Statute of Limitations Bars Health Plan's Subrogation Claim

>The U.S. Court of Appeals for the Eighth Circuit determined the clock started ticking on the statute of limitations when the participant’s estate informed the plan it would pay only $10,000 of $49,000 owed to the plan under its subrogation debt in January of 1997.   Thus, when the plan filed suit in March of 2002, the appeals court found under an Arkansas law that sets a five year window to file breach of written-contract actions, the suit came too late, according to Washington-based legal publisher BNA.

Further, the 2-1 majority found the plan’s action to also be time-barred under Arkansas’s three-year statute of limitations for breach of oral contract actions.

Wrongful Death

>Participant Patrick Hollander was struck by two cars and later died from his injuries in April of 1996.   Wal-Mart Stores Inc’s employee health plan, a plan in which Hollander participated, paid roughly $49,000 to cover his medical expenses.

>Two separate wrongful death suit were brought against the drivers of the two cars that struck Hollander by his mother, Evelyn Soles.   In January 1997, the automobile insurer for one of the drivers offered to pay Hollander’s estate $100,000 to settle the estate’s wrongful death action.

>Hollander’s estate accepted the settlement offer and notified the plan that it would pay $10,000 in satisfaction of the plan’s subrogation rights.  The plan agreed to accept the $10,000 but notified Hollander’s estate that the remainder of its subrogation interest would be taken from future settlements obtained by the estate.

>The estate reached a $1.5 million settlement with the driver of the second car that had struck and killed Hollander in May 2000.   Wal-Mart’s health plan was notified of the settlement by the estate and at the same time Hollander’s estate refused to pay the plan the outstanding $39,000 subrogation claim.

>Wal-Mart’s health plan filed suit against the estate in March 2002 under ERISA, which the U.S. District Court for the Western District of Arkansas dismissed in accordance with the Arkansas statute of limitations.   The appeals court affirmed this decision, finding the plan’s claim accrued in January 1997 when Hollander’s estate paid the plan $10,000 in partial satisfaction of the plan’s subrogation interest. Thus, the appellate court rejected the plan’s contention that the statute of limitations did not begin to run until May 2000, when the plan first became aware of the estate’s settlement in its second wrongful death action.

Dissenting Opinion

>However, in a dissenting opinion, Judge C. Arlen Beam disagreed with the conclusion that the plan’s acceptance of the $10,000 in January 1997 triggered the running of the statute of limitations, saying the plan “performed a good deed by agreeing to accept partial payment of a subrogation claim from a portion of the monies derived through a modest settlement with one of several potential tortfeasors.”   Arriving at this conclusion, Beam emphasized that two separate settlements occurred in the case, a modest settlement at first and a much greater settlement that provided funds to fully satisfy the plan’s subrogation interest. The estate’s refusal to pay the plan’s claim after the second settlement gave the plan a cause of action commencing in May 2000, Beam said.

The case is Administrative Committee of the Wal-Mart Stores Inc. Associates’ Health and Welfare Plan v. Soles, 8th Cir., No. 02-3803, 7/21/03.