United States Court of Appeals,

Eleventh Circuit.

No. 95-3659.

Doug CAGLE, Adrian A. DeVogel, Guy Dickerson, Don Hopkins, Henry

Jenkins, Lenore Miller, as Trustees and Fiduciaries of the Retail,

Wholesale and Department Store International Union and Industry

Health and Benefit Fund, Plaintiffs-Counter-Defendants-Appellants,

v.

Nancy M. BRUNER, Defendant-Counter-Claimant-Cross-DefendantAppellee,

Memorial Hospital Jacksonville, Inc., Defendant-Counter-ClaimantCross Claimant-Third Party Plaintiff-Appellee,

University Medical Center, Inc., Movant-Appellee,

Cobbie L. Bruner, Sr., Third Party Defendant.

May 22, 1997.

Appeal from the United States District Court for the Middle

District of Florida. (No. 94-1015-Civ-J-16), John H. Moore, II,

Judge.

Before TJOFLAT, DUBINA and CARNES, Circuit Judges.

PER CURIAM:

In this appeal, we decide three issues relating to the

Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461

("ERISA"). First, we consider whether a plan beneficiary's

assignment of the right to payment of ERISA benefits to a health

care provider gives the health care provider standing to sue the

plan. We hold that it does, at least where the plan does not

forbid such an assignment.

Second, we consider whether an ERISA plan may require a plan

participant to sign a subrogation agreement before paying claims

submitted by that participant on behalf of a plan beneficiary. We

hold that the plan may do so, where the required subrogation
 1

ERISA defines a plan participant to include:

any employee or former employee of an employer, ... who

is or may become eligible to receive a benefit of any

type from an employee benefit plan which covers

agreement does not contain an arbitrary and capricious

interpretation of the plan's subrogation rights.

Finally, we consider an issue relating to the "make whole"

doctrine of insurance law. Under the "make whole" doctrine, an

insurer who pays less than an insured's total loss may not exercise

a right of subrogation until the insured is "made whole" for his

total loss. We address whether the "make whole" doctrine applies

where an ERISA plan neither explicitly adopts nor disavows the

doctrine. We conclude that the doctrine applies where the plan

does not explicitly disavow it.

I. BACKGROUND

A. FACTS

This action was brought by the trustees of the Retail,

Wholesale and Department Store International Union and Industry

Health and Benefit Fund. (We will refer to both the trustees and

the fund as "the Fund"). The Fund was established pursuant to

various collective bargaining agreements between employers and

local unions affiliated with the Retail, Wholesale and Department

Store International Union to provide benefits for plan participants

and beneficiaries. The Fund provides an "employee benefit plan"

governed by ERISA.

Nancy Bruner, a defendant in this action, is a plan

participant by virtue of her employment with Swisher & Sons, a

contributor to the Fund.1 Bruner's son, Cobbie Bruner, Jr., is
employees of such employer or members of such

organization, or whose beneficiaries may be eligible to

receive any such benefit.

29 U.S.C.A. § 1002(7) (West Supp.1996). 

 2"The term "beneficiary' means a person designated by a

participant, or by the terms of an employee benefit plan, who is

or may become entitled to a benefit thereunder." 29 U.S.C.A. §

1002(8) (West Supp.1996). 

Bruner's dependent and a beneficiary of the Fund.2

On September 19, 1993, Cobbie Bruner, Jr. was involved in a

car accident caused by a third party. Immediately after the

accident, Cobbie Jr. received emergency treatment from University

Medical Center. On October 18, 1993, Cobbie Jr. was transferred to

Genesis Rehabilitation Hospital ("Genesis"), formerly Memorial

Hospital of Jacksonville. Cobbie Jr. remained at Genesis for four

months, and received outpatient treatment there for an additional

four months. When Cobbie Jr. was admitted to Genesis, his father,

Cobbie Bruner, Sr., signed a form assigning to Genesis his son's

right to payment of medical benefits. Soon after Cobbie Jr.'s

accident, the Fund paid an initial claim of $296.00 to Nancy Bruner

for Cobbie Jr.'s medical treatment. Yet, approximately one month

after Cobbie Jr. had been admitted to Genesis, the Fund refused to

pay or process any additional claims for him until Nancy Bruner

signed a standard subrogation form provided by the Fund. That

agreement provides:

I (we) understand that if payments are made under the Plan for

any treatment or services because of injury to, or sickness

of, an eligible individual who has a lawful claim, demand or

right against a third party or parties (including an insurance

carrier) for indemnification, damages or other payment with

respect to such injury or sickness, I (we) am (are) required

to subrogate to the RWDSU Health and Welfare Fund, the Plan,

to the extent of payments made under said plan, my (our)
rights to receive or claim such indemnification, damages or

other payment.

In consideration thereof, if payments are made under said plan

for treatment or service on account of the same injury or

sickness and to the extent of such payments made (but not in

excess of the proceeds of any recovery),

(a) I (we) agree to reimburse the Plan in full from the

proceeds of any recovery received by me (us) because of

such injury or sickness, and

(b) The Plan shall be subrogated in full to my (our)

rights to such recovery and my (our) interest in the

proceeds of such recovery;

if such recovery is based upon the eligible individual's

lawful claim, demand or right against a third party or parties

(including an insurance carrier).

Nancy Bruner signed the agreement sent by the Fund, but

attached an addendum stating that the subrogation agreement does

not "in any way expand the subrogation rights" of the Fund. The

Fund rejected the amended agreement and sent Bruner an unmodified

subrogation agreement to sign, promising to pay benefits if a

signed unmodified version was returned. Bruner again returned the

agreement with an addendum, stating that the subrogation agreement

"does not, in any way, expand the subrogation rights of [the Fund]

beyond the rights as provided in the [summary plan description]."

That agreement was also rejected by the Fund. Bruner and Genesis

threatened to sue the Fund for nonpayment.

B. PROCEDURAL HISTORY

The Fund filed this lawsuit in the Middle District of Florida

pursuant to ERISA, 29 U.S.C. § 1132(a)(3) and 28 U.S.C. § 2201,

seeking declaratory and injunctive relief. Naming both Nancy

Bruner and Genesis as defendants, the Fund asked the district court

to declare that Bruner was required to execute the plan's standard
subrogation agreement without modification as a condition precedent

to the payment of Bruner's claims to Genesis. The Fund also

requested that the district court issue an injunction ordering

Bruner to execute the subrogation agreement.

Bruner counterclaimed against the Fund for: (1) a declaration

that Cobbie Bruner is entitled under the plan to be made whole

before the Fund may participate in any recovery from an at-fault

party; (2) a judgment awarding Bruner an amount equal to the

medical expenses covered by the Fund; and (3) attorney's fees and

costs.

Genesis cross-claimed against Nancy Bruner for the amount of

Cobbie Jr.'s medical bills and asserted four counterclaims against

the Fund. Genesis claimed that the Fund had breached a contract

with Genesis by denying payment to Genesis after the plan's

precertification agent approved Cobbie Jr.'s stay. Second, Genesis

claimed that the Fund had breached a contract with Genesis by

refusing to pay benefits to which Genesis was entitled as an

assignee. Third, Genesis claimed that the Fund had breached its

fiduciary duty to Cobbie Jr. by refusing to accept Nancy Bruner's

modified subrogation agreement and by refusing to pay Cobbie Jr.'s

benefits. Finally, Genesis claimed entitlement to a declaration of

its right to be paid by the Fund. The Fund answered Genesis'

counterclaims with two affirmative defenses: (1) that Genesis

lacks standing to sue the Fund under 29 U.S.C. § 1132(a); and (2)

that Genesis' state law claims are preempted by ERISA.

All of the parties moved for summary judgment on the issue of

whether the Fund could require Nancy Bruner to execute its standard
subrogation agreement before processing her claims. In its motion

for summary judgment, the Fund also argued that Genesis did not

have standing under ERISA, and that Genesis' state law claims were

preempted by ERISA. The district court held that Genesis has

standing to sue the Fund under 29 U.S.C. § 1132(a) as an assignee

of Cobbie Jr.'s right to medical benefits. The district court also

held that Genesis' state law claims are preempted by ERISA. On the

requests for declaratory relief, the district court held that the

Fund acted arbitrarily and capriciously in requiring Bruner to

execute the subrogation agreement prior to processing her claims.

The district court granted Bruner's motion for summary

judgment, including her request for a declaratory relief. The

court denied the Fund's motion for summary judgment and granted

summary judgment to Genesis on its claim for declaratory relief,

but not on its damages claim. After a trial on damages, the court

entered a judgment requiring the Fund to pay Genesis $56,744.57.

II. DISCUSSION

Summary judgment may be granted only when there is no genuine

issue as to any material fact, and the moving party is entitled to

judgment as a matter of law. Fed.R.Civ.P. 56. This Court reviews

de novo a district court's decision to grant or deny summary

judgment. E.g., United States v. Route 2, Box 472, 136 Acres More

or Less, 60 F.3d 1523, 1526 (11th Cir.1995).

A. GENESIS' STANDING TO SUE THE PLAN

 Before addressing the district court's grant of summary

judgment, we must consider the Fund's argument that Genesis lacks

standing to counterclaim against the Fund. According to the Fund,
the only parties that have standing to sue an ERISA plan, and thus

to file counterclaims against it, are those listed in 29 U.S.C. §

1132(a): a "participant," "beneficiary," "fiduciary," or the

Secretary of Labor. See id. Because Genesis does not fall within

the definition of any of those terms, the Fund argues that Genesis

is not allowed to bring an action or file a counterclaim against

the Fund.

Genesis acknowledges that the list in § 1132(a) limits those

parties who have independent standing to sue an ERISA plan. See

Hermann Hosp. v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1289

(5th Cir.1988) (holding that parties not listed in § 1132(a) do not

have independent standing to sue an ERISA plan). However, Genesis

argues that § 1132(a)'s list of parties with standing does not bar

Genesis from suing the plan, because Genesis is an assignee of

rights held by an entity that is listed in § 1132(a). In other

words, Genesis argues that when Congress listed those who could

sue, it did not intend to alter the general rule that an assignee

of a right has the same standing to sue as the assignor. Because

Cobbie Jr. is a beneficiary of the plan, and the Bruners assigned

to Genesis his right to receive payment of benefits, Genesis

contends it may sue the Fund under § 1132(a).

The Fifth, Seventh, Eighth, and Ninth Circuits have held that

an assignee of ERISA-covered medical benefits has derivative

standing to bring an action under § 1132(a) against an ERISA plan,

if the plan does not forbid assignments of benefits. See Hermann,

845 F.2d at 1289; Kennedy v. Connecticut General Life Ins. Co.,

924 F.2d 698, 700-01 (7th Cir.1991); Lutheran Med. Ctr. v.
Contractors Health Plan, 25 F.3d 616, 619 (8th Cir.1994); Misic v.

Building Serv. Employees Health and Welfare Trust, 789 F.2d 1374,

1379 (9th Cir.1986). According to those courts, § 1132(a) does not

preclude assignees from enforcing rights assigned to them by those

listed in the statute as permissible plaintiffs. Only one circuit

appears to diverge from that view, and it has done so only in

dicta. In Northeast Dept. ILGWU Health and Welfare Fund v.

Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147 (3d

Cir.1985), a case which did not actually involve any assignment of

benefits, the court stated that the list of possible plaintiffs in

§ 1132(a) is exclusive and, for that reason, assignees do not have

standing to sue under that provision. See id. at 153-54 & n. 6.

Instead of following that dicta, we join our four sister

circuits that have grappled with the issue in a case requiring its

resolution. We hold that neither § 1132(a) nor any other ERISA

provision prevents derivative standing based upon an assignment of

rights from an entity listed in that subsection. As the Fifth

Circuit has pointed out, neither the text of § 1132(a)(1)(B) nor

any other ERISA provision forbids the assignment of health care

benefits provided by an ERISA plan. See Hermann, 845 F.2d at 1289.

The absence of any anti-assignment provision applicable to health

care benefits takes on added significance in view of the fact that

ERISA expressly prohibits the assignment of pension benefits

governed by ERISA. Id.; Misic, 789 F.2d at 1376. We agree with

the Fifth Circuit that the difference most likely exists because

Congress recognized that "[a]n assignment to a health care provider

facilitates rather than hampers the employee's receipt of health
benefits." Hermann, 845 F.2d at 1286.

Of course, an assignment will not facilitate a plan

participant's or beneficiary's receipt of benefits if the plan does

not pay the benefits it owes, and provider-assignees are not

permitted to sue on the participant's or beneficiary's behalf. If

provider-assignees cannot sue the ERISA plan for payment, they will

bill the participant or beneficiary directly for the insured

medical bills, and the participant or beneficiary will be required

to bring suit against the benefit plan when claims go unpaid. See

Hermann, 845 F.2d at n. 13. On the other hand, if

provider-assignees can sue for payment of benefits, an assignment

will transfer the burden of bringing suit from plan participants

and beneficiaries, to "providers[, who] are better situated and

financed to pursue an action for benefits owed for their services."

Id. For these reasons, the interests of ERISA plan participants

and beneficiaries are better served by allowing provider-assignees

to sue ERISA plans.

The Fund contends that we should reject the majority view and

its rationale because if we hold that Genesis has standing, it will

necessarily follow that Nancy Bruner does not. Only one entity can

wear Nancy Bruner's shoes, the argument goes, and in order to

protect her rights, we should reject Genesis' claim of standing.

Yet, we do not find Nancy Bruner's and Genesis' standing to be

mutually exclusive, because Bruner and Genesis have distinct

interests in this litigation. As an assignee, Genesis is concerned

with being paid for Cobbie Jr.'s bills to the extent that the plan

covers his treatment. Pursuant to that interest, Genesis has
 3

The Fund does not argue that the assignment of Cobbie Jr.'s

right to payment of benefits to Genesis is invalid as a matter of

contract law. Therefore, we need not decide what constitutes a

valid assignment of medical benefits covered by ERISA.

We also decline to address the issue of whether a

provider-assignee can sue an ERISA plan, where the terms of

the plan forbid such an assignment. That situation is not

before us in this case. 

counterclaimed against the Fund for damages and for a declaration

that it is entitled to be paid immediately. Meanwhile, Nancy

Bruner's primary concern in this case is whether the Fund's

subrogation agreement expands the Fund's subrogation rights beyond

the rights set forth in the benefits plan. That question is of

little or no concern to Genesis, which has no claim against any

damages that may be recovered from a third party.

The Fund also contends that we should not allow Genesis to

have standing, because doing so will provide Genesis with an unfair

advantage vis-a-vis other medical services providers that have

treated Cobbie Jr. According to the Fund, the plan will not pay

for all of Cobbie Jr.'s bills, and allowing Genesis to sue for

nonpayment will upset the plan's carefully drafted procedures for

paying all claims equitably. We see no reason why that must be

true. By recognizing Genesis' standing, we are not deciding the

amount Genesis is entitled to recover. We have not been asked to

determine how much the Fund will pay Genesis or any other health

care provider. All we decide is that Genesis, as a

provider-assignee, has derivative standing to sue the Fund under 29

U.S.C. § 1132(a).3

B. THE FUND'S INTERPRETATION OF THE PLAN

We now consider whether the Fund may condition the payment of
benefits on Nancy Bruner's execution of the Fund's subrogation

agreement. Bruner urges us to affirm the district court's decision

granting summary judgment in her favor on the ground that the

subrogation agreement expands the Fund's subrogation rights beyond

those set forth in the plan. In its argument for reversal, the

Fund contends that it may condition the payment of benefits on the

execution of the agreement, because the agreement is not an

arbitrary interpretation of its subrogation rights under the plan.

1. The Standard of Review of the Fund's Decision

 As an initial matter, we must decide the proper standard of

review of the Fund's interpretation of the plan. The parties agree

that this case should be treated as a denial-of-benefits case. In

such a case, the Fund's (conditional) denial of ERISA benefits is

subject to de novo review, unless "the benefit plan gives [the

Fund] discretionary authority to determine eligibility for benefits

or to construe the terms of the plan." Firestone Tire and Rubber

Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d

80 (1989); Lee v. Blue Cross/Blue Shield of Alabama, 10 F.3d 1547,

1549 (11th Cir.1994). If the plan reserves that discretion to the

Fund, the arbitrary and capricious standard of review applies, see

Firestone, 489 U.S. at 115, 109 S.Ct. at 956-57, unless the Fund's

construction "would advance a conflicting interest of [the Fund] at

the expense of the affected beneficiary." Brown v. Blue Cross and

Blue Shield of Alabama, Inc., 898 F.2d 1556, 1566-67 (11th

Cir.1990). If such a conflict of interest is shown, the burden

shifts to the Fund to demonstrate that its interpretation of the

plan is not tainted by self-interest. Lee, 10 F.3d at 1552;
Brown, 898 F.2d at 1566.

 Genesis claims that the Fund's decision creates a conflict of

interest, but we agree with the district court that there is no

conflict in this case. Conflicts arise when a fiduciary or

administrator pays benefits to participants and beneficiaries from

its own assets; an example is an insurance company administering

an ERISA plan that the company also insures. See Brown, 898 F.2d

at 1561. In that situation, the insurance company's role as

administrator "lies in perpetual conflict with its profit-making

role as a business." Id. In contrast, the Fund is a nonprofit

entity, and benefits are paid out of a trust funded from the

contributions of several employers. In such an arrangement, the

Fund's decision to require a signed subrogation agreement merely

protects the assets in the trust for other participants and

beneficiaries. That requirement does not benefit the Fund (i.e.,

the trustees) in any way which could create a conflict of interest

at the expense of a plan participant or beneficiary.

 Since there is no conflict of interest in this case, either

the de novo or the arbitrary and capricious standard applies,

depending upon whether the plan documents give the Fund sufficient

discretion. The Fund argues that it is provided sufficient

discretion to interpret the plan in the Trust Agreement and in the

Rules and Regulations. In opposition, both Genesis and Bruner

argue that the plan's Summary Plan Description ("SPD"), not other

plan documents, must contain the discretionary language in order

for the Fund to receive the deference required under the

arbitrariness standard. We reject that argument. Both the Supreme
Court and this Court have reviewed trust documents and other

non-SPD documents in the search for a reservation of discretion for

plan administrators or fiduciaries. See Firestone, 489 U.S. at

109-13, 109 S.Ct. at 954-55; Guy v. Southeastern Iron Workers'

Welfare Fund, 877 F.2d 37, 39 (11th Cir.1989). Accord Diaz v.

Seafarers Int'l Union, 13 F.3d 454, 457 (1st Cir.1994); Luby v.

Teamsters Health, Welfare and Pension Trust Funds, 944 F.2d 1176,

1180-81 (3d Cir.1991). Accordingly, we look to all of the plan

documents to determine whether the plan affords the Fund enough

discretion to make the arbitrariness standard applicable.

In this plan, the Declaration of Trust and the Trust Rules and

Regulations expressly reserve discretionary authority for the Fund

on certain matters. The Declaration of Trust provides:

Section 4. ELIGIBILITY REQUIREMENTS FOR BENEFITS. The

Trustees shall have full authority to determine eligibility

requirements for benefits and to adopt Rules and Regulations

setting forth same which shall be binding on the Employees,

their families and dependents.

Section 5. METHOD OF PROVIDING BENEFITS. The benefits

shall be provided and maintained by such means as the Trustees

shall in their sole discretion determine....

Agreement and Declaration of Trust, Article VI. The Rules and

Regulations state:

The determination of any question arising in connection with

the Plan, including (but not limited to) the interpretation of

the terms of the Plan, shall rest with the Trustees, and their

decision or action as to any such questions shall be final and

conclusive, and binding upon the Employers and any Employee,

Dependent or Beneficiary.

Retail, Wholesale and Department Store International Union and

Industry Health and Benefit Fund Rules and Regulations, § 8.11.

We have held that reservations of "full and exclusive

authority to determine all questions of coverage and eligibility"
 4

The parties agree that the SPD language is controlling on

the issue of the Fund's subrogation rights; no other plan

documents are cited by the parties on that specific issue. 

along with "full power to construe the [ambiguous] provision[s]" of

the plan reserve enough discretion to make the arbitrary and

capricious standard applicable. See Guy, 877 F.2d at 39. The

Declaration of Trust in this case reserves "full authority to

determine eligibility requirements for benefits," while the Rules

and Regulations reserve discretion in the Fund to interpret

ambiguous sections of the plan. Consequently, the Fund's

interpretations of the plan are subject to review under the

arbitrary and capricious standard.

2. Whether the Fund Acted Arbitrarily and Capriciously

The Fund's right to subrogation arises out of the following

language in the SPD:4

Subrogation seeks to conserve the assets of the Benefit

Fund by imposing the expense for accidental injuries suffered

by members or eligible dependent's [sic] on those responsible

for causing them. If you or one of your dependents, for

example, should receive benefits from the Fund for injuries

caused by someone else (such as an automobile accident,) the

Benefit Fund through subrogation has the right to seek

repayment from the other party or his insurance company, or in

the event you or your dependent recovers the amount of medical

expense paid by the Fund by suit, settlement or otherwise from

any third person or his insurer, the Fund has the right to be

reimbursed therefor through subrogation.

The Benefits Fund will provide benefits to you and your

dependents at the time of need, but you may be asked to

execute documents or take such other action as is necessary to

assure the rights of the Fund.

The Fund contends that this language enables it to require Bruner

to sign its standard subrogation agreement before paying benefits.
 5

The entire text of the subrogation agreement is quoted in

Section I.A. of this opinion. 

 6Other factors that may be relevant in reviewing a fiduciary

or administrator's decision for arbitrariness are the internal

consistency of a plan, the relevant regulations formulated by

administrative agencies, and the factual background of the

determination, including any inferences of bad faith. Blank, 926

F.2d at 1093. The parties do not argue that those factors are

particularly relevant to this case, and we agree that they are

not. 

The subrogation agreement provides in pertinent part:5

I (we) agree to reimburse the Plan in full from the proceeds

of any recovery received by me (us) because of such injury or

sickness, and

(b) The Plan shall be subrogated in full to my (our) rights to

such recovery and my (our) interest in the proceeds of such

recovery....

 Under the arbitrary and capricious standard of review, we are

limited to deciding whether the Fund's interpretation of the plan

was made rationally and in good faith. Blank v. Bethlehem Steel

Corp., 926 F.2d 1090, 1093 (11th Cir.1991) (citing Guy v.

Southeastern Iron Workers' Welfare Fund, 877 F.2d 37, 39 (11th

Cir.1989)). Factors relevant to that determination include: (1)

the uniformity of the Fund's construction; (2) the reasonableness

of its interpretation; and (3) possible concerns with the way

unexpected costs may affect the future financial health of the

Fund.6

 See id.

Bruner and Genesis challenge both the language of the

subrogation agreement and the Fund's requirement that the agreement

be signed before benefits are paid. Although the district court

conflated the two issues in its analysis, we will analyze the

issues separately.

a. The Fund's subrogation rights
 In deciding whether the Fund has acted arbitrarily and

capriciously in choosing the particular language contained in the

subrogation agreement, the district court was required to consider

the uniformity of the Fund's interpretation. The Fund claims it

has consistently interpreted the SPD to provide itself with a right

of subrogation to any recovery obtained from an at-fault third

party. The Fund's view is set forth in the standard subrogation

agreement, and the Fund has never accepted any modified or amended

form of that agreement. Bruner and Genesis failed to put forth any

evidence that the Fund has ever interpreted the SPD to provide

subrogation rights for the Fund that were narrower or in any way

different from those set out in the standard subrogation agreement.

Consequently, the uniformity factor indicates that the Fund's

interpretation was not arbitrary and capricious.

Another factor the district court was required to consider in

its review was whether the Fund's interpretation of the SPD's

relevant language is reasonable. According to Bruner and Genesis,

the SPD limits the Fund's subrogation rights to a recovery of

"medical expenses" paid by a third party. By contrast, the Fund

interprets the SPD to allow it to recover the medical expenses it

has paid to a participant or beneficiary, out of any recovery

achieved against the at-fault third party. While Bruner and

Genesis' interpretation is plausible, the Fund's interpretation is

more persuasive, because the SPD says the plan has a right of

reimbursement in the event a participant recovers "the amount of

medical expenses paid by the Fund" (emphasis added). The

subrogation agreement is consistent with the SPD insofar as the
 7

We were recently confronted with the same issue—the

consistency between a plan's SPD and its reimbursement agreement

on the issue of the plan's reimbursement rights—in a case that

did not require us to defer to the plan's interpretation, and we

concluded that the provisions were not in conflict. See Wright

v. Aetna Life Ins. Co., 110 F.3d 762, 764-65 (11th Cir.1997). 

The SPD at issue in Wright gave the plan a right to be reimbursed

out of any "damages" received by a plan participant from a

third-party tortfeasor. See id. at 763 & n. 1. The plan's

reimbursement agreement provided the plan with the right to be

reimbursed out of any recovery from a third-party tortfeasor, to

the extent such recovery was "attributable to" medical expenses

paid by the plan. See id. at 763 & n. 2.

Wright, the participant, settled with a third-party

tortfeasor, and the settling parties allocated all of the

damages to pain, suffering, and wage loss. See id. at 763-

64. After Wright refused to reimburse the plan out of that

recovery, the plan argued that the SPD and the reimbursement

agreement were inconsistent, and that the SPD gave the plan

a right to be reimbursed out of the participant's recovery. 

See id. We held that the SPD and the agreement were

consistent; the agreement only interpreted the ambiguous

language in the SPD. See id. at 764-65. We also held that

the plan's reimbursement rights were controlled by the more

specific reimbursement agreement, though not by the settling

parties' "allocation" of damages in their settlement

agreement. See id. at 765 & n. 3. We remanded the case so

that the district court could determine what portion of the

recovery was actually attributable to medical expenses paid

by the plan. See id. at 764-65. 

Fund's right to subrogation out of third-party recoveries is

concerned.7

The district court thought that both the Fund's interpretation

and the interpretation suggested by Genesis and Bruner were

plausible. Faced with competing plausible interpretations, the

district court construed all ambiguities in the SPD against the

Fund and concluded that the Fund's interpretation was arbitrary.

The district court erred in its "reasonable interpretation"

analysis. The "reasonable interpretation" factor and the arbitrary

and capricious standard of review would have little meaning if

ambiguous language in an ERISA plan were construed against the
Fund. If the Fund's interpretation is reasonable and is consistent

with the law, then the reasonableness-of-interpretation factor

militates against a conclusion that the Fund has acted arbitrarily

and capriciously.

The third and final factor that the district court was

required to consider was whether the Fund's interpretation was

arbitrary and capricious in light of concerns about unexpected

costs and the future financial stability of the Fund. The Fund

believes that trust assets will be endangered if the Fund's

subrogation rights do not extend to any recovery obtained by plan

participants and beneficiaries from third parties. If the Fund is

limited to subrogation of "medical expenses" recovered from the

tortfeasor, plan participants and beneficiaries could destroy the

Fund's subrogation rights by negotiating with the tortfeasor to

label all or most of the damages received from the tortfeasor as

"pain and suffering," even when they actually are intended to

compensate for medical expenses. The district court recognized

that the Fund's concern was a genuine one, but it concluded that

cost concerns were insufficient to overcome what the court

perceived to be the "unreasonableness" of the Fund's

interpretation, when all ambiguities were construed against the

Fund.

Whether or not cost concerns can trump an unreasonable

interpretation of plan language, the Fund's subrogation agreement

advances a reasonable interpretation of the subrogation rights

provided in the SPD. Given the reasonableness of the Fund's

interpretation, the uniformity of that interpretation, and the
genuine cost concerns that underlie it, we hold that the Fund did

not act arbitrarily and capriciously in requiring Nancy Bruner to

sign its subrogation agreement.

b. Requiring the agreement to be signed before paying benefits

Next, we consider whether it was arbitrary and capricious for

the Fund to require that Nancy Bruner sign its standard subrogation

agreement before paying benefits, instead of later. We turn again

to the Blank factors (uniformity of interpretation, reasonableness

of interpretation, and cost concerns) to determine whether the

Fund's decision survives review under the arbitrary and capricious

standard.

Nancy Bruner argues that the "uniform interpretation" factor

weighs in her favor, because the Fund has been inconsistent about

requiring a signed subrogation agreement prior to the payment of

benefits. The Fund admits that it requires such an agreement

before it pays benefits only when a large sum is at stake and the

participant's or beneficiary's lawyers indicate that they may

challenge the plan's subrogation rights. If only small sums are at

issue, or if a large sum is at issue but the Fund is convinced that

the participant's or beneficiary's lawyers will not object to the

Fund's subrogation rights, no agreement is required.

According to Nancy Bruner, the fact that the Fund does not

always require a signed subrogation agreement before paying

benefits demonstrates that the Fund has inconsistently interpreted

its right to insist upon the agreement being signed up-front. We

disagree. The Fund's policy fully recognizes its right to insist

upon a signed subrogation agreement as a prerequisite to receiving
benefits, but also withholds the exercise of that right in

circumstances where it does not appear to be necessary to protect

the Fund's assets. Here it did appear to be necessary, and the

accuracy of that appearance was confirmed by Nancy Bruner's

position in this litigation. Based on the evidence in the record,

we conclude that the Fund has uniformly interpreted the plan to

allow it to require a signed subrogation agreement before paying

benefits, and the Fund has done so in circumstances like those in

this case.

On the "reasonable interpretation" factor, the district court

determined that the Fund unreasonably interpreted the plan to allow

it to require a signed subrogation agreement prior to paying

benefits. According to Bruner, the district court correctly found

the Fund's position to be unreasonable, because the Fund has no

right of subrogation until benefits are paid. We believe that

Bruner is confusing the issues. It is true that because the Fund

has no right of subrogation until the plan pays benefits, it cannot

enforce the subrogation agreement until it pays benefits.

Nevertheless, nothing in the plan forbids the Fund from requiring

the agreement to be signed before it pays any claims. The SPD

states that "[the participant or beneficiary] may be asked to

execute documents or take such other action as is necessary to

assure the rights of the Fund." That language can be read to

require execution of the subrogation agreement before payment as

easily as it can be read to require execution of the agreement

after payment. Thus, the Fund's interpretation is not

unreasonable, given the language of the plan.
When we consider the practical reasons for requiring the

subrogation agreement to be signed before paying any benefits, the

reasonableness of that policy becomes abundantly clear. The Fund

uses the subrogation agreements in negotiations with at-fault third

parties. Once benefits are paid, participants and beneficiaries

have little incentive (other than the fear of a lawsuit) to sign a

subrogation agreement. If the Fund cannot require the agreement

beforehand, it often will have to resort to lawsuits or at least

the threat of lawsuits to obtain the agreements. Lawsuits cost

money, sometimes a lot of it. In addition, delay becomes

inevitable, and while the Fund is attempting to obtain the

agreements from participants and beneficiaries, the Fund is

hampered in its negotiations with at-fault third parties. In

short, having the agreement in hand before paying benefits provides

significant protection to trust assets. Cost concerns weigh in

favor of the Fund's policy.

The Blank factors all weigh in the Fund's favor. Accordingly,

we conclude that the Fund has not acted arbitrarily or capriciously

by requiring Nancy Bruner to sign its standard subrogation

agreement as a condition to the processing and payment of claims

for Cobbie Jr.

C. THE MAKE WHOLE RULE

The final issue we must decide is whether the "make whole"

doctrine of insurance law applies to this case. In Nancy Bruner's

answer to the Fund's complaint, she counterclaimed for a

declaration that the Fund has no right of subrogation with regard

to Cobbie Jr.'s recoveries from third parties, unless and until
 8

Guy involved two claims for benefits submitted by an ERISA

plan participant. The participant filed the first claim on

behalf of his son, after his son was involved in an accident with

Cobbie Jr. is "made whole." The district court granted Nancy

Bruner's motion for summary judgment in its entirety, and the Fund

seeks a reversal of the "make whole" declaratory relief judgment

Bruner obtained.

 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). See also 16 Couch on Insurance § 61:64 (2d ed.

1983) (if an insurer pays less than the insured's total loss, the

insurer cannot exercise a right of reimbursement or subrogation

until the insured's entire loss has been compensated). State

courts generally treat the "make whole" doctrine as a default rule

that is read into insurance contracts, except where it is

explicitly excluded. See Fields v. Farmers Ins. Co., Inc., 18 F.3d

831, 835-36 (10th Cir.1994) (diversity case listing states that

apply the make whole doctrine as a default rule).

According to the Fund, the "make whole" doctrine is a matter

of state law, and it has no force in the ERISA context. To the

extent that the Fund argues that this Court is not bound in ERISA

cases by doctrines of state insurance law, the Fund is correct.

But the Fund errs in claiming that the "make whole" doctrine is not

part of the federal common law of this circuit. We recognized in

the Guy case that the "make whole" doctrine applies in at least

some ERISA cases.8 See Guy, 877 F.2d at 39-40.
a third party. The plan paid eighty percent of the son's medical

bills. The participant's ex-wife later sued the third-party

tortfeasor in her individual capacity and as the next friend of

her son, and the participant joined the suit in his individual

capacity. The participant received $15,000 in a settlement with

the tortfeasor. 877 F.2d at 37-39.

The plan claimed it had a right of subrogation

regarding the settlement recovery of the participant. The

participant claimed the plan had no right to participate in

that recovery, because the son's unpaid medical bills

exceeded the amount recovered in the settlement. In other

words, because the son had not been made whole, the

participant argued that the plan's subrogation right was not

mature. While this dispute was being litigated, the

participant made an unrelated claim for benefits for his own

medical care. The plan denied his claim on the ground that

the participant owed the plan money for the benefits

previously paid to the son. Id. at 38.

We held in Guy that because the son had not been made

whole by the settlement recovery, the plan's right to

subrogation regarding that recovery was not mature. 

Accordingly, the plan's denial of benefits—which was based

on the plan's view of its subrogation rights—was deemed to

be arbitrary and capricious. Id. at 39. 

 9

In Sunbeam, the Fifth Circuit concluded that the plan

before it was not ambiguous on the issue of whether the plan

could exercise its right of subrogation before a plan beneficiary

was "made whole." See 102 F.3d at 1376. Because the plan was

not ambiguous, the Sunbeam Court had no cause to decide whether

the "make whole" doctrine should apply as a default rule in ERISA

 At most, the "make whole" doctrine operates as a default

rule. See Cutting v. Jerome Foods, Inc., 993 F.2d 1293, 1297 (7th

Cir.1993) (describing the "make whole" doctrine as a "gap filler"

and holding that it was not arbitrary for the plan to conclude it

was not part of the ERISA plan); Barnes v. Independent Auto.

Dealers Ass'n, 64 F.3d 1389, 1394 (9th Cir.1995) (applying the

"make whole" doctrine as a default rule). But see Sunbeam-Oster

Co., Inc. Group Benefits Plan v. Whitehurst, 102 F.3d 1368, 1378

(5th Cir.1996) (doubting whether court would adopt the "make whole"

doctrine as a default rule) (dicta).9

 As a default rule, the "make
cases. Id. Nevertheless, the Sunbeam Court expressed without

explanation its reservations about adopting the "make whole"

doctrine as a default rule in ERISA cases. Id. at 1378. 

whole" doctrine applies to limit a plan's subrogation rights where

an insured has not received compensation for his total loss and the

plan does not explicitly preclude operation of the doctrine.

Although we did not describe the "make whole" doctrine as a default

rule in Guy, our analysis in that case is consistent with the

default rule view. See 877 F.2d at 39 (recognizing that there are

possible exceptions to the "make whole" doctrine). We hold today

that the "make whole" doctrine is a default rule in ERISA cases.

Because the "make whole" doctrine is a default rule, the

parties can contract out of the doctrine. Barnes, 64 F.3d at 1395;

Cutting, 993 F.2d at 1297. Indeed, the Fund contends that it has

contracted out of the "make whole" doctrine in its benefits plan.

In support of that argument, the Fund points to the plan's

language, which gives the Fund:

the right to seek repayment from the other party or his

insurance company, or in the event you or your dependent

recovers the amount of medical expense paid by the Fund by

suit, settlement or otherwise from any third person or his

insurer, ... the right to be reimbursed therefor through

subrogation.

That language is standard subrogation language, which we think does

not demonstrate a specific rejection of the "make whole" doctrine.

See Barnes, 64 F.3d at 1395-96 (general subrogation language does

not override "make whole" doctrine). See also Guy, 877 F.2d at 38-

39 (applying the "make whole" doctrine even though the plan had a

right to reimbursement from "all amounts recovered by suit,

settlement or otherwise from any third person or his insurer to the
extent of benefits provided hereunder"). An ERISA plan overrides

the "make whole" doctrine only if it includes language

"specifically allow[ing] the Plan the right of first reimbursement

out of any recovery [the participant] was able to obtain even if

[the participant] were not made whole." See Barnes, 64 F.3d at

1395.

The Fund contends that specific language rejecting the "make

whole" doctrine is not necessary where, as in this case, the Fund

has discretion in interpreting the plan. We recognize that in

Cutting v. Jerome Foods, Inc., 993 F.2d 1293 (7th Cir.1993), the

Seventh Circuit held that where a plan did not specifically accept

or reject the "make whole" doctrine, and the administrator had

discretionary authority to interpret ambiguous language in the

plan, it was not arbitrary for the administrator to conclude that

the plan did not incorporate the "make whole" doctrine. Id. at

1299. We decline to follow Cutting. In our Guy decision, we

concluded that the "make whole" doctrine was applicable to a

subrogation dispute even though the administrators of the plan had

discretion to interpret the plan, and the administrators claimed

the "make whole" doctrine was inapplicable. See 877 F.2d at 39-40.

We believe Guy reached the right result. As we explained

above, the "make whole" doctrine exists because parties to an

insurance contract do not always explicitly address what happens

when the insurer pays less than the insured's total loss, and the

insured achieves a recovery from a third party. The effect of the

doctrine is to imply into ambiguous insurance contracts (including

ERISA plans) a default provision governing that situation. Either
the "make whole" doctrine is implied into the plan (the default

scenario), or it is not (if there is clear language rejecting it).

There is no interpretative question for the Fund to consider.

Under the Cutting approach, the Fund could avoid a default

rule of insurance law applicable in the ERISA context merely by

giving itself discretion to interpret the plan. We do not believe

that ERISA gives the Fund that kind of authority, which is denied

to insurance companies not governed by ERISA. Moreover, we think

Cutting 's broad grant of discretion is unwarranted, because if the

Fund wants to escape the "make whole" doctrine, it need only

include language in the plan explicitly providing the Fund with the

right to first recovery, even when a participant or beneficiary is

not made whole. The Fund did not include such language in its

plan. Therefore, the "make whole" doctrine applies to this case.

III. CONCLUSION

We REVERSE the district court's grant of summary judgment to

Genesis on its request for a declaration that the Fund must accept

Bruner's modified subrogation agreement and process Genesis' claims

thereafter. The Fund need not pay Genesis or Bruner until Bruner

signs an unmodified, standard subrogation agreement. At that time,

Genesis will have a right to receive payment for whatever the plan

owes Cobbie Jr. for his treatment at Genesis.

We AFFIRM the district court's grant of summary judgment to

Nancy Bruner on her request for a declaration that the Fund may not

participate in any recovery from a third party until Cobbie Jr. is

made whole. We REMAND to the district court for further

proceedings consistent with this opinion.