Judge Transfers Medical Claims Subrogation Case

October 14, 2003 (PLANSPONSOR.com) - A health plan's subrogation case has been transferred to the US District Court for the Eastern District of Illinois.

>Relying on five factors to consider when transferring such a case, US District Judge Elaine Bucklo of the US District Court for the Northern District of Illinois determined travel by the employee’s wife, which the subrogation case named as a defendant, would be inconvenient.   Thus, even though sufficient contacts were present for the defendant to have the case held in Illinois federal court, Missouri federal court would be the best forum, Bucklo ruled.  

>Additionally, Bucklo ruled the automobile insurance company named as a defendant in the case could not be sued under the Employee Retirement Income Security Act (ERISA). “If a covered individual violates a subrogation agreement by accepting a settlement from an insurer, the aggrieved employer’s remedy is to pursue the covered individual for breach of contract; neither ERISA nor the subrogation agreement provide any remedy against the insurer,” the court said.   Thus, the federal court dismissed the claims against the company.

Case History

>Lapham-Hickey Steel Corp employee and St. Louis, Missouri resident Sylvan Boxdorfer was involved in an auto accident in September 2001 that rendered him quadriplegic.   Boxdorfer received $776,256 to cover his medical expenses per the terms of Lapham’s health plan.

>In October 2001, Gina Boxdorfer, acting on behalf of her incapacitated husband, signed a subrogation agreement to repay Lapham for medical expenses if a personal injury settlement was obtained.   Early in 2002, a $2.5-million settlement was reached with the insurance company that covered the other driver involved in the accident, Federal Insurance Co.    Gina Boxdorfer was awarded $1.5 million that was placed in a special needs trust.  

>Lapham then filed suit against Gina Boxdorfer and A.G. Edwards Trust Co., the co-trustees of the trust, after learning of the settlement.   Gina Boxdorfer’s attorneys filed a motion to dismiss the lawsuit, or alternatively, to have the case transferred.

The case is Lapham-Hickey Steel Corp. v. A.G. Edwards Trust Co. FSB, Northern District of Illinois, Number 03 C 3282.