:: Assertion of Subrogation Rights Does Not Constitute Tortious Interference With Settlement
In McCord v. Healthcare Recoveries, Inc., — So.2d —-, 2007 WL 1366266 (Miss.) (May 10, 2007), the plaintiff alleged tortious interference with the settlement of a minor’s personal injury claim. Injured in an ATV accident, Courtney McCord, a minor, ultimately received an offer of settlement with a landowner on whose property she was injured.
Courtney was covered as a dependent under a health insurance policy issued by Travelers. Travelers engaged Health Care Recoveries to identify and monitor subrogation reimbursement opportunities.
The Tort Claim
The tortious interference claim arose out of a misrepresentation, albeit subsequently withdrawn (and apparently a mistake), that the policy contained a subrogation provision.
. . . on December 6, 1996, a representative from HRI faxed Courtney’s lawyer a purported copy of a page from the applicable insurance policy documenting the fact that HRI was entitled to subrogation as to the medical expenses of $26,222.79; however, as it turned out, the faxed page was not a part of the applicable policy or plan which had paid Courtney’s medical expenses. In fact, in due course, HRI admitted that, at the time of the accident, it did not hold a medical insurance policy containing an express reservation of subrogation rights on Courtney’s medical expenses.
Nonetheless, HRI asserted subrogation rights based upon equitable subrogation. Courtney’s attorney relied upon Cooper Tire & Rubber Co. v. Striplin, 652 So.2d 1102, 1104 (Miss.1995) (parents could not effectively assign subrogation rights to proceeds to which only their minor child was entitled), in opposition to the subrogation claims.
Meanwhile, the personal injury case settled. In the course of obtaining approval of the settlement in chancery court, Courtney’s attorney joined Travelers and HRI as defendants, asserting the tort claims based upon the representation of subrogation rights and the attempt to have HRI’s name placed upon the settlement check as a payee.
Appeal to the Supreme Court
The chancery court rejected the tort claims. On appeal, the Mississippi Supreme Court heard argument on whether the the defendants tortiously interfered with the settlement by asserting contractual rights (though the assertion was withdrawn), and by continuously asserting equitable subrogation rights.
Agreeing with the Chancellor, the Supreme Court distinguished Valley Forge Ins. Co. v. Strickland, 620 So.2d 535 (Miss.1993) (upholding one million dollar punitive damages award) inasmuch as the defendants withdrew their assertion of contractual rights where none existed whereas the defendants in Valley Forge did not.
The Court also agreed with the Chancellor that the plaintiff had not made out a case based upon the assertion of equitable subrogation. Since the defendants withdrew the subrogation claim entirely at some point during this controversy, the Supreme Court did not settle the question of availability of equitable subrogation (though the Chancellor concluded none existed). The Court held for the defendants on the tort claim, stating:
HRI’s pursuing a potential legal position concerning equitable subrogation, though unsuccessfully, does not in itself expose them to liability. Valley Forge, at 539 (“[F]iling a complaint to resolve a legal issue is not to be considered bad faith merely because the issue is ultimately resolved against the insurer.â€) (citing Employers’ Mutual Casualty Company v. Tompkins, 490 So.2d 897 (Miss.1986)). The Court finds that [Travelers and HRI] had a legitimate or arguable reason for asserting a right to equitable subrogation, though they did not succeed on their claim.
Note: The McCord case illustrates an interesting issue in the context of subrogation in Mississippi with perhaps broader implications in other states with caselaw such as Cooper Tire. In Cooper Tire & Rubber Co. v. Striplin, the Mississippi Supreme Court dismissed as “without merit” an employer’s argument that ERISA permitted the employer to enforce a subrogation agreement and recover the medical expenses of a covered minor to whom an insurer had paid benefits, holding that “Congress did not pre-empt areas traditionally regulated by the states”–areas such as domestic relations and minors’ business.
The Cooper Tire case may appear to have received some sanction from a Fifth Circuit case, Bauhaus USA, Inc. v. Copeland, 292 F.3d 439 (5th Cir.2002). On the other hand, another more recent Fifth Circuit opinion, Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot & Wansbrough, 354 F.3d 348 (5th Cir.2003), a decision that adumbrated Sereboff v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869 (2006), suggests that ERISA plans may assert rights under constructive trust theory in a proper case, i.e., where the claims are asserted against the party holding the funds and the plan contains a subrogation provision).
