Opinion ID: 740412
Heading Depth: 4
Heading Rank: 2

Heading: Requiring the agreement to be signed before paying benefits

Text: 54 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. 55 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. 56 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. 57 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. 58 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. 59 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.