Benny Blankenship v. Estate of Joshua Bain

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
______________________________________________

FILED
July 29, 1998

Cecil W. Crowson
BENNY N. BLANKENSHIP,
Appellate Court Clerk
and SHEILA BLANKENSHIP,

Plaintiffs-Appellees,

and

BLUECROSS BLUESHIELD OF
TENNESSEE, as administrator
of TennCare for the State of
Tennessee,

Plaintiff by Intervention/
Appellant,

Vs. Sumner Circuit No. 15078-C
C.A. No. 01A01-9709-CV-00492
ESTATE OF JOSHUA D. BAIN and
BOB WILLIAMS FORD
LINCOLN-MERCURY,

Defendants.
____________________________________________________________________________

FROM THE SUMNER COUNTY CIRCUIT COURT
THE HONORABLE THOMAS GOODALL, JUDGE

David E. High of Nashville
John Pellegrin of Gallatin
For Appellees

Jerome J. Cohen of Nashville
For Appellant

REVERSED AND REMANDED

Opinion filed:

W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.

CONCUR:

ALAN E. HIGHERS, JUDGE
HOLLY KIRBY LILLARD, JUDGE
The sole issue in this case is whether the statutory subrogation and/or assignment

provisions of the Tennessee TennCare Program are subject to the common law “made whole”

doctrine.

Plaintiffs, Benny Blankenship and Sheila Blankenship, were enrolled in the TennCare

program and paid monthly premiums for the health care coverage. On July 18, 1995, Benny

Blankenship was seriously injured in an automobile accident due to the negligence of Joshua

Bain, who was killed in the accident. Bain’s estate was insolvent but there was a total of

$125,000.00 liability insurance coverage available in his behalf. Blankenship’s medical

expenses totaled in excess of $30,000.00, and TennCare, through its administrator, BlueCross

BlueShield of Tennessee, paid $20,713.83 of the said medical expenses.

The Blankenships filed a complaint against the estate and the owner of the vehicle Bain

was driving to recover for the losses, injuries, and damages sustained. TennCare’s administrator

was allowed to intervene to pursue its subrogation claim, and the plaintiffs filed a “Petition to

Determine the Validity and/or the Amount of the Alleged Subrogation Claim.” The petition was

treated as an action for declaratory relief pursuant to Rule 57, Tenn.R.Civ.P. It is undisputed that

the plaintiffs’ tort claims were clearly worth in excess of the policy limits settlement plaintiffs

received. The trial court held that the administrator’s right to recover pursuant to T.C.A. § 71-5-

117 (Supp. 1997) was subject to the Blankenships first being made whole, and since they had

not been made whole by virtue of the settlement, there could be no subrogation recovery by the

administrator.

There are no material factual disputes; the sole issue is purely a question of law.

Therefore, our review of the trial court’s ruling is de novo with no presumption of correctness.

Marriott Employees’ Fed. Credit Union v. Harris, 897 S.W.2d 723, 727 (Tenn. App. 1994).

The medical expense payments were made pursuant to Tennessee’s “Medical Assistance

Act of 1968," codified as T.C.A. §§ 71-5-101, et seq. (1995 & Supp. 1997). The 1968 Act is

intended “to make possible medical assistance to those recipients determined to be eligible under

this chapter to receive medical assistance that conforms to the requirements of title XIX of the

Social Security Act [codified in 42 U.S.C. §§ 1396 et seq.(1992 & Supp. 1996)] and the

regulations promulgated pursuant thereto.” T.C.A. § 71-5-102 (1995).

T.C.A. § 71-5-117 provides in part, pertinent to the issue before us:

71-5-117. Recovery of benefits - State’s right of subrogation -
Assignment of insurance benefit rights - Commissioner
authorized to require certain information identifying persons
 covered by third parties - State’s right of action. - (a) Medical
assistance paid to, or on behalf of, any recipient cannot be
recovered from a beneficiary unless such assistance has been
incorrectly paid, or, unless the recipient or beneficiary recovers
or is entitled to recover from a third party reimbursement for all
or part of the costs of care or treatment for the injury or illness for
which the medical assistance is paid. To the extent of payments
of medical assistance, the state shall be subrogated to all rights of
recovery, for the cost of care or treatment for the injury or illness
for which medical assistance is provided, contractual or
otherwise, of the recipients against any person. Medicaid
payments to the provider of the medical services shall not be
withdrawn or reduced to recover funds obtained by the recipient
from third parties for medical services rendered by the provider
if these funds were obtained without the knowledge or direct
assistance of the provider of medical assistance. When the state
asserts its right to subrogation, the state shall notify the recipients
in language understandable to all recipients, of recipient’s rights
of recovery against third parties and that recipient should seek the
advice of an attorney regarding those rights of recovery to which
recipient may be entitled. . . .

(b) Upon accepting medical assistance, the recipient shall be
deemed to have made an assignment to the state of the right of
third party insurance benefits to which the recipient may be
entitled. Failure of the recipient to reimburse the state for
medical assistance received from any third party insurance
benefits received as a result of the illness or injury from which the
medical assistance was paid may be grounds for removing the
recipient from future participation in the benefits available under
this part; provided, that any removal from participation shall be
after appropriate advance notice to the recipient and that the
provider of service shall not be prevented from receiving payment
from the state for medical assistance services previously
furnished the recipient, and that nothing herein shall require an
insurer to pay benefits to the state which have already been paid
to the recipient.

42 U.S.C. § 1396a (Supp. 1998) states in pertinent part:

1396a. State plans for medical assistance

(a) Contents
A State plan for medical assistance must --

* * *
(25) provide --

(A) that the State or local agency administering such plan will
take all reasonable measures to ascertain the legal liability of third
parties (including health insurers, group health plans (as defined
in section 607(1) of the Employee Retirement Income Security
Act of 1974 [29 U.S.C.A. § 1167(1)]), service benefit plans, and
health maintenance organizations) to pay for care and services
available under the plan, including--
(i) the collection of sufficient information (as specified by
the Secretary in regulations) to enable the State to pursue claims
against such third parties, with such information being collected
at the time of any determination or redetermination of eligibility
for medical assistance, and
(ii) the submission to the Secretary of a plan (subject to
the approval by the Secretary) for pursuing claims against such

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 third parties, . . . .

(B) that in any case where such a legal liability is found to exist
after medical assistance has been made available on behalf of the
individual and where the amount of reimbursement the State can
reasonably expect to recover exceeds the costs of such recovery,
the State or local agency will seek reimbursement for such
assistance to the extent of such legal liability;

Relying primarily upon the holding in Wimberly v Amer. Cas. Co., 584 S.W.2d 200

(Tenn. 1979), the Blankenships assert that the administrator is not entitled to its subrogation

claim until they have been made whole. In Wimberly, two fire insurance companies sought to

enforce their subrogation rights under their fire insurance policies issued to the plaintiff,

Wimberly. Wimberly’s restaurant was destroyed by fire that was started after another party had

driven her automobile into the restaurant. The automobile driver’s insurance carrier paid

Wimberly its policy limits of $25,000.00, but it was undisputed that the loss caused by the fire

was $44,619.00. Wimberly’s insurance companies paid $15,000.00, and sought to recover the

amount pursuant to the subrogation provision of their policies and settlement instruments. The

Court noted that the doctrine of subrogation had its origin in general principles of equity, and

under equitable principles an insured must be made whole before subrogation rights arise in

favor of the insured. Id. at 203. The Court held that this principle is applicable to contractual

subrogations. Id. at 204. In the instant case, the trial court extended the principle to statutory

subrogation because T.C.A. § 71-5-117 contains no statutory exception to the “made whole”

doctrine, and held that the statutory interest of the administrator would be subject to the

Blankenships being first made whole.

We must respectfully disagree. Statutes are to be interpreted so as to give effect to the

ordinary meaning of the language used by the legislature. Ganzevoort v. Russell, 949 S.W.2d

293, 296 (Tenn. 1997); Chapman v. Sullivan, 608 S.W.2d 580, 581-82 (Tenn. 1980); see also

Henry v. White, 250 S.W.2d 70, 72 (Tenn. 1952) (“If the words of a statute plainly mean one

thing they cannot be given another meaning by judicial construction.”). In Wimberly, there was

no statute mandating subrogation. In the instant case the statute specifically provides for

subrogation, and the subrogation provision is in the statute because of the mandate by the federal

government. The statute states: “To the extent of payments of medical assistance, the state shall

be subrogated to all rights of recovery, for the cost of care or treatment for the injury or illness

for which medical assistance is provided. . .” T.C.A. § 71-5-117 (a). (emphasis added). The

language employed by the legislature in this statute is clear and unequivocal. In the instant case,

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the legislation was passed to provide the medical assistance in conformance with the

requirements of the Social Security Act. The act mandates that the state take the necessary steps

to pursue the legal liability of third parties. The legislature, in responding to this requirement,

mandated that “the state shall be subrogated to all rights of recovery.” T.C.A. § 71-5-117 (a).

There is nothing in the statute to indicate that this mandate is subject to the recipient of the

medical benefits being made whole.

In Castleman v. Ross Engineering, Inc., 958 S.W.2d 720 (Tenn. 1997), the Supreme

Court considered enforcement of a subrogation claim for benefits paid to an employee where

fault was attributed to the employee and to the employer. The employee acknowledged that the

employer’s insurance carrier has a statutory subrogation claim for benefits paid under the

workers compensation law, but asserted that this claim is subject to the principles of equitable

subrogation and is not enforceable unless the employee was made whole. In answer to this

assertion, the Supreme Court said:

The statute creating the subrogation claim does not by its
terms condition the claim upon the employee obtaining a full
recovery of damages sustained. The subrogation lien attaches to
“the net recovery collected” and secures the amount “paid” by the
employer or the amount of the employer’s “future liability, as it
accrues.” It appears that, under the statute, the subrogation lien
attaches to any recovery from the tortfeasor “by judgment,
settlement or otherwise.” Consequently, even if under equitable
principles of subrogation the employer was not entitled to assert
the subrogation lien, the statute specifically creates that right.

Id. at 724 (internal citation omitted).

This Court has previously recognized the similarity between Tennessee’s workers’

compensation statute and Tennessee’s Medicaid statute. See Hughlett v. Shelby County Health

Care Corp., 940 S.W.2d 571 (Tenn. App. 1996). Insofar as subrogation is concerned, there is

no meaningful distinction between the statutes. Id. at 574-75. Both workers’ compensation

subrogation and TennCare subrogation are mandated by statute. Neither statute makes reference

to the “made whole” doctrine, and we are not at liberty to add this language to the legislative

enactments. Therefore, we must reverse the trial court’s judgment which refuses to recognize

the subrogation claim.

The trial court also held that “if Blue Cross Blue Shield had an enforceable and valid

subrogation claim regarding the settlement proceeds, their claims would be subject to the

reasonable, necessary, and ordinary one-third contingent attorney’s fees incurred by the

Blankenships and pro rata litigation expenses incurred by the Blankenships pursuant to T.C.A.

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§ 71-5-117 (c).”

Although no issue is presented for review concerning the trial court’s holding regarding

attorney’s fees, we will consider the trial court’s ruling in view of our decision concerning the

issue presented for review. Tennessee Code Annotated § 71-5-117 (c) provides:

The right of subrogation by the state to the recipients’ right to
recovery shall be subject to ordinary and reasonable attorney fees;
provided, that further, where a recipient has retained an attorney,
the attorney shall not be considered liable unless the attorney has
notice from the state of the state’s claim of subrogation prior to
disbursement of the funds to the recipient.

The administrator asserts that this language is not terminology requiring payment of

attorney’s fees out of the subrogation claim but provides for priority of payment. The

administrator argues that the provision should be construed so that the state is entitled to

subrogation claim after the recipient’s counsel receives the ordinary and reasonable fees out of

the total recovery. We must respectfully disagree. We find no ambiguity in the language of the

statute which explicitly provides that the state’s right of subrogation is subject to the ordinary

and reasonable attorney’s fees.

Accordingly, the judgment of the trial court declaring that the Blankenship recovery is

not subject to the administrator’s subrogation claim is reversed. The case is remanded to the trial

court for a determination of the amount of any attorney’s fees and expenses to be charged to the

subrogation claim. Costs of the appeal are assessed to the appellees.

_________________________________
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.

CONCUR:

____________________________________
ALAN E. HIGHERS, JUDGE

____________________________________
HOLLY KIRBY LILLARD, JUDGE

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