Primax Recoveries, Inc v. Atherton

NOTICE NO. 5-04-0561
Decision filed 05/04/06. The text of
this decision may be changed or IN THE
corrected prior to the filing of a
Petition for Rehearing or the APPELLATE COURT OF ILLINOIS
disposition of the same.
FIFTH DISTRICT
___________________________________________________________________________
PRIMAX RECOVERIES, INC., ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Pulaski County.
)
v. ) No. 02-CH-2
)
TRACY ATHERTON, BROOKE ATHERTON, )
and PHIL ATHERTON, ) Honorable
) Mark H. Clarke,
Defendants-Appellees. ) Judge, presiding.
___________________________________________________________________________
JUSTICE CHAPMAN delivered the opinion of the court:
This appeal involves the right of a health insurance company to recover from the
proceeds of a settlement involving a minor child with catastrophic injuries stemming from
negligent medical care. The child's complaint in the underlying medical malpractice action
alleged, among other things, that she had incurred medical expenses in the past; however, it
is impossible to determine what, if any, portion of the proceeds received pursuant to the
settlement were intended to compensate her or her parents for past medical expenses. The
medical malpractice suit was filed in Missouri, where the child had the right to sue for
medical bills in her own name, jointly with her parents. See Boley v. Knowles, 905 S.W.2d
86, 90 (Mo. 1995). The plaintiff, Primax Recoveries, Inc. (Primax), appeals an order of the
trial court dismissing its complaint for a declaratory judgment. Primax argues that the trial
court erred in finding that the "minor's doctrine" prevented it from seeking reimbursement.
We affirm.
Brooke Atherton was born in July 1993. She suffered from respiratory distress within
1
the first day of her life. In treating Brooke for this problem, physicians at St. Louis
Children's Hospital attempted to place subclavian lines in her. In performing the procedure,
they ruptured Brooke's subclavian artery, causing an infarction to the temporal lobe of her
brain. This in turn caused severe and permanent brain damage that has left Brooke severely
mentally and physically disabled and in need of ongoing medical care.
At the time Brooke was born, her mother, Tracy Atherton, was an employee of the
State of Illinois. Both Tracy and Brooke were covered under the State of Illinois Quality
Care Health Plan. The plan provided, in relevant part:
"1. In the event of any payment under this Plan, the Plan shall be subrogated to
all of the covered person's rights of recovery ***. ***
2. The Plan is also granted a right of reimbursement from the proceeds of any
settlement, judgment[,] or other payment obtained by or on behalf of the covered
person. ***
***
5. No adult covered person hereunder may assign any rights that such person
may have to recover medical expenses from any tort[]feasor *** to any minor child or
children of the adult covered person ***."
On February 17, 2000, Phil Atherton, as the father and next friend of Brooke, filed a
medical malpractice action in Missouri against St. Louis Children's Hospital and two
physicians. The complaint alleged that, as a result of the negligent treatment she received,
Brooke had sustained permanent brain damage, would be unable ever to engage in
employment, and would require specialized care, education, and therapy. The complaint
further alleged that Brooke had incurred medical expenses in the past and would continue to
incur approximately $10,000 per month in medical expenses on an ongoing basis. The
complaint requested compensation for Brooke's actual damages, without specifying an
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amount sought.
The Quality Care Health Plan assigned its contractual right to reimbursement to
Primax, and Primax filed the instant declaratory judgment action in Illinois on January 11,
2002. Primax's complaint sought a declaratory judgment establishing its right to
reimbursement from the Athertons. On August 8, 2003, Primax filed an amended complaint
in which it alleged that there had been a jury trial in the Athertons' medical malpractice suit
in May 2002 but that the Athertons had settled the case before the jury rendered a verdict.
On February 17, 2004, Primax filed a second amended complaint, in which it alleged that (1)
Brooke's original complaint in the medical malpractice action included an allegation that she
had incurred medical expenses in the past, (2) Brooke and her parents had settled their claims
for an amount "greatly exceeding $1,000,000," and (3) the Athertons had "concealed" the
terms of the settlement agreement from Primax.
Each time a complaint or amended complaint was filed, the Athertons filed a motion
to dismiss pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West
2000)). In each, they argued that the minor's doctrine, which precludes reimbursement from
the estate of a minor (see Klem v. Mann, 279 Ill. App. 3d 735, 738, 665 N.E.2d 514, 517
(1996); Estate of Woodring v. Liberty Mutual Fire Insurance Co., 71 Ill. App. 3d 158, 160,
389 N.E.2d 211, 212 (1979)), is applicable and that Primax failed to allege any facts that
would demonstrate that it was entitled to relief from the Athertons. Primax argued in
response that the facts of the instant case fell within an exception to the minor's doctrine
found by a division of the First District Appellate Court in Sosin v. Hayes, 258 Ill. App. 3d
949, 630 N.E.2d 969 (1994). On August 9, 2005, the trial court granted the Athertons'
motion to dismiss, holding that the case before it was distinguishable from Sosin and
controlled by Klem. Primax filed the instant appeal on August 26, 2005.
Primax argues that its complaint stated facts which would entitle it to reimbursement
3
either from Brooke's estate or from Phil and Tracy Atherton. Its argument that it is entitled to
reimbursement from Brooke's estate is essentially an argument that, because a complaint filed
in her own name included a claim for medical expenses that had been paid by the health plan,
she became a third-party beneficiary of the plan, obliged to reimburse the plan or protect its
subrogation rights pursuant to the contractual language quoted above.
We note at the outset that the instant case differs from the precedents cited by both
parties in one significant respectBit comes to us after a ruling on a motion to dismiss the
complaint. Thus, we must treat all well-pled facts in Primax's complaint as true. Well-pled
facts are specific allegations of fact that bring a complaint within a recognized cause of
action; mere conclusory allegations unsupported by specific facts will not suffice. County of
Cook v. City of Chicago, 229 Ill. App. 3d 173, 175-76, 593 N.E.2d 928, 930 (1992). In the
cases cited by both parties, trial courts made factual findings regarding whether the minors
involved were made third-party beneficiaries of their parents' insurance contracts, findings
that appellate courts review to determine whether they are against the manifest weight of the
evidence. See Sosin, 258 Ill. App. 3d at 952, 630 N.E.2d at 971 (finding that the trial court's
determination that the minor child was made a third-party beneficiary of his father's health
insurance plan was not contrary to the manifest weight of the evidence); In re Estate of
Hammond, 141 Ill. App. 3d 963, 965, 491 N.E.2d 84, 85 (1986) (noting that the trial court
found that the minor child was not a third-party beneficiary of his parents' insurance plan).
Here, by contrast, our review is de novo. See Crusius v. Illinois Gaming Board, 216 Ill. 2d
315, 324, 837 N.E.2d 88, 94 (2005). For the reasons that follow, however, we agree with the
conclusion of the court below that Primax cannot prove that it is entitled to the relief it seeks,
even under this less deferential standard. See Klem, 279 Ill. App. 3d at 739, 665 N.E.2d at
518 (noting that "the trial judge declined to decide whether [the minor child] was a third-
party beneficiary of his father's insurance policy" and finding such a determination
4
unnecessary where there was no evidence that the father had assigned to the child his claim
for medical expenses for the child's injury).
In Illinois, a health insurer or medical care provider has no claim for subrogation or
reimbursement against funds received by the estate of a minor from a tortfeasor pursuant to a
judgment or settlement. Estate of Woodring, 71 Ill. App. 3d at 160, 389 N.E.2d at 212. This
is because the parents, rather than the minor, are responsible for paying the minor's medical
bills. See 750 ILCS 65/15(a)(1) (West 2002). Thus, Illinois courts have found that payments
made by a medical insurance plan for the treatment of a minor benefit the parents (who are
responsible for the child's medical bills), not the child (who bears no financial responsibility).
Because the payments benefit the parent rather than the child, the child is not a third-party
beneficiary under the insurance contract and is thus not bound by contractual provisions such
as the subrogation and reimbursement clauses here at issue. Estate of Woodring, 71 Ill. App.
3d at 160, 389 N.E.2d at 212. Further, any claim for medical expenses incurred in treating a
minor for injuries sustained due to a tortfeasor's negligence belongs to the parents, rather than
the child. Kennedy v. Kiss, 89 Ill. App. 3d 890, 894, 412 N.E.2d 624, 628 (1980). The
minor's doctrine is premised on both the rule that a minor child cannot be a third-party
beneficiary of an insurance contract and the related rule that only the parents can recover for
the child's medical expenses. See In re Estate of Hammond, 141 Ill. App. 3d at 967, 491
N.E.2d at 87.
As previously noted, Missouri takes a different approach to minors' claims for
personal injuries that include claims for medical expenses. The Missouri Supreme Court
found that the primary purpose behind the rule that a cause of action for a minor's medical
expenses lies only with the minor's parents was to prevent double recoveries. Because the
court found that this purpose could be served through other means, it held that a cause of
action for medical expenses belonged jointly to the minor child and the parents. Boley, 905
5
S.W.2d at 90.
Brooke filed her underlying medical malpractice suit in Missouri against three
Missouri defendants. Because of this difference in the law, Phil and Tracy did not need to
file a separate claim seeking compensation for Brooke's medical expenses. Primax argues
that this fact brings the case within the exception to the minor's doctrine found by the Sosin
court. We disagree.
In Sosin, a minor who was covered under his father's health insurance plan was
seriously and permanently injured in a car accident. After he was injured, his father signed a
written reimbursement agreement that was consistent with the reimbursement clause in his
insurance policy. Sosin, 258 Ill. App. 3d at 950, 630 N.E.2d at 970. The mother, as the next
friend of her son, filed a lawsuit against the driver. She expressly assigned to her son her
claim for medical expenses. Sosin, 258 Ill. App. 3d at 954, 630 N.E.2d at 972. The trial
court found that, by these actions, the parties manifested an intent to make the minor a third-
party beneficiary of the contract, and the appellate court held that this finding was supported
by the evidence. Sosin, 258 Ill. App. 3d at 952, 630 N.E.2d at 971. This holding is
consistent with the general principle that when a party assigns a cause of action to another,
the claim is subject to any defenses to it that might have been asserted against the party
assigning the claim. See Kennedy, 89 Ill. App. 3d at 895, 412 N.E.2d at 628. In the instant
case, by contrast, there is no allegation that Phil or Tracy took any affirmative steps from
which a court could infer an intent to make Brooke a third-party beneficiary of Tracy's
insurance contract. Thus, we find the case at bar readily distinguishable from Sosin.
Primax argues, however, that the instant case is analogous to Sosin in one other
respect. In Sosin, the appellate court observed that the insurance company made payments to
the minor that were "so large and continuous that, when taken together with those payments
[the minor] has a legal right to expect under the contract in the future, when he is no longer a
6
minor, they constitute a financial benefit to the minor himself." Sosin, 258 Ill. App. 3d at
953, 630 N.E.2d at 972. The instant case likewise involves medical expenses that will
continue throughout Brooke's life. We do not believe that this fact alone is sufficient to bring
this case within the ambit of Sosin's holding. That court focused on the actions of the parents
that had given the minor third-party beneficiary status. Simply put, if Brooke was not a
third-party beneficiary to Tracy's insurance policy and did not receive compensation for her
medical expenses in the settlement, Primax has no claim on her recovery even though she
will eventually receive a financial benefit from the insurance coverage when she reaches
adulthood.
The instant case is somewhat different from Klem and other cases applying the minor's
doctrine, in that Brooke was able to assert her own claim for medical expenses. However,
upon consideration of all the facts pled by Primax, we do not find that this distinction
requires a different result. The Athertons point out that Brooke's settlement does not
segregate a portion meant to compensate her for medical expenses that have been paid by the
health plan. In support of this contention, they include a copy of the Missouri court's order
approving the settlement. We note that the Missouri order was not made a part of the record
in this appeal by either party, and as Primax contends, it was never considered by the trial
court in this action. However, we may take judicial notice of a public record that is a part of
the records of another court. See Turner-El v. West, 349 Ill. App. 3d 475, 481, 811 N.E.2d
728, 734 (2004).
Moreover, settlements, unlike verdicts, generally do not specify any portion as
compensation for each type of damage alleged by the plaintiff. Primax does not allege that
the settlement in Brooke's medical malpractice action included such a breakdown; rather, it
contends that the settlement "must have" included compensation for her medical expenses.
We do not agree. We find the instant case analogous to Klem in this regard. There, a six-
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year-old boy was injured when he was struck by a car. He was covered under his father's
health insurance plan, which paid $26,740 for his medical care after the accident. Klem, 279
Ill. App. 3d at 736, 665 N.E.2d at 516. His parents filed a two-count complaint against the
driver of the car. The first count was brought by the parents as the parents and next friends
of their son and sought compensation for the child's injuries. The second count was brought
by the parents in their individual capacities and sought damages for their medical expenses.
Klem, 279 Ill. App. 3d at 737, 665 N.E.2d at 516. The parents dismissed their own claim and
then, one month later, settled the remaining claim on behalf of their son for $15,000. Klem,
279 Ill. App. 3d at 737, 665 N.E.2d at 516. The insurance company argued, much as Primax
does here, that the settlement amounted to a double recovery for the parents because they
received the benefit of payments from the insurance plan. Klem, 279 Ill. App. 3d at 739, 665
N.E.2d at 517. Implicit in this argument is a contention that the parents also received some
recovery in the settlement as compensation for medical expenses. The appeals court rejected
this argument, noting that because the settlement was received by the child's estate, as
Brooke's settlement was in the instant case, the parents made no recovery. Klem, 279 Ill.
App. 3d at 739, 665 N.E.2d at 517. In other words, it did not follow from the fact that the
claim was asserted and then dismissed, apparently in conjunction with the settlement, that the
settlement included compensation for the medical expenses.
We find the contention that some amount must have been recovered for medical
expenses merely because the complaint included an allegation that they had been incurred
fallacious. It ignores the reality of how settlements are reached. The complaint in the
Missouri malpractice action alleges that Brooke is incapacitated by the injury she sustained.
At the age of six, when the complaint was filed, she was unable to walk, speak, or even eat
without being fed intravenously. The complaint alleged that she would never be able to
engage in any sort of income-producing activity and would require special education and
8
therapy services in addition to ongoing medical expenses. A recovery that would adequately
compensate her for all the damages alleged would almost certainly be beyond any amount
she could realistically hope to recover in a settlement. A more realistic inference to be drawn
from the facts as pled is that the amount of the settlement was determined by the limits of the
insurance policies. Because this case comes to us from a ruling on a motion to dismiss, we
cannot presume that to be the case; however, we think it illustrates the flaw in Primax's
argument. Primax was required to allege something more specific than that Brooke's
settlement must have included some compensation for medical expenses merely because she
alleged in her complaint that she had incurred them.
Alternatively, Primax argues that it alleged facts sufficient to demonstrate that it was
entitled to reimbursement from Phil and Tracy. The Missouri court ordered the settlement
funds paid directly to Brooke's estate; therefore, Phil and Tracy did not receive any proceeds.
In a footnote in its brief, however, Primax argues, "[I]f Tracy and Phil impermissibly
relinquished their rights to recover Brooke's medical expenses without consideration as a
condition of the settlement agreement, they would have committed a fraud upon Primax'[s]
rights[,] which is equally actionable." In support of this contention, Primax cites Smith v.
Marzolf, 59 Ill. App. 3d 635, 375 N.E.2d 995 (1978). We find Smith distinguishable.
There, a man was seriously injured when he was pinned between a truck he was
servicing at his gas station and a car driven by the defendant. Smith, 59 Ill. App. 3d at 636,
375 N.E.2d at 996. He and his wife filed an action against the driver that included a claim by
the wife for a loss of consortium. They attempted to settle with the defendant for $75,000.
The agreement called for the injured husband to accept $10,000 in settlement of his claim
and the wife to accept $65,000 for her loss-of-consortium claim. Smith, 59 Ill. App. 3d at
637, 375 N.E.2d at 996-97. The insurance company objected to the proposed settlement.
The trial court agreed that it was a fraudulent attempt to avoid the insurer's subrogation
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rights, set aside the settlement agreement, and vacated its order dismissing the plaintiffs'
claims pursuant to the settlement. Smith, 59 Ill. App. 3d at 637, 375 N.E.2d at 997. The
cause then went to a trial, and the jury returned a verdict of $130,000. Smith, 59 Ill. App. 3d
at 637, 375 N.E.2d at 997.
On appeal, the reviewing court upheld the trial court's order setting aside the
settlement, finding that the "agree[ment] to allocate 77 percent of the settlement proceeds" to
the plaintiff's wife constituted a breach of the plaintiff's duties to his insurance company.
Smith, 59 Ill. App. 3d at 639, 375 N.E.2d at 998. Here, by contrast, there is no evidence and
no allegation that Phil and Tracy Atherton did anything more than what the parents did in
KlemBthey settled their daughter's entire case in a settlement that did not specifically
segregate an amount of money attributable to each type of damages she alleged she suffered.
Primax's remedy was to intervene in the Missouri malpractice action, which it chose not to
do. See Whitehead v. Lakeside Hospital Ass'n, 844 S.W.2d 475, 478-79 (Mo. App. 1992)
(citing Rule 52.12(a) of Missouri Supreme Court Rules of Civil Procedure and explaining
that a party may intervene of right if it has a direct interest in the litigation, which is an
interest that can be directly affected by the outcome of the litigation).
In conclusion, we find that Primax has not alleged facts sufficient to survive a motion
to dismiss. We therefore affirm the order of the trial court dismissing its complaint.
Affirmed.
WELCH and HOPKINS, JJ., concur.
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NO. 5-04-0561
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
___________________________________________________________________________________
PRIMAX RECOVERIES, INC., ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Pulaski County.
)
v. ) No. 02-CH-2
)
TRACY ATHERTON, BROOKE ATHERTON, )
and PHIL ATHERTON, ) Honorable
) Mark H. Clarke,
Defendants-Appellees. ) Judge, presiding.
___________________________________________________________________________________
Opinion Filed: May 4, 2006
___________________________________________________________________________________
Justices: Honorable Melissa A. Chapman, J.,
Honorable Thomas M. Welch, J., and
Honorable Terrence J. Hopkins, J.,
Concur
___________________________________________________________________________________
Attorneys David A. Belofsky, Douglas M. Belofsky, Lance R. Minor, Belofsky & Belofsky,
for P.C., 33 North Dearborn Street, Suite 2330, Chicago, IL 60602
Appellant
___________________________________________________________________________________
Attorneys Mark E. Goodman, Capes, Sokol, Goodman & Sarachan, P.C., 7701 Forsyth Blvd.,
for Fourth Floor, St. Louis, MO 63105; Jerome E. McDonald, Campbell, Black, Carnine,
Appellees Hedin, Ballard & McDonald, P.O. Drawer C, Mt. Vernon, IL 62864
___________________________________________________________________________________