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The Western and Southern Life Insurance Co v Wall; (USD- PUB, 5/25/1995; RB #1804)


United States District Court for the Eastern District of Michigan; Docket No. 94-75225  
Honorable Paul V. Gadola; Published  
Official Federal Reporter Citation:  903 F.Supp. 1155; Link to Opinion alt  

Coordination with Other Health and Accident Medical Insurance [§3109a]  
Coordination with ERISA Plans [§3109a]  
Applicability of Limitations Period to Claims by Insurers Against Injured Persons [§3145]

Employee Retirement Income Security Act (ERISA – 29 USC Section 1001, et seq.)   

The Western and Southern Life Insurance Company filed this action to recover medical expenses paid by the company's self-funded ERISA plan for treatment of injuries arising out of a motor vehicle accident.  

Defendant Wall was an employee of the company when she was injured in a motor vehicle accident. At the time of the accident, the company had in effect an ERISA plan that was self-funded. Wall was also covered by a Michigan no-fault automobile insurance policy issued by AAA. After the accident, the plan payed Wall $21,053 in medical expense benefits. AAA also paid Wall for her wage loss benefits and some of her medical expenses not covered by the plan. Additionally, Wall also recovered $100,000 from the other driver's insurance company in settlement of her non-economic damage claim. Plaintiff Western and Southern claimed that it was entitled to subrogation for the medical expenses it paid to be recovered out of plaintiffs recovery of non-economic damages from the other driver's insurance company. This action was filed to determine the issues relating to that claim.  

Judge Gadola, in his written opinion, first addressed the issue of ERISA preemption. Judge Gadola held that state law was preempted by ERISA pursuant to the United States Supreme Court holding in FMC Corp v Holliday, 498 US 52 (1992).  

Next, Judge Gadola addressed the interpretation of the subrogation language in the plan concerning whether or not the company had the right to subrogation for medical expenses that it paid to be reimbursed from plaintiffs third-party non-economic damage recovery. The subrogation provision stated:

In the event of any payment of medical or disability benefits under this plan, the employer shall, to the extent of such payment, be subrogated to all rights of recovery of the individual receiving such benefits under this plan against any insurance carriers "for any third parties who may be liable for expenses paid under the plan..." (emphasis added)

Judge Gadola held that since the settlement of the third party claim involved compensation only for plaintiffs non-economic pain and suffering damages, and since the provisions of §3135 of the no-fault act abolished tort liability for economic losses such as medical expenses and wage loss, the company's subrogation claims could not be asserted against plaintiffs third party recovery because the third party in this case was not liable for expenses paid under the plan. The court distinguished the decision in Fons v Hotel Employees International Union, 1991 WL 340288 (ED Mich, 1991), because in Fons the ERISA   -plan stated that it was subrogated to the participant's right "to recover said amounts as damages from another person or insurance carrier." In the instant case, the plan limits its subrogation rights to situations where the participant recovers from a third party who "may be liable for expenses under the plan."  

The court rejected the company's claim that it was entitled to subrogation because the summary plan description provides that "the plan may share in anything you may receive from a third party." The court noted that the summary plan description explicitly states that it is not a part of the plan. Therefore, the terms in the summary plan description do not control the actual language of the plan.  

The court next addressed the company's claim that it was entitled to "reimbursement" under the provisions of the plan that allows for the employer to have a right to recover "the excess amount of such payments from any persons to or for or with respect to whom such excess payments were made."  

The company argued that AAA should have paid Wall's medical expense benefits and therefore Wall was not entitled to any medical benefits under the plan. The court agreed that Wall was not entitled to medical benefits from the plan, because AAA should have paid those benefits under the coordination of benefits language of the plan. Therefore, according to the reimbursement provisions of the plan, Wall must reimburse the company for the medical expenses she received from the company.  

The court next addressed the claim by Wall's that the company suit was barred by §3145 of the no-fault act containing the one year statute of limitations. Relying upon Auto Club Insurance Association v New York Life Insurance Co, 440 Mich 126 (1992), the court held that §3145 did not bar claims by benefit providers under an insurance contract This claim was governed by a six year statute of limitations.  

Finally, the court addressed plaintiffs defense of the equitable doctrine of laches. Plaintiff claimed that the company's delay in bringing this action prejudiced her because the time had lapsed for her to seek payment of those benefits from AAA. The court indicated that he was extremely concerned about the inequitable situation created by the company, because the company's delay in bringing this action had prejudiced Wall. Unfortunately, however, the court felt that laches was not available as a defense against claims brought under law as in the instant action. Therefore, the court ordered that reimbursement was required under the plan.  

Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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