The opinion of the court was delivered by: Elaine E. Bucklo, United States District Judge
The defendants' minor child was injured in a car accident in November
1999. They submitted a claim to their CIGNA Signature Benefits plan (the
"Plan"), provided by CIGNA, David Duffy's employer. CIGNA paid out
$47,393.13. Meanwhile the defendants sued the tortfeasor in state court
and settled the lawsuit for $100,000. The defendants filed a motion, with
notice to Primax, the plaintiff here, to extinguish subrogation liens.
Primax did not respond. The motion was granted. Primax then filed this
ERISA lawsuit on behalf of CIGNA, asking for various relief. It moves for
summary judgment, and I grant the motion in part.
I first consider whether this case is governed exclusively by ERISA and
the Plan. A state law claim is preempted by ERISA if the plaintiff's
claim "relates to" an employer's ERISA plan. Ingersoll-Rand Co. v.
McClendon, 498 U.S. 133, 139 (1990); 29 U.S.C. § 1144(a). A state law
that regulates insurance is saved from preemption by the saving clause,
29 U.S.C. § 1144(b)(2)(A), but under the deemer clause, an employee
benefit plan may not be deemed to be an insurer for the purposes of the
saving clause, § 29 U.S.C. § 1144(b)(2)(B). An insured plan may
be regulated through state insurance laws, an uninsured plan may not, and
a self-funded plan is exempt from state regulation of insurance plans.
FMC Corp. v. Holliday, 488 U.S. 52, 64, 61 (1990).
The parties agree that the Plan is an employee welfare benefits plan
under ERISA. Illinois law denies insurers subrogation rights against
payments by a tortfeasor in settlement of a claim brought by a minor's
estate. Health Control Cost Controls v. Ross, No. 96 C 2527, 1997 WL
222877, at *2 (N.D. Ill. Apr. 24 1997) (Norgle, J.). The courts in this
district agree that the anti-subrogation law comes under the saving
clause. Id. The defendants contend that the deemer clause does not
operate here because "no language of the plan, as provided to [the
defendants] indicates that it was . . . self funded." Moreover, the plan
contains "many references to and emblems of CIGNA . . . a nationally
recognized insurance provider." However, the Plan plainly states that it
is "self-insured. All valid claims and fees . . . are funded by employee
pre-tax contributions." Plan, at D-86. The defendants provide no evidence
that they did not receive this page of the Plan. I find that it was
self-funded. The deemer clause operates.
The defendants argue that in deciding whether the deemer clause
applies, I should consider whether the state regulation conflicts with the
Plan's provisions. See Ross, 1997 WL 222877, at *3, The court there noted
that the plan language required "you" to reimburse the plan for any
payments received to the extent that the plan had provided benefits in
connection with an injury to "you or one of your covered dependants." It
found that only "you," the plan beneficiary, was required to reimburse
the plan, and the covered dependant was not. There was no conflict with
Illinois anti-subrogation law, and the deemer clause did not apply. Id.
at 4. The Plan language is similar here, the defendants argue, so the
deemer clause should not apply. However, that result depended on the fact
that the plan there was considered to be uninsured for purposes of the
motion at bar, Id. at 4, 3, but here the Plan is self-insured.
The defendants also argue that they did not agree to the subrogation [I
think they mean restitution] clause, as they say the Plan requires.
Restitution is available only when a party "has a reasonable expectation
of payment, the plaintiffs should have reasonably expected to pay, or
society's reasonable expectations of person and property would be
defeated by nonpayment." Harris Savings & Trust v. Provident Life &
Accident Ins. Co., 57 F.3d 608, 615 (7th Cir. 1995) (citations omitted).
The Plan states:
If . . . a covered dependant incurs expenses for
injuries . . . for which . . . a third party may be
liable, CIGNA's plan will provide its normal
benefits. However, you must first agree in writing to
refund at the time the amount of the third party's
responsibility is determined and satisfied the lesser
of the amount actually paid by the plan . . .; or
[the] amount . . . actually received from the third
Id. at D-80. The defendants say they made no such written agreement.
However, this clause says not that a signed writing is required for
restitution, but that a signed writing is required for payment in
circumstances where a third party may be liable. The clause says: unless
you sign, we (the Plan) don't have to pay you, and not: unless you sign,
you don't have to pay us back. All three prongs of the restitution
requirements are met here. The defendants are not entitled to a double
recovery at CIGNA's expense. See Harris Savings, supra (same result).
Defendants argue in a supplemental brief, to which plaintiff did not
reply, that Great-West Life & Annuity Ins. Co. v. Knudson, 122 S.Ct. 708
(2002), bars this action. As I read the Supreme Court's opinion, it does
bar plaintiff's action insofar as it seeks to require defendants to repay
money already received in the settlement. It does not appear, however, to
bar a lien on specific funds not yet received in the claim for
underinsurance. 122 S.Ct. at 715. Thus, this action cannot be dismissed
on that ground.
The defendants say that if I grant the plaintiff's motion, I should
apply the Illinois common fund doctrine, reducing CIGNA'S recovery by one
third in recognition of the fact that the defendants' counsel won the
settlement. CIGNA stipulates to the applicability of the doctrine and
does not oppose the defendants' request. I therefore reduce the
plaintiff's gross recovery by one third to $31,595.42, and further by its
share of the defendants' pro rata expenses in obtaining the recovery, or
$565.07. Plaintiff is therefore entitled to a lien in the amount of
$31,030.35 if plaintiff can identify a specific fund from which
reimbursement is appropriate.
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