The opinion of the court was delivered by: Hillman, District Judge
This matter comes before the Court on the motion of Plaintiffs James J. Mulholland and Anna Mulholland for summary judgment, and on the cross-motion for summary judgment of Defendant UFCW Local 1776 Participating Employers Health and Welfare Fund. For the reasons expressed below, Plaintiffs' motion will be denied, and Defendant's motion will granted in part and denied in part.
Defendant is an employee health and welfare plan (the "Fund") established under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001. Plaintiff James Mulholland is a participant of the Fund and Plaintiff Anna Mulholland is a covered dependant. On February 19, 2001, Mrs. Mulholland suffered personal injuries as a result of a slip-and-fall accident. Mrs. Mulholland received a total of $27,736.52 in medical and prescription benefits as a dependent covered by the Fund.
On February 4, 2003, the Mulhollands filed a personal injury suit in state court to recover damages for the injuries caused by the accident. Subsequently, the Fund notified the Mulhollands that it was asserting a subrogation lien against any recovery obtained by them. On April 11, 2005, the Mulhollands' attorney notified the Fund that the personal injury suit had been settled for $147,500.00. The letter also indicated that the Mulhollands disputed the validity of the Fund's subrogation lien and, accordingly, would place the full settlement amount in escrow pending resolution of the matter.
The Mulhollands have moved for summary judgment, arguing that the Fund is not entitled to a suborgation lien against their personal injury settlement recovery. The Fund has also moved for summary judgment, arguing that because the Mulhollands' medical and prescription expenses related to the slip-and-fall accident were paid by the Fund, those expenses may be recouped from the Mulhollands' settlement recovery.
A. Summary Judgment Standard
Summary judgment is appropriate where the Court is satisfied that "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986); Fed. R. Civ. P. 56(c). If review of cross-motions for summary judgment reveals no genuine issue of material fact, then judgment may be entered in favor of the party deserving of judgment in light of the law and undisputed facts. See Iberia Foods Corp. v. Romeo Jr., 150 F.3d 298, 302 (3d Cir. 1998) (citation omitted).
B. The Parties' Arguments
The Mulhollands contend that the Fund did not have the right to assert a subrogation lien on their recovery from a third party. The Mulhollands first argue that nothing in the Trust Agreement, one of the Fund's primary plan documents, authorizes the Fund to assert a right of subrogation. Second, even if there were such a right, the Mulhollands argue that the Fund could only recover benefits paid by the Fund--i.e., self-insured benefits-- and not benefits paid by another insurer. The Mulhollands contend that their benefits were paid by another insurer, Independence Blue Cross/Pennsylvania Blue Shield ("IBC"), and are, thus, unrecoverable. Finally, the Mulhollands argue that because the lien was asserted in bad faith, they are entitled to reimbursement of counsel fees and costs.
The Fund contests the Mulhollands' arguments, and argues that the Fund is entitled to, and permitted to, be reimbursed for the benefits it paid to them because the Fund paid those benefits directly out of the Fund. Even though IBC acts as an administrator for the Fund and "pays" participants' claims, and even though the Fund carries "stop-loss" insurance,*fn1 those benefits paid to the Mulhollands were self-insured benefits, recoverable under the terms of the plan. The Fund is also seeking attorneys' fees and costs.
The primary issue that must be decided is whether the benefits paid to the Mulhollands were paid out of the Fund--if they were not, then there is no need to address whether the Fund may assert a subrogation lien to recover them.
1. Whether the benefits were paid out of the Fund
The policies and procedures of the Fund are set forth in (1) the Agreement and Declaration of Trust ("Trust") and (2) the Summary Plan Description ("SPD"). The Trust authorizes a Board of Trustees to administer the Fund, and the SPD outlines the benefits to be provided, the rights and obligations of participants as to any benefits that are received, and the Funds' right to subrogation.
With respect to subrogation or reimbursement of costs and benefits, the SPD*fn2 states that a participant must notify the Fund whenever settlement payments related to a claim for benefits are received from a third party. It provides:
The Fund is entitled to 100% reimbursement of all costs and benefits, except as may be specifically agreed to by the Fund in writing, when you receive any payment from another party, if the Fund has paid or incurred, or will incur in the future, any such costs and/or benefits, . . . if the Fund has ...