Opinion ID: 731308
Heading Depth: 3
Heading Rank: 1

Heading: The Language of the Plan

Text: 31 The fundamental predicate of the district court's judgment in this case lay in its holding that the language of the Plan's SPD--in this instance, the governing document of the Plan--was silent in regard to priority of reimbursement. The court found silence not on the Plan's entitlement to reimbursement vel non once a beneficiary obtains a judgment or settlement of partial recovery from a third party or his insurer, but only on the question of what law rule establishes the ranking or priority between the Plan and the beneficiary in a partial recovery situation; i.e., (1) Plan Priority, under which priority is given to the plan for full recovery off the top, (2) Make Whole, under which priority is given to the beneficiary to keep everything he recovers from third parties until he is made entirely whole, or (3) Pro Rata, under which the plan and the beneficiary share ratably in the beneficiary's recovery from third parties. The district court examined the plain language of the Subrogation section of the SPD, as well as the subsequent Material Modification which replaced it, and found in particular that the former's reference to duplicate benefit amounts and the latter's statement that the Plan is entitled to recover benefits it pays which are duplicated from another source, merely preclude the participant from receiving a windfall or double recovery and do not establish the priority of recovery in reimbursement between the Plan and a beneficiary. 32 With all due respect to the district court, we must disagree with its foundational premise with respect to this issue, i.e., that the plain language of the SPD's subrogation and reimbursement provisions is either wholly silent or ambiguous. At the outset, we emphasize that the Plan's reimbursement and subrogation provisions must be read in the statutory context of ERISA and, more particularly, in the precise textual context in which they appeared. In keeping with this observation, we remain keenly aware that subrogation and reimbursement provisions in ordinary commercial insurance policies and workers' compensation laws are far from analogous, and are at best instructive, when considering ERISA plans established solely in summary plan descriptions. Were this a diversity case involving reimbursement or subrogation in the context of either workers' compensation or individual or group insurance plans that are not ERISA plans, we would, of course, be Erie-bound to apply Louisiana's partial subrogation doctrine, which embodies the Make Whole principle. 16 Yet, as it is well established that state subrogation doctrines are preempted under ERISA, 17 we are not Erie-bound to apply Louisiana's partial subrogation rules here. Thus, even though we may borrow from analogous state law when it is not inconsistent with congressional policy concerns, our formulation of federal common law in the instant situation must remain guided foremost by the congressional policies expressed or implicit in ERISA. 18 33 With these observations firmly in mind, we reiterate that the subrogation and reimbursement provisions at issue in this case were not part of a standard individual insurance contract purchased by or for the employee in the insurance market. If they had been, they would surely have been drafted with more particularity and with a plethora of legalistic boilerplate; and we would be subjecting them to a stricter standard of interpretation as well. 19 Instead, though, the particular provisions that here created the Plan's reimbursement right appeared in the SPD, a document that is expressly required by ERISA to be written in a manner calculated to be understood by the average plan participant, and need only be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. 20 34 Furthermore, as there was no separate master document or trust agreement in this instance, the SPD and modifications to it are the only writings that address basic questions of benefit eligibility and participant or beneficiary obligations under the Plan. Significantly, this kind of plan documentation is far from unusual; an SPD is frequently the only governing document created for and filed with the Department of Labor when the plan is a self-funded employee welfare benefit plan like the one we consider today. This is not surprising when it is recognized that the SPD is the only document that, under ERISA, is subject to mandatory filing with the Department of Labor and mandatory distribution to participants and beneficiaries. 21 35 In light of these congressional imperatives and common industry practices, we should not (and will not) penalize the Plan, or other similar ERISA plans for that matter, for lack of technical precision or verbosity by labeling the Plan silent or ambiguous when it uses the kind of direct, jargon-free language that is mandated by ERISA for all summary plan descriptions and does not expressly address every conceivable factual variation of recovery, depending on which combination of source and fraction is under consideration at the time. In other words, the fact that the SPD for the Plan does not express a reimbursement priority for each possible combination or permutation--here, the beneficiary's partial recovery from the tortfeasor's insurer--is not a valid reason for branding the SPD as silent and subjecting it first to a search for the intent of the parties and then to a default rule of interpretation if their intent cannot be discerned. 36 In this case, the original subrogation subsection of the SPD stated plainly that [s]ubrogation allows the Plan to recover duplicate benefit amounts ...., and added by way of explanation that, [i]f the plan has already paid benefits, it has the right to recover payment from you. The Material Modification reiterated these straightforward concepts in language that is, as required by ERISA, just as unmistakably plain, clear, and understandable by the average reasonable employee: 37 The Plan has subrogation and reimbursement provisions which allow the Plan to recover for benefits it pays which are duplicated from another source.... Reimbursement gives the Plan the right to collect from you money that you receive in a settlement or lawsuit that covers expenses that the Plan has already paid for.... 38 Thus, regardless of which version of the Plan is controlling, 22 the central thrust of the Plan's reimbursement rights was made amply clear: The Plan is entitled to obtain reimbursement for duplicate benefit amounts or benefits duplicated from another source. 39 When this language is read in context and viewed in light of all the circumstances, it can only mean that the Plan is entitled to be paid back by the beneficiary all amounts that the Plan has paid to the beneficiary, or on his behalf, to the full extent--but only to the extent--that the beneficiary recovers from another source (such as insurance purchased individually, a tortfeasor, the insurer of a tortfeasor, or the like). Far from the kind of silence that would be tantamount to ambiguity, the only silence here is the understandable absence of separate, specifically articulated rules for situations of partial recovery and total recovery with variations depending on the nature of the source of recovery. This signifies nothing more than that, regardless of source, the rule is the same for total and partial recoveries. Again, the absence of more particularized and technical legal language addressing the partial recovery situation cannot be grounds for supplanting the Plan Priority rule when recovery is partial, and thereby penalizing the Whitehursts' fellow employees. 23 This is doubly so when ERISA dictates that summary plan descriptions be simple and understandable by employees of varying backgrounds, and when the governing subrogation and reimbursement provisions express a reasonable and, indeed, the generally understood, meaning of these concepts. 24 40 That judges and lawyers, who by education and experience are primed to discover ambiguity in contract language, might find gaps or contradictions in a summary plan description's ordinary, conversational language does not mean that the language is necessarily ambiguous or silent to the point of default for ERISA purposes. 25 Whatever might or might not be appropriate in cases involving workers' compensation or individual or group medical insurance policies, 26 no such jurisprudential gloss can be justified in the context of a self-funded ERISA welfare benefit plan. 41 In sum, we hold that the plain language of the Plan's subrogation and reimbursement provisions was clear and unambiguous, and that--in the absence of any expressly selected alternative standard (such as Pro-Rata or Make Whole) which deviates from the anticipated Plan Priority norm--such language vested the Plan with an unconditional and unequivocal Plan Priority right to reimbursement for the full amount of the medical benefits it paid on a participant's behalf, from any and all funds that a participant might recover from, inter alia, a third party tortfeasor or his insurer. This holding is bolstered by the recognition that there is nothing included in or omitted from the Plan's plain language on which to base a conclusion that the Plan's unqualified and unequivocal right to reimbursement should be displaced by Pro Rata or Make Whole concepts. 42