Group Health Cooperative v. Hall

GROUP HEALTH COOPERATIVE, Respondent, v. TERRI LYN HALL, a widow, Appellant.

No. 53381-2-II

Court of Appeals of Washington, Division 2

January 5, 2021

UNPUBLISHED OPINION

SUTTON, J.

This appeal arises from Terri Lyn Hall's settlement of a personal injury lawsuit and Group Health Cooperative's efforts to investigate her claim to determine whether it had a right of reimbursement after paying over $83, 000 in medical expenses resulting from her injuries. Hall asserted that Group Health had no right to reimbursement under well settled law because her settlement did not make her whole. Group Health sued Hall for reimbursement, claiming that she could not challenge the right to reimbursement because she had breached the duty to cooperate under the Medical Coverage Agreement (MCA) by failing to provide Group Health with information regarding her personal injury claim. Hall appeals the superior court's grant of summary judgment in favor of Group Health and the summary judgment dismissal of her counterclaims.

Hall argues that (1) being made whole is a condition precedent to a duty to cooperate under the MCA and because she was not made whole, a duty to cooperate never arose; (2) even if a duty to cooperate did arise, there are questions of fact as to whether she failed to cooperate; (3) genuine issues of material fact exist as to whether any breach of the cooperation provision prejudiced Group Health; and (4) the court erred by dismissing her counterclaims because Group Health acted in bad faith and violated the Consumer Protection Act, chapter 19.86 RCW (CPA), in demanding reimbursement of the medical expenses paid.

We hold that (1) Hall's being made whole is not a condition precedent for a duty to cooperate to arise under the MCA. We further hold that (2) Hall and her attorney breached the duty to cooperate with Group Health in the MCA as a matter of law and because that breach rendered Group Health unable to investigate her claim, Group Health was prejudiced as a matter of law. We also hold that (3) because Group Health properly pursued its right to reimbursement, the superior court correctly dismissed her counterclaims. Therefore, we affirm the superior court's summary judgment orders.

FACTS

I. Background

A. The Accident

On September 18, 2012, Hall fractured her right leg and her left pinky finger when she fell. On October 4, Hall informed Group Health of her fall and that she had filed a personal injury claim with the building owner's insurance company. On May 8, 2013, her attorney sent Group Health a letter informing Group Health that Hall had retained his firm to represent her in all matters arising from her fall.

B. The MCA

Group Health is a Washington nonprofit corporation providing healthcare services in Washington. Hall contracted for medical coverage with Group Health beginning in January 2012 subjecting her to the provisions of the MCA.

The MCA contains a subrogation and reimbursement provision that gives Group Health the right to recover medical expenses paid on Hall's behalf from any third-party settlement:

If [Group Health] provides benefits under this Agreement for the treatment of the injury or illness, [Group Health] will be subrogated to any rights that the Member may have to recover compensation or damages related to the injury or illness and the Member shall reimburse [Group Health] for all benefits provided, from any amounts the Member received or is entitled to receive from any source on account of such injury or illness, whether by suit, settlement or otherwise.

Clerk's Papers (CP) at 1269. However, the MCA also provided "[Group Health]'s subrogation and reimbursement rights shall be limited to the excess of the amount required to fully compensate the Injured Person for the loss sustained, including general damages." CP at 1269.

The MCA required Hall and her attorney to cooperate in Group Health's efforts to collect its medical expenses by among other things, giving Group Health information regarding the cause of her injuries or settlement:

The Injured Person and his/her agents shall cooperate fully with [Group Health] in its efforts to collect [Group Health]'s Medical Expenses. This cooperation includes, but is not limited to, supplying [Group Health] with information about the cause of injury or illness, any potentially liable third parties, defendants and/or insurers related to the Injured Person's claim and informing [Group Health] of any settlement or other payments relating to the Injured Person's injury.

CP at 1269 (emphasis added). In addition, the MCA stated:

If the Injured Person fails to cooperate fully with [Group Health] in recovery of [Group Health]'s Medical Expenses, the Injured Person shall be responsible for directly reimbursing [Group Health] for 100% of [Group Health]'s Medical Expenses.

CP at 1270 (emphasis added).

The MCA also stated:

To the extent that the Injured Person recovers funds from any source that may serve to compensate for medical injuries or medical expenses, the Injured Person agrees to hold such monies in trust or in a separate identifiable account until [Group Health]'s subrogation and reimbursement rights are fully determined and that [Group Health] has an equitable lien over such monies to the full extent of [Group Health]'s Medical Expenses and/or the Injured Person agrees to serve as constructive trustee over the monies to the extent of [Group Health]'s Medical Expenses.

CP at 1270 (emphasis added).

Finally, the MCA provided that "under certain conditions" Group Health would "reduce the amount of reimbursement to [Group Health] by the amount of an equitable apportionment" of attorney's fees so long as Hall provided Group Health with "a list of the fees and associated costs before settlement" and "the Injured Person's attorney's actions were reasonable and necessary to secure recovery." CP at 1270.

C. Hall's Personal Injury Settlement and Group Health's Requests for Information

In a May 2013 letter, Group Health informed Hall's attorney of its subrogation rights and that it was "entitled to reimbursement for medical treatment given . . . where the patient obtains a settlement or judgment against [a] third party." CP at 1296. Group Health told Hall's attorney that Group Health "may be willing to pay a portion of your attorneys' fees" and that he "should contact us if you believe such an arrangement would be appropriate." CP at 1297. Group Health concluded by asking that Hall's attorney "not take any action to prejudice the rights of Group Health and also that you contact us prior to any settlement." CP at 1297.

In December 2014, Hall filed suit against the owner of the building where she fell, Labor 1992 Corporation. Between August 2013 and February 2016, Group Health sent 11 letters to Hall's attorney, reminding them of Group Health's subrogation claim, providing an updated list of providers that Group Health had paid on Hall's behalf, and requesting that Hall's attorney keep Group Health informed of any settlement negotiations with Labor 1992 Corporation. Group Health ultimately informed Hall that it had paid a total of $83, 580.66 in medical expenses.

On March 18, 2016, Hall's attorney informed Group Health's third party specialist Pamela Henley that Hall had a mediation with Labor 1992 Corporation set for March 23, and asked whether Group Health would accept $5, 000 to release its subrogation claim. Group Health rejected this offer and asked Hall's attorney to contact Group Health during the mediation. Hall's attorney failed to do so.

On March 30, Hall's attorney called Henley to tell her that Hall intended to accept a post-mediation settlement offer of $600, 000, and that they did not think Hall had been fully compensated because her special damages exceeded $600, 000. Hall did not provide any details or supporting documentation.

Hall's economic damages expert's report stated that Hall had nearly lost $484, 199 in past and future income as a result of the fall. The expert's estimate was based on Hall's representation that, as a result of the fall, she was forced to retire from her position as a Department of Labor and Industries (L&I) Workers' Compensation Adjudicator, and that, but for the fall, she would have worked until 2019. Hall had worked at L&I for almost 30 years when she fell, and turned 60 years old two months after her fall.

On April 5, 2016, Hall executed a settlement agreement with Labor 1992 Corporation. Hall accepted $600, 000 in exchange for "releas[ing] and forever discharg[ing]" Labor 1992 Corporation from "all claims . . . resulting from the accident." CP at 1172. Hall further agreed to hold Labor 1992 harmless from all subrogated claims and claims for reimbursement, and "to pay and fully resolve all outstanding health care expenses, liens, attorney fees and expenses, subrogation claims and claims for reimbursement, related to the described accident or event, from money received in this settlement." CP at 1172.

The same day, April 5, Group Health's attorney sent Hall's attorney a letter stating that he was representing Group Health. The letter stated that Hall was "not authorized to release any of the funds at issue [with] Group Health's subrogation claim." CP at 1201 (emphasis omitted). Hall's attorney responded immediately, denying that Group Health "has any right of reimbursement," withdrawing Hall's previous offer of $5, 000 to release any subrogation claim, and threatening to sue Group Health under the CPA. CP at 1203.

On April 27, Group Health's attorney again wrote to Hall's attorney, asserting that Hall had been fully compensated by the settlement and thus, Group Health was "entitled to be reimbursed for the amounts it expended for Ms. Hall's medical care." CP at 1207. Group Health's...