Rob Hoskins
10-31-2011, 11:16 AM
In Stewart v. Atwood, et. al., the federal court is forced to decide whether it has jurisdiction. At the heart of the case is a personal injury suit for injuries that took place on a boat in Lake Erie. The ERISA health insurer, HealthNow, paid in excess of $12,000.00 in medical bills for the injured party. The health insurance policy had a “rider for subrogation rights” that provided:
The insurance policy contains a “Rider for Subrogation Rights” (“Subrogation Rider”) providing, as relevant, that in the event the insured in injured in an accident for which another party is responsible, and HealthNow has paid health insurance benefits as a result of that injury, HealthNow “will be subrogated and succeed to the right of recovery against the party responsible” for the injury to the extent of health insurance benefits paid by HealthNow. Subrogation Rider ¶ 1. The Subrogation Rider further provides HealthNow is entitled to be reimbursed for any health insurance benefits paid by HealthNow, from any settlement or judgment funds received by the insured from the party responsible for the insured’s injuries, provided the settlement or judgment received “specifically identifies or allocates monetary sums directly attributable to expenses for which we have paid benefits.” Id.
In the attached opinion, the court is deciding whether the federal court has jurisdiction and the court concludes that it does not. However, the court also is deciding the health insurer’s motion to intervene to try and collect on its subrogation rights. The court holds that the motion to intervene is based upon a cause of action for which the statute of limitations has already run and, therefore, the motion to intervene is denied.
“‘Subrogation is the right one party has against a third party following payment, in whole or in part, of a legal obligation that ought to have been met by the third party.’” Allstate Insurance Co. v. Mazzola, 175 F.3d 255, 258 (2d Cir. 1999) (quoting 2 Allan D. Windt, Insurance Claims and Disputes § 10.05 (1995)). “The doctrine of equitable subrogation allows insurers to ‘stand in the shoes’ of their insured to seek indemnification by pursuing any claims that the insured may have had against third parties legally responsible for the loss.” Id. (citing Winkelmann v. Excelsior Insurance Co., 650 N.E.2d 841, 843 (N.Y. 1995); and 16 George J. Couch et al., Couch on Insurance 2d § 61:1 (2d rev. ed. 1983 & Supp. 1988)). “In short, one party known as the subrogee is substituted for and succeeds to the rights of another party, known as the sugrogor.” Id. Based upon principles of equity, the doctrine of subrogation “has a dual objective as stated by New York courts:
It seeks, first, to prevent the insured from recovering twice for one harm, as it might if it could recover from both insurer and from a third person who caused the harm, and second, to require the party who has caused the damage to reimburse the insurer for the payment the insurer has made.
Id. (quoting Winkelmann, 650 N.E.2d at 843 (citations omitted)).
It is so well settled as not to require discussion that an insurer who pays claims against the insured for damages caused by the default or wrongdoing of a third party is entitled to be subrogated to the rights which the insured would have had against such third party for its default or wrongdoing . . . [and] to enforce these rights by an action in its own name without joining the insured as a party. This right of subrogation is based upon principles of equity and natural justice. We recognize at once the fairness of the proposition that an insurer who has been compelled by his contract to pay to or in behalf of the insured claims for damages ought to be reimbursed by the party whose fault has caused such damages. . . .”
Allstate Insurance Company v. Stein, 807 N.E.2d 268, 272 (N.Y. 2004) (quoting Ocean Accident & Guarantee Corporation v. Hooker Electro-Chemical Co., 147 N.E. 351, 353 (N.Y. 1925)).
Because timeliness is required for both mandatory and permissive intervention, a determination that the application to intervene is untimely dispenses with the need to address the remaining three requirements. Associated Builders and Contractors, Inc. v. Herman, 166 F.3d 1248, 1257 (D.C.Cir. 1999) (“If the motion was not timely, there is no need for the court to address the other factors that enter into an intervention analysis.”). Here, the subrogation claim HealthNow seeks to assert by intervention is governed by the same three-year statute of limitations applicable to the personal injury action Plaintiff commenced in state court against Defendants. See Stein, 807 N.E. at 271 & n. 1 (citing N.Y. C.P.L.R. 214(5) (imposing three-year statute of limitations for most personal injury accidents, and observing a subrogation claim based on a personal injury accident is subject to the same statute of limitations applicable to a claim based on the incident giving rise to the subrogation claim). In other words, the statute of limitations in a subrogation action by an insurance company, as subrogee of an insured to whom the insurer had paid health insurance benefits for injuries sustained in an accident, runs from the date of the accident rather than from the date the benefits were first paid. Stein, 807 N.E.2d at 272. Moreover, “‘[a] motion to intervene filed after the statute of limitations had run for the movant would not be timely.’” New Jersey Carpenters Health Fund v. DLJ Mortgage Capital, Inc., 2010 WL 6508190, at * 1 (S.D.N.Y. Dec. 15, 2010) (quoting Ceribelli v. Elghanayan, 1994 WL 529853, at *3 (S.D.N.Y. Sept. 28, 1994)).
In the instant case, the accident for which Plaintiff sues occurred on September 22, 2007. Accordingly, the three-year period for the subrogation claim for which HealthNow seeks to intervene to assert also accrued on September 22, 2007, and the three year limitations period applicable to such claim expired on September 22, 2010, more than six months before HealthNow filed its motion to intervene on April 14, 2011. As such, the motion to intervene is not timely under either Rule 24(a) (intervention as of right), or 24(b) (permissive intervention). Moreover, permitting intervention where, as here, the statute of limitations on the subrogation claim would prevent it from being filed as a separate action would be to allow the time-barred claim in through the ‘back door.’ See United States v. California, 507 U.S. 746, 758-59 (1993) (although United States had subrogation right to contractor’s claims against the state, the federal government was not subrogated to a right free of a preexisting infirmity, i.e., the passage of the applicable statute of limitations which had run almost six years prior to filing subrogation action).
Furthermore, insofar as the Subrogation Rider provides that HealthNow is entitled to be reimbursed by Plaintiff, as the insured, for any benefits HealthNow paid for treatment of Plaintiff’s injuries, from any funds in settlement or judgment Plaintiff receives from the party responsible for her injuries, Subrogation Rider ¶ 1, such claim would be in equity for constructive trust and would not yet be time-barred. “‘A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.’” Dolmetta v. Uintah National Corporation, 712 F.2d 15, 18 (2d Cir. 1983) (quoting Beatty v. Gugenheim Exploration Co., 122 N.E.2d 378 (N.Y. 1919)). “Since a cause of action for a constructive trust is one ‘for which no limitation is specifically prescribed by law,’ it is governed by New York’s six-year statute of limitations.” Dolmetta, 712 F.2d at 18 (quoting N.Y C.P.L.R. § 213[1] (McKinney 1972)). Further, the accrual of a claim for constructive trust “runs from the occurrence of the wrongful act or event which creates a duty of restitution.’” Id. (citing Scheuer v. Scheuer, 126 N.E.2d 555 (N.Y. 1955)). Because HealthNow’s construction trust claim based on restitution must be sought from Plaintiff, HealthNow would have to assert a claim for constructive trust against any funds that come into Plaintiff’s possession as a result of Plaintiff’s personal injury action against Defendants. See Great-West Life & Annuity Insurance Company v. Knudson, 534 U.S. 204, 213 (2002) (recognizing an equitable restitution claim seeks to impose a constructive trust or equitable lien on “particular funds or property in the defendant’s possession.” (citations omitted)); Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 103 (2d Cir. 2005) (affirming district court’s dismissal of plaintiffs’ claim seeking to impose constructive trust on funds, health care insurance premiums paid by plaintiffs to defendant insurance company, which plaintiffs maintained were in defendant’s possession only because defendant had wrongly denied to pay plaintiffs’ insurance claims, because plaintiffs failed to establish such funds could clearly be traced back to any particular funds in the defendant’s possession).
In the instant case, HealthNow could not assert a cause of action for constructive trust against Plaintiff until and unless Plaintiff receives money damages from either Defendant through settlement, such as with Bistis, or as the result of a trial in Plaintiff’s favor against Atwater, and then fails to reimburse HealthNow for the health insurance benefits HealthNow has paid for treatment of Plaintiff’s injuries in accordance with the insurance policy. See Dolmetta, 712 F.2d at 18 (cause of action for imposition of constructive trust runs from occurrence of event or wrongful act creating duty of restitution). Even if Plaintiff has already received a monetary sum from Bistis in settlement of Plaintiff’s claims against Bistis, as anticipated in accordance with the Stipulation of Discontinuance, given that less than six years have elapsed since the Stipulation of Discontinuance was filed, HealthNow could yet pursue an action against Plaintiff in state court10 to impose a constructive trust on such funds.
HealthNow’s motion to intervene is, therefore, DENIED.
A copy of the decision is attached.
The insurance policy contains a “Rider for Subrogation Rights” (“Subrogation Rider”) providing, as relevant, that in the event the insured in injured in an accident for which another party is responsible, and HealthNow has paid health insurance benefits as a result of that injury, HealthNow “will be subrogated and succeed to the right of recovery against the party responsible” for the injury to the extent of health insurance benefits paid by HealthNow. Subrogation Rider ¶ 1. The Subrogation Rider further provides HealthNow is entitled to be reimbursed for any health insurance benefits paid by HealthNow, from any settlement or judgment funds received by the insured from the party responsible for the insured’s injuries, provided the settlement or judgment received “specifically identifies or allocates monetary sums directly attributable to expenses for which we have paid benefits.” Id.
In the attached opinion, the court is deciding whether the federal court has jurisdiction and the court concludes that it does not. However, the court also is deciding the health insurer’s motion to intervene to try and collect on its subrogation rights. The court holds that the motion to intervene is based upon a cause of action for which the statute of limitations has already run and, therefore, the motion to intervene is denied.
“‘Subrogation is the right one party has against a third party following payment, in whole or in part, of a legal obligation that ought to have been met by the third party.’” Allstate Insurance Co. v. Mazzola, 175 F.3d 255, 258 (2d Cir. 1999) (quoting 2 Allan D. Windt, Insurance Claims and Disputes § 10.05 (1995)). “The doctrine of equitable subrogation allows insurers to ‘stand in the shoes’ of their insured to seek indemnification by pursuing any claims that the insured may have had against third parties legally responsible for the loss.” Id. (citing Winkelmann v. Excelsior Insurance Co., 650 N.E.2d 841, 843 (N.Y. 1995); and 16 George J. Couch et al., Couch on Insurance 2d § 61:1 (2d rev. ed. 1983 & Supp. 1988)). “In short, one party known as the subrogee is substituted for and succeeds to the rights of another party, known as the sugrogor.” Id. Based upon principles of equity, the doctrine of subrogation “has a dual objective as stated by New York courts:
It seeks, first, to prevent the insured from recovering twice for one harm, as it might if it could recover from both insurer and from a third person who caused the harm, and second, to require the party who has caused the damage to reimburse the insurer for the payment the insurer has made.
Id. (quoting Winkelmann, 650 N.E.2d at 843 (citations omitted)).
It is so well settled as not to require discussion that an insurer who pays claims against the insured for damages caused by the default or wrongdoing of a third party is entitled to be subrogated to the rights which the insured would have had against such third party for its default or wrongdoing . . . [and] to enforce these rights by an action in its own name without joining the insured as a party. This right of subrogation is based upon principles of equity and natural justice. We recognize at once the fairness of the proposition that an insurer who has been compelled by his contract to pay to or in behalf of the insured claims for damages ought to be reimbursed by the party whose fault has caused such damages. . . .”
Allstate Insurance Company v. Stein, 807 N.E.2d 268, 272 (N.Y. 2004) (quoting Ocean Accident & Guarantee Corporation v. Hooker Electro-Chemical Co., 147 N.E. 351, 353 (N.Y. 1925)).
Because timeliness is required for both mandatory and permissive intervention, a determination that the application to intervene is untimely dispenses with the need to address the remaining three requirements. Associated Builders and Contractors, Inc. v. Herman, 166 F.3d 1248, 1257 (D.C.Cir. 1999) (“If the motion was not timely, there is no need for the court to address the other factors that enter into an intervention analysis.”). Here, the subrogation claim HealthNow seeks to assert by intervention is governed by the same three-year statute of limitations applicable to the personal injury action Plaintiff commenced in state court against Defendants. See Stein, 807 N.E. at 271 & n. 1 (citing N.Y. C.P.L.R. 214(5) (imposing three-year statute of limitations for most personal injury accidents, and observing a subrogation claim based on a personal injury accident is subject to the same statute of limitations applicable to a claim based on the incident giving rise to the subrogation claim). In other words, the statute of limitations in a subrogation action by an insurance company, as subrogee of an insured to whom the insurer had paid health insurance benefits for injuries sustained in an accident, runs from the date of the accident rather than from the date the benefits were first paid. Stein, 807 N.E.2d at 272. Moreover, “‘[a] motion to intervene filed after the statute of limitations had run for the movant would not be timely.’” New Jersey Carpenters Health Fund v. DLJ Mortgage Capital, Inc., 2010 WL 6508190, at * 1 (S.D.N.Y. Dec. 15, 2010) (quoting Ceribelli v. Elghanayan, 1994 WL 529853, at *3 (S.D.N.Y. Sept. 28, 1994)).
In the instant case, the accident for which Plaintiff sues occurred on September 22, 2007. Accordingly, the three-year period for the subrogation claim for which HealthNow seeks to intervene to assert also accrued on September 22, 2007, and the three year limitations period applicable to such claim expired on September 22, 2010, more than six months before HealthNow filed its motion to intervene on April 14, 2011. As such, the motion to intervene is not timely under either Rule 24(a) (intervention as of right), or 24(b) (permissive intervention). Moreover, permitting intervention where, as here, the statute of limitations on the subrogation claim would prevent it from being filed as a separate action would be to allow the time-barred claim in through the ‘back door.’ See United States v. California, 507 U.S. 746, 758-59 (1993) (although United States had subrogation right to contractor’s claims against the state, the federal government was not subrogated to a right free of a preexisting infirmity, i.e., the passage of the applicable statute of limitations which had run almost six years prior to filing subrogation action).
Furthermore, insofar as the Subrogation Rider provides that HealthNow is entitled to be reimbursed by Plaintiff, as the insured, for any benefits HealthNow paid for treatment of Plaintiff’s injuries, from any funds in settlement or judgment Plaintiff receives from the party responsible for her injuries, Subrogation Rider ¶ 1, such claim would be in equity for constructive trust and would not yet be time-barred. “‘A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.’” Dolmetta v. Uintah National Corporation, 712 F.2d 15, 18 (2d Cir. 1983) (quoting Beatty v. Gugenheim Exploration Co., 122 N.E.2d 378 (N.Y. 1919)). “Since a cause of action for a constructive trust is one ‘for which no limitation is specifically prescribed by law,’ it is governed by New York’s six-year statute of limitations.” Dolmetta, 712 F.2d at 18 (quoting N.Y C.P.L.R. § 213[1] (McKinney 1972)). Further, the accrual of a claim for constructive trust “runs from the occurrence of the wrongful act or event which creates a duty of restitution.’” Id. (citing Scheuer v. Scheuer, 126 N.E.2d 555 (N.Y. 1955)). Because HealthNow’s construction trust claim based on restitution must be sought from Plaintiff, HealthNow would have to assert a claim for constructive trust against any funds that come into Plaintiff’s possession as a result of Plaintiff’s personal injury action against Defendants. See Great-West Life & Annuity Insurance Company v. Knudson, 534 U.S. 204, 213 (2002) (recognizing an equitable restitution claim seeks to impose a constructive trust or equitable lien on “particular funds or property in the defendant’s possession.” (citations omitted)); Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 103 (2d Cir. 2005) (affirming district court’s dismissal of plaintiffs’ claim seeking to impose constructive trust on funds, health care insurance premiums paid by plaintiffs to defendant insurance company, which plaintiffs maintained were in defendant’s possession only because defendant had wrongly denied to pay plaintiffs’ insurance claims, because plaintiffs failed to establish such funds could clearly be traced back to any particular funds in the defendant’s possession).
In the instant case, HealthNow could not assert a cause of action for constructive trust against Plaintiff until and unless Plaintiff receives money damages from either Defendant through settlement, such as with Bistis, or as the result of a trial in Plaintiff’s favor against Atwater, and then fails to reimburse HealthNow for the health insurance benefits HealthNow has paid for treatment of Plaintiff’s injuries in accordance with the insurance policy. See Dolmetta, 712 F.2d at 18 (cause of action for imposition of constructive trust runs from occurrence of event or wrongful act creating duty of restitution). Even if Plaintiff has already received a monetary sum from Bistis in settlement of Plaintiff’s claims against Bistis, as anticipated in accordance with the Stipulation of Discontinuance, given that less than six years have elapsed since the Stipulation of Discontinuance was filed, HealthNow could yet pursue an action against Plaintiff in state court10 to impose a constructive trust on such funds.
HealthNow’s motion to intervene is, therefore, DENIED.
A copy of the decision is attached.