The landscape on ERISA[1] subrogation and reimbursement of health and disability benefits paid is ever changing. Now there is a trend toward much more aggressive assertion of ERISA subrogation claims. The question arises that if you or your client refuses to honor the subrogation claim can you be sued as the attorney? One Court has said “yes”.
Every personal injury attorney is familiar with the fact that clients are very irritated to learn that health insurance benefit plan, that the claimant paid and worked for, is demanding back monies paid out for health benefits while the claimant was the one suffering harm. If the recovery is not sufficient to allow a fair recovery after payment of the entire subrogation interest, it is especially unfair to the claimant. One court, Schwade v. Total Plastics, Inc., 837 F. Supp. 2d 1255, 1265 (M.D. Fla. 2011), explained, “While [the participant] is exclusively concerned with her own benefits, [the plan] is concerned with the benefits of all [ ] employees, … a subrogation agreement furthers the salutary purpose of ensuring that the plan administrator preserves the plan's assets for the totality of the plan's members.”
The problem here is that regardless of whether the plan is self-funded or funded by an insurance policy, the courts are going to interpret and enforce subrogation and reimbursement provisions as stated in the plan document. Many plans have very broad subrogation language, indicating the right to seek subrogation and reimbursement from the first dollar that a participant or beneficiary is entitled to receive as a result of an accident, illness, or injury, to the full extent of the benefits paid. That broad language can be interpreted to mean that even if a claimant only sues for mental anguish and pain-and-suffering, and not recovery of medical bills, nonetheless, the plan is entitled to the first dollar out of that recovery up to the amount of the benefits.
Many times, plaintiff's counsel will attempt to work out the subrogation claim amicably and fairly. It is not infrequent for a plan contact person to be available to work out a resolution of the matter so that the claimant achieves some fair recovery, counsel receives a fee and the subrogation claim is resolved. However, there are instances where the ERISA plan refuses to compromise and may assert a right to the entire recovery. That is often where the plan document expressly disclaims the make whole rule and the common fund doctrine. The Plan contends regardless as to the claims asserted, if the accident involved payment of medical expenses or disability benefits the plan has a right to the first dollar of the recovery until the subrogation claim resolved.
The problem has more recently been expanded to include liability for counsel now. A court in GC America Inc. v. Kevin Hood, et al., 20-cv-03045 (N.D. Ill. Mar. 29, 2022) [2023 WL 6290281], allowed a subrogation claim against counsel when it related to fee received for representation of an injured plaintiff in a medical malpractice case. Counsel and the plaintiff both refused to provide any of the $7 million recovery on the medical malpractice claim to reimburse the plan for $1.7 million in expenses. “Under the terms of the Plan, Hood was required to reimburse the Plan for those medical expenses in the event he won any judgments or settlements from third parties compensating him for his deficient medical care … The Plan's terms also stated that the Plan would have a first priority lien on any recovery received from third parties, and the Plan's beneficiary or their legal representative would be considered a constructive trustee for any such recovery.”
When plans are ignored in this circumstance, they tend to act very aggressively. Ignoring the plan or asserting that there were no claims asserted for medical expenses do not win the day for either the lawyer or the plaintiff, generally. If the plan document disclaims the make whole rule and the common fund doctrine and has the “first dollar out” language for any recovery that is typically good enough, regardless as to whether there are claims asserted for medical expenses. If one proceeds that is with peril as counsel can be included when matters turn more aggressive.
[1] The Employee Retirement Income Security Act of 1974.
Comments
There are no comments for this post. Be the first and Add your Comment below.
Leave a Comment