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Kobold v. The Aetna Life Insurance Company

Court of Appeals of Arizona, First Division, Department A

September 5, 2013

MATTHEW KOBOLD, a single man, Plaintiff/Counterdefendant/ Appellee,
v.
THE AETNA LIFE INSURANCE COMPANY, a foreign insurer, Third-Party Defendant/ Appellant.

Appeal from the Superior Court in Maricopa County Cause No. CV2008-023699 The Honorable John A. Buttrick, Retired Judge

Neal S. Sundeen and Knapp & Roberts, P.C. by David L. Abney Co-counsel for Plaintiff/Counterdefendant/Appellee

Brownstein Hyatt Farber Schreck, LLP by John C. West Attorneys for Third-party Defendant/Appellant

OPINION

PETER B. SWANN, Judge

¶1 Arizona law generally forbids subrogation in personal injury cases. This case presents the question whether 5 U.S.C. § 8902(m)(1) of the Federal Employee Health Benefits Act ("FEHBA") preempts that Arizona law. We answer the question in the negative, and hold that Arizona law barring subrogation governs this dispute between an injured insured and his FEHBA insurer.

FACTS AND PROCEDURAL HISTORY

¶2 In October 2006, Kobold, a federal employee, was injured in a motorcycle accident. At the time of the accident, Kobold was entitled to health care benefits under an insurance plan ("Plan") governed by the FEHBA. The carrier for the Plan, Aetna, paid Kobold's medical providers $24, 473.53 for his treatment related to the accident.

¶3 Kobold brought a negligence action against the parties allegedly responsible for the accident, and eventually settled the case for $145, 000. Under the terms of the Plan, Aetna had a right to subrogation and a right to reimbursement in the event that Kobold recovered from a responsible third party.[1] Aetna asserted a lien on the settlement proceeds for the medical expenses it had paid, and Kobold disputed Aetna's entitlement to reimbursement. The alleged tortfeasors paid $120, 526.40 of the settlement sum to Kobold, deposited the remaining $24, 473.53 with the superior court, and filed an interpleader action against Kobold and Aetna.

¶4 In the interpleader action, Kobold and Aetna filed cross-motions for summary judgment in which they disputed the preemptive effect of 5 U.S.C. § 8902(m)(1), which provides that certain types of FEHBA contract terms preempt state laws. Concluding that the United States Supreme Court had "spoken on this very issue" in Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006), the superior court found no preemption, granted summary judgment in favor of Kobold, and awarded him attorney's fees and costs. Aetna timely appeals. We have jurisdiction under A.R.S. § 12-2101(A)(1).

DISCUSSION

¶5 The single issue presented by this appeal is whether the Plan's subrogation and reimbursement provision falls within the scope of 5 U.S.C. § 8902's preemption clause, which provides that FEHBA contract terms that

relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

5 U.S.C. § 8902(m)(1).[2]

¶6 If the Plan's subrogation and reimbursement provision falls within the statute's preemption clause, then the provision governs and Aetna is entitled to reimbursement. But if the Plan's provision does not fall within the preemption clause, then Arizona law applies and makes the provision void. E.g., Allstate Ins. Co. v. Druke, 118 Ariz. 301, 304, 576 P.2d 489, 492 (1978) (explaining that anti-subrogation rule protects insureds whose medical coverage may not indemnify them for all aspects of ...


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