determine the authority 
of the plan administrator.  Summers, 309 Wis. 2d 78, ¶16.  
No.  2009AP1558   
 
16 
 
Review of a plan administrator's decision is limited "to the 
record available to the plan administrator at the time the 
decision was made."  Rekowski v. Metro. Life Ins. Co., 417 F. 
Supp. 2d 1040, 1047 (W.D. Wis. 2006) (citing Hess v. Hartford 
Life & Accident Ins. Co., 274 F.3d 456, 462 (7th Cir. 2001); 
Smart v. State Farm Ins. Co., 868 F.2d 929, 936 (7th Cir. 
1989)); see also Brown v. Ret. Comm. of Briggs & Stratton Ret. 
Plan, 575 F. Supp. 1073, 1076 (E.D. Wis. 1983).  "Deferential 
review is accorded to the plan administrator's interpretation of 
the plan's terms and its factual findings."  Rekowski, 417 F. 
Supp. 2d at 1047 (citing Paramore v. Delta Air Lines, Inc., 129 
F.3d 1446, 1450-51 (11th Cir. 1997)).   
B.  Foundational Principles 
¶36 BlueCross claims it is entitled to reimbursement for 
expenses paid for Steffens' back surgery under the Plan's right 
of subrogation.  Subrogation is "[t]he 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."  Black's Law Dictionary 1563-64 (9th ed. 
2009).   
¶37 There are three basic types of subrogation:  (1) 
contractual subrogation, Millers National Insurance Co. v. City 
of Milwaukee, 184 Wis. 2d 155, 167, 516 N.W.2d 376 (1994); (2) 
statutory subrogation, Ellsworth v. Schelbrock, 2000 WI 63, ¶19, 
235 Wis. 2d 678, 611 N.W.2d 764; and (3) equitable subrogation, 
Berna-Mork v. Jones, 174 Wis. 2d 645, 652-53, 498 N.W.2d 221 
(1993).  We also note that it has been opined that all 
No.  2009AP1558   
 
17 
 
subrogation "rights are governed by equitable principles" to 
some degree.  Russell M. Ware, The Law of Damages in Wisconsin, 
§ 32.6, p. 6 (5th ed. 2010).  The ERISA case before us involves 
a species of contractual subrogation because BlueCross's right 
of subrogation arises under the Plan documents.   
¶38 All parties agree that the Plan is governed by ERISA.  
ERISA was enacted, in part, to set forth "minimum standards 
. . . assuring the equitable character of [employee benefit] 
plans and their financial soundness."  29 U.S.C. § 1001(a) 
(2008).14  In other words, "Congress enacted ERISA to ensure that 
employees would receive the [contractually defined] benefits 
they had earned."  Conkright v. Frommert, 556 U.S. __, 130 
S. Ct. 1640, 1648 (2010); Firestone, 489 U.S. at 113.   
¶39 ERISA applies to "any plan, fund, or program which was 
heretofore or is hereafter established or maintained by an 
employer or by an employee organization" for the purpose of 
providing 
participants 
specified 
benefits.15 
 
29 
U.S.C. 
§ 1002(1).  However, ERISA does not "require employers to 
establish benefit plans in the first place."  Conkright, 130 
S. Ct. at 1648.   
                                                 
14 All references to the United States Code are to the 2008 
version unless otherwise noted. 
15 Those benefits include:  "medical, surgical, or hospital 
care or benefits, or benefits in the event of sickness, 
accident, 
disability, 
death 
or 
unemployment, 
or 
vacation 
benefits, apprenticeship or other training programs, or day care 
centers, scholarship funds, or prepaid legal services."  29 
U.S.C. § 1002(1)(A).    
No.  2009AP1558   
 
18 
 
¶40 Therefore, ERISA strives to ensure the equitable 
enforcement of employees' rights under employee benefit plans 
while, at the same time, encouraging employers to create such 
plans.  As the Supreme Court recently explained: 
ERISA represents a careful balancing between ensuring 
fair and prompt enforcement of rights under a plan and 
the encouragement of the creation of such plans.  
Congress sought to create a system that is not so 
complex 
that 
administrative 
costs, 
or 
litigation 
expenses, unduly discourage employers from offering 
ERISA plans in the first place.  ERISA induces 
employers to offer benefits by assuring a predictable 
set of liabilities, under uniform standards of primary 
conduct and a uniform regime of ultimate remedial 
orders and awards when a violation has occurred.    
Id. at 1649 (internal quotations, brackets and citations 
omitted).  See also Varity Corp. v. Howe, 516 U.S. 489, 497 
(1996) (describing the competing congressional goals of ERISA as 
the "desire to offer employees enhanced protection for their 
benefits, on the one hand, and, on the other, its desire not to 
create a system that is so complex that administrative costs, or 
litigation expenses, unduly discourage employers from offering 
welfare benefit plans in the first place").  
¶41 ERISA commands that a plan "specify the basis on which 
payments are made to and from the plan," 29 U.S.C. § 1102(b)(4), 
and that the plan's fiduciary "discharge his duties with respect 
to a plan . . . in accordance with the documents and instruments 
governing the plan."  29 U.S.C. § 1104(a)(1)(D).   
¶42 Under all ERISA plans, a plan fiduciary, often termed 
the plan administrator, determines whether participants are 
eligible for requested benefits.  Diaz v. Prudential Ins. Co. of 
No.  2009AP1558   
 
19 
 
Am., 424 F.3d 635, 637 (7th Cir. 2005).  No provision of ERISA 
sets forth the appropriate standard a court should employ when 
reviewing 
a 
plan 
administrator's 
benefit 
determinations, 
Firestone, 489 U.S. at 108-09, or determinations regarding the 
enforcement of plan terms.  Ronald J. Cooke, ERISA Practice and 
Procedure § 8:14, at 8-104 (2d ed. 2010) [hereinafter "Cooke, 
ERISA Practice"].  However, the Supreme Court did so in 
Firestone.16   
¶43 In Firestone, when presented the question of what 
standard courts should employ when reviewing an administrator's 
benefit determinations, the Court refused to adopt a uniform 
standard of review to be applied in all ERISA cases.  Instead, 
the Court concluded that the language of the plan itself should 
govern the standard of review, thereby allowing parties to 
bargain for the applicable standard.  In instances when a plan 
does not specify a standard, however, the Court held that courts 
should review the administrator's determination under a de novo 
standard.  In particular, the Court held that "a denial of 
benefits challenged under [29 U.S.C.] § 1132(a)(1)(B) is to be 
reviewed under a de novo standard unless the benefit plan gives 
the 
administrator 
or fiduciary discretionary authority to 
                                                 
16 Pronouncements of the United States Supreme Court on 
federal law bind this court.  State v. Webster, 114 Wis. 2d 418, 
426 n.4, 338 N.W.2d 474 (1983).  Moreover, we look to other 
applicable federal case law in reviewing actions of ERISA plan 
administrators.  Evans v. W.E.A. Ins. Trust, 122 Wis. 2d 1, 14, 
361 N.W.2d 630 (1985).  See also Schultz v. NEPCO Emps. Mut. 
Benefit Ass'n, Inc., 190 Wis. 2d 742, 746 n.5, 528 N.W.2d 441 
(Ct. App. 1994).       
No.  2009AP1558   
 
20 
 
determine eligibility for benefits or to construe the terms of 
the plan."17  Firestone, 489 U.S. at 115.   
¶44 Notably, Firestone explicitly limited its discussion 
and holding to actions challenging the denial of benefits under 
29 U.S.C. § 1132(a)(1)(B).18  Id. at 108.  However, we are not 
faced with an action brought by a plan participant challenging 
the denial of benefits under § 1132(a)(1)(B).  Rather, this is 
an 
action 
brought 
by 
the 
Plan 
administrator 
under 
§ 1132(a)(3)(B)19 to enforce the subrogation terms of the Plan.  
See Mank ex rel. Hannaford Health Plan v. Green, 297 F. Supp. 2d 
297, 301 (D. Me. 2003).   
¶45 The Seventh Circuit and Wisconsin courts apply the 
Firestone test when deciding the appropriate level of review of 
a plan administrator's interpretation and application of an 
                                                 
17 The Firestone standard of review applies even if the 
administrator is operating under a conflict of interest.  Metro. 
Life Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008).  When 
considering the lawfulness of an administrator's determination, 
a reviewing court, however, should consider the conflict as one 
factor in the analysis.  Id. at 117.  
18 Pursuant to 29 U.S.C. § 1132(a)(1)(B):  "A civil action 
may be brought——(1) by a participant or beneficiary . . . (B) to 
recover benefits due to him under the terms of his plan, to 
enforce his rights under the terms of the plan, or to clarify 
his rights to future benefits under the terms of the plan." 
19 Pursuant to 29 U.S.C. § 1132(a)(3):  "A civil action may 
be brought . . . (3) by a participant, beneficiary, or fiduciary 
(A) to enjoin any act or practice which violates any provision 
of this subchapter or the terms of the plan, or (B) to obtain 
other 
appropriate 
equitable 
relief 
(i) 
to 
redress 
such 
violations or (ii) to enforce any provisions of this subchapter 
or the terms of the plan." 
No.  2009AP1558   
 
21 
 
ERISA plan's subrogation clause.  See Cutting, 993 F.2d at 1296; 
Schultz v. NEPCO Emps. Mut. Benefit Ass'n, Inc., 190 Wis. 2d 
742, 747-48 & n.6, 528 N.W.2d 441 (Ct. App. 1994).  
¶46 Under Firestone, determining the appropriate standard 
of review for the administrator's subrogation determination that 
is at issue here is "a matter of contract."  Williams v. 
Interpublic Severance Pay Plan, 523 F.3d 819, 821 (7th Cir. 
2008).  Firestone prescribes that "[b]y using particular 
language, the plan's sponsors can require deferential review."  
Id.  As such, the Firestone test is consistent with contract 
law. Under contract law, contracting parties are entitled to 
receive the benefits of their bargain.  Daanen & Janssen, Inc. 
v. Cedarapids, Inc., 216 Wis. 2d 395, 404, 573 N.W.2d 842 
(1998).  "[T]he best indication of the parties' intent is the 
language of the contract itself."  Town Bank v. City Real Estate 
Dev., LLC, 2010 WI 134, ¶33, 330 Wis. 2d 340, 793 N.W.2d 476.  
Therefore, when enforcing an unambiguous contract, the court 
looks to the contract terms, and it is those terms that are 
enforced.  See Mackenzie v. Miller Brewing Co., 2001 WI 23, ¶28, 
241 Wis. 2d 700, 623 N.W.2d 739. 
¶47 Allowing 
parties 
to 
bargain 
for 
the 
amount 
of 
deference given to the plan administrator is also consistent 
with the policies underlying ERISA.  As aforementioned, one of 
ERISA's primary goals is to encourage employers to offer benefit 
plans to their employees.  Conkright, 130 S. Ct. at 1649.  In 
order to encourage employers to adopt these plans, Congress 
sought to create a system that is straightforward, thereby 
No.  2009AP1558   
 
22 
 
minimizing administrative and litigation expenses.  Varity, 516 
U.S. at 497.  Affording employers the ability to bargain for a 
deferential standard gives them the ability to minimize these 
expenses.  
¶48 A critical question when deciding whether an ERISA 
plan affords discretion to the administrator is notice.  Diaz, 
424 F.3d at 637.  "[P]articipants must be able to tell from the 
plan's language whether the plan is one that reserves discretion 
for the administrator."  Id.  In other words, the language of 
the plan granting the plan administrator discretion must be 
clear.  Cooke, ERISA Practice § 8:14, at 8-113.   
¶49 There are no "magic words" required in order to afford 
the administrator discretion.  Herzberger v. Standard Ins. Co., 
205 F.3d 327, 331 (7th Cir. 2000).  However, a plan's provision 
stating that the plan administrator has the authority to make 
eligibility 
determinations 
is 
insufficient 
to 
put 
the 
participant on notice that the administrator's decisions will be 
reviewed under a discretionary standard.  Diaz, 424 F.3d at 637.  
A plan's requirement that an applicant submit "satisfactory 
proof of entitlement" also is not sufficient notice.  Id.  By 
contrast, notice is sufficient when a plan gives the plan 
administrator the "sole discretion" to interpret the terms of 
the plan.  Cutting, 993 F.2d at 1295-96.  In such a case, an 
No.  2009AP1558   
 
23 
 
administrator's decisions are reviewed under the discretionary 
arbitrary and capricious standard.20  Id.   
¶50 When a plan gives the plan administrator discretion to 
interpret the terms of the plan, a reviewing court will not 
reverse the plan administrator's interpretation unless it is not 
reasonable.  See Firestone, 489 U.S. at 111.  A plan 
administrator's interpretation of the plan is not reasonable if 
the interpretation is "arbitrary and capricious in light of the 
language of the Plan."  Evans v. W.E.A. Ins. Trust, 122 Wis. 2d 
1, 14, 361 N.W.2d 630 (1985) (quoting Wardle v. Cent. States, 
Se. & Sw. Areas Pension Fund, 627 F.2d 820, 823-24 (7th Cir. 
1980) (abrogated on other grounds by Firestone, 489 U.S. 101)); 
see also Summers, 309 Wis. 2d 78, ¶16.  Both the plan 
administrator's interpretation of a plan's terms and the plan 
administrator's 
factual 
findings 
are 
reviewed 
under 
this 
discretionary standard.  Rekowski, 417 F. Supp. 2d at 1047.  
Stated another way, a reviewing court will not reverse a plan 
administrator's decision unless it is "downright unreasonable."  
Ruiz v. Cont'l Cas. Co., 400 F.3d 986, 991 (7th Cir. 2005) 
(internal quotation marks omitted). 
                                                 
20 The Seventh Circuit has also suggested that employers use 
the following "safe harbor" language if they want to be sure 
their plan gives adequate notice that a discretionary standard 
will be applied:  "'Benefits under this plan will be paid only 
if the plan administrator decides in his discretion that the 
applicant is entitled to them.'"  Herzberger v. Standard Ins. 
Co., 205 F.3d 327, 331 (7th Cir. 2000) (internal quotation marks 
omitted).   
No.  2009AP1558   
 
24 
 
¶51 Review of a plan administrator's decision is limited 
"to the record available to the plan administrator at the time 
the decision was made."  Rekowski, 417 F. Supp. 2d at 1047 
(citing numerous Seventh Circuit cases).  See also Cooke, ERISA 
Practice § 8:14, at 8-121 (explaining that this limitation is 
the general rule).  
¶52 Subrogation clauses in ERISA plans trump the Wisconsin 
make-whole doctrine.21  Cutting, 993 F.2d at 1298-99 (Under 
ERISA, 
"the 
make-whole 
rule 
is 
just 
a 
principle 
of 
interpretation, it can be overridden by clear language in the 
plan."); see also  Ruckel v. Gassner, 2002 WI 67, ¶42 n.7, 253 
Wis. 2d 280, 646 N.W.2d 11; Newport News Shipbuilding Co. v. 
T.H.E. Ins. Co., 187 Wis. 2d 364, 371-72, 523 N.W.2d 270 (Ct. 
App. 1994).  This, too, is in line with the goal of ERISA to 
encourage employers to adopt benefit plans and the principle of 
contract law that parties are entitled to the benefits of their 
bargain.  As one court has explained: 
[G]iven that an employer is free to refuse to provide 
a health benefit plan in the first place, it is 
unclear why, if the employer does provide such a plan, 
it may not condition benefits on the agreement of the 
                                                 
21 Wisconsin has adopted the make-whole doctrine.  An 
injured party is not made whole until "there has been full 
compensation for all the damage elements of the entire cause of 
action."  Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 
263, 275, 316 N.W.2d 348 (1982).  The made-whole doctrine 
provides that "only where an injured party has received an award 
by judgment or otherwise which pays all of his elements of 
damages, 
including 
those 
for 
which 
he 
has 
already 
been 
indemnified 
by 
an 
insurer, 
is 
there 
any 
occasion 
for 
subrogation."  Id.   
No.  2009AP1558   
 
25 
 
members to reimburse the plan from payments received 
from other parties responsible for the injury.  Having 
accepted benefits under a plan that expressly required 
reimbursement from money received from responsible 
third parties, regardless of the amount received, it 
does not seem inequitable that plaintiff fulfill her 
obligation under the plan. 
Forsling v. J.J. Keller & Assocs., Inc., 241 F. Supp. 2d 915, 
920 (E.D. Wis. 2003).  
C.  Application 
¶53 We now apply the principles set forth above to the 
facts and circumstances of this case.  The subrogation clause in 
the Plan unambiguously disavows the make-whole doctrine and 
asserts BlueCross's right of first priority.  It states:  
The Plan's right to reduction, reimbursement and 
subrogation will not be reduced even if the recovery 
does not fully compensate you or your dependents, or 
you or your dependents were not made whole, for all 
losses sustained or alleged, or the recovery is not 
described as being related to medical costs. . . .  
Any so-called "make-whole" or "full-compensation" rule 
or 
doctrine 
is 
hereby 
explicitly 
rejected 
and 
disavowed.   
Under ERISA jurisprudence, this clear language asserting a right 
of first-priority trumps the make-whole doctrine.  Cutting, 993 
F.2d at 1298-99.  Therefore, as Steffens has rightfully 
conceded, the make-whole doctrine has no application here. 
¶54 The subrogation clause in the Plan unambiguously gives 
the Plan administrator discretion to make subrogation decisions.  
It states:  "The Plan/Plan Administrator has sole discretion to 
interpret the terms of this provision in its entirety."  When an 
ERISA plan states that the administrator has "sole discretion" 
to interpret the plan, the administrator's decision is reviewed 
No.  2009AP1558   
 
26 
 
under the discretionary standard established in Firestone.  
Summers, 309 Wis. 2d 78, ¶16; Cutting, 993 F.2d at 1295-97.  
Therefore, 
under 
the 
Plan, 
we 
will 
overturn 
the 
Plan 
administrator's 
decision 
only 
if 
it 
was 
arbitrary 
and 
capricious.  Summers, 309 Wis. 2d 78, ¶16.     
¶55 Having concluded that the make-whole doctrine does not 
apply to Steffens' claim, and that the Plan administrator's 
determinations under the subrogation clause are reviewed under a 
discretionary standard, we move to the main issue presented:  
whether the Plan administrator's determination was arbitrary and 
capricious.  The Plan administrator determined that the surgery 
expenses were "expenses incurred as the result of, or that arose 
out of, an accident" for which another party "may be liable," 
thereby entitling BlueCross to reimbursement.22 
                                                 
22 Steffens, erroneously, argues that BlueCross must prove 
causation, namely, that the accident caused the surgery-
necessitating injuries.  Steffens grounds this argument in the 
law of negligence under which causation is an element.  However, 
the subrogation issue here arises under contract law, not tort 
law.  See Herzberger, 205 F.3d at 330 ("An ERISA plan is a 
contract.").  Therefore, we look to the terms of the contract, 
i.e., the terms of the Plan.  Pursuant to the terms, the 
question is whether the administrator's determination that the 
surgery-necessitating injuries arose from the accident was 
arbitrary and capricious, not whether BlueCross must prove the 
accident caused the injuries. 
No.  2009AP1558   
 
27 
 
¶56 Under 
the 
facts and circumstances presented, we 
conclude that the Plan administrator's determination was not 
arbitrary and capricious.  Under the Plan, BlueCross has a 
subrogation right for:  
any benefits payable under the Plan to you or your 
dependents [that] were for expenses incurred as the 
result of, or that arose out of, an accident or other 
situation such that other party or parties, may be 
liable 
for 
the 
payment 
of 
expenses 
and 
you 
subsequently obtain a settlement from or a judgment 
against such other party or parties.  
Therefore, BlueCross has a right to be reimbursed for the 
surgery expenses if the Plan administrator determined that the 
surgery expenses incurred as a result of or arose out of the 
2005 
accident 
for 
which Dishno may be liable, and his 
determination is not arbitrary and capricious.  Id., ¶16.  
Stated otherwise, we determine whether the Plan administrator's 
interpretation of the terms of the Plan under the facts and 
                                                                                                                                                             
An example provided by Steffens illustrates his error in 
grounding his argument in tort law.  In an attempt to argue that 
BlueCross must prove causation, he contends:  "For instance, if 
an insured injures his arm in a car accident and subsequently 
has an unrelated surgery on his toe, the insurer would be able 
to take money out of a settlement regarding the arm for bills 
the insurer paid on the toe surgery, if not required to prove 
causation."  Under the law set out above, and assuming the plan 
in this example is identical to BlueCross's Plan, this example 
reaches an erroneous conclusion.  Under the Plan, the insurer 
would not be capable of reimbursement from the settlement money 
unless the Plan administrator reasonably determined that the toe 
surgery arose from the car accident.  Such a determination would 
be arbitrary and capricious since the example explicitly states 
that the two events were unrelated.  
No.  2009AP1558   
 
28 
 
circumstances herein presented is reasonable.  Firestone, 489 
U.S. at 111. 
¶57 Steffens' amended complaint alleged that he suffered 
injuries due to the negligence of Dishno and that those injuries 
caused him to incur "significant expenses for the care and 
treatment of his injuries."  As evidenced by the counterclaim 
and cross-claim that BlueCross filed on March 17, 2008, the Plan 
administrator did determine that the surgery expenses were 
incurred as a result of or arose out of the accident and that 
Dishno may be liable for them.  In the cross-claim, BlueCross 
asserted that it had paid $67,477.57 in medical bills "on behalf 
of John R. Steffens for treatment of injuries suffered in the 
accident of June 29, 2005."  Moreover, attached to the cross-
No.  2009AP1558   
 
29 
 
claim was a "Medical Itemization Report" that listed the cost of 
the May 22, 2007 surgery.23  
                                                 
23 The dissent makes an issue of the lack of a formal and 
written decision by the Plan administrator.  Dissent, ¶¶74-80.  
Because the record does not contain a written decision with an 
explanation for "how and why the plan administrator made the 
decision about subrogation," id., ¶74, the dissent argues that 
we cannot evaluate the reasonableness of the administrator's 
determination that the surgery-necessitating injuries arose out 
of the accident and that BlueCross is entitled to subrogation.  
Id., ¶¶74-80.  While taking issue with the lack of such a 
decision in the record, the dissent acknowledges that formal, 
written 
decisions 
are 
not 
statutorily 
required 
when 
an 
administrator interprets a plan for the purpose of invoking the 
plan's subrogation rights.  Id., ¶80 n.1.  Nevertheless, the 
dissent summarily concludes that plan administrators should meet 
notice requirements similar to those set forth in 29 U.S.C. 
§ 1133, which apply when an administrator denies a plan 
participant benefits.  Id.  Chapter 29 U.S.C. § 1133 requires 
the plan to "provide adequate notice in writing to any 
participant or beneficiary whose claim for benefits under the 
plan has been denied, setting forth the specific reasons for 
such denial."   
The facts of this case, however, highlight one potential 
reason Congress may have chosen to require notice requirements 
in benefits denial cases, and not in subrogation cases.  Namely, 
it is probable that in many cases where subrogation becomes the 
issue, the insured and administrator agree that the injuries 
arose out of the accident, as occurred pre-settlement here.  
Requiring a formal, written decision in cases where all parties 
to the benefits contract agree would be inefficient.  Moreover, 
unlike a benefits denial situation, when an administrator 
invokes a plan's subrogation rights, he is not automatically 
adverse to the participant.  That is, the administrator is not 
denying the participant benefits under the plan, but rather has 
already provided benefits and is seeking payment from a third 
party.  Consequently, while we agree with the dissent that in 
some instances a formal written decision would be ideal, that 
often will not be necessary when dealing with an administrator's 
invocation of a plan's right to subrogation.  Therefore, 
contrary to the dissent's position, we review all of the 
relevant 
circumstances 
presented 
when 
evaluating 
the 
reasonableness of the administrator's interpretation.   
No.  2009AP1558   
 
30 
 
¶58 The decision of the Plan administrator that the 
surgery-related expenses fell within the Plan's right of 
subrogation is evaluated based on the information that the Plan 
administrator had when he made his decision.  Rekowski, 417 F. 
Supp. 2d at 1047.  Given the facts and circumstances of this 
case, we cannot say the Plan administrator's determination was 
arbitrary 
and 
capricious. 
 
Stated 
otherwise, 
the 
Plan 
administrator's decision was reasonable. 
¶59 The 
reasonableness 
of 
the 
Plan 
administrator's 
decision is supported by Steffens' own statements prior to 
BlueCross's counterclaim and confirmed by statements and events 
occurring subsequent thereto.  For example, in his complaint, 
Steffens averred that he was "severely and permanently" injured 
                                                                                                                                                             
Here, the cross and counterclaims clearly demonstrate the 
administrator's interpretation, and Steffens' own statements 
support the reasonableness of the interpretation.  The dissent 
attempts 
to 
argue 
that 
the 
cross 
and 
counterclaims 
are 
insufficient 
to 
show 
the 
administrator's 
interpretation.  
However, the case to which the dissent cites, Marolt v. Alliant 
Techsystems, Inc., 146 F.3d 617 (8th Cir. 1998), provides no 
support for the dissent's position because Marolt is a benefits 
denial case.  In Marolt, the plan participant was denied 
benefits she was told she could obtain by "bridging" her break 
in service, and thereby increase her benefits because her 
benefits would be calculated based on her first start date with 
the employer, not the start date following her break in service.  
Consequently, pursuant to 29 U.S.C. § 1133, a written decision 
denying benefits was statutorily required.  In quoting Marolt, 
the dissent leaves out this dispositive difference.  Dissent, 
¶82.  The entire quote from Marolt, of which the dissent quotes 
only a portion, reads:  "We will not permit ERISA claimants 
denied the timely and specific explanation to which the law 
entitles 
them 
to 
be 
sandbagged 
by 
after-the-fact 
plan 
interpretations devised for purposes of litigation."  Marolt, 
146 F.3d at 620 (emphasis added) (citing 29 U.S.C. § 1133). 
No.  2009AP1558   
 
31 
 
in the accident.  BlueCross then alleged in its cross-claim that 
it had paid $67,477.57 on behalf of Steffens for the treatment 
of injuries suffered in the accident, and listed the surgery-
related expenses in the attached "Medical Itemization Report."  
Steffens did not deny BlueCross's allegation in his reply to 
BlueCross's counterclaim. 
¶60 In his responses to interrogatories, Steffens also 
stated that the surgery-related expenses arose out of the 
accident.  When asked to describe the extent of his injuries 
from the accident, Steffens began, "I sustained a back injury 
that resulted in lumbosacral fusion surgery."  Under oath, he 
averred that the accident resulted in permanent injuries and 
that his back surgeon would testify to this permanency.  He 
further asserted that he was entitled to $130,712.19 in total 
medical expenses from the accident, of which BlueCross had paid 
$64,751.50. 
 
Not 
only 
did 
Steffens 
assert 
the 
surgery-
necessitating injuries arose from the accident, he asked the 
other parties to admit as much in his requests for admissions. 
¶61 Furthermore, Steffens represented to the court that 
the surgery-necessitating injuries arose from the accident.  In 
his 
May 
2008 
scheduling 
conference 
statement, 
Steffens 
reiterated that he was seeking the cost of his surgery.  
Steffens also listed his surgeon, Dr. Johnson, as an expert 
witness, further indicating that he planned to present evidence 
No.  2009AP1558   
 
32 
 
at trial that the surgery-necessitating injuries arose out of 
the accident.24   
¶62 These pre-settlement sworn statements and assertions 
undeniably show that, according to Steffens, the surgery-
necessitating injuries arose out of the June 2005 accident.25  As 
the circuit court observed, "it's clear here that we have the 
testimony of the very person himself linking [the accident] to 
those [surgery] expenses."  If Steffens himself consistently 
averred that the surgery-necessitating injuries arose out of the 
accident, 
both 
before 
and 
after 
the 
Plan 
administrator 
determined that reimbursement was due, we do not see how the 
Plan 
administrator's 
determination 
can 
be 
arbitrary 
and 
capricious.   
¶63 The $100,000 settlement with Dishno and AIG is 
additional evidence that it was not unreasonable for the Plan 
administrator to have concluded that the surgery-necessitating 
injuries arose from the accident.  Had the surgery expenses not 
factored into the settlement, Steffens would not have received 
                                                 
24 As counsel for BlueCross pointed out at oral argument, 
there is no reason that Dr. Johnson, who performed the surgery, 
would be listed as a witness unless Steffens was going to link 
the accident to the surgery.  
25 The dissent quotes this sentence in an attempt to imply 
that we are somehow substituting Steffens' pre-settlement sworn 
statements and assertions for the Plan administrator's decision.  
Dissent, ¶84.  A complete reading of the text surrounding this 
sentence, however, makes clear that we conclude that Steffens' 
sworn statements and assertions support our conclusion that the 
administrator's 
decision 
was 
reasonable. 
 
As 
thoroughly 
explained above, our job is to evaluate the reasonableness of 
the administrator's decision.  
No.  2009AP1558   
 
33 
 
$100,000 to cover only $2,441.50 in medical expenses arising 
from the accident.  Stated otherwise, if Steffens' injuries did 
not encompass the need for surgery, AIG and Dishno would not 
have agreed to pay Steffens $97,588.50 for pain and suffering 
caused by occipital headaches and other discomfort suffered by 
Steffens in the six months following the accident.  Based on 
these figures, the circuit found that "[i]t just bears no 
credibility to say that this did not have some relatedness, that 
is, the surgery had some relatedness to this settlement."  
¶64 Following his January 2009 settlement with Dishno and 
AIG for $100,000 (the AIG policy limits), Steffens did an about-
face and claimed that the surgery did not arise out of the 
accident.  Steffens contends he changed his position because of 
Dr. Monacci's independent evaluation.  Dr. Monacci was the 
medical opinion witness that AIG had hired to defend against 
Steffens' claim.   
¶65 Steffens became aware of Dr. Monacci's findings and 
conclusions on October 2, 2008.  Steffens did not change his 
position with regard to the surgery expenses at that time.  In 
his 2008 witness list, Steffens listed Dr. Johnson as a witness.  
It wasn't until February of 2009, a month after Steffens settled 
with AIG and Dishno, that he amended his interrogatory answers.  
Accordingly, 
the 
timeline 
of 
events 
seriously 
undermines 
Steffens' assertion about relying on Dr. Monacci, as the circuit 
court found that it did.  
¶66 In sum, given Steffens' consistent averments prior to 
settlement that the surgery-necessitating injuries arose out of 
No.  2009AP1558   
 
34 
 
the accident, we cannot say that the Plan administrator's 
determination that the surgery-necessitating injuries arose out 
of the accident was arbitrary and capricious.  Stated another 
way, because Steffens himself averred both before and after 
BlueCross's counterclaim for reimbursement under the Plan that 
the surgery-necessitating injuries arose out of the accident, it 
is reasonable for the Plan administrator to have reached the 
same conclusion.  See Ruiz, 400 F.3d at 991.   
¶67 Because our above discussion is dispositive of the 
overriding question presented, whether BlueCross is entitled to 
reimbursement, we do not address the judicial estoppel argument 
presented to us.  See Gross v. Hoffman, 227 Wis. 296, 300, 277 
N.W. 663 (1938) (only dispositive issues need be addressed).  
Accordingly, we reverse the decision of the court of appeals. 
III.  CONCLUSION 
¶68 We 
conclude 
that 
the 
Plan 
administrator's 
determination that BlueCross is entitled to reimbursement was 
not arbitrary and capricious.  The Plan states that BlueCross is 
entitled to reimbursement from the beneficiary of the Plan for 
"expenses incurred as the result of, or that arose out of, an 
accident" when a third party "may be liable" for the payment of 
those expenses and the beneficiary obtains a settlement from the 
third party.  The Plan gives the Plan administrator discretion 
to interpret the clause.   
¶69 Prior to settlement, Steffen consistently asserted 
that the surgery-necessitating injuries arose out of a June 2005 
automobile accident.  Consequently, it was not arbitrary and 
No.  2009AP1558   
 
35 
 
capricious for the Plan administrator to interpret the Plan and 
conclude that BlueCross is entitled to reimbursement because the 
expenses that BlueCross paid arose from an accident for which a 
third party may be liable.   
¶70 Our 
conclusion 
that 
the 
Plan 
administrator's 
determination that BlueCross is entitled to reimbursement is not 
arbitrary and capricious is dispositive of the case.  We, 
therefore, do not reach the judicial estoppel issue. 
By the Court.—The decision of the court of appeals is 
reversed. 
 
 
No.  2009AP1558.ssa 
 
1 
 
¶71 SHIRLEY 
S. 
ABRAHAMSON, 
C.J.   (dissenting). 
 
The 
majority opinion correctly states the law but then fails to 
apply it.  I therefore dissent. 
¶72 I agree with the court of appeals (although my 
reasoning differs from that of the court of appeals) that 
BlueCross BlueShield is not entitled to a judgment as a matter 
of law and that the cause should be remanded to the circuit 
court.    
¶73 The applicable law is clear:  When an ERISA plan 
expressly gives the plan administrator discretion to interpret 
the terms of the plan, as the Plan at issue here does, a 
reviewing court will review the administrator's exercise of 
discretion 
under 
an 
"arbitrary 
and 
capricious" 
standard.  
Majority op., ¶¶34, 50, 54.  Judicial review of the plan 
administrator's decision is limited "to the record available to 
the plan administrator at the time the decision was made."  
Majority op., ¶¶35, 51. 
¶74 I have carefully read the majority opinion to find the 
plan 
administrator's 
interpretation 
of 
the 
Plan 
and 
the 
administrator's exercise of discretion.  I can't find them.  The 
majority opinion assumes the plan administrator interpreted the 
Plan but does not tell us who the plan administrator is, when 
the administrator made a decision about subrogation, or how and 
why the plan administrator made the decision about subrogation.  
See, e.g., majority op., ¶¶55, 57.   
¶75 I carefully searched the record to no avail to 
discover who the plan administrator is.  A complete copy of the 
No.  2009AP1558.ssa 
 
2 
 
Plan is not in the record.  The parties' briefs inform us that 
BlueCross BlueShield is a third-party administrator of the Plan, 
at least in regards to the payment of health benefits.   
¶76 As third-party administrator of the health benefits of 
the Plan, BlueCross BlueShield was required to make the medical 
payments at issue regardless of whether the injuries were caused 
by an accident for which some other person is liable.  The 
payment of medical expenses does not tell us who had discretion 
to interpret the Plan; the payment does not illuminate the 
interpretation and determination regarding subrogation. 
¶77 The first mention of subrogation was in Steffens' 
complaint.  The complaint alleged that BlueCross BlueShield is 
joined as a party because of possible subrogation rights and to 
comply with Wis. Stat. § 803.03.  The complaint further demanded 
judgment against BlueCross BlueShield "foreclosing any claim 
they may have for subrogation or other right to reimbursement 
they may have."    
¶78 The insurance company's pleading demanded subrogation, 
and an affidavit by the insurance company's counsel is in the 
record. 
 
The 
affidavit 
reveals 
nothing 
about 
the 
plan 
administrator or the plan administrator's decision.  
¶79 I searched the record to find the answers to many 
questions:  When did the plan administrator interpret the Plan?  
What was that interpretation?  What decision was made?  On what 
facts was decision based?  And what was the plan administrator's 
reasoning in reaching the decision?  I can't find answers in the 
record to any of these questions. 
No.  2009AP1558.ssa 
 
3 
 
¶80 No copy of the plan administrator's decision is in the 
record.1  No affidavit of the plan administrator is in the 
record.  Nevertheless, the majority opinion declares that it is 
evaluating the plan administrator's decision on the basis of the 
information the administrator had when it made its decision.   
¶81 A court cannot evaluate an interpretation and decision 
of a plan administrator and determine whether that decision is 
arbitrary and capricious without knowing what the interpretation 
and decision is, and on what it is based.2    
¶82 It 
seems 
that 
the 
majority 
is 
relying 
on 
the 
counterclaim and cross-claim of BlueCross BlueShield in the 
present litigation as the plan administrator's determination and 
interpretation of the Plan language.  See majority op., ¶57.  
BlueCross BlueShield does not allege in its pleadings that it is 
the plan administrator.  The allegations do not include an 
interpretation of the Plan.  Is the majority allowing a claimant 
                                                 
1 I acknowledge that plan claimants are statutorily entitled 
to a timely and specific explanation of a claim denial and that 
a similar statutory requirement is not specifically provided for 
a plan administrator to interpret the plan language and invoke 
the subrogation rights of the Plan.  I conclude, however, that 
the underlying arguments are as pertinent to the present 
situation as they are in the benefits claim situation.  In both 
instances, a timely and specific explanation allows the plan 
beneficiary 
to 
respond 
to 
the 
plan 
administrator's 
interpretation and allows a court to do its review.  
2 In the review of a denial of benefits claim, a court is 
free to "ignore ERISA plan interpretations that did not actually 
furnish the basis for a plan administrator's benefits decision."  
Marolt v. Alliant Techsystems, Inc., 146 F.3d 617, 620 (8th Cir. 
1998). 
No.  2009AP1558.ssa 
 
4 
 
to "be sandbagged by after-the-fact plan interpretations devised 
for purposes of litigation[?]"3     
¶83 In that counterclaim, BlueCross BlueShield alleges: 
Pursuant to the terms of the plan in question as 
reflected in the reimbursement provision, plaintiff 
John R. Steffens, is obligated to reimburse [BlueCross 
BlueShield] in an amount equal to the amounts paid by 
[it], out of any recovery by the plaintiff in this 
action, whether by settlement, judgment or otherwise. 
¶84 This allegation was made when the plaintiff was 
asserting in the litigation that the back injury (and the 
subsequent costs of the back surgery) was caused by the 
negligence of the tortfeasor.  BlueCross BlueShield's allegation 
seems to rely on that assertion.  The majority also seems to 
rely on the plaintiff's original assertion that the back injury 
was caused by the accident to support its reasonableness 
determination.  Majority op., ¶59.  According to the majority 
opinion, the plaintiff's original pleadings and assertions in 
the early stages of this litigation present compelling facts 
that seem to "undeniably show that, according to Steffens, the 
surgery-necessitating injuries arose out of the June 2005 
accident."  Majority op., ¶62.  Steffens is not the plan 
administrator. 
¶85 Even if the plan administrator's "decision" relied 
solely upon the plaintiff's allegations, then when the plaintiff 
no longer was asserting that the back injury arose out of the 
negligent acts of the tortfeasor, did the plan administrator 
                                                 
3 Marolt v. Alliant Techsystems, Inc., 146 F.3d 617, 620 
(8th Cir. 1998). 
No.  2009AP1558.ssa 
 
5 
 
update its determination?  Perhaps the majority is relying on 
BlueCross BlueShield's motion for declaratory judgment as the 
plan administrator's decision subsequent to the plaintiff's 
changed assertions regarding the cause of the lower back injury 
that necessitated the surgery.  If so, what was the basis for 
its updated determination?  The majority doesn't say and 
scouring the record doesn't produce an answer.  
¶86 On the record in the present case, neither the 
majority nor I can review the plan administrator's decision to 
determine whether it is arbitrary and capricious, and we cannot 
limit 
our 
review 
"to the record available to the plan 
administrator at the time the decision was made."  Majority op., 
¶¶35, 51.       
¶87 I dissent because nothing in the record articulates 
the plan administrator's interpretation or application of the 
Plan's subrogation language.  There is no analysis or reasoning 
of the plan administrator to which the court may defer under the 
arbitrary and capricious standard.  
¶88 Accordingly, I would remand the matter to the circuit 
court for the determination of what (if any) interpretation and 
determination the plan administrator (whoever that is) made, 
when, and why.  If the plan administrator did not interpret the 
Plan or make a determination, then the circuit court must, as a 
No.  2009AP1558.ssa 
 
6 
 
matter of law, interpret and apply the Plan language as it would 
any other contract.4    
¶89 For the reasons set forth, I dissent. 
¶90 I am authorized to state that Justice ANN WALSH 
BRADLEY joins this opinion. 
 
                                                 
4 "Where a trustee fails to act or to exercise his or her 
discretion, de novo review is appropriate because the trustee 
has forfeited the privilege to apply his or her discretion; it 
is the trustee's analysis, not his or her right to use 
discretion or a mere arbitrary denial, to which a court should 
defer."  Gritzer v. CBS, Inc., 275 F.3d 291, 296 (3rd Cir. 
2002). 
No.  2009AP1558.ssa 
 
 
 
1