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Failure to Have the Plan May Be a Plan to Fail

Posted by David P. Martin | Mar 08, 2023 | 0 Comments

“If You Fail to Plan, You Are Planning to Fail” — Benjamin Franklin. 

It may also be true with ERISA cases, especially subrogation and reimbursement claims, that “If you don't have the plan, you have planned to fail.” Sure, you might get lucky, but then you might also win the lottery. Lori Freitas and Kaylee McWilliams had a subrogation-reimbursement case that underscored the importance of having the whole plan document. 

Both ladies were hurt due to different personal injury claims. They eventually settled with third-party tortfeasors, but their health insurance plan had paid medical benefits, so the health plan demanded reimbursement in full of all amounts paid. The plaintiffs protested the assertion of this subrogation right, then paid part of what was demanded and filed a class-action lawsuit. Attached to the complaint was a group subscription certificate, which allegedly contained all the relevant terms of the plan. The whole basis of the class action was that this certificate did not give a clear right of subrogation with reimbursement.  

Defendants, inclusive of the health plan, filed a motion to dismiss. However, the court denied that motion, contending that the certificate attached to the complaint did not clearly reference a right of subrogation with a reimbursement provision. It looked good for the plaintiffs. Later, however, during discovery, it was revealed that there were some documents called The Employer Plans, which more fully described the subrogation and reimbursement provision. Therefore, the defendants changed course and broadened their view of what constituted the full plan documents. Now they argued that both The Employer Plans and the certificate were the entire plans, not just the certificate.

Based on this, the defendants re-filed a motion to dismiss, and the court converted it to a Rule 56 summary judgment motion. The court then quickly agreed that The Employer Plans with the certificate were the full plan documents. The Employer Plans explicitly authorized subrogation and reimbursement, and all documents were considered the entire plan. The class action was doomed.

This situation can be extremely disappointing after much time and effort have been put into advancing a case. Having the entire plan is a critical issue of concern in every personal injury case where a health plan asserts a subrogation and reimbursement right. It is not unusual for a certificate to not be the full plan document. That is frequently the case, although a claim adjuster may represent to a claimant that the certificate is the full plan document. 

The best strategy before filing suit is to demand all plan documents and make it known with the request to the plan administrator that a statutory penalty claim will be asserted if all plan documents are not, in fact, provided within the time allowed by law. Then be prepared to assert that statutory penalty claim at the maximum rate of $110 per day for every day after the first 30 days that the request for all plan documents were received. 

Personal injury attorneys may not be familiar with ERISA's ins and outs but follow this strategy when attempting to defeat, reduce, or resolve a subrogation and reimbursement claim. Failure to have the plan may be a plan to fail with your claim!   

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David P. Martin

Senior & Managing Attorney


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