Opinion ID: 37881
Heading Depth: 3
Heading Rank: 2

Heading: Shelton's claims

Text: 11 Because it is undisputed that MHHS is subrogated to the Ethridge Estate's causes of action, the sole issue of contention between Shelton and MHHS is the meaning of the term subrogation as used in the Occupational Benefits Plan. Shelton contends that the Administrative Committee's interpretation of the meaning of subrogation amounts to an abuse of discretion because MHHS' subrogation rights do not allow MHHS the right to exclusively control the Ethridge Estate's causes of action without the consent or participation of the Ethridge Estate representative. 12 We conclude that the Administrative Committee's interpretation of the meaning of subrogation is legally correct under both an ordinary meaning analysis and the three-part test this Court employs to determine the legal correctness of an ERISA plan administrative committee's determination.
13 Subrogation is not defined in the Occupational Benefits Plan and its meaning cannot be unambiguously discerned from the Occupational Benefits Plan language. However, as it is ordinarily understood, subrogation simply means substitution of one person for another; that is, one person is allowed to stand in the shoes of another and assert that person's rights. Black's Law Dictionary 1468 (8th ed.2004). Put differently, [i]n a subrogation action, it is well established that there is only one cause of action for the insured's injuries .... [and t]he insurer can assert its subrogation claim independently of the insured. Prudential Prop. and Cas. Co. v. Dow Chevrolet-Olds, Inc., 10 S.W.3d 97, 100 (Tex.App.Texarkana 1999). Moreover, under Texas state law, [t]he subrogees stand in the shoes of the one whose rights they claim. Interstate Fire Ins. Co. v. First Tape, Inc., 817 S.W.2d 142, 145 (Tex.App. Houston 1991). Therefore, if there is only one cause of action for an insured's injuries, and in a subrogated action that cause of action belongs to the insurance company subrogee, it follows that the insurance company subrogee has the right to control the subrogated cause of action. 14 As applied to the instant case, the Ethridge Estate has a cause of action on behalf of Silvia Ethridge. However, under the clear terms of the Occupational Benefits Plan, by accepting Occupational Benefits Plan death benefits, the Ethridge Estate has subrogated its cause of action to MHHS, which then stands in the shoes of the Ethridge Estate. Because there is only one cause of action, and MHHS received from the Ethridge Estate the right to control that cause of action, as the party in control MHHS is entitled to prosecute and settle the Ethridge Estate's claims without seeking approval from the Ethridge Estate representative.
15 Moreover, the Administrative Committee gave the meaning of subrogation in the Occupational Benefits Plan a legally correct interpretation under the three-part test employed by this Court to determine the legal correctness of an ERISA administrative committee's determination. Pickrom v. Belger Cartage Serv., Inc., 57 F.3d 468, 471 (5th Cir.1995). Under the three-part test, this Court considers: (1) whether the administrative committee has given the plan a uniform construction; (2) whether the administrative committee's interpretation is consistent with a fair reading of the plan; and (3) whether different interpretations of the plan will result in unanticipated costs. Id. 16 Regarding the first factor, when there is no evidence in the record as to whether an administrative committee has given the plan a uniform construction, this Court should proceed to the other two factors. See id. Because there is no evidence in the record that the Administrative Committee previously had to construe the scope of the Occupational Benefits Plan's subrogation rights, our analysis necessarily turns to the remaining two factors. 17 Regarding the second factor, the Administrative Committee's interpretation of the term subrogation is consistent with a fair reading of the Occupational Benefits Plan. The Occupational Benefits Plan language limits MHHS' recovery to the extent of any Benefit payments made under the Plan, but does not limit MHHS' right of subrogation. The Occupational Benefits Plan language, in fact, grants MHHS a broad subrogation right since it states that MHHS has the right to pursue any action to enforce its subrogation rights against a third party. Therefore, a plain reading of the Occupational Benefits Plan language gives MHHS the right of subrogation to all of the Ethridge Estate's claims, with MHHS' right of recovery in any action against a third party limited to the amount of the death benefit paid to the Ethridge Estate. 18 Regarding the third factor, a different interpretation of the Occupational Benefits Plan than the one adopted by the Administrative Committee would result in unanticipated costs to MHHS. If, as Shelton argues, MHHS should not be permitted to prosecute or settle any subrogated claims without the consent of an employee's estate as subrogor, MHHS would be at the mercy of the estate. Pursuant to Article 11.3 of the Occupational Benefits Plan, MHHS has priority over an employee's estate with respect to all funds recovered from third parties, up to the amount of benefits MHHS has paid plus the costs of recovery. If MHHS is not permitted to independently prosecute and settle the claims of an employee's estate, MHHS runs the risk that the estate — having already received funds from MHHS — will hold up settlement negotiations in the hopes of obtaining a larger recovery. An estate that has received funds from MHHS has no incentive to settle its claims for any amount that does not exceed that already paid to it by MHHS, irrespective of how reasonable the settlement offer may be. Adopting an alternate reading of the term subrogation would result in unanticipated costs to MHHS, namely the increased costs of recovering from third parties. Accordingly, we conclude that the Administrative Committee has given a legally correct interpretation to the term subrogation as it appears in the Occupational Benefits Plan. 19 Therefore, for the foregoing reasons, we affirm the judgment of the district court upholding the Administrative Committee's interpretation of MHHS' subrogation rights with respect to any claims of the Ethridge Estate, and rejecting Shelton's argument that she should control or share in the control of the prosecution of any actions brought on behalf of the Ethridge Estate.