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Caterpillar, Inc. v. Wilhelm

September 29, 2009


The opinion of the court was delivered by: Michael P. McCUSKEY Chief U.S. District Judge


This case is before the court for ruling on the Motion for Summary Judgment (#29) filed by Defendants, Charles and Gloria Wilhelm, and the Motion for Summary Judgment (#38) filed by Plaintiff Caterpillar, Inc. (Caterpillar). This court has carefully reviewed the arguments of the parties and the documents filed by the parties. Following this careful and thorough review, Defendants' Motion for Summary Judgment (#29) is GRANTED and Caterpillar's Motion for Summary Judgment is DENIED (#38).


Matthew Charles Wilhelm, decedent, suffered a catastrophic brain injury when he was struck by an automobile on September 2, 2006, resulting in his death on September 8, 2006. Wilhelm was riding a bike when he was struck from behind by a vehicle driven by Jennifer Stark, who was distracted while downloading ringtones to her cell phone. Wilhelm accrued $72,799.79 in hospital bills that were paid by Caterpillar under Wilhelm's employee benefits plan. Stark was insured by Erie Insurance Company (Erie), which provided $100,000 in coverage under the liability endorsement. Defendants, who were appointed administrators of Wilhelm's estate, were owners of an insurance policy with a $500,000 limit with Indiana Insurance Company (Indiana).

A proposed settlement for $100,000 was negotiated between Erie and Defendants. A Petition for Authorization was filed in state court and a hearing was set for June 29, 2007. Notice was sent to Ingenix Subrogation Services (Ingenix), a United HealthCare Services (Caterpillar's health care insurance representative) subsidiary company. Ingenix received the notice on June 8, 2007. The hearing was held and an order was entered by the state court approving the settlement and allocating the proceeds between wrongful death and all other claims, with $99,500 going towards Defendants' claim under the Illinois Wrongful Death Act (740 Ill.Comp.Stat. 180/1 (West 2008)) and $500 going to other claims of the estate, including under the Illinois Survival Act (755 Ill.Comp.Stat. 5/27-6 (West 2008))..

Defendants then negotiated a proposed settlement of the underinsured motorist claim against Indiana for the policy limit of $400,000 ($500,000 less the $100,000 recovered from Erie). On November 19, 2007, Wilhelm's estate filed a Petition for Authorization in state court for the Indiana claim. Carol Sachtsale, Ingenix's attorney, and the attorneys for Wilhelm's estate corresponded about Ingenix's possible subrogation lien for Wilhelm's medical bills and how it related to the insurance settlements. Notice was sent to Ingenix on December 11, 2007, concerning the Indiana settlement proceed allocation hearing to be held in state court on January 9, 2008. On January 3, 2008, attorney James Kearns, who represented Indiana, received a call from Caterpillar's attorney David Belofsky. Belofsky called to discuss a potential subrogation lien in the Wilhelm case. On January 4, 2008, in response to the telephone call, Kearns sent Belofsky a letter referencing the prior day's telephone conversation. The letter to Belofsky concluded with:

"My file reflects that notice was given of the petition authorizing settlement to the University of Illinois, Carle Foundation Hospital, Carle Clinic Association and Ingenix, the only companies I was aware of who had potential claims against the settlement proceeds. I attach the Notice of Hearing on the petition to settle which was served on all those parties.

Let me know if you have any other questions."

In his affidavit, Joseph W. Phebus, attorney for Defendants, stated that on or about January 3, 2008, Caterpillar attorney Belofsky left a phone message for him wanting to speak with Phebus concerning the January 9, 2008 Indiana settlement hearing. Phebus, who had been out of state, returned Belofsky's call on January 8, 2008. During the conversation, Belofsky requested the January 9 settlement hearing be vacated, but Phebus said he "could not agree as notice had been given to other interested parties and that accordingly the hearing would proceed on January 9, 2008."

The hearing was in fact held on January 9, and two days later an order was entered by the state court approving the settlement and allocating all $400,000 to Defendants for wrongful death. Caterpillar, by its attorneys or otherwise, never entered an appearance in the Wilhelm estate proceedings. Moreover, Caterpillar never contested the validity of the state court's orders or filed an appeal. Caterpillar claims that neither it nor Ingenix were ever named as a party to the state court action, nor were they ever served with any legally sufficient process.

Caterpillar brought this current federal action on January 23, 2008, under the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1132(e)(1)) (hereinafter "ERISA"). Caterpillar seeks $72,799.79 in funds it believes it is owed for the medical payments it made. Caterpillar claims it is entitled to the funds from the $500,000 collected by Defendants in insurance proceeds relating to the accident. Caterpillar says it has never been reimbursed for the medical bills it paid on the deceased's behalf through Caterpillar's employee benefits plan. The plan's subrogation and reimbursement provisions state that "if the injury or condition giving rise to subrogation or reimbursement involves the wrongful death of a Program beneficiary, this section applies to the personal representative of the deceased Program beneficiary."

In its Complaint, Caterpillar alleged that Wilhelm's estate is required to reimburse the plan for the benefits it provided in treatment of the injuries Wilhelm sustained in the accident, and further, that the plan does not permit Defendants to recharacterize amounts received by Wilhelm's estate to be recoveries for wrongful death. Caterpillar claims that the plan's right to subrogation and reimbursement are exclusively governed by material provisions of ERISA and terms of the plan. Caterpillar claims that Defendants have wilfully disregarded the plan provisions that state "you will do nothing to prejudice the Program's rights under this provision, either before or after the need for services or benefits under the Program" and "you will not accept any settlement that does not fully compensate or reimburse the Program without written approval."

The plan provides, as a condition to the receipt of benefits, that the participant will "hold in trust for our benefit under these subrogation provisions any proceeds of settlement or judgment." According to Caterpillar, Defendants hold for the benefit of ...

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