K–Va–T Food Stores, Inc. v. Hutchins

872 F.Supp.2d 486

K–VA–T FOOD STORES, INC., Plaintiff,

v.Mark D. HUTCHINS, Defendant.

Case No. 1:11CV00037.

United States District Court,

W.D. Virginia,

Abingdon Division.

Jan. 20, 2012.

Robert S. Reverski, Jr., Midkiff, Muncie & Ross, P.C., Richmond, VA, for Plaintiff.

Carl E. McAfee and Joseph R. Carico, Carl E. McAfee, P.C., Norton, VA, for Defendant.

OPINION

JAMES P. JONES, District Judge.

The issue in this ERISA case is whether the undisputed facts are sufficient to grant summary judgment in favor of a plan administrator who seeks reimbursement from the proceeds of an employee's automobile accident settlement for medical benefits paid. I find that summary judgment is appropriate.

I

The plaintiff, K–VA–T Food Stores, Inc. (“K–VA–T”), employed the defendant, Mark D. Hutchins, at one of its grocery stores located in this judicial district. Hutchins was hurt in an automobile accident and settled his personal injury claim. K–VA–T seeks a declaratory judgment recognizing Hutchins' obligation to reimburse the company employee health benefit plan for its payment of his medical bills.¹ K–VA–T has moved for summary judgment in its favor. Hutchins opposes summary judgment on the ground, among others, that he wishes to engage in further discovery. The Motion for Summary Judgment has been briefed and argued and is ripe for determination.

The following are the facts now before the court, as shown by the pleadings, deposition extracts, and witness declarations.

K–VA–T operates a chain of grocery stores, primarily under the name “Food City.” Hutchins was hired at the Big Stone Gap Food City store on February 13, 2010. K–VA–T sponsors, administers, and is a fiduciary of an employee welfare benefit plan, the “K–VA–T Food Stores, Inc. Tax Savings Plan” (the “Plan”). K–VA–T contends that the Plan is a self-funded employee health-care plan organized under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.A. §§ 1001–1400.

Hutchins enrolled for coverage under the Plan on May 18, 2010, after he had achieved 90 days of employment with K–VA–T. K–VA–T avers that it then delivered his proof of medical coverage and a copy of the Summary Plan Description (“SPD”) to him via interoffice mail, as was its habit and routine. Hutchins does not recall having receiving the SPD. The SPD explains that the Plan has a Third Party Recovery Provision that states:

The Covered Person may incur medical or dental charges due to injuries which may be caused by the act or omission of a Third Party or a Third Party may be responsible for payment. In such circumstances, the Covered Person may have a claim against that Third Party, or insurer, for payment of the medical or dental charges. Accepting benefits under this Plan for those incurred medical or dental expenses automatically assigns to the Plan any rights the Covered Person may have to Recover payments from any Third Party or insurer.... [T]he Plan has a lien on any amount Recovered by the Covered Person whether or not designated as payment for medical expenses.

...

The Covered Person:

...

(2) must repay to the Plan the benefits paid on his or her behalf out of the Recovery made from the Third Party or insurer.

(Meadows Decl. Ex. 1 at 47.) Under the paragraph entitled Conditions Precedent to Coverage, the SPD further explains:

The Plan shall have no obligation whatsoever to pay medical or dental benefits to a Covered Person if a Covered Person refuses to cooperate with the Plan's reimbursement and Subrogation rights or refuses to execute and deliver such papers as the Plan may require in furtherance of its reimbursement and Subrogation rights.

( Id.)

On June 14, 2010, Hutchins was seriously injured in an automobile accident. K–VA–T thereafter asked Hutchins to sign certain documents confirming its reimbursement rights but he refused to do so. Through its third party claims administrator, Wells Fargo, K–VA–T accordingly refused to pay Hutchins' medical bills arising from the accident. Hutchins then filed a lawsuit against Wells Fargo in state court seeking payment of his medical bills, alleging that Wells Fargo was “obligated to pay [Hutchins'] medical expenses pursuant to the Medical Plan affording coverage to [Hutchins]....” (Hutchins' Answer Ex. B.) K–VA–T, through Wells Fargo, then initiated payments to Hutchins and eventually paid medical bills on his behalf totalling $191,948.75.

Hutchins also filed a lawsuit in state court against Jeffrey A. Stapleton. Hutchins alleged that Stapleton negligently caused the automobile accident and his injuries. Upon becoming aware of Hutchins' action against Stapleton, K–VA–T requested that Hutchins recognize its right to reimbursement, keep it informed of all developments, and, should the claim be settled, retain funds sufficient to reimburse K–VA–T. In response, Hutchins informed K–VA–T that he had instructed his attorney, “to not withhold or pay any monies to any party who may have paid any of my medical bills as a result of my employment with Food City Stores under any and all insurance policies.” (Meadows Decl. Ex. 4.) Hutchins also said he had instructed the attorney “to not respond to or answer any inquiries as to the amount of any settlement and/or judgment, and you may feel free to file whatever you deem appropriate to attempt to protect your alleged subrogation rights.” ( Id.)

After K–VA–T had filed the present action in this court, Hutchins settled his claim against Stapleton for $850,000, which amount was paid into state court. K–VA–T intervened in Hutchins' state court suit against Stapleton and obtained an order providing that the amount claimed by K–VA–T ($191,948.75) would be held there pending the resolution of this federal court action.

II

Federal Rule of Civil Procedure 56 provides that the court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[T]he mere existence of some alleged factual dispute ... will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (italics in original).

Hutchins' opposition to summary judgment proceeds on three grounds. He asserts that there is insufficient proof that the Plan is a self-funded plan and that accordingly, ERISA does not preempt application of Virginia's anti-subrogation statute. He also claims that K–VA–T has not adequately shown that he received a copy of the SPD or that the terms of the Third Party Recovery Provision can be applied to him.

The parties do not disagree on the underlying legal principles of K–VA–T's claim. It is settled that a self-funded ERISA plan is not subject to state laws regarding insurance, including state anti-subrogation laws precluding health insurers from seeking reimbursement from third parties of medical benefits paid. See29 U.S.C.A. § 1144(b)(2)(B) (West 2009); FMC Corp. v. Holliday, 498 U.S. 52, 61, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990). Although Virginia has such an anti-subrogation law, Va.Code Ann. § 38.2–3405 (2007), ERISA preempts its application to a self-funded benefit plan. State Farm Mut. Auto. Ins. Co. v. Smith, 342 F.Supp.2d 541, 543–44 (W.D.Va.2004).

K–VA–T's evidence in support of its Motion for Summary Judgment plainly shows that the Plan is self-funded. K–VA–T's vice-president of human resources attests to that fact under penalty of perjury. (Meadows Decl. ¶ 6.) The SPD states that the funding for the benefits is “derived from the funds of the Employer and contributions made by covered Employees. The Plan is not insured.” (Meadows Decl. Ex. 1 at 59.) A form filed with the U.S. Department of Labor by K–VA–T states that it is a self-funded plan. (Pl.'s Reply Mem. Ex. 1 to Ex. B.)

In response, Hutchins points to an employee handbook provided to him when he started work, which under the heading “Hospitalization and Medical Benefits,” directs Food City employees to consider their “insurance” options and to review the “insurance policy” with the “insurance company.” (Hutchins' Answer Ex. A at 13.) However, the use of such general terms in the employee handbook is not sufficient to raise a genuine issue of material fact in light of the overwhelming evidence supporting the conclusion that the Plan is self-funded.

Hutchins also argues that there is insufficient proof that he ever received a copy of the SPD. He contends that absence such proof, K–VA–T has not shown that it complied with its statutory duty. Hutchins asserts that without such compliance, the Plan does not qualify under ERISA and is thus subject to state law.

ERISA requires the administrator of an employee benefit plan to furnish the SPD, and other materials, to each participant covered under the plan and to each beneficiary who is receiving benefits under the plan. 29 U.S.C.A. § 1021 (West 2008). An administrator who fails to meet this duty is personally liable in the amount of up to $100 a day from the day of failure. 29 U.S.C.A. § 1132(c)(1) (West 2009). ERISA does not provide that an administrator's failure to provide an SPD to a participant makes the Plan unqualified under ERISA or unenforceable in whole or in part. See Hightshue v. AIG Life Ins. Co., 135 F.3d 1144, 1149 (7th Cir.1998) (noting that “it is not at all apparent” that waiving a plan's exclusions and deeming coverage to exist is the proper remedy for failure to provide an SPD).

In any event, the evidence shows that K–VA–T fulfilled its statutory duty to provide Hutchins with the SPD. The relevant regulation states that the SPD “must be sent by a method or methods of delivery likely to result in full distribution,” and that the “administrator shall use measures reasonably calculated to ensure actual receipt of the material by plan participants.” 29 C.F.R. § 2520.104b–1(b)(1) (2011). C...