# FILED

June 11, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk 

## IN THE COURT OF APPEALS OF TENNESSEE MIDDLE SECTION AT NASHVILLE

HARRY J. WOO D, JR. and ) CATHE RINE D . WOO D, as ne xt ) of kin as A dministrat

ors of the ) Estate of Marc Jam

es Wood, ) decease d, and Indi vidually, ) ) Plaintiff s/Appelle es, )

) ) VS. ) Davidson C ircuit ) No. 92C- 2112 ) MARCUS M. PROS SER, ) Appeal N o. ) 01A01-9510- CV-00468 Defenda nt, )

) McDONOUGH CAPERTON ) INSURANCE ADMINISTRATORS, ) ) Interven or/Appell ant. )

APPEAL FROM THE CIRCUIT COURT FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE THE HONORABLE MARIETTA M. SHIPLEY, JUDGE
For the Plaintiffs/Appellees : For the I ntervenor /Appella nt : Daniel B . Eisens tein John D. S chwalb Nashville, Tennessee Brewer , Kraus e, Brook s & Mills Nashville, Tennessee



## REVERSED AND REMANDED

WILLIAM C. KOCH, JR., JUDGE-2- 

## O P I N I O N

This appeal inv olves the r ight of an e mployee be nefit plan to be reimbursed for its payment of themedical expenses of one of its m

embers who was kill ed in
an automobile

collision. The parents of the decea sed employe e filed a wrongful deathaction in the Circuit Court for Davidson County ag ainst the d river of the othervehicle in volved i n the coll ision. Theplan inter vened in the

parents’ action seeking to recover the medical payments it had made on their son’s behalf. After the parents settled the w

rongful dea

th claim, the trial court held that the plan was not entitled tobe reimbu

rsed from the settlement proce eds. The plan appeal ed. We have determin ed that the trial court erred and that the plan has a contractual right to be reim

bursed fr om the proc eeds of the

settleme nt of the wrongful dea th action.

I.

Marc James Wood was seriously i njured on Ma y 12, 1992 when the c ar he
was driving col lided head- on with a truck being driven by

Marcus Prosser. Mr. Woodwas rushed to the emergency room at Williamson County Medical Center where he died lat

er that da y. The charges for Mr. Wood’s care in the emergency
room amounted to $11,5 46.50.

Mr. Wood was covered by two insura

nce polici es when th e collision
occurre d. The fir st was a P rincipal F

inancial G

roup poli cy purcha sed by his parents in 1984 when

he gradua

t ed from college. The second was a group plan provided by his employ er, Food Lion , Inc., where he

had worke d since 1991. Principal Financia

l Group ini tially paidfor Mr. Wood’s medical treatment. When FoodLion’s gr

oup plan late

r paid for the same t

reatment, the Wi lliamson C ounty Medical Cen ter refunde d Principa l Financia l Group’s p ayments.

In August 1992, Mr. Woo d’s parents fil e d a wrongf ul death ac tion in the Circuit Court for Davidson County against Mr. Prosser. The trial court later permitted McDonoug h Caperton Insurance Ad ministrat ors (“McDo n ough1 The trial cou rt appro ved disbursing the r emaining settle ment pro ceeds a s follows: $7,268.10 to Mr. Wood’ s parent s to reimburs e them fo r the exp enses of

Mr. Wood’ s funera

l; $11,151.16 to the lawyer

representing Mr. Wood’s parents, and $15,034.24 to be held by the tria l court clerk for Mr. Wood’s son. -3- Caperton”) , the admini strator of Food Lion’ s group plan, to interve ne in the wrongful death suit in order to recover the $11,546.50 it paid on Mr Wood’s behalf. Mr. Wood’s parents settled their wrongful death action against Mr. Prosser for $45,0 00, and in A

ugust 1993, t

he trial courtdirected

that $11,54 6.50 of the settleme nt procee ds be held by the circ uit court c lerk pendin g the resolution of McDonou gh Caperto n’s assert ed “medical lien.” 1

Both McDonough C aperton a nd Mr. W ood’s parent s filed summary judgment motions. McDonough Caperton claimed thatFood Lion’s group plan had a contractual right

to reimbursement for the medical payments made on Mr. Wood’s behalf. Mr. Wood’s parents assertedthat McD onough Caper ton was not entitled to the sett

lement pr oceeds and

that it should seek reimburs ement fr om the Principal Financia

l Group. In an orde

r entere d on Dece mber 30 , 1994, the trial court found

that McD onough Caper

ton was not entitled to the $11, 546.50 being he ld by the tria

l court cle

rk and dire cted McD onough Caper ton to bring s ui t against any

other par ty “who Mc Donough . . . believe s may owe it for the funds itpaid to Wil liamson M edical Cent er for treatmen t of Marc James Wood.” McDonough

Caperton took no action aga

inst any othe

r party, and on August 15, 1995, the trial

court dism

issed its int

ervening c omplaint an d directed the cler k to disbursethe $11,546.50 plus accrued interest to Mr. Wood’s parents. This appeal followed.

II.

The facts of this case are undisp uted. Accordingly, the question presented by McDonough C aperton is one of law . We mus t determi ne whether a self-funded employee benefit plan may seek reimburs ement fr

om an emplo yee’s est ate for i ts payment of the employee’s medical expenses when it was not re q uired to ma ke these payments. We have determined that Food Lion’s group plan is entitled to
aportion of t

he settlem

ent proce eds becaus e of a provis ion in the plan p ermitting2 The Employment Retirement Security Act (“ERISA”) is codified at 29 U.S.C .A. § §

1001 through 1461 (1985 & Supp. 1997).
-4- the plan to recover

medical b enefits pa

id as a re sult of injur

ies occur ring through the act or om ission o f another p erson.

A.

FoodLion’s gr

oup plan is a fully self-funded employee benefit plan governed by the Employee Retirem ent Secur ity Act. 2 ERISA federalizes the law dealing with cove

red self- funded emp loyee bene fit plans a nd expressly preempts “any and all St ate law s insofar a s th ey may now or her eafter relate to any [cove red] employee b enefit pla n.” 29 U.S.C.A. § 114 4(a) (1985 ). Th i s preemptio n provision is “clearly expansive,” New York State Confe rence of B lue Cross and Blue Shield Pla ns v. Travele rs Ins. Co., 514 U.S. 645, ___, 1 15 S. Ct. 1671, 1677 (1995), and “broadly worde d.” Ingerso ll-Rand C o. v. M cClendon, 498 U.S. 133, 138, 1 11 S. Ct. 478 , 482 (199 0).

In order to determine whether a particular state law “relates to” an employee benefit plan, the courts must determine whether the law has a connect ion with or refers to the pla

n itself. California Div. of Labor Standards Enforcement v. Dillingham

Constr., N.A. Inc ., ___ U.S. ___, ___, 1 17 S. Ct. 832 , 837 (1997); District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 129, 1 13 S. Ct. 580, 583 (1992). A cause of action premised on the existence of a covered plan or di recting th e court’s attention t o a covere d plan “re lates to” t he plan for pree mptio n purposes . California Div. of Labor Standards Enforcement v. Dillingham

Constr., N.A., Inc., ___ U.S. at ___, 117 S. Ct. at 837-38; IngersollRand Co. v. McClendo n, 498 U.S. at 140 , 111 S. Ct. at483. Caus es of act ion involving subrogation

or reimbu

rsement r ights under a covered employee benefit p lan are pre mised on the plan itself

and, ther

efore, are gover

ned by federa l common law

rather t han state law. FMC Corp. v. Holliday, 498 U.S. 52, 58-61, 111 S. Ct. 403, 407-09 (1990); Dugan v. Nickla, 763 F. Sup p. 981, 983 (N.D . Ill. 1991); Blue Cross / Blue Shiel d v. Flam, 509 N.W.2d 393, 398 (Mi nn. Ct. App. 1993).-5- The basic federa l common-l aw p r inciples r equired to resolve this dispute
are straightf

orward a nd are not d

i ssimila r to familiar principles of contract constructi on. An employee benefit pl an is essen tially a co ntract. Kemmerer v. ICI Americ as, Inc., 70 F.3d 281, 287 (3d Cir . 1995); Conley v. Pitney Bowes, 34 F.3d 714, 717 (8th Cir . 1994); Williams v. Co rdis Cor p., 30 F.3d 1429 , 1432 (11th Cir. 1994); Land v. C

hicago Truck Driver

s, Helpe rs & Wareho use Worke rs Uni on (Independ

ent) Health and Welfare F und, 25 F.3d 509, 514 (7th Cir . 1994). Thus, adjudicati ng ri ghts of subrogation or reimbursement arising under a covered employee benefit plan requires the application of the federal common-law rules of contract co nstructi on. Central States, So utheast and

Southwest A reas Pens ion Fund v. Krog er Co., 73 F.3d 727, 731 (7th Cir. 1996).

The federal

contract construct ion rules r equire the courts to f

irst look to t

he language of the empl oyee benefit plan, Armiste ad v. Ve rnitr on C orp., 944 F.2d 1287, 1293 (6th Cir . 1991), and to inter pret this la

nguage in its popular and ordin ary sense just a s a person o f averag e intelligence and exp erience would

. Cash v. Wal-Mart GroupHealth P lan, 107 F.3d 637, 643 (8th Cir. 1997); McClurev. Life Ins. Co. o f N. Am., 84 F.3d 1129 , 1134 (9th Cir. 1996) ; Brewer v. Protexal l, Inc., 50 F.3d 453, 457 (7th Cir. 1995). Unambiguous plan language is controlling , Meadows v. Ca gle’s, Inc., 954 F.2d 68 6, 691 (11th Cir. 1992 ), and must be enforced as written. Ryan v. Federal Express Cor p., 78 F.3d 123, 128 (3d Cir. 1996); Bellino v. Sc hlumberg er Techs., Inc., 9 44 F.2d26, 29-30 (1st Cir. 1991); Danowski v . United Stat es , 924 F. Sup p. 661, 672 (D.N .J. 1996) . The courts should not

invoke t he common-law rules of construction to “overturn careful ly crafted plan provisions.” Singer v. Black & Decker Corp., 964 F.2d 1449, 1 454 (4th Cir. 1992) (Wilkinson , J., c oncurring) . They s hould likew ise decline to torture the plan language to reach a particula r result t hat the contracting parties never intended o r i magined, Ryan v. Federal Express Cor p., 78 F.3d at 126, or to igno re the plan language in order to provide co verage for wh ich n o premium has been paid. Coleman v. Na tionwid e Life Ins. Co ., 969 F.2d 54, 57-58 (4th Cir. 1992).

The language of

an employe e benefit

plan is amb iguous only if it is subject to reasonabl e alternati ve interpr etations

. Wahlin v. Se ars, Roebu ck & Co., 78 F.3d-6-

1232, 1235 (7th Cir . 1996); Wulf v. Quantu m Chem. Corp., 26 F.3d 1368 , 1376 (6th Cir. 19 94). Ambiguities in an employee benefit plan must be construed agai nst the draf

ter and in fa vor of the i nsured. Barnes v. Independe nt Auto. Dealers Assoc. of Cal. H

ealth & We lfare Ben efit Pla n, 64 F.3d 1389, 1393 (9th Cal. 1995); Lee v. Blue Cros s/Blue Shi eld of Ala., 10 F.3d 1547 , 1551 (11th Cir. 1994); McMahan v . New E ngland Mut. Life Ins. Co., 888 F.2d 426, 429 (6th Cir. 1989).

B.

ERISAdoes not re gulate the substantive

content of

employee benefit

plans. Hughes v. General Mot ors Corp ., 764 F. Sup p. 123 1, 1235 (W .D. Mich. 1990). Thus, it neither

requires nor bars su

brogation or

reimburs ement cla

uses, and it does not otherw ise regula te the content o f these clau ses. Ryan v. Federal E xpress Corp., 78 F.3d at

127; Land v. Chic ago Truck Dr ivers , Helpe rs & Wareho use Workers Union (Ind ependent ) Health an d Welfare Fu nd, 25 F.3d at 51 4. Thus, reimbursement

andsub rogation clauses included in an employee benefit plan shouldbe enforc ed accor

ding to their plai n meaning. The righ t to reimburs ement
or subrogation

thus depends on the term s of the em ployee bene fit

pl an itself. Serembus ex rel. UIU Health & W elfare Fu nd v. Mat

hwig, 817 F. Sup p. 1414, 1423 (E. D. Wis. 1992); Blue Cross / Blue Shie ld v. Flam, 509 N.W .2d at 398.

FoodLion’s gr

oup pla n contains th e followi ng provision w ith regar d to coverage for injuri es occurr

ing as a re sult of act s of third pe rsons: Medical car e be nefits and disability p ayments ar

e not payableto or for a

person covered underthis plan when t he inju ry or illness to the covered person occurs throughthe act or

omission of another pe rso n. However, the Employer

may elec t to advance pa

yment f or medical and disability expenses incurred for a n injury or il lness in which a third party may be liable. For this to happen, the cover

ed person or guardia

n must s ign an agree ment to re

pay the Em

ployer in f

ull an y sums advanced t

o cover suc h medical

or disabili ty expenses from the judgm ent o r settlem ent rece ived. This provision giv es to the E mployer the

right to recover the medical or d isability expenses advanced regardle ss of whethe

r that per son ac tually signs t he3 In its most basic form, subrogation means that Party A is substituted for Party B an d

may assert the pre-substitution rights Party B had against Party C directly against Party C.

4 Reimburse

ment, in its most ba si c form , permits Party A to recover from Party B payments to Party C that Party A made on Party B’s behalf. -7- repaymen tag reeme nt. It is o nly necessa ry that the injury occurre d through the act of a t hird party and the Employer’s right of r

ecove ry may be from the third party or any liab ility insura nce cover ing the third pa

rty, or the cover

ed person’ s own uninsur ed moto ris t benefits, underinsur

ed motorist

benefits o r any no-f

ault benefits which are paid or payable. Althoug h McDonough c alls this pr ovision a "su

brogatio n endorseme nt," it permit s both subrogat

ion 3 and reimb ursement. 4

Clauses such as the

one at issue

in this case

should be given effect

unless they violate public policy or are invalid for some other reason of general contract la w. Mr. Wood’s par

ents have no t asserte d that this c lause is voi d as agains t public policy, a

nd we per ceive of n o policy basi s for inval idating it. Food Lion couldappropria

tely exclu de from

its plan’s cov erage me dical expenses stemm ing fr om inj uries res ulting from acts of third partie s, and it c ould also con dition making advance payments for non-covered medical expenses on the requirem ent thatthe employee reimburse the pla n for these payments. Other c ourts have consistently upheld t he validi ty of prov isions s uch as thes e. See e.g., BollmanHat Co. v. Root

, 112 F.3d 113 , 116 (3d C ir. 1997) ; Unisys Med. Plan v. Timm. 98 F.3d 971, 973 (7t

h Cir. 199 6); Wendy’s Int’l, Inc. v. Karsko, 94 F.3d 1010, 1013 (6th Cir. 1996) Ha rris Trust

& Sav. Bank v. Pro vident Lif e & Accident In s. Co., 57 F.3d 608, 615-16(7th Cir. 1995); Blackburn v. Becker , 933 F . S upp. 724, 7 29 (N.D. Ill. 1996); Crumb v. Beverl y Enters., Inc., 841 F. Supp. 389, 391 (M.D. Fla. 1993); Singleton v. Board of Trustee s of IBE W Local 61 3, 830 F. Sup p. 630, ___ (N.D. Ga. 1993).

FoodLion’s gr

oup plan is una

mbiguous and d oes no thing substantial ly differentfrom

the other E

RISA pla ns approved

by the federal courts. It excludes from coverage

injuries r

esulting fr

om acts of

third-par

ties, but i t also accommod ates its e mployees by allowing a

dvanced me dical paym

ents for th ese5 Mr. Wood’s parents have not asserted the typical defenses to McDonough Caperton’s claims for reimbursement. They have neither claimed nor proved that

their settlement with Mr. Prosser didnot include the medical expenses stemming from the accident or that the settlement didnot fully

compensa

te them or make them whole. They have likewise not attempted to argue or prove tha

t they could not have

pursued a

claim f or benefits under the Principal Financial Group plan. -8- injuries. The plan permits F ood Lion to o bt ain reimbursement directly from an employee who signs a

repayme nt agreem

ent, and, if t

he employe e does not si gn
arepayment agreement, it permits Food Lion to seek recovery from any third party or its liabilit y insurer o r from the emp loyee’s o wn uninsured or underinsured motorist insurer.
McDonough

Caperton ’s intervening compla int is consistent

with the terms of Food Lion’s group plan. It seeks t o recover from Mr. Prosser and his liab ility insurance carrie

r. The plan has a

clear right to assert t his claim. To rule other wise would be to vitiat

e the contractual agreement between the insure r and the in sured.

C.

Rather than confronting the c o ntract iss ue direct ly, Mr. Wood’s par

ents assertthat this is , in essence, a coordination of benefits dispute. 5 We do not agree. The coordinati on of benef its clause in Food Lion’s group plan applies only when “the covered p erson is co vered unde r more tha

n one plan” and is limit e d t o medical expenses “ for whic h the claim ant is cove red under one or

more plan s.” Food Lion’s group plan did not cover medical expenses stemming from injuries
resu lt ing from acts of by third parties and, therefore, Food Lion was never contract ually bound to pay Mr. Wood’s medical expenses. Accordi ngly, for the purposes of this dispute, Mr. Woo d was not a p erson cove red by mor

e than one plan.

III.

We reverse the summary judgment dismissing McDonough Caperton’s intervenin g complaint and rema nd the case to the trial court with instr

uctions to-9-

grant McD onough Caper ton’s cros s-motion

for summary judgment and to enter
an order dir

ecting the clerk of the court t

o pay over t

he $11,546. 50 plus accrued interest now in the c lerk’s ha

nds to McDo nough Caper ton, as the adm

inistrator of Food Lion’ s group plan. The cost s of this app eal are taxed aga

inst the pro ceeds now in the h ands of the

trial cour t clerk.

_________________ __________ WILLIAM C. KOCH, JR., JUDGE

CONCUR:

_________________

_______________ SAMUEL L. LEWIS, JUDGE

_________________

_______________ BEN H. CANTRELL, JUDGE