Kansas City federal judge's ruling relieves insurer of medical bills

Daily Record and the Kansas City Daily News-Press, Dec 12, 2006 by Charles Emerick

The plain language of a divorce decree settled a dispute between two insurers.

A federal judge in Kansas City awarded summary judgment to Blue Cross Blue Shield of Texas, despite the fact that it insured Julie Ann Richardson, whose son died from an illness while he was in her care and was listed as her dependant.

U.S. District Judge Fernando Gaitan turned to a 1993 divorce decree in his decision that Blue Cross did not owe more than $1 million to Connecticut General Life Insurance, claims administrator for Butler Manufacturing, the employer of Kyle Richardson's father. Neither side had knowledge of a case with similar circumstances.

"The divorce decree clearly granted custody to Michael Richardson," Gaitan wrote. "Although the parties may have agreed among themselves to a different living arrangement for their son Kyle, the divorce decree was never officially modified.

"Giving the terms of the divorce decree its plain, ordinary meaning, it is apparent that Michael Richardson was the parent who had custody of Kyle," he added.

Plaintiffs' attorney Erik Askelsen, of Stinson Morrison Hecker, disagreed with the summary judgment.

"What does 'custody' mean?" Askelsen said. "Does it mean physical or legal custody? The child lived with his mother for four years. It's our position that it would mean physical custody."

Defense attorney Dennis Palmer said the facts were in the decree.

"The court took a plain language approach," said Palmer, of Shughart Thomson & Kilroy. "It was obvious the divorce decree determines custody."

Michael and Julie Ann Richardson, who both live in Texas, divorced in March 1993, according to court records. They had two minor sons at the time.

A divorced decree named Michael "sole managing conservator," while Julie Ann was named "possessory conservator." The decree did not address which parent should provide medical coverage for their children.

Kyle stayed with his father for approximately the next six years after the divorce.

It was in 1999 that Kyle began living with his mother because he was having trouble in school and not getting along with his younger brother, Palmer said.

About four years later, in July 2003, Kyle went to the hospital, where it was discovered that he was ill with a disease that attacked the lining of his lungs.

Kyle died on Dec. 19, 2003. His medical bills throughout five months totaled more than $1 million. He was listed as a dependant on both Michael's and Julie Ann's insurance plans.

Connecticut General, as claims administrator for the Butler plan, paid the medical claims. During the claim adjudication process, Connecticut General alleged that it learned of the Blue Cross coverage and demanded reimbursement.

Blue Cross declined to pay, and the plaintiffs filed their suit in May 2005 seeking declaratory judgment against Blue Cross.

Though they lost their claims against Blue Cross, Butler Manufacturing and Connecticut General Life have one option remaining in an attempt to collect. The two also filed one count of breach of contract against Gerber Life Insurance.

The plaintiffs alleged that Gerber agreed to pay for medical claims that were covered by the Butler plan and in excess of $235,000. They seek at least $755,000 from Gerber for the alleged breach.

The plaintiffs will decide how to proceed with the judgment in favor of Blue Cross once their claim against Gerber is resolved, Askelsen said.