Steve Bruzonsky - Arizona\'s get well, get on with life attorney Peer Review Rated Steve Bruzonsky - Arizona\'s get well, get on with life attorney






Steven J. Bruzonsky

Attorney At Law

Law Office of
Steven J. Bruzonsky
917 E. San Angelo Ave.
Gilbert, AZ 85234
480-969-3003

Call 480-969-3003

 

Please note that Attorney Bruzonsky has been doing this regular “Liens Corner” column since April 2006. His last “Liens Corner” article was for the November/December 2017 issue of The Advocate, having stepped down from this regular column, as he now works part-time (and is part-time retired) exclusively handling large subrogation/lien claims in very large personal injury and medical malpractice cases for other attorneys. However, attorney Bruzonsky may add notes to this website under the subject lien article headers from time to time. (Please keep in mind that this site contains general information for educational purposes only. It is not intended to provide legal advise, which can only come from a qualified attorney who is familiair with all the facts and circumstances of your specific case and relevant law.) 

 

 

2010-03/05: FEHBA Lien Claims, a Brief Primer, Parts 1-3

June 25th, 2016 12:01:03 pm


These article have been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, March - May 2010 issues, @2010 by Steven J. Bruzonsky, Esq.


FEHBA LIEN CLAIMS, A BRIEF PRIMER – PART 1


(My "Liens Corner" article published December 2006 discussed the U.S. Supreme Court landmark decision, Empire Healthchoice Assurance, Inc. v. McVeigh, concerning FEHBA lien claims. This is the first of a three part series on FEHBA lien claims.)


Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006), remains the gold standard regarding Federal Employees Health Benefits Act of 1959 (FEHBA) (5 U.S.C. §§ 8901-8914) lien claims. In this case, the U.S. Supreme Court affirmed the Second Circuit and District Court dismissals for lack of federal subject matter jurisdiction. The Court noted that there was no federal jurisdiction, no federal question presented, and no federal preemption of state anti-subrogation law. The Court stated that if the plan had exercised its subrogation right to recover directly from the third party, that the tortfeasor's liability would be governed not only by the OMB (U.S. Office of Personnel Management) - BCBSA (Blue Cross Blue Shield Association) agreement, but by state law as well. Therefore, any FEHBA lien claim must be brought in state court under state law, federal law (the FEHBA) does not preempt state anti-subrogation case law, and Arizona anti-subrogation caselaw applies when a FEHBA lien claim is asserted.


The Federal Employees Health Benefits Act of 1959 (FEHBA) does not include any lien or subrogation provisions. Apparently, neither do the FEHBA regulations, which are set forth at Title 5 of the Code of Federal Regulations (CFR). Title 5 CFR, Part 890 regulates the "Federal Employees Health Benefits Program" for active federal employees. Title 5 CFR, Part 891 regulates "Retired Federal employees health benefits". I have searched through these CFRs and I am unable to find any regulation which even provides for liens or subrogation rights. Note that the Empire Healthchoice opinion references the OPM contract subrogation provision but does not mention any pertinent CFRs.


The OPM website at http://www.opm.gov/insure/health/planinfo/2009/states/az.asp has the current 2009 plan brochures with all plan provisions, as particular plans are offered depending upon the federal agency and state of residence of the federal employee. Each plan will have a subrogation provision as required by the OPM contract. Each plan will have a coordination of benefits provision which may or may not reference injury settlements or auto insurance as primary.


Do you have an ER 1.15 responsibility to protect your client's FEHBA healthplan subrogation interest when your client's injury claim settles? Given current law as noted above, I don't see how you could possibly have an ER 1.15 responsibility in this situation. There is simply no "matured legal or equitable claim" (Comment 4 to ER 1.15) in consideration of the current state of the law as discussed above. In order to hold disputed funds in Trust and protect the lien claimant's interest, the plaintiff's attorney must have "good faith doubt" as to the proper recipient (Ethics Opinions 98-06 and 88-02). Again, given current law as noted above, how could any plaintiff's attorney have such "good faith doubt". I certainly don't. If you'd like a refresh concerning ER 1.15 please see my February – May 2008 "Liens Corner" articles on ER 1.15.


(The second and third parts will be in the next two issues.)


FEHBA LIEN CLAIMS, A BRIEF PRIMER – PART 2


(This is the second of a three part series on FEHBA lien claims.)


Following is my form letter which you may use to respond to a FEHBA lien claim.


LAW OFFICES OF STEVEN J. BRUZONSKY
1152 E. GREENWAY ST., STE. 5 MESA, AZ 85203 480-969-3003
FAX: 480-962-5879


Date
Certified Mail


[Name and Address of Subrogation Company]


Re: Our Client:
Your File No.:
Date of Accident:
Your Client:


YOU ARE DIRECTED TO FORWARD THIS FILE TO LEGAL COUNSEL SHOULD YOU CONTINUE TO ASSERT THIS UNLAWFUL SUBROGATION CLAIM


Dear _____________;


This is in response to your letter dated ___________, which claims reimbursement or subrogation against our above named client's personal injury claim or settlement.


You claim that the Federal Employee Program (FHP) has a right of "subrogation/reimbursement" which is "controlled by subrogation language contained in the Federal Employee Plan and federal statute, 5 U.S. C. § 8902(m)(1). However, you have no lien claim for the reasons set forth below.


Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006), remains the gold standard regarding Federal Employees Health Benefits Act of 1959 (FEHBA) (5 U.S.C. §§ 8901-8914) lien claims. In this case, the U.S. Supreme Court affirmed the Second Circuit and District Court dismissals for lack of federal subject matter jurisdiction. The Court noted that there was no federal jurisdiction, no federal question presented, and no federal preemption of state anti-subrogation law. The Court stated that if the plan had exercised its subrogation right to recover directly from the third party, that the tortfeasor's liability would be governed not only by the OMB (U.S. Office of Personnel Management) - BCBSA (Blue Cross Blue Shield Association) agreement, but by state law as well. Therefore, any FEHBA lien claim must be brought in state court under state law, federal law (the FEHBA) does not preempt state anti-subrogation case law, and Arizona anti-subrogation caselaw applies when a FEHBA lien claim is asserted.


The Federal Employees Health Benefits Act of 1959 (FEHBA) does not include any lien or subrogation provisions. Neither do the FEHBA regulations, which are set forth at Title 5 of the Code of Federal Regulations (CFR). (Title 5 CFR, Part 890 regulates the "Federal Employees Health Benefits Program" for active federal employees. Title 5 CFR, Part 891 regulates "Retired Federal employees health benefits").


We appreciate that most states do not have anti-subrogation statutes or case law, and that in such states, the fact that the FEHBA healthplan contains subrogation/lien language may be applicable. However, here in Arizona, we have a long line of anti-subrogation caselaw which is controlling: The common law rule long followed in Arizona is that, absent a statute, an assignment of a cause of action for personal injuries against a third party tortfeasor is void and unenforceable. Harleysville Mutual Ins. Co. v. Lea, 2 Ariz. App. 538, 410 P.2d 495 (App. 1966) (auto medical payments); State Farm Fire and Casualty Co. v. Knapp, 107 Ariz. 184, 484 P.2d 180 (1971) (auto medical payments); Allstate Ins. Co. v. Druke, 118 Ariz. 301, 576 P.2d 49 (1978) (auto medical payments); Gallego v. Strickland, 121 Ariz. 160, 589 P.2d 34 (App. Div. 2 1978) (uninsured motorist) (prior to statutory amendment providing for uninsured motorist subrogation); Brockman v. Metropolitan Life Ins. Co., 125 Ariz. 246, 609 P. 2D 61 (1980) (group health insurance); Karp v. Speizer, 132 Ariz. 599, 647 P.2d 1197 (App. Div. 1 1982) (assignment to judgement creditor by judgement debtor of proceeds expected to be recovered from personal injury action) ; Piano v. Hunter, 173 Ariz. 172, 840 P.2d 1037 (App. 1992) (same rule applies to local school district health trust fund); and Lingel v. Olbin, 198 Ariz. 249, 8 P.3d 1163 (App.2000) (prohibition against assignment of personal injury claims is based on public policy). A.R.S. §20-1072 prohibits health insurance carriers from charging health plan insured's anything other than the copay and deductible.


We assume that you will demonstrate your "good faith" by closing this unlawful subrogation claim. If you intend to continue to wrongfully pursue this subrogation claim, then you should immediately give this file to legal counsel to respond. If we don't receive any written correspondence from legal counsel within thirty days, then if our client's settlement is received, we will distribute settlement proceeds without regard to your invalid subrogation claim. We have no intention of any further correspondence with subrogation adjusters, as our experience is that they will continue to assert unlawful subrogation claims regardless of the law, since they usually get paid as a percentage of their collections.


To Legal Counsel: If you don't respond in writing within thirty days stating that you intend to continue to pursue this subrogation claim, then if our client's settlement is received, we will distribute settlement proceeds without regard to your invalid subrogation claim. If the FEHBA healthplan intends to take any adverse or legal action against our client, please give us advance written notice, and please explain in detail the basis thereof attaching any pertinent documents, plan provisions, and regulatory (CFR) and statutory authority. Please keep in mind that it is unethical for an attorney to threaten to file a lawsuit or other adverse action unless the attorney has authority from the client to actually do so. If the FEHBA healthplan at any time authorizes you to file an action in any Court, then please disclose which Court and if so, the legal and jurisdictional basis therefore.


Notice: Your false and misleading attempt to collect this debt is in violation of the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692. In Hamilton v. United Healthcare of Louisiana, Inc., 310 F.3d 385 (5th Cir. 2002), a group health insurer's contract based subrogation claim against an employee's uninsured motorist settlement proceeds was held to be subject to the requirements of the FDCPA. DO NOT CONTACT OUR CLIENT, OUR FIRM, OR ANYONE ELSE regarding this alleged debt, except as permitted by the FDCPA.


Thank you for your courtesy and assistance.


Very truly yours,


Steven J. Bruzonsky
cc: client


(The third and last part will be in the next issue.)


FEHBA LIEN CLAIMS, A BRIEF PRIMER – PART 3


(This is the third of a three part series on FEHBA lien claims.)


Notwithstanding the current state of law regarding FEHBA lien claims here in Arizona, subrogation adjusters still assert these lien claims. My experience is that subrogation adjusters get paid to collect liens regardless of their validity and that they will continue to do so in many cases.


The subrogation adjuster may barrage you with letters demanding payment of their subrogation or lien interest from settlement of your client's injury claim. The subrogation adjuster may ignore your requests to turn this matter over to their legal counsel. You may ask why do you want the adjuster to turn this matter over to legal counsel if the FEHBA lien plan continues to claim a lien? Because (1) legal counsel understands the law regardless of counsel's pretense that the law supports subrogation; and (2) legal counsel, as an attorney, has certain minimum ethical requirements to follow (the adjuster essentially has none, unless you think a complaint to the state insurance department concerning unfair claims settlement practices will get you anywhere). Once legal counsel gets involved, I simply continue responding in writing and including the following paragraph in each letter:


"If you don't respond in writing within thirty days stating that you intend to continue to pursue this subrogation claim, then if our client's settlement is received, we will distribute settlement proceeds without regard to your invalid subrogation claim. If the FEHBA healthplan intends to take any adverse or legal action against our client, please give us advance written notice, and please explain in detail the basis thereof attaching any pertinent documents, plan provisions, and regulatory (CFR) and statutory authority. Please keep in mind that it is unethical for an attorney to threaten to file a lawsuit or other adverse action unless the attorney has authority from the client to actually do so. If the FEHBA healthplan at any time authorizes you to file an action in any Court, then please disclose which Court and if so, the legal and jurisdictional basis therefore. Please give us the identity and contact information of the claims processing official who has advised that this adverse action will be taken against our client."


Eventually, I have found that legal counsel will simply not respond any further. To me, this means that they have given up on trying to cajole us into paying their unlawful claim of a subrogation lien, or even a small monetary compromise, from my client's injury settlement. I've had a few FEHBA lien claims these past several years and each one has gone away in this manner.


What if the subrogation adjuster or legal counsel threaten that the plan will offset the subrogation amount claimed against future medical benefits? Keep in mind that the subrogation division and their attorneys are a separate division from claims processing. If you receive such a threat, I advise that your response state that "Neither the FEHBA (5 U.S.C. §§ 8901-8914) or the applicable Code of Federal Regulations at Title 5, Parts 890 and 891, provide for subrogation or withholding or offset of future medical benefits. Please cite specific provisions of federal law, federal regulation, and/or the OPM contract which provide for this. Please give us the identity and contact information of the claims processing official who has advised that this future offset will be applied against our client." I have never had a reply to my response in this regard.


My bottom line is that so far I haven't seen any reason why a FEHBA subrogation lien, for an accident which occurs in Arizona and which involves an Arizona resident as the injured party, should be paid or even negotiated at pennies on a dollar.




Return to Articles

© Copyright 2006, Steven J. Bruzonsky, Attorney
Terms of Use: This site contains general information for educational purposes only. It is not intended to provide legal advise, which can only come from a qualified attorney who is familiar with all the facts and circumstances of your specific case and relevant law. If you use this site, or send information or e-mail the attorney, such action does not create an attorney-client relationship. For legal advise please personally consult with an experienced attorney like Steven J. Bruzonsky.