Steffens v. BlueCross BlueShield
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John Steffens, a beneficiary under an ERISA plan provided by BlueCross, required surgery after an automobile accident. BlueCross paid for a significant portion of Steffens' medical expenses as it was required to do under the Plan. Steffens then sued the other individual in the accident, naming BlueCross as a defendant. Steffens asked for a judgment against BlueCross foreclosing any claim it may have had for subrogation. BlueCross filed a counterclaim against Steffens, alleging it had paid $67,477 on behalf of Stevens and that under the Plan, Steffens was obligated to reimburse BlueCross. The circuit court ordered Steffens to reimburse BlueCross $64,751 plus attorney fees. The court of appeals reversed the circuit court's order and remanded, holding that BlueCross must prove that the surgery-necessitating injuries were related to the accident. The Supreme Court granted review and reversed the judgment of the court of appeals, holding that it was not arbitrary and capricious for the Plan administrator to interpret the Plan and conclude that BlueCross was entitled to reimbursement because the expenses that BlueCross paid arose from an accident for which a third party may have been liable.
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2011 WI 60 SUPREME COURT CASE NO.: COMPLETE TITLE: OF WISCONSIN 2009AP1558 John R. Steffens, Plaintiff-Appellant, v. BlueCross BlueShield of Illinois, Defendant-Respondent-Petitioner, v. Wesley D. Dishno, AIG National Insurance Company, Inc., BlueCross BlueShield of Wisconsin and The Farmers Automobile Insurance Association, Defendants. REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at 329 Wis. 2d 710, 790 N.W. 2d 543 (Ct. App. 2010-Unpublished) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: SOURCE OF APPEAL: COURT: COUNTY: JUDGE: JUSTICES: CONCURRED: DISSENTED: July 8, 2011 March 1, 2011 Circuit Outagamie Dee R. Dyer ABRAHAMSON, C. J. dissents (Opinion filed). BRADLEY, J. joins dissent. NOT PARTICIPATING: ATTORNEYS: For the defendant-respondent-petitioner there were briefs by Sheila M. Sullivan, Sarah Germonprez and Bell, Moore, and Richter, S.C., Madison, and oral argument by Ms. Germonprez. For the plaintiff-appellant there was a brief by Amy M. Risseeuw, John C. Peterson, and Peterson, Berk, and Cross, S.C., Appleton, and oral argument by Ms. Risseeuw. 2011 WI 60 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2009AP1558 (L.C. No. 2008CV16) STATE OF WISCONSIN : IN SUPREME COURT John R. Steffens, Plaintiff-Appellant, v. FILED BlueCross BlueShield of Illinois, Defendant-Respondent-Petitioner, JUL 8, 2011 v. A. John Voelker Acting Clerk of Supreme Court Wesley D. Dishno, AIG National Insurance Company, Inc., BlueCross BlueShield of Wisconsin and The Farmers Automobile Insurance Association, Defendants. REVIEW of a decision of the Court of Appeals. ¶1 PATIENCE unpublished opinion DRAKE of the ROGGENSACK, court of J. We appeals1 Reversed. review an reversing the circuit court's order2 granting BlueCross BlueShield of Illinois' 1 Steffens v. BlueCross BlueShield of Ill., No. 2009AP1558, unpublished slip op. (Wis. Ct. App. Aug. 3, 2010). 2 The Honorable Dee R. Dyer of Outagamie County presided. No. (BlueCross) motion for declaratory judgment. subrogated party in plaintiff John R. requested a declaration that BlueCross is a Steffens' lawsuit based on a June 2005 car accident. Steffens 2009AP1558 (Steffens) BlueCross's motion reimburse BlueCross $67,477.57, the amount BlueCross paid pursuant to BlueCross's ERISA benefits plan (the Plan) accident-related injuries. that covered Steffens for The issues presented to this court are: (1) whether the Plan administrator's determination that under the arbitrary Plan and BlueCross is capricious; representations that the entitled and (2) to reimbursement whether surgery-necessitating is Steffens' prior injuries arose out of the automobile accident judicially estop him from now claiming that a degenerative condition caused the injuries for which surgery was performed. ¶2 We conclude that the Plan administrator's determination that BlueCross is entitled to reimbursement was not arbitrary and capricious. The Plan states that BlueCross is entitled to reimbursement from the beneficiary of the Plan for "expenses incurred as the result of, or that arose out of, an accident" when a third party "may be liable" for the payment of those expenses and the beneficiary obtains a settlement from the third party. The Plan gives the Plan administrator discretion to interpret the clause. ¶3 Prior to settlement, Steffen consistently asserted that the surgery-necessitating injuries arose out of a June 2005 automobile accident. Consequently, it was not arbitrary and capricious for the Plan administrator to interpret the Plan and 2 No. 2009AP1558 conclude that BlueCross is entitled to reimbursement because the expenses that BlueCross paid arose from an accident for which a third party may be liable. ¶4 Our conclusion that the Plan administrator's determination that BlueCross is entitled to reimbursement is not arbitrary and capricious is dispositive of the case. We, therefore, do not reach the judicial estoppel issue. I. A. ¶5 On June 29, BACKGROUND The Accident 2005, Steffens automobile accident in Outagamie County. was involved in an According to Steffens, he was stopped at a traffic light when Wesley Dishno's (Dishno) vehicle hit him from behind. in front of him. This pushed Steffens into the van Steffens suffered injuries as a result of the accident. ¶6 Steffens visited the emergency room approximately two hours after the accident. as shoulder and neck He complained of a headache, as well pain. performed during this visit. No significant procedures were Various doctors' notes from July of 2005 to March of 2006 indicate that Steffens continued to suffer from pain and stiffness in his neck, upper back, thorax, and shoulders. Moreover, in the months immediately following the accident, Steffens suffered from headaches. ¶7 In early March of 2006 Steffens was beginning to experience lower back pain with intermittent radiation to his lower 2006. extremities. This low back pain continued throughout In December of 2006, Steffens had a Magnetic Resonance 3 No. Imaging (MRI) of his spine. 2009AP1558 The MRI revealed that at L5-S1, Steffens had a grade-one spondylolisthesis.3 On May 22, 2007, Steffens underwent L5-S1, lumbosacral fusion surgery. ¶8 The medical notes indicate improved following the surgery. that he did not have any that Steffens' pain Moreover, Steffens had asserted back pain prior to the June 2005 accident. B. ¶9 ERISA4 The Plan As aforementioned, Steffens was a beneficiary under an plan provided by BlueCross. BlueCross paid for a significant portion of Steffens' back and neck related medical expenses, including the lumbosacral fusion surgery, as it was required to do under the Plan. Subrogation, and/or Right of The Plan has a "Reimbursement, Reduction" clause. The clause gives the administrator discretion to interpret its terms. states: It "The Plan/Plan administrator has sole discretion to interpret the terms of this provision in its entirety . . . ." ¶10 The clause details when BlueCross is entitled to subrogation: If any benefits payable under the Plan to you or your dependents were for expenses incurred as the result of, or that arose out of, an accident or other situation such that other party or parties, may be 3 Spondylolisthesis is a "[f]orward movement of the body of one of the lower lumbar vertebrae on the vertebra below it, or upon the sacrum." Stedman's Medical Dictionary 1678 (27th ed. 2000). 4 ERISA is the acronym for the Employee Retirement Income Security of Act of 1974. 4 No. 2009AP1558 liable for the payment of expenses and you subsequently obtain a settlement from or a judgment against such other party or parties, you or your dependents are obligated to reimburse the Plan. The Plan's right to reduction, reimbursement and subrogation apply regardless of whether the settlement or award is designated as payment for, but not limited to pain and suffering, wage loss, loss of consortium, medical benefits, and other specified damages. The Plan has first priority with respect to its right to reduction, reimbursement and subrogation. ¶11 right In addition, the clause explicitly gives BlueCross a of first priority, notwithstanding the make-whole doctrine: The Plan's right to reduction, reimbursement and subrogation will not be reduced even if the recovery does not fully compensate you or your dependents, or you or your dependents were not made whole, for all losses sustained or alleged, or the recovery is not described as being related to medical costs. The amount the Plan is entitled to will also not be reduced by legal fees or court costs incurred in seeking the recovery. Any so-called "make-whole" or "full-compensation" rule or doctrine is hereby explicitly rejected and disavowed. C. ¶12 Pre-Settlement Litigation On January 2, 2008, Steffens filed a complaint against Dishno demanding compensatory damages for the accident. complaint was later amended on February 25, 2008. the amended complaint, the accident caused According to Steffens severe, permanent, and costly injuries: As a direct and proximate consequence of the negligence of the defendant, Wesley D. Dishno, the plaintiff, John R. Steffens, was severely and permanently injured, has been unable to undertake his usual activities and occupations for a sustained period of time, has incurred significant expenses for 5 The No. 2009AP1558 the care and treatment of his injuries, and has been otherwise permanently injured and damaged.5 ¶13 In addition to Dishno, Steffens named AIG National Insurance Company (AIG), BlueCross, and the Farmers Automobile Insurance Association (Farmers) as defendants. AIG was named as a defendant because Dishno carried AIG's automobile liability insurance. their Steffens named both BlueCross and Farmers6 due to potential complaint, rights both of insurers subrogation. "paid some According of the to medical the bills incurred by John R. Steffens as a result of injuries sustained in the collision."7 Despite naming them as subrogated parties, Steffens the asked in complaint for a "judgment against [BlueCross and Farmers], foreclosing any claim they may have for subrogation." ¶14 Subsequent to the amended complaint, on March 17, 2008, BlueCross filed a cross-claim against Dishno and AIG, and a counterclaim against Steffens. BlueCross's cross-claim alleged that it "has paid medical bills on behalf of John R. Steffens for treatment of injuries suffered in the accident of June 29, BlueCross 2005, in the amount of asserted that because the $67,477.57."8 Plan is an Moreover, ERISA plan, BlueCross's subrogated interest is not subject to the "make- 5 Am. Compl., ¶8. 6 The Farmers policy does not come within ERISA. 7 Id., ¶¶4-5. 8 BlueCross's Cross-cl. & Countercl., ¶2b. 6 No. whole" doctrine.9 2009AP1558 BlueCross's counterclaim alleged that under the Plan, Steffens is obligated to reimburse BlueCross, out of any recovery BlueCross.10 in the action for the $67,477.57 paid by BlueCross attached a "Medical Itemization Report" stating the amounts billed for injuries related to the accident and the lien amounts held by BlueCross. Steffens' surgery was listed. ¶15 On April 10, 2008, Steffens replied to BlueCross's counterclaim, asserting that "BlueCross . . . is entitled to no reimbursement for medical expenses paid in this matter until and unless Plaintiff is made whole."11 Steffens made in his reply. This was the only assertion Notably, Steffens did not contest the dollar amount, i.e., the $67,477.57 that BlueCross claimed it had paid "for treatment of injuries suffered in the accident of June 29, 2005."12 of litigation, To the contrary, throughout the first year Steffens asserted that BlueCross had paid $67,477.57 and that the surgery-necessitating injuries arose out of the accident. 9 Id., ¶2e-f. 10 Id., ¶3. Farmers filed a similar response, however, Farmers alleged that it had only paid $2,000 to or on behalf of Steffens for medical expenses incurred as a result of the accident. Farmers is no longer involved in this lawsuit. 11 Steffens' Reply to Countercl. 12 BlueCross's Cross-cl. & Countercl., ¶2b. 7 No. ¶16 2009AP1558 In particular, Steffen responded to interrogatories in April of 2008. Steffens described the extent of his injuries from the accident: I sustained a back injury that resulted in a lumbosacral fusion surgery. Initially, following the accident, I primarily had pain that radiated down my leg all the way to my toes. After the surgery, my pain was primarily isolated in my low back at the surgery site. The injuries have affected, impaired and changed my life in numerous ways. For example, prior to the accident I enjoyed golfing, snowboarding and snowmobiling, however, since the accident I have not been able to participate in those activities. Additionally, normal day-to-day activities have been difficult for me since the accident. Specifically, activities that require bending over are difficult and I have pain even when I try to tie my shoes. Standing for prolonged periods of time is painful as well. ¶17 Steffens made other responses to interrogatories. relevant assertions in his First, he averred that his back injury was permanent and that his surgeon, Dr. Randall Johnson, M.D. (Dr. Johnson), "ha[s] or will" diagnose the permanent injury. Second, he asserted that he made a claim for medical coverage to specifically, $64,751.40." BlueCross that "arising BlueCross out has of made the incident," "payments and totaling Finally, Steffens claimed that he was entitled to medical expenses totaling $130,712.19. ¶18 In addition to his April 2008 interrogatory answers, on May 9, 2008, Steffens sent a request for admissions to all counsel of record. In his request, he asked that all parties admit that the surgery expense "was necessary . . . to provide the essential care and treatment for injuries sustained by . . . 8 No. Steffens, which were caused by the June 29, 2005 2009AP1558 automobile accident." ¶19 Likewise, on May 13, 2008, Steffens filed a scheduling conference statement with the court that reiterated that he was seeking the cost of his surgery as damages. statement, when asked Steffens stated: to "itemize claimed Namely, in the special damages," "The plaintiff incurred medical expenses in the amount of $132,282.19." On the same day, Steffens filed a "Disclosure of Expert Witnesses" list with the court. In this disclosure, Steffens listed Dr. Johnson as his expert witness. D. ¶20 The Settlement and Post-Settlement Litigation In January of 2009, agreement with Dishno and AIG. Steffens reached a settlement Under the settlement, AIG was to pay Steffens $100,000, the AIG policy limits. BlueCross was not advised of the settlement negotiations. ¶21 Subsequently, BlueCross amended on answers February 9, to the 2009, Steffens interrogatories. mailed In the amended answers Steffens no longer claimed that the surgerynecessitating injuries arose out of the accident. Steffens, instead, described the extent of his injuries from the accident as follows: I sustained injuries to my upper back and neck which resulted in what the records describe as occipital headaches. The injuries caused me substantial discomfort, and I had multiple visits to my doctor as well as prescribed physical therapy. I subsequently, in the following year, developed a serious problem with my low back. I subsequently received the evaluation of Independent Medical examiner, Dr. William T. Monacci, which I am attaching to these 9 No. 2009AP1558 amended answers and incorporating by reference. I now have learned that my low back pain and surgery was not related to the accident. With regard to the specific treatment that Steffens received for the accident related injuries, he stated, "I was seen at the emergency room of Appleton Medical Center on the day of the accident. John I was subsequently treated by my family doctor, Dr. Ganser, and his associates. Finally, in January and February, 2006, I received physical therapy at Appleton Medical Center." ¶22 Steffens' amended answers to the interrogatories included these additional distinctions from his first answers: ¢ The accident injury. ¢ BlueCross made payments totaling only $1,934.50 for medical expenses arising out of the accident. ¢ The total amount of medical expenses to which Steffens was entitled because of the accident was $2,441.50. ¢ Dr. William T. Monacci was listed as Steffens' expert witness. Dr. Johnson was no longer listed as a treating physician or an expert. ¶23 medical did not result Notably, Dr. Monacci had evaluation of Steffens on in any permanent performed October 2, an independent 2008. In his report, filed with the circuit court on October 13, 2008, Dr. Monacci concluded that progressive degenerative Prior to defendant the settlement, tortfeasor the L5-S1 condition Dr. Dishno spondylolisthesis unrelated Monacci and 10 his had to the was a accident. been named insurer AIG's as the expert No. witness. 2009AP1558 Dr. Monacci was not listed as a witness on an amended expert witness list Steffens filed in December of 2008. ¶24 In response to Steffens' changed position regarding the cause of the surgery-necessitating injuries, BlueCross moved for declaratory judgment to determine its rights under the Plan. BlueCross requested a declaration that Steffens had an obligation to reimburse BlueCross the $67,477.57 "it paid to treat injuries Steffens claimed he suffered in the car accident of June 29, 2005" and that BlueCross attorney fees. under the Plan, Steffens owed BlueCross argued that it is entitled to reimbursement before Steffens is made whole because the Plan is an ERISA plan that explicitly disavows the make-whole doctrine. ¶25 Next, BlueCross argued that the doctrine of judicial estoppel barred Steffens from now asserting that the surgerynecessitating injuries did not arise out of the accident. BlueCross listed the three elements of judicial estoppel as set forth in Salveson v. Douglas County, 2001 WI 100, 245 Wis. 2d 497, 630 N.W.2d 182, and argued that all elements had been met in this case. The elements are: "(1) the later position must be clearly inconsistent with the earlier position; (2) the facts at issue should be the same in both cases; and (3) the party to be estopped must have convinced the first court to adopt its position." ¶26 Id., ¶38. Finally, BlueCross argued that it is not required to prove that the surgery-necessitating injuries were caused by the accident. Specifically, BlueCross underscored the language of 11 No. the Plan that states, "[t]he Plan's right to 2009AP1558 reduction, reimbursement and subrogation will not be reduced even if . . . the recovery costs." is not described BlueCross Therefore, as being argued related that to "the medical only facts required to trigger BlueCross's right to reimbursement are (1) that it paid for medical benefits and (2) benefits were used to invoke a settlement." contended that the Plan gives the Plan that the medical Finally, BlueCross administrator "sole discretion" to interpret the relevant terms of the Plan, and that the Plan administrator's interpretation of BlueCross's rights under the Plan was not arbitrary and capricious. ¶27 In his response, Steffens argued that the doctrine of judicial estoppel did not apply to this case because he had not taken inconsistent positions. In particular, he argued that he changed his position after he received the independent medical evaluation of Dr. Monacci and that his interrogatories were amended in accordance with Wisconsin's discovery statutes. ¶28 Steffens acknowledged in his response that the Plan trumps the Wisconsin make-whole doctrine. He argued, however, that BlueCross is entitled to reimbursement only if BlueCross can prove that the accident caused the surgery-necessitating injuries. ¶29 The circuit court ordered to reimburse BlueCross $64,751.40,13 plus attorney fees and costs. The court 13 Steffens Prior to the order, the parties debated whether the amount BlueCross paid for the accident-related injuries was $66,353.57 or $64.751.40. BlueCross agreed to the $64.751.40 figure for the sake of getting the matter resolved quickly. 12 No. 2009AP1558 concluded that, based on Steffens' previous assertions that the surgery-necessitating injuries arose from the accident, he was judicially estopped from now arguing that the injuries were the result of a degenerative condition. In its oral decision, the court opined: [T]o not find today that the ERISA plan is entitled to their payment from this plaintiff would be essentially the plaintiff perpetrating a fraud on the Court. This plaintiff said in answers sworn under oath that the medical bills that Blue Cross paid were related to his accident. He stated that in the accident I sustained a back injury that resulted in a lumbosacral fusion surgery. Under oath he stated, yes, I have made a claim for injuries arising out of the accident. According to the records of my attorneys, [BlueCross] made payments totalling $64,751.40. He said when asked about injuries received as a result of the accident, he said, on May 22, 2007, I had a lumbosacral fusion surgery; and he further said my medical expenses resulting from the accident total $130,712.19. I realize that he changed his letter his responses to his interrogatories after he made settlement in this case. And it's got to be noted that the total medical expense for which the settlement of $100,000 was paid is now over $2,000. It just bears no credibility to say that this did not have some relatedness, that is, the surgery had some relatedness to this settlement. There's no question about that. The fact that, of course, there was only $100,000 available That's a fact of this case and that's perhaps why the case was settled for that. Still we know that ERISA trumps everything. So in this case this party, [BlueCross], is entitled to their money back under all of the circumstances here. Not to do so I find that that Mr. Steffens is judicially estopped from taking a contrary position because he played it for all it was worth in the settlement of this case; and it's the same, you know, had no action even been started and he 13 No. 2009AP1558 settled for that amount. ERISA would still have a claim back, and it's clear here that we have the testimony of the very person himself linking it to those very expenses. ¶30 Steffens appealed. In an unpublished opinion, court of appeals reversed the circuit court's order. v. BlueCross BlueShield of Ill., No. slip op. (Wis. Ct. App. Aug. 3, 2010). 2009AP1558, the Steffens unpublished First, with regard to judicial estoppel, the court concluded that, while there was no question that Steffens took inconsistent positions, the third element of judicial estoppel had not been met because Steffens had "never convinced any court to adopt his position that the surgery was related to the accident." Id., ¶9. The court noted that no Wisconsin court has ever construed a position taken at settlement as satisfying the third element. ¶31 Id., ¶10. The court of appeals also held that BlueCross must prove that the surgery-necessitating injuries were related to the accident. Id., ¶¶11-15. The court acknowledged that it owed substantial deference to BlueCross's interpretation. ¶15. Id., Nonetheless, the court concluded that nothing in the Plan authorized reimbursement for benefits BlueCross paid that were not related to the accident. and remanded the Id. declaratory Therefore, the court reversed judgment to give BlueCross opportunity to prove that it is entitled to reimbursement. an Id., ¶16. ¶32 We granted review and appeals. 14 now reverse the court of No. II. A. ¶33 2009AP1558 DISCUSSION Standard of Review We review the court of appeals decision regarding the Plan administrator's interpretation of rights under BlueCross's ERISA plan documents. and obligations In turn, our review encompasses a review of the Plan administrator's interpretation and application of the Plan in regard to whether Steffens was required to surgery. reimburse BlueCross for the cost of his back Summers v. Touchpoint Health Plan, Inc., 2008 WI 45, ¶¶16-17, 309 Wis. 2d 78, 749 N.W.2d 182. ¶34 As discussed in-depth below, when an ERISA plan gives the plan administrator the discretion to interpret and apply the plan, we review the discretionary standard. administrator's decisions under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989); Summers, 309 Wis. 2d 78, ¶16. the discretionary a standard of review, we will not Under reverse a decision of a plan administrator unless the decision was not reasonable. Firestone, Foods, 993 Inc., F.2d 489 U.S. at 111; 1293, 1299 (7th Cutting Cir. v. 1993). Jerome A plan administrator's discretionary decision is not reasonable if it is "arbitrary and capricious." Firestone, 489 U.S. at 114-15; Summers, 309 Wis. 2d 78, ¶16. ¶35 However, administrator whether interpretive the plan discretion, at issue gives such that his the decision will be reviewed under a discretionary standard, requires us to construe the written plan documents to determine the authority of the plan administrator. Summers, 15 309 Wis. 2d 78, ¶16. No. 2009AP1558 Review of a plan administrator's decision is limited "to the record available to the decision was made." plan administrator at the time the Rekowski v. Metro. Life Ins. Co., 417 F. Supp. 2d 1040, 1047 (W.D. Wis. 2006) (citing Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 462 (7th Cir. 2001); Smart v. State Farm Ins. Co., 868 F.2d 929, 936 (7th Cir. 1989)); see also Brown v. Ret. Comm. of Briggs & Stratton Ret. Plan, 575 F. Supp. 1073, 1076 (E.D. Wis. 1983). "Deferential review is accorded to the plan administrator's interpretation of the plan's terms and its factual findings." Rekowski, 417 F. Supp. 2d at 1047 (citing Paramore v. Delta Air Lines, Inc., 129 F.3d 1446, 1450-51 (11th Cir. 1997)). B. ¶36 Foundational Principles BlueCross claims it is entitled to reimbursement for expenses paid for Steffens' back surgery under the Plan's right of subrogation. for another Subrogation is "[t]he substitution of one party whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor." Black's Law Dictionary 1563-64 (9th ed. 2009). ¶37 There are three basic types of subrogation: (1) contractual subrogation, Millers National Insurance Co. v. City of Milwaukee, 184 Wis. 2d 155, 167, 516 N.W.2d 376 (1994); (2) statutory subrogation, Ellsworth v. Schelbrock, 2000 WI 63, ¶19, 235 Wis. 2d 678, 611 N.W.2d 764; and (3) equitable subrogation, Berna-Mork v. Jones, 174 Wis. 2d 645, 652-53, 498 N.W.2d 221 (1993). We also note that it 16 has been opined that all No. subrogation "rights some degree. are governed by equitable 2009AP1558 principles" to Russell M. Ware, The Law of Damages in Wisconsin, § 32.6, p. 6 (5th ed. 2010). The ERISA case before us involves a species of contractual subrogation because BlueCross's right of subrogation arises under the Plan documents. ¶38 All parties agree that the Plan is governed by ERISA. ERISA was enacted, in part, to . . . assuring character plans and the their equitable financial set forth "minimum [employee of soundness." standards benefit] U.S.C. § 1001(a) 29 (2008).14 In other words, "Congress enacted ERISA to ensure that employees would they earned." had receive the [contractually Conkright v. Frommert, defined] benefits 556 __, U.S. 130 S. Ct. 1640, 1648 (2010); Firestone, 489 U.S. at 113. ¶39 ERISA applies to "any plan, fund, or program which was heretofore employer or is hereafter or by an employee providing participants § 1002(1). However, established organization" specified ERISA or does maintained for the benefits.15 not "require establish benefit plans in the first place." by an purpose of 29 U.S.C. employers to Conkright, 130 S. Ct. at 1648. 14 All references to the United States Code are to the 2008 version unless otherwise noted. 15 Those benefits include: "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services." 29 U.S.C. § 1002(1)(A). 17 No. ¶40 Therefore, ERISA strives to ensure the 2009AP1558 equitable enforcement of employees' rights under employee benefit plans while, at the same time, encouraging employers to create such plans. As the Supreme Court recently explained: ERISA represents a careful balancing between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans. Congress sought to create a system that is not so complex that administrative costs, or litigation expenses, unduly discourage employers from offering ERISA plans in the first place. ERISA induces employers to offer benefits by assuring a predictable set of liabilities, under uniform standards of primary conduct and a uniform regime of ultimate remedial orders and awards when a violation has occurred. Id. at omitted). 1649 (internal quotations, brackets and citations See also Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) (describing the competing congressional goals of ERISA as the "desire to offer employees enhanced protection for their benefits, on the one hand, and, on the other, its desire not to create a system that is so complex that administrative costs, or litigation expenses, unduly discourage employers from offering welfare benefit plans in the first place"). ¶41 ERISA commands that a plan "specify the basis on which payments are made to and from the plan," 29 U.S.C. § 1102(b)(4), and that the plan's fiduciary "discharge his duties with respect to a plan . . . in accordance with the documents and instruments governing the plan." ¶42 the plan 29 U.S.C. § 1104(a)(1)(D). Under all ERISA plans, a plan fiduciary, often termed administrator, determines eligible for requested benefits. 18 whether participants are Diaz v. Prudential Ins. Co. of No. Am., 424 F.3d 635, 637 (7th Cir. 2005). 2009AP1558 No provision of ERISA sets forth the appropriate standard a court should employ when reviewing a plan administrator's benefit determinations, Firestone, 489 U.S. at 108-09, or determinations regarding the enforcement of plan terms. Ronald J. Cooke, ERISA Practice and Procedure § 8:14, at 8-104 (2d ed. 2010) [hereinafter "Cooke, ERISA Practice"]. However, the Supreme Court did so in Firestone.16 ¶43 In Firestone, when presented the question of what standard courts should employ when reviewing an administrator's benefit determinations, the Court refused to adopt a uniform standard of review to be applied in all ERISA cases. Instead, the Court concluded that the language of the plan itself should govern the standard of review, thereby bargain for the applicable standard. allowing parties to In instances when a plan does not specify a standard, however, the Court held that courts should review the administrator's determination under a de novo standard. In particular, the Court held that "a denial of benefits challenged under [29 U.S.C.] § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary 16 discretionary authority to Pronouncements of the United States Supreme Court on federal law bind this court. State v. Webster, 114 Wis. 2d 418, 426 n.4, 338 N.W.2d 474 (1983). Moreover, we look to other applicable federal case law in reviewing actions of ERISA plan administrators. Evans v. W.E.A. Ins. Trust, 122 Wis. 2d 1, 14, 361 N.W.2d 630 (1985). See also Schultz v. NEPCO Emps. Mut. Benefit Ass'n, Inc., 190 Wis. 2d 742, 746 n.5, 528 N.W.2d 441 (Ct. App. 1994). 19 No. 2009AP1558 determine eligibility for benefits or to construe the terms of the plan."17 ¶44 Firestone, 489 U.S. at 115. Notably, Firestone explicitly limited its discussion and holding to actions challenging the denial of benefits under 29 U.S.C. § 1132(a)(1)(B).18 Id. at 108. However, we are not faced with an action brought by a plan participant challenging the denial of benefits under § 1132(a)(1)(B). an action brought by the Plan Rather, this is administrator under § 1132(a)(3)(B)19 to enforce the subrogation terms of the Plan. See Mank ex rel. Hannaford Health Plan v. Green, 297 F. Supp. 2d 297, 301 (D. Me. 2003). ¶45 The Seventh Circuit and Wisconsin courts apply the Firestone test when deciding the appropriate level of review of a plan administrator's interpretation and application of an 17 The Firestone standard of review applies even if the administrator is operating under a conflict of interest. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008). When considering the lawfulness of an administrator's determination, a reviewing court, however, should consider the conflict as one factor in the analysis. Id. at 117. 18 Pursuant to 29 U.S.C. § 1132(a)(1)(B): "A civil action may be brought (1) by a participant or beneficiary . . . (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 19 Pursuant to 29 U.S.C. § 1132(a)(3): "A civil action may be brought . . . (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 20 No. ERISA plan's subrogation clause. 2009AP1558 See Cutting, 993 F.2d at 1296; Schultz v. NEPCO Emps. Mut. Benefit Ass'n, Inc., 190 Wis. 2d 742, 747-48 & n.6, 528 N.W.2d 441 (Ct. App. 1994). ¶46 Under Firestone, determining the appropriate standard of review for the administrator's subrogation determination that is at issue Interpublic 2008). here is "a Severance Pay Firestone matter of Plan, 523 prescribes contract." F.3d that 819, "[b]y Williams 821 using (7th v. Cir. particular language, the plan's sponsors can require deferential review." As such, the Firestone test is consistent with contract Id. law. Under contract law, contracting parties are entitled to receive the benefits of their bargain. v. Cedarapids, (1998). Inc., 216 Wis. 2d Daanen & Janssen, Inc. 395, 404, 573 N.W.2d 842 "[T]he best indication of the parties' intent is the language of the contract itself." Town Bank v. City Real Estate Dev., LLC, 2010 WI 134, ¶33, 330 Wis. 2d 340, 793 N.W.2d 476. Therefore, when enforcing an unambiguous contract, the court looks to the contract terms, and it is those terms that are enforced. See Mackenzie v. Miller Brewing Co., 2001 WI 23, ¶28, 241 Wis. 2d 700, 623 N.W.2d 739. ¶47 Allowing parties to bargain for the amount of deference given to the plan administrator is also consistent with the policies underlying ERISA. As aforementioned, one of ERISA's primary goals is to encourage employers to offer benefit plans to their employees. order sought to to encourage create Conkright, 130 S. Ct. at 1649. employers a system to that 21 adopt is these plans, straightforward, In Congress thereby No. minimizing administrative and litigation expenses. U.S. at 497. 2009AP1558 Varity, 516 Affording employers the ability to bargain for a deferential standard gives them the ability to minimize these expenses. ¶48 A critical question when deciding whether an plan affords discretion to the administrator is notice. 424 F.3d at 637. ERISA Diaz, "[P]articipants must be able to tell from the plan's language whether the plan is one that reserves discretion for the administrator." the plan clear. granting the In other words, the language of Id. plan administrator discretion must be Cooke, ERISA Practice § 8:14, at 8-113. ¶49 There are no "magic words" required in order to afford the administrator discretion. Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000). However, a plan's provision stating that the plan administrator has the authority to make eligibility determinations is insufficient to put the participant on notice that the administrator's decisions will be reviewed under a discretionary standard. A plan's requirement that an Diaz, 424 F.3d at 637. applicant submit "satisfactory proof of entitlement" also is not sufficient notice. contrast, notice is sufficient when a plan gives Id. the By plan administrator the "sole discretion" to interpret the terms of the plan. Cutting, 993 F.2d at 1295-96. 22 In such a case, an No. 2009AP1558 administrator's decisions are reviewed under the discretionary arbitrary and capricious standard.20 ¶50 Id. When a plan gives the plan administrator discretion to interpret the terms of the plan, a reviewing court will not reverse the plan administrator's interpretation unless it is not reasonable. See Firestone, 489 U.S. at 111. A plan administrator's interpretation of the plan is not reasonable if the interpretation is "arbitrary and capricious in light of the language of the Plan." Evans v. W.E.A. Ins. Trust, 122 Wis. 2d 1, 14, 361 N.W.2d 630 (1985) (quoting Wardle v. Cent. States, Se. & Sw. Areas Pension Fund, 627 F.2d 820, 823-24 (7th Cir. 1980) (abrogated on other grounds by Firestone, 489 U.S. 101)); see also Summers, 309 Wis. 2d 78, ¶16. Both the plan administrator's interpretation of a plan's terms and the plan administrator's factual discretionary standard. findings are Rekowski, 417 reviewed F. Supp. under 2d this at 1047. Stated another way, a reviewing court will not reverse a plan administrator's decision unless it is "downright unreasonable." Ruiz v. Cont'l Cas. Co., 400 F.3d 986, 991 (7th Cir. 2005) (internal quotation marks omitted). 20 The Seventh Circuit has also suggested that employers use the following "safe harbor" language if they want to be sure their plan gives adequate notice that a discretionary standard will be applied: "'Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them.'" Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000) (internal quotation marks omitted). 23 No. ¶51 2009AP1558 Review of a plan administrator's decision is limited "to the record available to the plan administrator at the time the decision was made." Rekowski, 417 F. Supp. 2d at 1047 (citing numerous Seventh Circuit cases). See also Cooke, ERISA Practice § 8:14, at 8-121 (explaining that this limitation is the general rule). ¶52 Subrogation clauses in ERISA plans trump the Wisconsin make-whole ERISA, doctrine.21 "the make-whole Cutting, rule 993 F.2d at is just a 1298-99 (Under principle of interpretation, it can be overridden by clear language in the plan."); see also Ruckel v. Gassner, 2002 WI 67, ¶42 n.7, 253 Wis. 2d 280, 646 N.W.2d 11; Newport News Shipbuilding Co. v. T.H.E. Ins. Co., 187 Wis. 2d 364, 371-72, 523 N.W.2d 270 (Ct. App. 1994). This, too, is in line with the goal of ERISA to encourage employers to adopt benefit plans and the principle of contract law that parties are entitled to the benefits of their bargain. As one court has explained: [G]iven that an employer is free a health benefit plan in the unclear why, if the employer does it may not condition benefits on 21 to refuse to provide first place, it is provide such a plan, the agreement of the Wisconsin has adopted the make-whole doctrine. An injured party is not made whole until "there has been full compensation for all the damage elements of the entire cause of action." Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis. 2d 263, 275, 316 N.W.2d 348 (1982). The made-whole doctrine provides that "only where an injured party has received an award by judgment or otherwise which pays all of his elements of damages, including those for which he has already been indemnified by an insurer, is there any occasion for subrogation." Id. 24 No. 2009AP1558 members to reimburse the plan from payments received from other parties responsible for the injury. Having accepted benefits under a plan that expressly required reimbursement from money received from responsible third parties, regardless of the amount received, it does not seem inequitable that plaintiff fulfill her obligation under the plan. Forsling v. J.J. Keller & Assocs., Inc., 241 F. Supp. 2d 915, 920 (E.D. Wis. 2003). C. ¶53 Application We now apply the principles set forth above to the facts and circumstances of this case. the Plan unambiguously disavows the The subrogation clause in make-whole asserts BlueCross's right of first priority. doctrine and It states: The Plan's right to reduction, reimbursement and subrogation will not be reduced even if the recovery does not fully compensate you or your dependents, or you or your dependents were not made whole, for all losses sustained or alleged, or the recovery is not described as being related to medical costs. . . . Any so-called "make-whole" or "full-compensation" rule or doctrine is hereby explicitly rejected and disavowed. Under ERISA jurisprudence, this clear language asserting a right of first-priority trumps the make-whole doctrine. F.2d at 1298-99. Therefore, as Steffens Cutting, 993 has rightfully conceded, the make-whole doctrine has no application here. ¶54 The subrogation clause in the Plan unambiguously gives the Plan administrator discretion to make subrogation decisions. It states: "The Plan/Plan Administrator has sole discretion to interpret the terms of this provision in its entirety." When an ERISA plan states that the administrator has "sole discretion" to interpret the plan, the administrator's decision is reviewed 25 No. under the discretionary Summers, 309 Therefore, Wis. 2d under administrator's capricious. ¶55 apply to standard 78, the ¶16; Cutting, Plan, decision established we only if will it 993 in F.2d overturn was 2009AP1558 Firestone. at 1295-97. the arbitrary Plan and Summers, 309 Wis. 2d 78, ¶16. Having concluded that the make-whole doctrine does not Steffens' claim, and that the Plan administrator's determinations under the subrogation clause are reviewed under a discretionary standard, we move to the main issue presented: whether the Plan administrator's determination was arbitrary and capricious. The Plan administrator determined that the surgery expenses were "expenses incurred as the result of, or that arose out of, an accident" for which another party "may be liable," thereby entitling BlueCross to reimbursement.22 22 Steffens, erroneously, argues that BlueCross must prove causation, namely, that the accident caused the surgerynecessitating injuries. Steffens grounds this argument in the law of negligence under which causation is an element. However, the subrogation issue here arises under contract law, not tort law. See Herzberger, 205 F.3d at 330 ("An ERISA plan is a contract."). Therefore, we look to the terms of the contract, i.e., the terms of the Plan. Pursuant to the terms, the question is whether the administrator's determination that the surgery-necessitating injuries arose from the accident was arbitrary and capricious, not whether BlueCross must prove the accident caused the injuries. 26 No. ¶56 conclude Under that arbitrary and the the facts Plan and circumstances administrator's capricious. Under the 2009AP1558 presented, determination Plan, was BlueCross we not has a subrogation right for: any benefits payable under the Plan to you or your dependents [that] were for expenses incurred as the result of, or that arose out of, an accident or other situation such that other party or parties, may be liable for the payment of expenses and you subsequently obtain a settlement from or a judgment against such other party or parties. Therefore, BlueCross has a right to be reimbursed for the surgery expenses if the Plan administrator determined that the surgery expenses incurred as a result of or arose out of the 2005 accident determination for is not which Dishno arbitrary may and be liable, capricious. and Id., his ¶16. Stated otherwise, we determine whether the Plan administrator's interpretation of the terms of the Plan under the facts and An example provided by Steffens illustrates his error in grounding his argument in tort law. In an attempt to argue that BlueCross must prove causation, he contends: "For instance, if an insured injures his arm in a car accident and subsequently has an unrelated surgery on his toe, the insurer would be able to take money out of a settlement regarding the arm for bills the insurer paid on the toe surgery, if not required to prove causation." Under the law set out above, and assuming the plan in this example is identical to BlueCross's Plan, this example reaches an erroneous conclusion. Under the Plan, the insurer would not be capable of reimbursement from the settlement money unless the Plan administrator reasonably determined that the toe surgery arose from the car accident. Such a determination would be arbitrary and capricious since the example explicitly states that the two events were unrelated. 27 No. circumstances herein presented is reasonable. 2009AP1558 Firestone, 489 U.S. at 111. ¶57 Steffens' amended complaint alleged that he suffered injuries due to the negligence of Dishno and that those injuries caused him to incur "significant treatment of his injuries." expenses for the care and As evidenced by the counterclaim and cross-claim that BlueCross filed on March 17, 2008, the Plan administrator did determine that the surgery expenses were incurred as a result of or arose out of the accident and that Dishno may be liable for them. In the cross-claim, BlueCross asserted that it had paid $67,477.57 in medical bills "on behalf of John R. Steffens for treatment of injuries suffered in the accident of June 29, 2005." Moreover, attached to the cross- 28 No. 2009AP1558 claim was a "Medical Itemization Report" that listed the cost of the May 22, 2007 surgery.23 23 The dissent makes an issue of the lack of a formal and written decision by the Plan administrator. Dissent, ¶¶74-80. Because the record does not contain a written decision with an explanation for "how and why the plan administrator made the decision about subrogation," id., ¶74, the dissent argues that we cannot evaluate the reasonableness of the administrator's determination that the surgery-necessitating injuries arose out of the accident and that BlueCross is entitled to subrogation. Id., ¶¶74-80. While taking issue with the lack of such a decision in the record, the dissent acknowledges that formal, written decisions are not statutorily required when an administrator interprets a plan for the purpose of invoking the plan's subrogation rights. Id., ¶80 n.1. Nevertheless, the dissent summarily concludes that plan administrators should meet notice requirements similar to those set forth in 29 U.S.C. § 1133, which apply when an administrator denies a plan participant benefits. Id. Chapter 29 U.S.C. § 1133 requires the plan to "provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial." The facts of this case, however, highlight one potential reason Congress may have chosen to require notice requirements in benefits denial cases, and not in subrogation cases. Namely, it is probable that in many cases where subrogation becomes the issue, the insured and administrator agree that the injuries arose out of the accident, as occurred pre-settlement here. Requiring a formal, written decision in cases where all parties to the benefits contract agree would be inefficient. Moreover, unlike a benefits denial situation, when an administrator invokes a plan's subrogation rights, he is not automatically adverse to the participant. That is, the administrator is not denying the participant benefits under the plan, but rather has already provided benefits and is seeking payment from a third party. Consequently, while we agree with the dissent that in some instances a formal written decision would be ideal, that often will not be necessary when dealing with an administrator's invocation of a plan's right to subrogation. Therefore, contrary to the dissent's position, we review all of the relevant circumstances presented when evaluating the reasonableness of the administrator's interpretation. 29 No. ¶58 The decision surgery-related of expenses the Plan fell administrator within the Plan's 2009AP1558 that the right of subrogation is evaluated based on the information that the Plan administrator had when he made his decision. Supp. 2d at 1047. Rekowski, 417 F. Given the facts and circumstances of this case, we cannot say the Plan administrator's determination was arbitrary and capricious. Stated otherwise, the Plan administrator's decision was reasonable. ¶59 decision The is reasonableness supported by of the Steffens' own Plan administrator's statements prior to BlueCross's counterclaim and confirmed by statements and events occurring subsequent thereto. For example, in his complaint, Steffens averred that he was "severely and permanently" injured Here, the cross and counterclaims clearly demonstrate the administrator's interpretation, and Steffens' own statements support the reasonableness of the interpretation. The dissent attempts to argue that the cross and counterclaims are insufficient to show the administrator's interpretation. However, the case to which the dissent cites, Marolt v. Alliant Techsystems, Inc., 146 F.3d 617 (8th Cir. 1998), provides no support for the dissent's position because Marolt is a benefits denial case. In Marolt, the plan participant was denied benefits she was told she could obtain by "bridging" her break in service, and thereby increase her benefits because her benefits would be calculated based on her first start date with the employer, not the start date following her break in service. Consequently, pursuant to 29 U.S.C. § 1133, a written decision denying benefits was statutorily required. In quoting Marolt, the dissent leaves out this dispositive difference. Dissent, ¶82. The entire quote from Marolt, of which the dissent quotes only a portion, reads: "We will not permit ERISA claimants denied the timely and specific explanation to which the law entitles them to be sandbagged by after-the-fact plan interpretations devised for purposes of litigation." Marolt, 146 F.3d at 620 (emphasis added) (citing 29 U.S.C. § 1133). 30 No. in the accident. 2009AP1558 BlueCross then alleged in its cross-claim that it had paid $67,477.57 on behalf of Steffens for the treatment of injuries suffered in the accident, and listed the surgeryrelated expenses in the attached "Medical Itemization Report." Steffens did not deny BlueCross's allegation in his reply to BlueCross's counterclaim. ¶60 stated In his responses that the surgery-related accident. to interrogatories, expenses Steffens arose out also of the When asked to describe the extent of his injuries from the accident, Steffens began, "I sustained a back injury that resulted in lumbosacral fusion surgery." Under oath, he averred that the accident resulted in permanent injuries and that his back surgeon would testify to this permanency. He further asserted that he was entitled to $130,712.19 in total medical expenses from the accident, of which BlueCross had paid $64,751.50. Not only did Steffens assert the surgery- necessitating injuries arose from the accident, he asked the other parties to admit as much in his requests for admissions. ¶61 Furthermore, Steffens represented to the court the surgery-necessitating injuries arose from the accident. his May 2008 reiterated Steffens scheduling that he also listed was his conference seeking surgeon, the Dr. statement, cost of Johnson, his as that In Steffens surgery. an expert witness, further indicating that he planned to present evidence 31 No. 2009AP1558 at trial that the surgery-necessitating injuries arose out of the accident.24 ¶62 These pre-settlement sworn statements and assertions undeniably show that, according to Steffens, the surgery- necessitating injuries arose out of the June 2005 accident.25 As the circuit court observed, "it's clear here that we have the testimony of the very person himself linking [the accident] to those [surgery] expenses." If Steffens himself consistently averred that the surgery-necessitating injuries arose out of the accident, both before and after the Plan administrator determined that reimbursement was due, we do not see how the Plan administrator's determination can be arbitrary and capricious. ¶63 The $100,000 settlement with Dishno and AIG is additional evidence that it was not unreasonable for the Plan administrator to have concluded that the surgery-necessitating injuries arose from the accident. Had the surgery expenses not factored into the settlement, Steffens would not have received 24 As counsel for BlueCross pointed out at oral argument, there is no reason that Dr. Johnson, who performed the surgery, would be listed as a witness unless Steffens was going to link the accident to the surgery. 25 The dissent quotes this sentence in an attempt to imply that we are somehow substituting Steffens' pre-settlement sworn statements and assertions for the Plan administrator's decision. Dissent, ¶84. A complete reading of the text surrounding this sentence, however, makes clear that we conclude that Steffens' sworn statements and assertions support our conclusion that the administrator's decision was reasonable. As thoroughly explained above, our job is to evaluate the reasonableness of the administrator's decision. 32 No. 2009AP1558 $100,000 to cover only $2,441.50 in medical expenses arising from the accident. Stated otherwise, if Steffens' injuries did not encompass the need for surgery, AIG and Dishno would not have agreed to pay Steffens $97,588.50 for pain and suffering caused by occipital headaches and other discomfort suffered by Steffens in the six months following the accident. Based on these bears figures, the circuit found that "[i]t just no credibility to say that this did not have some relatedness, that is, the surgery had some relatedness to this settlement." ¶64 Following his January 2009 settlement with Dishno and AIG for $100,000 (the AIG policy limits), Steffens did an aboutface and claimed that the surgery did not arise out of the accident. Dr. Steffens contends he changed his position because of Monacci's independent evaluation. Dr. Monacci was the medical opinion witness that AIG had hired to defend against Steffens' claim. ¶65 Steffens became aware of Dr. Monacci's findings and conclusions on October 2, 2008. Steffens did not change his position with regard to the surgery expenses at that time. In his 2008 witness list, Steffens listed Dr. Johnson as a witness. It wasn't until February of 2009, a month after Steffens settled with AIG and Dishno, that he amended his interrogatory answers. Accordingly, the timeline of events seriously undermines Steffens' assertion about relying on Dr. Monacci, as the circuit court found that it did. ¶66 In sum, given Steffens' consistent averments prior to settlement that the surgery-necessitating injuries arose out of 33 No. the accident, we cannot say that the Plan 2009AP1558 administrator's determination that the surgery-necessitating injuries arose out of the accident was arbitrary and capricious. way, because Steffens himself averred both Stated another before and after BlueCross's counterclaim for reimbursement under the Plan that the surgery-necessitating injuries arose out of the accident, it is reasonable for the Plan administrator to have reached the same conclusion. ¶67 See Ruiz, 400 F.3d at 991. Because our above discussion is dispositive of the overriding question presented, whether BlueCross is entitled to reimbursement, we do not address the judicial estoppel argument See Gross v. Hoffman, 227 Wis. 296, 300, 277 presented to us. N.W. 663 (1938) (only dispositive issues need be addressed). Accordingly, we reverse the decision of the court of appeals. III. ¶68 We conclude CONCLUSION that the Plan administrator's determination that BlueCross is entitled to reimbursement was not arbitrary and capricious. The Plan states that BlueCross is entitled to reimbursement from the beneficiary of the Plan for "expenses incurred as the result of, or that arose out of, an accident" when a third party "may be liable" for the payment of those expenses and the beneficiary obtains a settlement from the third party. The Plan gives the Plan administrator discretion to interpret the clause. ¶69 Prior to settlement, Steffen consistently asserted that the surgery-necessitating injuries arose out of a June 2005 automobile accident. Consequently, it was not arbitrary and 34 No. 2009AP1558 capricious for the Plan administrator to interpret the Plan and conclude that BlueCross is entitled to reimbursement because the expenses that BlueCross paid arose from an accident for which a third party may be liable. ¶70 Our conclusion that the Plan administrator's determination that BlueCross is entitled to reimbursement is not arbitrary and capricious is dispositive of the case. We, therefore, do not reach the judicial estoppel issue. By the Court. The decision reversed. 35 of the court of appeals is No. ¶71 SHIRLEY S. ABRAHAMSON, majority opinion correctly apply it. C.J. states the 2009AP1558.ssa (dissenting). law but then The fails to I therefore dissent. ¶72 I with the differs reasoning agree from court that of of the appeals court (although of appeals) my that BlueCross BlueShield is not entitled to a judgment as a matter of law and that the cause should be remanded to the circuit court. ¶73 The applicable law is clear: When an ERISA plan expressly gives the plan administrator discretion to interpret the terms of reviewing court discretion Majority the under op., plan, will the review an ¶¶34, as Plan the "arbitrary 50, 54. at issue here administrator's and exercise capricious" Judicial review does, of a of standard. the plan administrator's decision is limited "to the record available to the plan administrator at the time the decision was made." Majority op., ¶¶35, 51. ¶74 plan I have carefully read the majority opinion to find the administrator's interpretation of and the I can't find them. administrator's exercise of discretion. the Plan The majority opinion assumes the plan administrator interpreted the Plan but does not tell us who the plan administrator is, when the administrator made a decision about subrogation, or how and why the plan administrator made the decision about subrogation. See, e.g., majority op., ¶¶55, 57. ¶75 I carefully searched the record discover who the plan administrator is. 1 to no avail to A complete copy of the No. Plan is not in the record. 2009AP1558.ssa The parties' briefs inform us that BlueCross BlueShield is a third-party administrator of the Plan, at least in regards to the payment of health benefits. ¶76 As third-party administrator of the health benefits of the Plan, BlueCross BlueShield was required to make the medical payments at issue regardless of whether the injuries were caused by an accident for which some other person is liable. The payment of medical expenses does not tell us who had discretion to interpret the Plan; the payment does not illuminate the interpretation and determination regarding subrogation. ¶77 The complaint. first mention of subrogation was in Steffens' The complaint alleged that BlueCross BlueShield is joined as a party because of possible subrogation rights and to comply with Wis. Stat. § 803.03. judgment against BlueCross The complaint further demanded BlueShield "foreclosing any claim they may have for subrogation or other right to reimbursement they may have." ¶78 The insurance company's pleading demanded subrogation, and an affidavit by the insurance company's counsel is in the record. The affidavit reveals nothing about the plan administrator or the plan administrator's decision. ¶79 questions: I searched the record to find the answers to many When did the plan administrator interpret the Plan? What was that interpretation? facts was decision based? What decision was made? On what And what was the plan administrator's reasoning in reaching the decision? record to any of these questions. 2 I can't find answers in the No. ¶80 record.1 record. 2009AP1558.ssa No copy of the plan administrator's decision is in the No affidavit of the plan administrator is in the Nevertheless, the majority opinion declares that it is evaluating the plan administrator's decision on the basis of the information the administrator had when it made its decision. ¶81 A court cannot evaluate an interpretation and decision of a plan administrator and determine whether that decision is arbitrary and capricious without knowing what the interpretation and decision is, and on what it is based.2 ¶82 It counterclaim seems and that the cross-claim majority of is BlueCross relying on the BlueShield in the present litigation as the plan administrator's determination and interpretation of the Plan language. See majority op., ¶57. BlueCross BlueShield does not allege in its pleadings that it is the plan administrator. interpretation of the Plan. The allegations do not include an Is the majority allowing a claimant 1 I acknowledge that plan claimants are statutorily entitled to a timely and specific explanation of a claim denial and that a similar statutory requirement is not specifically provided for a plan administrator to interpret the plan language and invoke the subrogation rights of the Plan. I conclude, however, that the underlying arguments are as pertinent to the present situation as they are in the benefits claim situation. In both instances, a timely and specific explanation allows the plan beneficiary to respond to the plan administrator's interpretation and allows a court to do its review. 2 In the review of a denial of benefits claim, a court is free to "ignore ERISA plan interpretations that did not actually furnish the basis for a plan administrator's benefits decision." Marolt v. Alliant Techsystems, Inc., 146 F.3d 617, 620 (8th Cir. 1998). 3 No. 2009AP1558.ssa to "be sandbagged by after-the-fact plan interpretations devised for purposes of litigation[?]"3 ¶83 In that counterclaim, BlueCross BlueShield alleges: Pursuant to the terms of the plan in question as reflected in the reimbursement provision, plaintiff John R. Steffens, is obligated to reimburse [BlueCross BlueShield] in an amount equal to the amounts paid by [it], out of any recovery by the plaintiff in this action, whether by settlement, judgment or otherwise. ¶84 This asserting in subsequent allegation the costs was litigation of the made that back negligence of the tortfeasor. when the the back surgery) plaintiff injury was was (and the by the caused BlueCross BlueShield's allegation seems to rely on that assertion. The majority also seems to rely on the plaintiff's original assertion that the back injury was caused by determination. the accident to support Majority op., ¶59. its reasonableness According to the majority opinion, the plaintiff's original pleadings and assertions in the early stages of this litigation present compelling facts that seem to "undeniably show that, according to Steffens, the surgery-necessitating injuries accident." op., Majority arose ¶62. out Steffens of is the not June 2005 the plan administrator. ¶85 Even if the plan administrator's "decision" relied solely upon the plaintiff's allegations, then when the plaintiff no longer was asserting that the back injury arose out of the negligent acts of the tortfeasor, did the plan administrator 3 Marolt v. Alliant Techsystems, Inc., 146 F.3d 617, 620 (8th Cir. 1998). 4 No. update its determination? 2009AP1558.ssa Perhaps the majority is relying on BlueCross BlueShield's motion for declaratory judgment as the plan administrator's decision subsequent to the plaintiff's changed assertions regarding the cause of the lower back injury that necessitated the surgery. its updated determination? If so, what was the basis for The majority doesn't say and neither the scouring the record doesn't produce an answer. ¶86 On the record in the present case, majority nor I can review the plan administrator's decision to determine whether it is arbitrary and capricious, and we cannot limit our review "to the record available to administrator at the time the decision was made." the plan Majority op., ¶¶35, 51. ¶87 I dissent because nothing in the record articulates the plan administrator's interpretation or application of the Plan's subrogation language. There is no analysis or reasoning of the plan administrator to which the court may defer under the arbitrary and capricious standard. ¶88 Accordingly, I would remand the matter to the circuit court for the determination of what (if any) interpretation and determination when, and why. the plan administrator (whoever that is) made, If the plan administrator did not interpret the Plan or make a determination, then the circuit court must, as a 5 No. 2009AP1558.ssa matter of law, interpret and apply the Plan language as it would any other contract.4 ¶89 For the reasons set forth, I dissent. ¶90 I am authorized to state that Justice ANN WALSH BRADLEY joins this opinion. 4 "Where a trustee fails to act or to exercise his or her discretion, de novo review is appropriate because the trustee has forfeited the privilege to apply his or her discretion; it is the trustee's analysis, not his or her right to use discretion or a mere arbitrary denial, to which a court should defer." Gritzer v. CBS, Inc., 275 F.3d 291, 296 (3rd Cir. 2002). 6 No. 1 2009AP1558.ssa
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