Mellor v. Wasatch Crest Insurance Co. in Liquidation

2015 UT App 239THE UTAH COURT OF APPEALS
CHRIS ANN MELLOR,
Appellant,
v.
WASATCH CREST INSURANCE COMPANY IN LIQUIDATION,
Appellee.
Opinion
No. 20131174-CA
Filed September 17, 2015
Third District Court, Salt Lake Department
The Honorable Kate A. Toomey
No. 030915527
Brian S. King, Attorney for Appellant
John P. Harrington and Cecilia M. Romero,
Attorneys for Appellee
JUDGE J. FREDERIC VOROS JR. authored this Opinion, in which
JUDGES JAMES Z. DAVIS and STEPHEN L. ROTH concurred.
VOROS, Judge:
¶1 This appeal involves a claim against an insolvent health
insurance company in a liquidation proceeding. The district
court ruled the claim untimely and, in any event, that it did not
qualify for priority treatment, because Medicaid had reimbursed
the claimant for the losses she claimed. We reverse on the first
point and affirm on the second.
BACKGROUND
¶2 In early August 2001, Appellant Chris Ann Mellor’s son
suffered a near-drowning incident that left him with permanent
injuries. At the time of the incident, Mellor’s son had health
Mellor v. Wasatch Crest Insurance Company in Liquidation
coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) through his father’s
insurance policy with Wasatch Crest Insurance Company
(Wasatch Crest). After the accident, Mellor also obtained
Medicaid coverage for her son. Medicaid back-dated its coverage
to August 1, 2001. Wasatch Crest paid claims arising from the
near-drowning incident until November 2001. Then Wasatch
Crest determined that Mellor’s son’s Medicaid coverage made
him ineligible for coverage under the terms of its policy.
Wasatch Crest informed Mellor that her son had no coverage
under its policy due to his Medicaid coverage, and consequently,
as of November 1, 2001, she stopped paying COBRA premiums.
Wasatch Crest then began requesting and receiving
reimbursements for payments it made to providers on claims
during the period of the overlapping coverage. Since August 1,
2001, Medicaid has paid Mellor’s son’s medical expenses in full.
¶3 In September 2002, Mellor entered into a collection
agreement with the Utah State Office of Recovery Services
(ORS). The collection agreement made ORS an assignee of any
recovery Mellor obtained from Wasatch Crest for wrongly
denying her son’s coverage. In March 2003, Mellor filed suit
against Wasatch Crest alleging, among other things, breach of
contract for its failure to pay Mellor’s son’s medical expenses. In
July 2003, the district court declared Wasatch Crest insolvent
under Utah’s Insurers Rehabilitation and Liquidation statutes
(the Liquidation Act), Utah Code Ann. §§ 31A-27-101 to -411
(LexisNexis 2002). 1 The district court also appointed a liquidator
1. In 2007, the legislature repealed and replaced most of the
Liquidation Act with the Insurer Receivership Act. The Insurer
Receivership Act does not apply to liquidation proceedings
ongoing as of April 30, 2007. See Utah Code Ann. § 31A-27a-119
(LexisNexis 2014); see also id. § 31A-27a-102(9)(b). Because
Wasatch Crest’s liquidation was ongoing as of April 30, 2007, the
(continued…)
20131174-CA 2 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
(the Liquidator) to manage the Wasatch Crest estate, and the
court set a July 31, 2004 deadline to file a proof of claim against
Wasatch Crest’s estate.
¶4 Wasatch Crest’s insolvency automatically stayed all
pending litigation against it. Id. § 31A-27-317(1). Mellor then
submitted a timely proof of claim to the Liquidator. The
Liquidator denied Mellor’s claim in its first amended notice of
determination on the ground that Mellor’s son’s Medicaid
coverage excluded him from coverage under the terms of
Wasatch Crest’s policy. Mellor filed a timely objection to the first
amended notice of determination. A referee found that Wasatch
Crest had no liability for the claims Mellor asserted on behalf of
her son after the date that he acquired Medicaid coverage. The
referee recommended that the district court affirm the
Liquidator’s denial of Mellor’s proof of claim.
¶5 At a hearing before the district court on Mellor’s objection
to the referee’s findings and recommendation, the Liquidator
raised the issue of Mellor’s standing and moved to have her
claim dismissed. The district court ultimately determined that
Mellor had standing to assert claims on behalf of her son.
Nevertheless, the district court approved the recommendation of
the referee and denied Mellor’s claim on the merits.
¶6 Mellor appealed the district court’s ruling on the issue of
her son’s COBRA coverage. The Liquidator cross-appealed on
the issue of standing. The Utah Supreme Court ruled for Mellor
on both issues—affirming on the issue of standing but reversing
on the issue of coverage. Mellor v. Wasatch Crest Mut. Ins. Co.
(…continued)
Insurer Receivership Act does not apply. We apply the
Liquidation Act in effect at the time Wasatch Crest’s liquidation
commenced.
20131174-CA 3 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
(Mellor I), 2009 UT 5, ¶¶ 9, 20, 201 P.3d 1004. The court held that
Mellor’s son’s Medicaid coverage did not terminate his COBRA
coverage as a matter of contract law. Id. ¶ 20. Accordingly, the
supreme court concluded that because Mellor’s son “is a
beneficiary of the Wasatch Crest plan, he, and through him his
mother . . . , have standing to pursue an action for recovery of
benefits owing . . . under the plan.” Id. ¶ 21.
¶7 For approximately one year after remittitur from the
supreme court, little happened with Mellor’s claim. In an
apparent effort to move things along, Mellor filed a motion for
summary judgment in the district court. She asserted that, under
Mellor I, her son was a covered beneficiary of the Wasatch Crest
insurance plan. Therefore, she argued, principles of estoppel
entitled her son to the reinstatement of his COBRA coverage
under the Wasatch Crest insurance plan, and accordingly, her
son had a reimbursable claim.
¶8 The Liquidator moved to strike or stay Mellor’s motion
for summary judgment. The Liquidator argued that Mellor’s
claim was not properly before the district court, because the
Liquidator had not yet made a second determination on Mellor’s
claim. In the alternative, the Liquidator opposed Mellor’s motion
for summary judgment on the merits. The Liquidator explained,
“As a result of . . . [the Liquidation Act’s] priority scheme, it is
evident that Mellor does not have a Class Three Claim.” The
Liquidator continued that any valid claim arising from the
collection agreement Mellor entered into with ORS “the
Liquidator will classify . . . as Class Six.”
¶9 Mellor filed a response to the Liquidator’s opposition to
the motion for summary judgment. In her response, Mellor
argued that the parties need not wait for the Liquidator to make
a second determination on her claim, because the Liquidator’s
opposition to summary judgment made the Liquidator’s official
denial a mere formality. Mellor went on to challenge the
20131174-CA 4 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
Liquidator’s opposition on the merits and its determination that
Mellor’s claim constituted a class-six and not a class-three claim.
Mellor then requested that the district court “proceed with a
ruling on the proper classification of Mellor’s claim.”
¶10 The Liquidator filed a reply memorandum. The reply
memorandum’s caption page indicated, in a single sentence, that
the Liquidator had attached his official denial of Mellor’s
claim—the second amended notice of determination (the Second
Notice)—as an exhibit to the reply memorandum:
In conjunction with this Reply Memorandum, the
Liquidator . . . attaches its Second Amended Notice
of Determination with respect to the Proof of Claim
filed by [Mellor] on behalf of her son . . . , a copy of
which is attached hereto as Exhibit A.
The Second Notice, dated June 29, 2010, denied Mellor’s claim:
Based upon review of the documents that were
submitted and the records of [Wasatch Crest], the
Liquidator has DENIED the claim in the amount of
$200,000+. The basis for the Denial is included in
the attached Reply Memorandum, the essence of
which is that [Mellor] has been indemnified by a
third party [Medicaid] and thus has suffered no
unreimbursed loss . . . .
The Liquidator’s reply memorandum explained that he denied
Mellor’s claim because “Medicaid payments indemnified Mellor
against any claims by doctors or hospitals.” Further, because
Medicaid indemnified Mellor, the Liquidator reiterated that the
Liquidation Act explicitly excludes her claim from the class-three
priority classification. The Liquidator concluded, “[I]t is
apparent that Mellor has no claim against the liquidation estate
either as a Class Three or Class Six since Mellor has suffered no
loss that has not been covered.” The Liquidator requested “that
20131174-CA 5 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
the Motion for Summary Judgment be dismissed and that the
[Second Notice] constitute the final determination of the Mellor
Claim.”
¶11 In November 2010, the district court issued its first
memorandum decision and order (the 2010 Order). The district
court ruled that under the terms of the Liquidation Act Mellor
could not assert a class-three claim, because Medicaid had
indemnified her for claims based on her son’s accident. The
court concluded that the statute relegated Mellor’s claim to the
statute’s class-six catch-all classification. The district court then
denied Mellor’s motion for summary judgment and stayed
further proceedings in the underlying lawsuit—i.e., any
proceedings brought against Wasatch Crest before its insolvency
and unrelated to Wasatch Crest’s liquidation. Mellor appealed.
¶12 The Utah Supreme Court dismissed Mellor’s appeal for
lack of jurisdiction. Mellor v. Wasatch Crest Mut. Ins. (Mellor II),
2012 UT 24, ¶ 17, 282 P.3d 981. In Mellor II, the supreme court
determined that it lacked jurisdiction over Mellor’s appeal
because she did not appeal from a final judgment. Id. The
supreme court explained that the district court’s “denial of
[Mellor’s] summary judgment motion and stay of further
proceedings obviously leave the merits of the case unresolved.”
Id. ¶ 12. It continued, “Issues yet remain in dispute in the
proceedings below regarding the value of Mellor’s claim and
whether the method by which Wasatch Crest provided [the
Second Notice] satisfies the requirements of the Liquidation
Act.” Id.
¶13 Back before the district court, Mellor filed an objection to
the Second Notice. However, counting from the date of the
Second Notice, her objection was untimely. Accordingly, Mellor
challenged the Second Notice’s validity given the means by
which the Liquidator had provided it, namely, attached as an
exhibit to a reply memorandum in connection with a summary
20131174-CA 6 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
judgment motion. Mellor requested that the district court
“require the Liquidator to issue and serve a Notice of
Determination of the priority and classification of Mellor’s claim
. . . [so as to] allow[] for a full and fair review of the Liquidator’s
actions.” The Liquidator responded that the Second Notice
complied with the requirements of the statute, and because
Mellor did not object within sixty days of the Second Notice, the
statute rendered her objection untimely.
¶14 In December 2013, the district court issued its second
memorandum decision and order (the 2013 Order). The district
court ruled that the means by which the Liquidator served the
Second Notice complied with the statute and that Mellor never
disputed that she received actual notice. The district court also
ruled that “Mellor had 60 days from the date of notice to file an
objection. She did not object within the given time.” (Citation
omitted.) Finally, the district court explained that while the
statute requires the Liquidator’s “claim determination [to] be
reviewed and approved by the Court,” the 2010 Order
“effectively approved the Liquidator’s classification of [Mellor’s]
claim [as having a class-six priority], and a formal request by the
Liquidator [for approval] is not necessary as it would be
redundant.” Mellor timely appeals the 2013 Order.
ISSUES ON APPEAL
¶15 Mellor raises three issues on appeal. First, Mellor
contends that the Second Notice did not constitute sufficient
notice. Second, Mellor contends that even if the Second Notice
constituted sufficient notice, her “claim is not barred by any
failure to submit an objection to the Liquidator’s Second Notice.”
Finally, Mellor contends that the district court erred by ruling in
the 2010 Order, and reaffirming in the 2013 Order, that Mellor’s
claim does not enjoy a class-three priority classification under
the Liquidation Act.
20131174-CA 7 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
ANALYSIS
I. Sufficient Notice
¶16 Mellor first contends that the Second Notice did not
constitute sufficient notice. Whether Mellor “received proper
statutory notice presents a question of law, which [we] review[]
for correctness.” Salt Lake City Corp. v. Jordan River Restoration
Network, 2012 UT 84, ¶ 42, 299 P.3d 990 (citation and internal
quotation marks omitted).
¶17 The Liquidation Act explains the manner by which a
liquidator shall notify claimants of disallowed claims:
When a claim is disallowed in whole or in part by
the liquidator, written notice of the determination
and of the right to object shall be given promptly to
the claimant or the claimant’s attorney of record, if
any, by first-class mail at the addresses shown in
the proof of claim.
Utah Code Ann. § 31A-27-332(1)(a) (LexisNexis 2002).
¶18 Here, the Liquidator provided notice by attaching the
Second Notice as an exhibit to a memorandum filed with the
district court. We think it helpful at this point to recap the flurry
of memoranda filed with the district court, and served on the
parties, after Mellor II: (1) Mellor filed a motion for summary
judgment on her claim (Mellor’s Motion); (2) the Liquidator filed
a motion to strike or stay Mellor’s Motion, and in the alternative,
to oppose it on the merits (the Opposition Motion); (3) Mellor
filed a response challenging the Opposition Motion (Mellor’s
Response); and (4) the Liquidator filed a reply memorandum to
Mellor’s response (the Reply Memo). The Liquidator attached
the Second Notice as an exhibit to the Reply Memo—the last of
these documents filed after Mellor II.
20131174-CA 8 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
¶19 Mellor argues that “attaching the [Second] Notice to the
Liquidator’s Reply Memo as an exhibit was insufficient to
constitute ‘service’ of the [Second] Notice.” The Liquidator
argues that it complied with the requirements of the statute
when it attached the Second Notice as an exhibit to the Reply
Memo and sent it to Mellor via first-class mail.
¶20 The Liquidation Act does not require the Liquidator to
“formally serve” Mellor or her counsel, as she argues.
Rather, the Liquidation Act requires that “written notice of the
determination and of the right to object . . . be given promptly
to the claimant or the claimant’s attorney of record . . . by first-
class mail.” Id. § 31A-27-332(1)(a). Further, “[a]dequate notice
is . . . notice reasonably calculated to apprise a person of an
action, proceeding, or motion. Notice sufficient to permit an
objection or defense.” Bissland v. Bankhead, 2007 UT 86, ¶ 16, 171
P.3d 430 (omission in original) (citation and internal quotation
marks omitted).
¶21 We conclude that Mellor received notice of the denial of
her claim. Mellor does not contest that she received actual notice
of the Liquidator’s denial or its basis. Nor could she—the
Opposition Motion apprised Mellor of the Liquidator’s denial of
her claim, as well as the basis of the denial. She acknowledged
that denial and opposed it in her district court filings. We share
Mellor’s skepticism that merely attaching the required notice as
an exhibit to a reply memorandum constitutes notice
“reasonably calculated to apprise a person of an action,
proceeding, or motion” or provides “[n]otice sufficient to permit
an objection or defense.” Id. (citation and internal quotation
marks omitted). However, on these facts we conclude that the
totality of the Liquidator’s filings in connection with Mellor’s
summary judgment motion did constitute notice reasonably
calculated to apprise Mellor of the denial of her claim and its
basis, and thus satisfied the requirements of the Liquidation Act.
20131174-CA 9 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
II. Timely Objection
¶22 Mellor next contends that the district court erred in ruling
in the 2013 Order that “Mellor had 60 days from the date of [the
Second Notice] to file an objection. She did not object within the
given time.” (Citation omitted.) Mellor contends that her claim
“is not barred by any failure to submit an objection to the . . .
Second Notice.” Whether Mellor filed a timely objection under
the Liquidation Act “involves the interpretation and application
of a statute” and the district court’s “legal conclusion is granted
no particular deference but is reviewed for correctness.” See Salt
Lake Child & Family Therapy Clinic, Inc. v. Frederick, 890 P.2d 1017,
1019 (Utah 1995).
¶23 The Liquidation Act establishes a time frame within
which a claimant may object to the liquidator’s denial of her
claim:
(1)(b)(i) Within 60 days from the mailing of the
notice [of a disallowed claim], the claimant may file
objections with the court.
(1)(b)(ii) If objections are not filed within the period
provided in Subsection (1)(b)(i), the claimant may
not further object to the determination.
Utah Code Ann. § 31A-27-332(1)(b) (LexisNexis 2002).
¶24 The Liquidator argues that under the plain language of
the Liquidation Act “Mellor was required to file an objection in
the Trial Court before August 28, 2010, i.e., 60 days after the
receipt of the Second [Notice] dated June 28, 2010.” 2
Accordingly, the Liquidator asserts that Mellor “did not comply
2. We note that the record reflects that the Second Notice and the
Reply Memo to which it was attached, are actually dated June
29, 2010, not June 28 as indicated in the Liquidator’s brief.
20131174-CA 10 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
with the statute,” because “[o]ver three years after the deadline,
Mellor filed an untimely objection” to the Second Notice. We
agree that the objection Mellor filed in 2013 would be untimely
had that been the only objection Mellor filed. However, just as
we concluded that the memoranda served by the Liquidator in
connection with the summary judgment motion gave Mellor
actual notice of the denial of her claim and thus satisfied the
requirements of subsection 332(1)(a), we likewise conclude that
the memoranda filed with the court by Mellor gave the
Liquidator actual and timely notice of her objection to that denial
and thus satisfied subsection 332(1)(b).
¶25 The Liquidation Act does not prescribe any particular
form by which a claimant may file an objection to a disallowed
claim. The Liquidation Act simply states that “[w]ithin 60 days
from the mailing of the notice [of a disallowed claim] the
claimant may file objections with the court.” Utah Code Ann.
§ 31A-27-332(1)(b)(i). The provision does not require a claimant’s
objection take any particular form or have any particular
procedural label. Nor does the provision require that a claimant
file her objection in any special manner—unlike the provision
requiring a liquidator to send notice of disallowed claims via
first-class mail. See id. § 31A-27-332(1)(a). The Liquidation Act
merely requires a claimant to file her objection with the court
within the statutory sixty-day time frame. Id. § 31A-27-332(1)(b).
¶26 Mellor’s Response substantively objected to the basis of
the Liquidator’s denial of her claim and it constitutes a timely
objection under the Liquidation Act. Mellor filed her Response
with the district court as required under section 31A-27-332(1)(b)
of the Liquidation Act. And she filed it before August 28, 2010—
the date by which the Liquidator contends Mellor had to object.
¶27 During oral argument before this court, the Liquidator
argued that we cannot construe Mellor’s Response as a timely
objection because Mellor filed it prematurely, that is, before the
20131174-CA 11 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
Liquidator had issued the Second Notice. However, Mellor’s
Response was filed within sixty days of the mailing of the
Opposition Motion, which substantively informed her of the
Liquidator’s denial and its basis; and her response addressed the
merits of the Liquidator’s subsequent denial head on.
Accordingly, we hold that under the peculiar circumstances of
this case, Mellor timely objected to the Liquidator’s denial of her
claim. 3
III. Priority of Claim
¶28 Finally, Mellor contends that the district court erred in
ruling that Mellor’s claim has a priority, under the Liquidation
Act, of class six rather than class three. Whether the district court
erred “involves the interpretation and application of [the
Liquidation Act]” and the district court’s “legal conclusion is
granted no particular deference but is reviewed for correctness.”
See Salt Lake Child & Family Therapy Clinic, Inc. v. Frederick, 890
P.2d 1017, 1019 (Utah 1995).
¶29 Section 31A-27-335 of the Liquidation Act establishes the
priority of claims in liquidation proceedings. A class-three
priority represents the highest priority classification Mellor’s
claim could have. See Utah Code Ann. § 31A-27-335(2)(a), (b)
(LexisNexis 2002) (defining class one as “the costs and expenses
of administration,” and class two as “the administrative
expenses of a guaranty association”). “Class three is all claims
under policies for losses incurred . . . . All claims under life and
health insurance and annuity policies shall be treated as
loss claims.” Id. § 31A-27-335(2)(c). Class-three claims for losses
include government claims, third-party claims, unearned
premium claims, and guaranty association claims other than
3. We also note that the Liquidator does not claim that it lacked
actual notice of Mellor’s objection.
20131174-CA 12 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
those classified as class two. Id. § 31A-27-335(2)(c)(i). The
Liquidation Act explicitly excludes from class three “[t]hat
portion of any loss for which indemnification is provided by
other benefits.” Id. § 31A-27-335(2)(c)(iii). A class-six priority
represents the only other possible classification for Mellor’s
claim. See id. § 31A-27-335(2)(d), (e) (defining class four as
“claims of the federal government other than those claims
included under class three,” and class five as “debts due
employees for services, benefits, contractual or otherwise”).
“Class six is claims of any person, including claims of state or
local governments, except those specifically classified elsewhere
in this section.” Id. § 31A-27-335(2)(f)(i)(A).
¶30 Mellor advances two arguments for why her claim
warrants class-three priority. First, Mellor argues that her claim
constitutes a claim for losses incurred as a Wasatch Crest policy
holder. The supreme court in Mellor I held that “the Wasatch
Crest plan did not operate to terminate [Mellor’s son’s] coverage
as a matter of law when [he] became eligible for Medicaid
coverage.” 2009 UT 5, ¶ 20, 201 P.3d 1004. Accordingly, Mellor’s
son was entitled to Wasatch Crest policy coverage at least until
November 2001 when Mellor stopped paying the Wasatch Crest
policy’s COBRA premiums. Therefore, Mellor could arguably
assert a class-three claim for losses incurred as an insured under
the Wasatch Crest policy. 4
¶31 But Mellor has not actually incurred any out-of-pocket
loss as a result of Wasatch Crest’s allegedly wrongful denial of
claims. Mellor has no liability for any medical care her son
received, because Medicaid has paid for his care in full—
4. The Liquidation Act excludes from class three “obligations
incurred after . . . the policy has been canceled at the insured’s
request.” Utah Code Ann. § 31A-27-335(2)(c)(iv)(B)(III) (LexisNexis
2002).
20131174-CA 13 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
Medicaid has indemnified her of any liability owed to her son’s
medical care providers. The Liquidation Act expressly excludes
from class three “[t]hat portion of any loss for which
indemnification is provided by other benefits.” Utah Code Ann.
§ 31A-27-335(2)(c)(iii). Accordingly, Mellor’s claim for losses
incurred as a policy holder does not qualify for class-three
status.
¶32 Second, Mellor argues that ORS has a class-three claim
and that she submitted that claim on its behalf by virtue of the
collection agreement she entered with ORS. Mellor asserts that
ORS’s claim constitutes a class-three claim because it is a
“claim[] of the federal, state, or local government.” Id. § 31A-27-
335(2)(c)(i)(A). She further asserts that because ORS has not been
indemnified for its losses, section 31A-27-335(2)(c)(iii) of the
Liquidation Act does not exclude ORS’s claim from the class-
three priority. Thus, according to Mellor, “Even if Medicaid
indemnified Mellor for [her son’s] medical claims, nothing in the
[Liquidation Act] prevents the indemnitor, the Utah State
Medicaid program through its agent, ORS and Mellor in this
case, from stepping up to assert a Class Three rather than a Class
Six claim under the statute.”
¶33 As Mellor correctly points out, the Liquidation Act
allowed ORS to submit a class-three claim for the payments
Medicaid made on behalf of Mellor’s son while he still had
Wasatch Crest COBRA coverage. However, neither ORS nor
Medicaid, through Mellor or otherwise, ever submitted a proof
of claim to the Liquidator for these payments. ORS did submit a
Notice of Representation of Medicaid Claim stating, “Notice is
given that . . . the State of Utah entered into a written agreement
with . . . Mellor and her attorney allowing the Medicaid claim to
be included in the claim filed by . . . Mellor.” While ORS’s notice
alerted the district court and the Liquidator that it had a claim,
and that it would allow Mellor to include that claim along with
her own, Mellor’s proof of claim does not assert any claim on
20131174-CA 14 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
behalf of ORS. Rather, Mellor’s proof of claim asserts only her
own claim. Though Mellor’s proof of claim indicates that ORS
has a lien on her claim by virtue of the collection agreement, it
does not assert any claim on behalf of ORS. Rather, her proof of
claim checks a single item stating, “Claim is made by
policyholder for benefits provided by the policy.” And her proof
of claim has one line of explanation under the heading “The
identity and amount of security on the claim” stating, “State of
Utah, Office of Recovery Services—Medicaid Liens—$154,000+.”
In addition, in a memorandum filed with the district court,
Mellor’s prior counsel stated that he “has not appeared as
counsel for [ORS]. He only entered into a Collection Agreement
with ORS relative to this claim.” Importantly, “[t]he Collection
Agreement does nothing more than place a lien in favor of ORS
on any reimbursement for medical expenses that may be
recovered from Wasatch Crest.” Mellor I, 2009 UT 5, ¶ 10.
¶34 We conclude that Mellor has not asserted a claim on
behalf of ORS or Medicaid, only her own claim, in which ORS
has an interest. As a result, while ORS or Medicaid might have
class-three claims in their own right, Mellor cannot bootstrap her
independent claim to the class-three priority ORS or Medicaid
may have enjoyed if they had submitted their own timely proof
of claim, or if Mellor had actually asserted a claim on their
behalf.
¶35 Finally, Mellor cites many authorities to make the policy
argument that the law should not be construed in such a way as
to, in effect, transfer money from Medicaid to the shareholders of
insurance companies. See, e.g., S.S. v. State, 972 P.2d 439, 442
(Utah 1998) (“Payments made by a third party do not legally
become the property of the recipient until after a valid
settlement, which necessarily must include reimbursement to
Medicaid.”); Rehabilitation Ass’n of Va., Inc. v. Kozlowski, 42 F.3d
1444, 1447 (4th Cir. 1994) (“Medicaid is essentially a payer of last
resort, and one of the requirements of a state Medicaid plan is
20131174-CA 15 2015 UT App 239Mellor v. Wasatch Crest Insurance Company in Liquidation
that it attempt to identify and collect other insurance or source of
health care funding available to a Medicaid participant . . . .”).
But this principle, however wise, does not apply here. Wasatch
Crest is in liquidation. Mellor has offered no reason to believe
Wasatch Crest’s shareholders will receive anything by virtue of
our ruling today. Any Medicaid money transferred will be
effectively transferred from Medicaid to non-Medicaid recipients
whose insurance claims would be otherwise unreimbursed by
Wasatch Crest. The statutory scheme requires this result.
CONCLUSION
¶36 In sum, we hold as follows: the Liquidator’s litigation
filings constituted a denial of Mellor’s claim; Mellor’s litigation
filings constituted a timely objection to the Liquidator’s denial of
her claim; and the district court correctly concluded that Mellor’s
claim did not qualify for class-three priority. Accordingly, the
order of the district court is affirmed in part and reversed in
part, and the case is remanded for further proceedings, if any.
20131174-CA 16 2015 UT App 239