## Facts

- Leslie Stadalman was employed by Riverside Hospital and was covered under Riverside’s employee health care plan.
- She was also covered as a dependent under her spouse’s City of Wichita group health plan administered by Blue Cross and Blue Shield of Kansas, Inc.
- In fall 1982, Leslie incurred $1,963.19 in medical expenses.
- Riverside refused to pay, asserting its plan provided only secondary coverage because other coverage existed.
- Blue Cross also initially denied liability on the same basis, but ultimately paid the claim while reserving the right to seek contribution/indemnity from Riverside.
- Both plans contained coordination-of-benefits/non-duplication provisions that attempted to make their coverage secondary when other group coverage was available, creating a conflict.

## Issues

1. Whether ERISA preempted state-law rules used to determine primary versus secondary responsibility in a dispute between two group health plan providers.
2. When two group plans covering the same person contain conflicting coordination-of-benefits/non-duplication provisions, whether the plan covering the person as an employee is primary over the plan covering the person as a dependent.

## Decision

- The Kansas Supreme Court held ERISA preemption did not apply to this inter-plan coverage dispute.
- The court held the plan covering the individual as an employee is primary, and the plan covering the individual as a dependent is secondary.
- The court rejected the district court’s 50–50 allocation and required Riverside’s plan to pay as primary, with Blue Cross secondary.

## Legal Principles

- ERISA preemption may be inapplicable where the controversy is between plan providers over allocation of primary coverage rather than a participant’s claim for benefits against a plan.
- When competing coordination-of-benefits/non-duplication clauses would otherwise leave each plan asserting secondary status, courts apply interpretive rules to ensure workable primary coverage rather than circular denial.
- In overlapping group coverage, the plan that insures a person as an employee is primary to a plan that insures the person only as a dependent.

## Conclusion

The court determined that ERISA did not displace state-law allocation rules in this dispute and resolved conflicting coordination clauses by applying an employee-versus-dependent priority rule, making the employee’s own group plan primary and the dependent plan secondary.


Blue Cross & Blue Shield of Kan., Inc. v. Riverside Hosp., 237 Kan. 829, 703 P.2d 1384 (1985)