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Farm Bureau General Ins Co v Melton; (USD-UNP, 10/27/2014; RB #3378)

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United States District Court, Western District of Michigan; Case #14-cv-10266  
Hon. Robert Holmes Bell  
Official Michigan Reporter Citation: Not Applicable; Opinion Not Available alt   


STATUTORY INDEXING:
Coordination with ERISA Plans [§3109a]

TOPICAL INDEXING:
Employee Retirement Income Security Act (ERISA – 29 USC §1001, et seq.) 


CASE SUMMARY:
In this written Opinion involving a subrogation lien asserted by the health plan of an injured driver against the driver’s recovery in a pending non-economic damages action against the at-fault driver, Federal Judge Robert Holmes Bell remanded a declaratory judgment action filed by the injured driver’s no-fault insurer back to state court to determine whether the insurer must honor the subrogation lien and indemnify its insured against the health plan’s claim. The judge ruled the federal court did not have jurisdiction over the matter because, although the injured driver’s health plan was established pursuant to the Employee Retirement Income Security Act (ERISA), no decision had to be made regarding the ERISA plan.

Defendant Melton was injured in an auto accident. Plaintiff Farm Bureau was his no-fault insurer. Melton was also eligible for benefits under his employer’s ERISA health plan (Chico’s plan), which provided that its coverage was primary to defendant’s coverage with plaintiff. The Chico’s plan also included a subrogation and/or reimbursement provision that allowed it to recover from defendant any damages he might recover from the at-fault driver. Melton brought a tort claim for non-economic damages against the at-fault driver in Kent County Circuit Court. Meanwhile, the Chico’s plan was paying Melton’s medical expenses. Chico’s plan then asserted a subrogation lien against Melton, seeking reimbursement for the bills it had paid from the pending tort claim. Melton requested that Farm Bureau honor the subrogation lien. Farm Bureau filed a declaratory judgment action in state court, claiming it only had to pay excess benefits and that Melton was not entitled to seek indemnification. Melton removed the claim to federal court, alleging it fell within the court’s jurisdiction because the action was subject to ERISA. Farm Bureau filed a motion to remand the case, arguing the state court had jurisdiction because ERISA interpretation was not necessary.

Concluding that jurisdiction was proper in state court, Judge Bell noted that Melton removed the case to federal court under 28 USC §1331 and that, when a declaratory judgment is involved, the court must examine the underlying cause of action to determine whether there is a federal question. The judge stated:

“Farm Bureau’s complaint seeks a declaratory judgment pursuant to Michigan’s No-Fault Insurance Act, … that, under the terms of Defendant Melton’s insurance policy with Farm Bureau, Farm Bureau is not obligated to indemnify Melton against reimbursement or subrogation claim asserted by his primary health plan. The underlying cause of action is in the nature of a breach of contract. There is no federal question that requires resolution in order to determine whether Farm Bureau has an obligation to pay under the terms of its policy.”

According to Judge Bell, Melton’s case rested on the same theory as presented in Allstate Ins Co v Nowakowski, 861 F Supp 2d 866 (WD Mich 2012), where it was held that a health plan’s status as an ERISA plan did not give rise to a question of federal law because the claim under the No-Fault Act did not require any ruling relevant to the ERISA plan.

Applying Allstate to this case, Judge Bell concluded:

“Farm Bureau’s obligations under its policy are contingent on the validity of the Chico’s plan lien, an ERISA plan. However, Farm Bureau’s obligations do not present a question of federal law. Moreover, Melton attempts to name Chico’s, Blue Cross Blue Shield, and Gadison-Herring Agency as parties, and he has filed counterclaims and cross-claims. For the reasons explained by this Court in Allstate, the Court concludes that it does not possess jurisdiction pursuant to §1331 over the action for declaratory judgment nor the claims or parties added by Defendant Melton.”

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