Federal Judge Bars Insurance Double Dip

December 23, 2002 (PLANSPONSOR.com) - ERISA does not prohibit an employer insurance plan from collecting more than $50,000 mistakenly paid to a woman injured in a car accident.

According to a report by Washington-based legal publisher BNA, US District Chief Judge Charles Kocoras from the US District Court for the Northern District of Illinois said the claim for benefit repayments was equitable, rather than legal – and so was not prohibited by a January 2002 US Supreme Court case.

According to the BNA story, Lois Jaraczewski received $100,000 from State Farm Mutual Automobile Insurance Co., the insurance carrier for the driver allegedly causing the accident. The Iron Workers Tri-State Welfare Plan, of which Jaraczewski was a beneficiary, also paid her $50,178 – not knowing about the State Farm payment.

Once discovering the State Farm payment, the plan demanded the money back from Jaraczewski, since her injuries were caused by a third party fully covered by State Farm. She refused and the plan filed a federal court ERISA lawsuit.

Kocoras agreed with the plan that Jaraczewski was wrong to take both payments.

“Jaraczewski never informed Iron Workers of the State Farm payment. Thus, Iron Workers, at the time it paid Jaraczewski, mistakenly believed that she was entitled to the benefits under the Plan. We find these payments to be the sort that equity demands in return,” Kocoras said.

The case is Iron Workers Tri-State Welfare Plan v. Jaraczewski, N.D. Ill., No. 02 C 2596, 12/18/02.