The 5th US Circuit Court of Appeals ruled that ERISA didn’t authorize the plan administrator’s suit.
The administrator was also wrong to sue the participant for repayment of benefits because the participant hadn’t yet received money from the settlement of a separate liability case, the judges said. That meant any plan repayment would come from the participant’s personal funds, the court said.
The participant got more than $45,000 in health benefits for her daughter who was injured in a car crash.
The plan rules required the covered person, before receiving any benefits, to agree to reimburse the plan out of any court recovery. The employee signed a subrogation agreement on her daughter’s behalf so that her daughter could receive medical treatment.
When a $750,000 settlement with the driver of the other vehicle was proposed, the employee asked a state court judge for authority to settle with the other driver.
The proposed settlement called for over $78,000 to be paid into the court registry to cover various liens. A Mississippi state judge ordered the plan to be made a party to the case, but the employer, as plan administrator, filed a federal court suit instead. The employer was seeking a ruling that the company was entitled to reimbursement from the settlement funds.
Shortly after that, the state court approved the settlement, retaining the specified amount in its registry.
A lower federal court judge dismissed the plan administrator’s suit, and the plan appealed.