UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

NORTHERN DIVISION

DALE BASH, KERRIE BASH,

Plaintiffs/Counter-Defendants,

Case Number 08-14967-BC

v. Honorable Thomas L. Ludington

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY,

Defendant,

PETSMART SMART CHOICES BENEFIT

PLAN,

Defendant/Counter-Claimant.

_________________________________________/

OPINION AND ORDER DENYING STATE FARM’S MOTION FOR DECLARATORY

JUDGMENT OR SUMMARY JUDGMENT, GRANTING THE PLAN’S MOTION FOR

SUMMARY JUDGMENT, AND GRANTING IN PART AND DENYING IN PART

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

The primary issue raised in this declaratory judgment action is whether Defendant PetSmart

Smart Choices Benefit Plan (“the Plan”), is entitled to reimbursement for medical expenses paid on

behalf of Plaintiff Kerrie Bash, who sustained catastrophic injuries in an automobile accident, from

a tort recovery settlement primarily based on the recovery of non-economic damages. If the Plan

is entitled to reimbursement from the tort recovery settlement, the question becomes whether State

Farm Mutual Automobile Insurance Company (“State Farm”), as Kerrie Bash’s first-party insurer,

is in turn obligated to reimburse the Estate of Kerrie Bash for those funds paid to the Plan.

Plaintiffs Kerrie Bash, and Dale Bash, as Conservator of the Estate of Kerrie Bash

(collectively, “Plaintiff”), filed an amended complaint [Dkt. # 12] on April 7, 2009, seeking a

declaratory judgment against State Farm, the Plan, Francesca Spinelli (the administrator of the Plan),
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and PetSmart, Inc. (Kerrie Bash’s former employer). The Plan filed counterclaims [Dkt. # 16]

against Plaintiff for breach of contract and a declaratory judgment on May 15, 2009. On February

2, 2010, Defendants PetSmart, Inc., and Francesca Spinelli, were dismissed without prejudice

pursuant to a stipulated order [Dkt. # 29].

Now before the Court are State Farm’s motion for declaratory judgment or summary

judgment as to Plaintiff’s claims [Dkt. # 25], the Plan’s motion for summary judgment on Plaintiff’s

claims and its counterclaims [Dkt. # 27], and Plaintiff’s motion for summary judgment on Plaintiff’s

claims and the Plan’s counterclaims [Dkt. # 33]. The Plan filed a response [Dkt. # 31] to State

Farm’s motion and a response [Dkt. # 36] to Plaintiff’s motion. State Farm filed a response [Dkt.

# 32] to the Plan’s motion. No other responses or replies were filed.

The Court has reviewed the parties’ submissions and finds that oral argument will not aid

in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the

papers submitted. E.D. Mich. LR 7.1(e)(2). For the reasons stated below, State Farm’s motion for

declaratory judgment or summary judgment [Dkt. # 25] will be denied, the Plan’s motion for

summary judgment [Dkt. # 27] will be granted, and Plaintiff’s motion for summary judgment [Dkt.

# 33] will be granted in part and denied in part. The Plan is entitled to reimbursement for medical

expenses paid on behalf of Plaintiff and State Farm is obligated to reimburse Plaintiff for the

settlement funds that must be used to pay the Plan.

I

Under Federal Rule of Civil Procedure 56(c), a court must review “pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any,” to conclude

that “there is no genuine issue as to any material fact and that the moving party is entitled to a
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judgment as a matter of law.” The Court must view the evidence and draw all reasonable inferences

in favor of the non-moving party and determine “whether the evidence presents a sufficient

disagreement to require submission to a jury or whether it is so one-sided that one party must prevail

as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The party

bringing the summary judgment motion has the initial burden of informing the court of the basis for

its motion and identifying portions of the record which demonstrate the absence of a genuine dispute

over material facts. Mt. Lebanon Personal Care Home, Inc. v. Hoover Universal, Inc., 276 F.3d

845, 848 (6th Cir. 2002). The party opposing the motion then may not “rely on the hope that the

trier of fact will disbelieve the movant’s denial of a disputed fact” but must make an affirmative

showing with proper evidence in order to defeat the motion. Street v. J.C. Bradford & Co., 886 F.2d

1472, 1479 (6th Cir. 1989).

II

On February 3, 2007, Kerrie Bash was catastrophically injured while a passenger in a vehicle

being operated by her stepfather, Thomas Markus, MD. The injuries that Kerrie Bash suffered

include a severe traumatic brain injury that required a prolonged hospitalization during which she

was comatose and on a ventilator before progressing to a “minimally conscious state.” Kerrie Bash

also suffered a fractured neck, which ultimately required a surgical fusion. Kerrie Bash currently

resides at the Riverside Rehabilitation Center for the Brain Injured in Bay City, Michigan. Kerrie

Bash’s injuries deprive her of any semblance of a normal life and she is unable to live

independently.

At the time of the accident, Kerrie Bash was employed by PetSmart, Inc., and thereby

covered by the Plan. At this juncture, the parties do not dispute that the Plan is a self-funded health
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benefits ERISA plan within the meaning of the Employee Retirement Income Security Act

(“ERISA”), 29 U.S.C. §§ 1001, et seq. At all times relevant, both Kerrie Bash and Dr. Markus were

Michigan residents. At the time of the accident, the vehicle Dr. Markus was operating was insured

under Michigan no-fault policy number G235-507-22D, issued by State Farm. State Farm also

issued Michigan no-fault insurance policy number 1057365-C16-22B to Kerrie Bash. Plaintiff

reached a settlement agreement with State Farm, as Dr. Markus’ insurer, for the sum of $1,100,000.

Plaintiff also reached a settlement agreement for the sum of $100,000 with Erie Insurance Company,

the insurer of the operator of another vehicle involved in the accident of February 3, 2007.

In a previous lawsuit in this Court, case number 07-14626, to which the parties were State

Farm, the Plan, PetSmart, Inc., and Francesca Spinelli, the Court entered a declaratory judgment by

consent. The consent judgment provided that the Plan was responsible for “primary coverage, as

between the Plan and State Farm, for the benefits of Bash arising out of the Accident under the terms

of the Plan, and State Farm shall provide coverage as the secondary/excess insurer, as between the

Plan and State Farm, for the benefits of Kerrie Bash arising out of the Accident.” See State Farm

Mut. Auto. Ins. Co. v. PetSmart, Inc., No. 07-14626 (E.D. Mich. Apr. 13, 2009) (Dkt. # 22). To date,

the Plan has paid approximately $475,000 for Kerrie Bash’s medical care; and the parties explain

that the Plan is not anticipated to have future coverage obligations.

The Plan provisions now at issue in this case provide as follows:

ARTICLE NINE

SUBROGATION

9.1 Benefits Conditioned on Plan’s Right of Subrogation/Reimbursement. The

provision of benefits under the Plain is subject to the Plan’s right to

subrogation/reimbursement as set forth in this Article. By electing to participate in the Plan

and receiving benefits that are conditioned on the Plan’s right to subrogation/reimbursement,
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Covered Persons agree to abide by the terms and conditions of the Plan in general and this

Article in particular.

9.2 Plan’s Right to Subrogation/Reimbursement. If a Covered Person is injured or

becomes ill as a result of or in connection with the act or omission of a third party (“Third

Party Act Injury or Illness”), any benefits provided under the Plan to the Covered Person for

the Third Part Act Injury or Illness are conditioned on the Plan’s right to

subrogation/reimbursement. The Plan’s right to subrogation/reimbursement applies to any

and all amounts recovered (“Recovery Amount”) by the Covered Person (whether by

settlement, court order, judgment, or otherwise, and whether or not actually collected) or the

Plan (if the Plan elects to exercise its right to pursue recovery directly) from the third party,

the third party’s personal representative, the third party’s insurance carrier(s), or any other

source (collectively, “Third Party”) for the act or omission of the third party. The Plan’s

right to subrogation/reimbursement is a right of first recovery from the Recovery Amount,

and the Subrogation Amount shall be paid from the Recovery Amount without regard to

whether Covered Person will be made whole by the Recovery Amount.

9.3 Subrogation Amount. The amount to which the Plan has a right to

subrogation/reimbursement (“Subrogation Amount”) is the lesser of (a) the value of the

benefits that have been (and will be) provided under the Plan for the Third Party Act Injury

or Illness, or (b) the Recovery Amount minus the amount of reasonable attorneys’ fees and

costs incurred by the Covered Person in obtaining the Recovery Amount. The value of the

benefits provided shall be conclusively presumed to be the cost to the Plan of providing the

benefits.

9.4 Covered Person’s Obligations. If represented by an attorney, the Covered Person

will instruct his/her attorney to pay the Plan, out of the Recovery Amount, the Subrogation

Amount. If not represented by an attorney, the Covered Person will make such payment

directly to the Plan or instruct the Third Party to make such payment to the Plan. If a

Covered Person or an individual who collects from a Third Party on behalf of a Covered

Persons does not reimburse the Plan as required, such failure may be treated as a breach of

contract and the Plan may pursue all remedies available to it.

If the Administrator, in its sole discretion, determines that it should pursue recovery

directly against the Third Party to preserve or further its subrogation rights under this

Article, the Administrator may require that the Covered Person execute any documentation

necessary or useful for the Administrator to pursue recovery directly against the Third Party.

The Covered Person will execute any such requested documentation and will cooperate fully

to assist the Administrator in pursuing the recovery. If a Covered Person refuses to sign any

requested documentation, the claimed benefits will be deemed excluded from coverage and

will not be paid. If any such benefits are inadvertently paid by the Plan, future benefit may

be reduced until the excess amount has been repaid to the Plan.

Plan Br. Ex. B-1 (p. 8).
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III

The first question is whether the Plan is entitled to reimbursement for medical expenses paid

on behalf of Plaintiff from settlement proceeds that are composed primarily of compensation for

Plaintiff’s non-economic injuries. The second question presented is whether State Farm is obligated

to reimburse Plaintiff for any funds required to be paid to the Plan. Both questions will be answered

in the affirmative.

A

Section 502(a)(3) of ERISA empowers a plan fiduciary to bring a civil action to obtain

“appropriate equitable relief . . . to enforce any provisions of this subchapter or the terms of the

plan.” 29 U.S.C. § 1132(a)(3)(B)(ii). The parties do not dispute the applicability of this section of

ERISA as the statutory authorization for the Plan’s claim to enforce its reimbursement provisions.

See also Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356 (2006). The parties also do not dispute

that ERISA’s “preemption” clause provides that ERISA “supersede[s] any and all State laws insofar

as they may now or hereafter relate to any employee benefit plan described in section 4(a) [29

U.S.C. § 1003(a)] and [are] not exempt under section 4(b) [29 U.S.C. § 1003(b)].” 29 U.S.C. §

1144(a). Likewise, it is undisputed that “federal common law rules of contract interpretation”

apply to ERISA plans. Univ. Hosps. of Cleveland v. S. Lorain Merchs. Ass’n Health & Welfare

Benefit Plan & Trust, 441 F.3d 430, 437 (6th Cir. 2006) (quotation omitted). However, “[a] primary

purpose of ERISA is to ensure the integrity and primacy of the written plans. Thus, the plain

language of an ERISA plan should be given its literal and natural meaning.” Health Cost Controls

v. Isbell, 139 F.3d 1070, 1072 (6th Cir. 1997). Federal common law simply “fills the gaps.” Id.
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To determine the correct interpretation of a plan, a court considers “both the policy language

and the intent underlying the provision.” Citizens Ins. Co. of Am. v. MidMichigan Health

ConnectCare Network, 449 F.3d 688, 692 (6th Cir. 2006) (citing inter alia Firestone Tire and

Rubber Co. v. Bruch, 489 U.S. 101, 112-13 (1989)). See id. at 693 (“[T]he Court’s paramount

responsibility in construing plan language is to ascertain and effectuate the underlying intent.”)

(quotation omitted). “A technical construction of a policy’s language which would defeat a

reasonable expectation of coverage is not favored.” Id. at 692. “[A]n insurer has a duty to express

clearly the limitations in its policy; any ambiguity will be construed liberally in favor of the insured

and strictly against the insurer.” Id. (quotations omitted). “[L]anguage is ambiguous if it is subject

to two reasonable interpretations.” Wulf v. Quantum Chem. Corp., 26 F.3d 1368, 1376 (6th Cir.

1994).

The Plan contends that under its terms Plaintiff is obligated to reimburse it for medical

expenses paid on Kerrie Bash’s behalf, out of the $1.2 million recovered through tort settlements

with State Farm and Erie. The Plan asserts that § 9.2 of the Plan establishes its right to obtain

reimbursement from any third party tort recovery arising from the same accident. As noted above,

it provides:

If a Covered Person is injured or becomes ill as a result of or in connection with the act or

omission of a third party (“Third Party Act Injury or Illness”), any benefits provided under

the Plan to the Covered Person for the Third Party Act Injury or Illness are conditioned on

the Plan’s right to subrogation/reimbursement.

Plan § 9.2. All of the parties recognize that “[w]hile subrogation and reimbursement may have

similar effects, they are distinct doctrines.” Unisys Med. Plan v. Timm, 98 F.3d 971, 973 (6th Cir.

1996). “Unlike subrogation, which arises under state law and allows the insurer to stand in the shoes
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of its insured, reimbursement is a contractual right governed by ERISA and comes into play only

after a plan member has received personal injury compensation.” Id.

The Plan highlights that although Article Nine of the Plan is entitled “subrogation,” § 1.2

provides that “[h]eadings and subheadings are for the purpose of reference only and are not to be

considered in the construction of this Plan.” The Plan asserts that § 9.2 refers to

“subrogation/reimbursement,” which indicates that both remedies are available. See, e.g., Random

House College Dictionary, rev. ed. (1975) (defining virgule as “an oblique stroke (/) used between

two words to show that an appropriate one may be chosen to complete the sense of the text.”).

More importantly from the Plan’s perspective, § 9.2 expressly provides that the Plan’s “right

to subrogation/reimbursement applies to any and all amounts recovered . . . by the Covered

Person . . . or the Plan . . . from the third party.” The Plan asserts that the reference allowing the

Plan to receive “amounts recovered . . . by the Covered Person,” applies to reimbursement and that

the reference to “amounts recovered . . . by the Plan” applies to subrogation. In addition, the Plan

contends that § 9.4, which describes the Covered Person’s obligation to pay the Plan, necessarily

recognizes a distinct reimbursement right because the Covered Person would not ever be in a

position to pay anything to the Plan if the Plan were itself pursuing a remedy through subrogation.

Finally, the Plan argues that the Summary Plan Description (“SPD”) confirms that the Plan

is entitled to reimbursement:

Am I Required to Reimburse the Plan if I Am Inured By a Third Party? If you are

injured or become ill as a result of a third party’s act or omission, as a condition of receiving

treatment covered by the Plan for such injury or illness you are agreeing to:

• repay the Plan any amounts recovered (whether by settlement, court order or otherwise)

from the third party, the third party’s personal representative or the third party’s

insurance carrier(s) on account of your injury or illness.
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Plan Br. Ex. B-2 (p. 79). The Plan incorporates the Summary Plan Description by reference: “The

SmartChoices SPD . . . shall form a part of this Plan in the same manner as if all the terms and

provisions thereof were included herein.” Id. (p. 1).

The Plan relies primarily on Ward v. Wal-Mart Stores, Inc. Assoc.’s Health & Welfare Plan,

194 F.3d 1315 (table), 1999 WL 801532 (6th Cir. 1999). In Ward, the plaintiff’s no-fault

automobile insurance had expired and her employee benefits plan paid her medical expenses arising

from an automobile accident. 1999 WL 801532, at *1. The plaintiff filed a negligence suit against

the third-party tortfeasor, resulting in a monetary settlement for non-economic damages. Id. (noting

that the recovery was necessarily for non-economic damages because the Michigan No-Fault Act

“bars recovery for medical expenses from third-party tortfeasors”).

The court of appeals noted that the district court had determined that subrogation was not

appropriate because “the Plan limited subrogation to recoveries from ‘any third party who may be

liable for such benefits.’ Because the [third party] was not liable for medical expenses under

Michigan law, it did not meet the Plan’s definition of a ‘third party who may be liable for benefits.’ ”

Id. at *1 n.2. In contrast, with respect to reimbursement, “the Plan provided that it had the right to

recover benefits paid from a judgment or settlement ‘regardless of whether the payment is

designated as payment for such damages including, but not limited, to pain and/or suffering, loss of

income, medical benefits or any other specified damages; or any other damages.” Id.

Ultimately, the question that Ward presented was whether the plan’s right to reimbursement

was properly reduced “by a pro rata share of the costs and attorneys’ fees . . . expended by the

[plaintiff] to obtain the settlement.” Id. at *1. The plaintiff argued that the plan did not

“unambiguously specify the extent of reimbursement,” while the plan argued that “the language of
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the Plan clearly states that it is entitled to full reimbursement.” Id. at *3. The court of appeals found

that “[t]he language of the Plan does not limit or restrict its right to full reimbursement in any

manner” when it provided as follows:

The PLAN shall have the right to reduce benefits otherwise payable by the PLAN or

recover benefits previously paid by the PLAN to the extent of any and all of the following:

A. Any payment resulting from a judgment or settlement, or other payment or payments

made or to be made by any person or persons considered responsible for the condition giving

rise to the medical expense-or by their insurers, regardless of whether the payment is

designated as payment for such damages including, but not limited, to pain and/or suffering,

loss of income, medical benefits or any other specified damages; or any other damages made

or to be made by any person.

Id. at *4 (emphasis in opinion). The court acknowledged that “it would have been preferable for the

Plan to state specifically that it does not permit a deduction in reimbursement amounts for attorneys’

fees,” but emphasized that “when a plan is clear and unambiguous, we cannot apply a common-law

rule of interpretation, but . . . must give the plain language of a plan its natural meaning.” Id.

The Plan insists that it need not specifically itemize non-economic damages that are

reimbursable in order to reserve a reimbursement right superior to what the Plan could recover

directly through subrogation under Michigan no-fault law. The Plan asserts that even if the

subrogation remedy is limited by Michigan law, it does not follow that the reimbursement remedy

is limited in the same manner, particularly given the fact that it is undisputed that subrogation and

reimbursement are “distinct doctrines.” The Plan further argues that there is no limit on either the

subrogation or reimbursement remedy based on the language of the Plan that “[t]he Plan’s right to

subrogation/reimbursement applies to any and all amounts recovered (“Recovery Amount”) by the

Covered Person (whether by settlement, court order, judgment, or otherwise, and whether or not
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actually collected).” The Plan maintains that “ ‘all’ means all – including tort damages of any

description.”

On the other hand, Plaintiff and State Farm contend that because Plaintiff, with some minor

exceptions, cannot recover medical expenses from third parties under Michigan no-fault law, the

Plan cannot seek reimbursement for medical expenses from the tort settlement funds, composed

primarily of compensation for non-economic injuries. Under Michigan no-fault law, “tort liability

arising from the . . . use . . . of a motor vehicle . . . is abolished” with limited exceptions. Mich.

Comp. Laws § 500.3135(3). For example, “[a] person remains subject to tort liability for

noneconomic loss caused by his or her . . . use of a motor vehicle only if the injured person has

suffered death, serious impairment of body function, or permanent serious disfigurement.” Id. §

500.3135(1). Only certain very limited economic damages can be recovered. See id. §

500.3135(3)(c)–(e). 

Plaintiff and State Farm suggest that the reimbursement provisions of the Plan do not clearly

provide that Plaintiff is required to reimburse the Plan for medical expenses when the Plan does not

expressly provide that the Plan is entitled to be reimbursed for expenses that it could not directly

recover through a suit of its own under Michigan law. They argue that the Plan’s reimbursement

rights are no greater than the Plan’s subrogation rights, which they assert are necessarily limited by

Michigan no-fault law. They note that the Plan always uses the words “subrogation” and

“reimbursement” together, or only “subrogation”; and reimbursement is never independently

referenced. They also note that the Plan refers to the “subrogation/reimbursement” right in the

singular, and not to “rights,” suggesting that the remedies are identical in practical effect. Plaintiff

and State Farm suggest that the only difference is that the reimbursement remedy simply protect’s
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the Plan’s right to recover when the injured person files a third-party case, rather than the Plan filing

such a suit under its right of subrogation.

Furthermore, Plaintiff and State Farm emphasize that Article Nine of the Plan does not refer

to any type of non-economic damages, unlike the plan at issue in Ward. For reimbursement rights

to exceed subrogation rights, they effectively assert that the Plan would require an express statement

to that effect. In addition to Ward, Plaintiff and State Farm also seek to distinguish the case of

Glover v. Nationwide Mut. Fire Ins. Co., - - - F. Supp. 2d - - - -, 2009 WL 3644716 (W.D. Mich.

2009), wherein the court found that the language of the plan at issue was not ambiguous and that the

plan had a right to reimbursement of medical expenses from a tort recovery. The court noted that

the plan provided that “if a third party causes a sickness or injury for which the participant receives

a settlement, judgment, or other recovery, the participant ‘must use those proceeds to fully return

to the Plan 100% of any benefits you received for that Sickness or Injury.’ ” 2009 WL 3644716, at

*7. The court recognized that the reimbursement would necessarily be paid from a settlement

compensating the participant only for her non-economic injuries. Id.

Under those circumstances, the court noted that avoidance of the “make whole” doctrine

requires that an ERISA plan include “language conclusively disavowing the rule’s application to the

plan.” Id. The rule itself is simply a default rule of construction “that an insurer cannot enforce its

own subrogation [or reimbursement] rights unless and until the insured has been made whole by any

recovery.” Id. (quoting Copeland Oaks v. Haupt, 209 F.3d 811, 813 (6th Cir. 2000)). Finding that

the “make whole” doctrine was inapplicable to the case before it, the court relied on the following

provisions in the summary plan description (“SPD”):

The SPD provides that the Plan “has a first priority right to receive payment on any claim

against a third party, before you receive payment from that third party.” It further states that
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the Plan’s reimbursement rights “apply to full and partial settlements, judgments, or other

recoveries paid or payable to you or your representative, no matter how those proceeds are

captioned or characterized.” Relevant to the present case, the SPD states that payments

include “economic, non-economic, and punitive damages.” And, to remove all doubt, the

SPD provides that the Plan may enforce its reimbursement rights “regardless of whether you

have been ‘made whole’ (fully compensated for your injuries and damages).”

Id. at *8 (citations omitted).

Significantly, the court also rejected the argument that “the reimbursement clause requiring

a participant to reimburse a plan for medical expenses out of the participant’s tort recovery for

non-economic loss ‘indirectly violates Michigan public policy’ in favor of fully compensating

injured victims” as expressed in the Michigan No-Fault Act, Mich. Comp. Laws § 500.3135. Id.

(citation omitted). The court explained that “Michigan law . . . does not govern the validity of

self-funded ERISA plans” due to preemption. Id. (citations omitted).

Finally, Plaintiff and State Farm note that the Plan refers only to a “Subrogation Amount,”

and not a separate reimbursement amount. Nonetheless, the “Subrogation Amount,” is not confined

to funds recoverable only through subrogation when it is defined as “[t]he amount to which the Plan

has a right to subrogation/reimbursement.” Plan § 9.3. The amount is either the “value of the

benefits” provided under the Plan, or the full amount recovered by the participant minus attorney

fees and costs incurred to obtain the recovery, whichever is less. Id.

The Plan’s arguments that it is entitled to full reimbursement from the tort settlements are

persuasive, particularly given the Summary Plan Description, which states unequivocally that: “If

you are injured . . . as a result of a third party’s act or omission, as a condition of receiving treatment

covered by the Plan . . . you are agreeing to repay the Plan any amounts recovered (whether by

settlement, court order or otherwise) from the third party.” Like in Ward, it may have been

“preferable for the Plan to state specifically that it does not permit a deduction in reimbursement
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amounts” based on limitations applicable to the subrogation remedy based on state law, the plain

language of the Plan is not ambiguous. Thus, the Plan is entitled to reimbursement from the

settlement proceeds recovered by Plaintiff.

B

Next, Plaintiff argues that State Farm is required to reimburse Plaintiff for the settlement

funds that Plaintiff is required to pay to the Plan to reimburse the Plan for medical expenses.

Plaintiff relies primarily on Shields v. Gov’t Employees Hosp. Ass’n, Inc., 450 F.3d 643 (6th Cir.

2006), overruled in part on other grounds by Adkins v. Wolever, 554 F.3d 650, 652 (6th Cir. 2009).

Briefly, in Shields, the plaintiff, who was injured in an automobile accident, was covered by her

mother’s no-fault automobile insurance policy with State Farm and her mother’s employee benefits

plan with the defendant (“GEHA”). 450 F.3d at 645. GEHA paid over $160,000 in medical

expenses on the plaintiff’s behalf, and the plaintiff sought to require State Farm to reimburse GEHA

on her behalf when GEHA was entitled to reimbursement from the damages for pain and suffering

that the plaintiff recovered in a tort action. Id. In granting the plaintiff the requested relief, the

court explained as follows:

In this case, the insured received payment to cover medical expenses, that pursuant to federal

law, she is required to repay from the proceeds of her tort recovery for pain and suffering

damages. Because federal law preempts state law, Michigan cannot stop GEHA from

requiring reimbursement. Consequently, here, as in Sibley [v. Detroit Auto. Inter-Ins.Exch.,

427 N.W.2d 528 (Mich. 1988)], the insured is being forced to pay her own medical expenses

out of her tort damages for pain and suffering. This contravenes the expressed intent of the

Michigan legislature as embodied in [the Michigan No-Fault Insurance Act], which requires

all car owners to maintain insurance coverage for medical expenses and prohibits no-fault

insurers from seeking reimbursement from tort settlements. Mich. Comp. Laws §§ 3101,

3116. Furthermore, the Michigan legislature mandated coordinated benefits plans to avoid

duplicative coverage, not to deny insured persons coverage altogether. See Smith [v.

Physicians Health Plan, Inc.], 514 N.W.2d [150,] 154 ([Mich.] 1994). Here the coverage

is not duplicative because Plaintiff’s tort damages are for pain and suffering and State Farm

is covering Plaintiff’s medical expenses. Thus, the fact that the State Farm Policy is
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coordinated with GEHA’s policy is irrelevant. The insured maintains an insurance policy

for medical expenses and should not be required to pay her medical expenses without help

from her insurance carrier.

Id. at 648.

Significantly, State Farm did not respond to Plaintiff’s motion for summary judgment, nor

did it address the issue in its own motion for summary judgment. Based on the legal authority

advanced by Plaintiff, Plaintiff is entitled to reimbursement from State Farm for the settlement funds

that Plaintiff is required to use to reimburse the Plan for medical expenses.

IV

Accordingly, it is ORDERED that State Farm’s motion for declaratory judgment or

summary judgment [Dkt. # 25] is DENIED, that the Plan’s motion for summary judgment [Dkt. #

27] is GRANTED, and Plaintiff’s motion for summary judgment [Dkt. # 33] is GRANTED IN

PART and DENIED IN PART.

s/Thomas L. Ludington 

THOMAS L. LUDINGTON

United States District Judge

Dated: April 23, 2010

PROOF OF SERVICE

The undersigned certifies that a copy of the foregoing order was served

upon each attorney or party of record herein by electronic means or first

class U.S. mail on April 23, 2010.

s/Tracy A. Jacobs 

TRACY A. JACOBS