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The equitable remedies provision of ERISA Section 502(a)(3) has been a "hot topic" for years with the Supreme Court, according to BNA; every few years, the Court considers another case interpreting this provision in the context of plans' ability to seek reimbursement from plan participants who receive personal injury settlements. Here are five things you should know about the equitable remedies conflict in this term's ERISA case, U.S. Airways v. McCutchen.
The Facts. In 2007, James McCutchen -- an employee of U.S. Airways and a participant in the company's self-funded health plan -- was severely injured in an automobile accident. The plan paid $66,866 in medical expenses from McCutchen's injuries. McCutchen obtained a $10,000 settlement from the driver at fault, and $100,000 in underinsured motorist coverage from his own auto insurer. McCutchen's attorneys received 40 percent of that amount as a contingency fee, leaving McCutchen with $66,000, (slightly less than the ERISA plan amount). U.S. Airways later demanded reimbursement of its full payment, arguing that it was entitled to that amount under the terms of the plan.
The Plan. The ERISA plan states, "If the Plan pays benefits for any claim you incur as the result of negligence ... of a third party, the Plan will be subrogated to all your rights of recovery. You will be required to reimburse the Plan for amounts paid for claims out of any monies recovered from a third party, including, but not limited to, your own insurance company."
The Split. In McCutchen, the Third Circuit held that Section 502(a)(3) of ERISA authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan's terms give it an absolute right to full reimbursement. That ruling created a conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits.
The Amici. Three industry groups -- the National Association of Subrogation Professionals, the Self-Insurance Institute of America, and the Western Pennsylvania Teamsters and Employers Welfare Fund -- filed a joint amicus brief in favor of US Airways. They argue that the Third Circuit's decision would make it more difficult and expensive to sponsor and maintain affordable health care plans, BNA reports.
The Middle. The U.S. government supports a middle-ground approach, SCOTUSblog reports. "In the government's view, when a plan elects not to file a subrogation action against a third party, but then benefits from an award obtained by a beneficiary, the court may require the plan to share in the cost of the attorney services that secured that benefit."