## Facts

- In 1983, Cornelius M. Berry, a New York State Capitol Police Officer, was admitted to St. Peter’s Hospital for diagnostic testing, including a fiber-optic bronchoscopy.
- During or as a result of the procedure/anesthesia, Berry suffered a catastrophic event leaving him in a permanent coma requiring respirator and feeding tube support and continuous nursing care.
- Berry’s wife was appointed conservator in 1985 and brought a medical malpractice action against St. Peter’s Hospital and physicians, alleging negligent care caused the coma.
- Berry was covered by an employer-sponsored health benefits plan administered by Metropolitan Life Insurance Company and sponsored by his employer (later Lucent Technologies).
- The plan paid substantial medical expenses and contained reimbursement/subrogation provisions asserting a right to recover medical payments from any third-party tort recovery.
- In 1995, Berry and St. Peter’s Hospital entered a court-approved, sealed settlement that characterized the payment as for lost income and pain and suffering and did not include an amount designated for medical expenses.
- MetLife and Lucent were not notified of, and did not participate in, the settlement.

## Issues

1. Whether the health plan administrator and sponsor could enforce contractual reimbursement/subrogation rights against proceeds of Berry’s malpractice settlement.
2. Whether the settling parties could allocate the entire settlement to non-medical damages to defeat the plan’s reimbursement/subrogation rights when the plan was not notified or given an opportunity to be heard.
3. What proceedings were required to determine whether and to what extent the settlement represented recovery for medical expenses subject to reimbursement.

## Decision

- The Appellate Division reversed the trial court to the extent it denied MetLife/Lucent enforcement of their contractual reimbursement/subrogation claims against the settlement proceeds.
- The court held that the settlement’s characterization of damages as solely lost income and pain and suffering was not dispositive against nonparties holding contractual reimbursement rights.
- The court remitted for further proceedings to determine whether, and to what extent, the settlement represented recovery of medical expenses subject to reimbursement under the plan.

## Legal Principles

- Contractual reimbursement/subrogation provisions in health or employee benefit plans are generally enforceable under New York law.
- Parties to a tort settlement cannot defeat a plan’s reimbursement rights merely by labeling the settlement as non-medical damages, particularly where the plan was not notified and substantial medical expenses were paid.
- Courts may look beyond the settlement’s form to assess whether the recovery effectively includes compensation for medical expenses and to prevent double recovery.

## Conclusion

The court permitted the health plan to pursue reimbursement despite a sealed settlement allocating the recovery to non-medical damages, and it required further proceedings to determine what portion of the settlement, if any, should be treated as medical-expense recovery subject to the plan’s contractual rights.


Berry v. St. Peter's Hosp., 250 A.D.2d 63, 678 N.Y.S.2d 674 (N.Y. App. Div. 3d Dep't 1998)