June 28, 2012 (PLANSPONSOR.com) - The U.S. Supreme Court agreed to determine whether an employee benefits plan is subject to equitable limitations when it demands reimbursement of benefits paid to a covered employee who recovers money from third parties.
In 2006, the high court upheld a decision by the 4th U.S. Circuit Court of Appeals which said that under certain circumstances health plan fiduciaries could be reimbursed from a participant who had recovered damages from a third party (see “High Court Approves ERISA’s Equitable Relief Provisions”). However, in another case from the 9th Circuit, the court ruled a health plan participant could not be forced to repay a provider nearly $400,000 for covering the medical work she received on injuries she sustained from a car accident, because she was not in possession of the money as some had been paid to her attorneys and the rest was put in a trust for her care (see “Supreme Court to Provide Clarification of Equitable Relief”).
In the current case, James McCutchen, a 51-year-old US Airways employee, was seriously injured in an automobile accident when a young driver lost control of her vehicle and struck the car he was driving, Courthouse News Service reports. US Airways, through its Employee Retirement Income Security Act (ERISA) benefits plan, paid $66,866 to cover McCutchen's medical expenses.
McCutchen sued the driver that caused the accident, settling the case for $10,000. Then, at his lawyers' assistance, he and his wife received another $100,000 in underinsured motorist coverage for a total third-party recovery of $110,000. After paying a 40% contingency attorney's fee and expenses, McCutchen's net recovery was less than $66,000.