Diamond Crystal Brands, Inc. v. Wallace, 531 F.Supp.2d 1366 (N.D. Ga.2008)

After the negligent medical care and consequential death of Deborah Hayes, the Estate and her daughter Tamara Hayes pursued a wrongful death claim against the hospital.  In Georgia State Court plaintiffs settled for $900,000, of which $837,000 went to Tamara Hayes and $63,000 to the Estate of Deborah Hayes.

Prior to Deborah Hayes’s death, her employer, Diamond Crystal provided $261,863.58 in medical benefits related to the medical malpractice.  After the settlement, Diamond Crystal sought reimbursement of claims paid.

During a preliminary injunction hearing, counsel for Tamara argued that under Georgia’s wrongful death statute, the claim for medical bills belongs to the Estate and therefore the Plan could only subrogate and/or pursue reimbursement through the Estate.  Counsel for Diamond Crystal countered that the settlement disbursement violated the terms of the Plan by granting insufficient finds to the Estate and excess funds to Tamara.  Despite the settlement allocation, the Plan could still seek reimbursement from Tamara because Georgia’s wrongful death statute that conflicted with the Plan’s reimbursement provision was preempted by ERISA.

On January 22, 2008, the court that held the Plan was entitled to a preliminary injunction over the Estate’s settlement, but not to Tamara’s settlement.  The court believed the Plan could have intervened by filing an injunction prohibiting the Estate from settlement proceedings in the initial suit.

Diamond Crystal and counsel disagreed with the court’s rationale that it could not revisit the allocation issue, however just after the court decision, the 11th Circuit re-allocated settlement proceedings in Wal-mart Stores Inc. Assocs. Health and Welfare Plan v. Horton, 513 3d 1223, 1226 (11^th Cir.2008).

After Learning about the 11^th Circuit case, Diamond Crystal moved for reconsideration of the allocation.  The court found in favor of Diamond Crystal’s plan language, requiring that the Estate reimburse the Plan out of any settlement to the full extent of the benefits paid by the Plan. The plan language also prohibits the Estate from doing anything that may affect any of the preceding rights, including arranging for others to receive proceeds of the settlement or releasing any claim without reasonable compensation.

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This entry was posted by Adam V. Russo on Wednesday, July 23rd, 2008 at 2:29 pm and is filed under 11th, Georgia, Plan Language, Wrongful Death. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.