Personal Injury Claims and ERISA Subrogation

Recently the United States Supreme Court held that an employer as an administrator of a self funded  ERISA (Employee Retirement Income Security Act of 1974) plan for its employees could recover the insurance benefits it provided to that employee.

In this particular case, US Airways Versus McCutchen, the plaintiff was involved in a car accident.  He incurred medical expenses of approximately $66,000.  His attorney settled the case for $110,000 (not that it is relevant but I am assuming that the defendant in the car accident had limited insurance coverage).  I am also assuming that the attorney took the usual 40% of the settlement.  If my assumptions are correct the plaintiff was left with exactly $66,000.  He was also left with significant pain and suffering as a result of the accident.

His employer which administered the health insurance plan had a contract between employer and the employee.  That contract provided that the employer was entitled to reimbursement for medical expenses it paid out if a third-party was responsible for the injuries to the employee and the employee collected from that third-party.  The employer sued him for reimbursement of the medical expenses.

The case wound its way up through the federal court system until it ultimately reached the Supreme Court of the United States.  The Supreme Court held for the insurance company/employer.  It held that the terms of an ERISA plan govern in actions brought under that specific portion of the federal law, § 502(a)(3). The Court based its decision, in part, on the idea that subrogation and reimbursement provisions of self-funded ERISA plans are seeking to enforce rights that are based on the contract itself.  Relying on a previous decision, the Court found that proper enforcement of this type of “equitable lien by agreement” is accomplished by holding the parties to their mutual promises as reflected in the plan contract. Accordingly, the Court rejected the application of general principles of equity (e.g., unjust enrichment) where a health plan’s terms contradict those rules.

What this means for those injured (who have self-funded insurance plans ) through the fault of others and their attorneys is that they should look at rights of reimbursement by the insurance company at the outset of the case.  In the instant case, it seems like the attorney made out, the insurance company made out and the badly injured plaintiff not only was left with permanent injuries but an outstanding bill.

If you or someone you know has been injured you need to be aware of the situation and certainly hire an attorney who can deal effectively not only with the tortfeasor but also with the health insurance company.