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Group Policy – Blue Cross v. Platt, 3 Pa. D.&C. 4th 561, aff’d. 576 A.2d 1129 (Pa. Super. 1990)

Blue Cross v. Platt, 3 Pa. D.&C. 4th 561, aff’d. 576 A.2d 1129 (Pa. Super. 1990).  Blue Cross Blue Shield paid medical benefits on a group policy arising out of a motorcycle accident.  The insurance company notified the injured victims of their subrogation interest.  The insurance company sued based upon their claimed subrogation interest.  A group policy is a contract between the insurance company and the victims’ employer and not with the victims as individuals.  As third party beneficiaries, the victims are not parties to the contract and are not bound by any provision provided for subrogation rights.  In a Memorandum Opinion the Superior Court affirmed, albeit on somewhat different grounds.  In a lengthy Opinion, the court stated as follows:


“Therefore, we would not reach an equitable result if we permitted an insurer to unilaterally bind the insured by the outlay of a benefit, where the insureds were unaware that acceptance of this benefit could encumber further settlement negotiations with the tortfeaser.”  Opinion Page 7 & 8


The victims specifically deny any prior knowledge of Blue Cross’ subrogation rights.  Blue Cross admits that the victims had no knowledge of their parents signing subrogation documents or the circumstances under which those documents were signed.


Blue Cross “utterly” failed to plead that they gave Platt and Coffman notice of their subrogation rights or that Platt and Coffman were otherwise made aware of these rights.  Opinion Page 8 & 9.  “There is nothing in the record to suggest that they were notified prior to the extension of benefits, and it remains questionable that they were notified before the settlement of their claims with Berrigan.”  Opinion Page 9


The court found that Blue Cross had the ability to protect its subrogation rights by requiring the execution of the subrogation documents by the insureds before paying their medical bills.  This they did not do.


“Having failed to take this minimal step to protect its rights, Blue Cross may not seek relief in equity to the prejudice of the insureds who accepted the benefits without notice and proceeded to settle their claims.  We therefore hold that in order for Blue Cross to establish a right of subrogation against their own insureds, Blue Cross must allege not only the payment of the tort-feasers debt and a subsequent recovery from the tort-feaser by the insureds, but also knowledge on the part of the insureds that the extension of benefits was being made subject to the insureds agreement not to prejudice Blue Cross’ subrogation right.”  Opinion Page 9 & 10.


The Superior Court thus affirmed the Order of Summary Judgment.