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Bell v. Blue Cross and Blue Shield of Oklahoma

United States District Court, W.D. Arkansas, Fayetteville Division

November 3, 2014

TERESA BELL, Plaintiff,
v.
BLUE CROSS AND BLUE SHIELD OF OKLAHOMA, a Division of HEALTH CARE SERVICE CORPORATION, a Mutual Legal Reserve Company; and BLUE CROSS AND BLUE SHIELD OF TEXAS, a Division of HEALTH CARE SERVICE CORPORATION, a Mutual Legal Reserve Company, Defendants.

OPINION AND ORDER

TIMOTHY L. BROOKS, District Judge.

Now before the Court are Plaintiff Teresa Bell's Motion to Remand (Doc. 10) and Defendants Blue Cross and Blue Shield of Oklahoma ("BCBS-OK") and Blue Cross and Blue Shield of Texas's ("BCBS-TX") Motion for Judgment on the Pleadings (Doc. 14).

For the following reasons, Plaintiff's Motion to Remand (Doc. 10) is DENIED, and Defendants' Motion for Judgment on the Pleadings (Doc. 14) is GRANTED.

I. BACKGROUND

Bell seeks to determine the rights of the parties with respect to Defendants' subrogation claim against her. In October of 2010, Bell, who worked as a registered nurse for the Veterans Affairs Hospital in Tulsa, Oklahoma, sustained personal injuries and medical expenses as a result of a motor vehicle accident to which she was not at fault. Bell was insured through a government-sponsored benefits plan ("Plan") available only to federal employees and administered by BCBS-OK and BCBS-TX. The Plan paid $33, 014.01 in medical benefits on Bell's behalf. Bell alleges this amount does not adequately compensate her for all injuries, damages, and attorney fees, which according to Bell total in excess of $100, 000.00.

Bell negotiated a compromise settlement[1] with Progressive Insurance Company ("Progressive"), the third-party carrier that insured the tortfeasor responsible for her car accident. Before Bell received her settlement check, BCBS-OK and BCBS-TX intervened and made a claim for subrogation, maintaining that the terms and conditions of Bell's health benefits Plan stipulated that any money she received from a third party was required to be reimbursed to the Plan, regardless of whether Bell had been "made whole, " for her injuries.

The Plan's Statement of Benefits states in relevant part:

If another person or entity, through an act or omission, causes you to suffer an injury or illness, and if we paid benefits for that injury or illness, you must agree to the provisions listed below. In addition, if you are injured and no other person or entity is responsible but you receive (or are entitled to) a recovery from another source, and if we paid benefits for that injury, you must agree to the following provisions:
• All recoveries you or your representatives obtain (whether by lawsuit, settlement, insurance or benefit program claims, or otherwise), no matter how described or designated, must be used to reimburse us in full for benefits we paid...
• We are entitled under our right of recovery to be reimbursed for our benefit payments even if you are not "made whole" for all of your damages in the recoveries that you receive. Our right of recovery is not subject to reduction for attorneys' fees and costs under the "common fund" or any other doctrine.

(Doc. 16, p. 16; Doc. 5-10, p. 138).

Despite this provision, Bell brought suit against BCBS-OK and BCBS-TX in state court, contending that she should not be required to reimburse the Plan with her third-party settlement monies. She points out that under Arkansas law, an insurer may only be reimbursed afte r the insured has been "wholly compensated for his injuries." Shelter Mut. Ins. Co. v. Kennedy, 347 Ark. 184, 189 (2001). Bell claims she was not "made whole" and that the subrogation lien is therefore invalid, void, and unenforceable as a matter of law.

The made-whole doctrine in Arkansas is one of equity. Bell argues that the combined sum received from the tortfeasor and the benefits paid by the Plan is less than the total amount of her injuries and damages. According to Bell, she should only be required to reimburse an amount, if any, by which her combined benefits and settlement proceeds exceed her actual loss. The Arkansas Supreme Court likens this concept to unjust enrichment. "An insured should not recover more than that which fully compensates, and an insurer should not recover any payments that should rightfully go to the insured so that... she is fully compensated. S. Farm Bureau Cas. Ins. Co. v. Tallant, 362 Ark. 17, 24 (2005); Shelter Mut. Ins. Co. v. Bough, 310 Ark. 21, 28 (1992) ("Thus, while the general rule is that an insurer is not entitled to subrogation unless the insured has been made whole for his loss, the insurer should not be precluded from employing its right of subrogation when the insured has been fully compensated and is in a position where the insured will recover twice for some of his or her damages.").

Under Arkansas law, an insurer cannot unilaterally assert and recover benefits through the subrogation provisions of its policy language. Eastwood v. S. Farm Bureau Cas. Ins. Co., 291 F.R.D. 273, 277 (W.D. Ark. 2013) ("[A]n insurance company seeking subrogation is required to secure either a legal determination by a court that the insured was made whole or an agreement with the insured that he was made whole prior to collecting subrogation.") (analyzing Riley v. State Farm Mut. Auto. Ins. Co., 2011 Ark. 256 (2011)) (emphasis in original). Bell therefore contends, applying Arkansas law, [2] that a court must determine whether she has been made whole by the combined amount of Plan benefits and settlement monies.

BCBS-OK and BCBS-TX removed this case to federal court on February 2, 2014 (Doc. 1), citing the Federal Officer Removal Statute, 28 U.S.C. § 1442(a)(1). In Jacks v. Meridian Resource Co., LLC, 701 F.3d 1224, 1233 (8th Cir. 2012), the Eighth Circuit held that removal pursuant to this Statute was appropriate in a case involving an insurance plan governed by the Federal Employees Health Benefits Act of 1959 ("FEHBA"), 5 U.S.C. §8901 et seq., and a private insurer's subrogation claims against an insured. According to Jacks, federal jurisdiction is proper in a case such as the one at bar because the "act of pursuing ...


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