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Recent decision from Third Circuit Court of Appeals offers hope for personal injury victims subject to ERISA claims.
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Recently the United States Court of Appeals for the Third Circuit rendered a well reasoned decision that provides hope for innocent victims in negligence actions subject to ERISA subrogation liens. US Airways, Inc. v. McCutchen, 2011 U.S. App. LEXIS 22883 (3rd Cir. Nov. 16, 2011). Because ERISA health plans are governed by federal law, ERISA health plan liens, unlike most health insurance liens, are not subject to state law “made whole doctrines”. If the plan in question is fully self funded and has the appropriate language, it can contract around the federal common law “made whole doctrine”. The result is that if the plan has certain language it can take the injured victim’s recovery, even if that leaves the victim without compensation for his or her injuries, pain and suffering and permanent impairment. However, the US Airways case looks deeper into the purpose behind the Federal law that governs ERISA plans (Employee Retirement Income Security Act of 1974, 29 U.S.C.S. §§ 1001-1461). Specifically, because the statute references the plan’s right’s as “appropriate equitable relief”, the courts must give consideration to traditional equitable defenses, such as unjust enrichment.
In the US Airways case, the court determined that the lower court should have considered the costs to the injured victim of procuring the recovery in the first place. In other words, the fact that the injured victim had to incur costs and attorney’s fees to recover from the negligent driver. US Airways sought recovery of it’s entire lien which would have in effect taken from the injured accident’s pocket, leaving the victim worse off than if he/she had made the claim in the first place. The Court quoted from 4 Palmer, Law of Restititution § 23.18 ([T]he principle of unjust enrichment . . . .should serve to limit the effectiveness of contract provisions which in terms provide for reimbursement out of the insured’s tort recovery without regard to whether or the extent to which, that recovery includes medical expense.”)
Interestingly, the Court didn’t stop there. It remanded to the District Court to exercise it’s discretion to determine appropriate equitable relief, including, but not limited to costs of procuring recovery and the allocation of costs and risks. One must ask, logically, if allowing the ERISA plan to pick the pockets of injured tort victims for even those costs advanced by the tort victim to collect, couldn’t the tort victim also claim an equitable defense for unjust enrichment where the plan seeks to recover for uninsured or underinsured benefits paid by the victims UM plan, paid for the victim? Or what about recovery for sums specifically allocated to categories other than medical bills, such as pain and suffering, or loss of consortium? It seems unfathomable that a person injured in a car wreck would have to pay for an ERISA health plan and UM premiums, then get hit by a tractor trailer driver or even a drunk driver, file suit, pay attorney’s fees and costs, and then reimburse the plan 100% on top of it all, leaving the injured victim in worse position than he/she was in prior to seeking recovery. Believe it or not, that is exactly what one plan is attempting to do to one of my client’s in Henry County, Georgia. Yes, we are fighting the plan and hopefully, the US Airways case will help get some justice for my client.