Kobold v. Aetna (CA1 3/31/16)

The subject is narrow but the procedure reminds us that, for better or worse, there is more than one way to skin a cat.

Kobold, a federal employee, was injured in a motorcycle accident. Aetna, his employer’s insurer, paid his medical bills. When he obtained judgment against the other driver Aetna tried to assert a lien against his recovery. Although prohibited by Arizona law this is allowed by Aetna’s policy; under federal law – the Federal Employee Health Benefits Act (5 USC 8902(m)(1)) – the insurance policy supersedes state law (we hope you are startled by that; even the U.S. Supreme Court considers it “unusual”). The trial court denied Aetna’s claim; the Court of Appeals affirmed, reasoning that the language of the federal statute didn’t quite cover reimbursement claims.

Aetna reacted to that in a traditional, if slightly unusual in this context, way – it filed a petition for writ of certiorari with the U.S. Supreme Court. But it also reacted in the modern way – by sending in the lobbyists. So by the time the Supreme Court got around to considering the case the federal Office of Personnel Management had already written new regulations saying that the statute does too allow Aetna’s claim. The Supreme Court accepted cert but remanded for reconsideration in light of the new regulations.

The Court of Appeals now reverses its earlier ruling. The OPM is an agency entitled to deference in the matter. Its new regulation is a reasonable interpretation of what everybody agrees is an ambiguous statute. “The fact that the regulations postdate our [earlier] decision  . . . does not deprive them of authority” because the court hadn’t concluded that the statute unambiguously leaves no room for the OPM’s construction. The court remands with instructions to enter judgment for Aetna.

Substantively the Court of Appeals’ first opinion was probably wrong anyway; the court was stretching things a bit to uphold Arizona law and policy. But the important lesson is to keep your case alive long enough to let it be decided not by mere judges but by the people who have real power in our society, the bureaucrats.

(Opinion: Kobold v. Aetna)