Judge: Health Plan Admin Committee Wrong in Subrogation Agreement Demand

June 15, 2005 (PLANSPONSOR.com) - The administrative committee of a Wal-Mart health plan acted arbitrarily by refusing to cover a beneficiary's medical expenses because she refused to sign a subrogation agreement, a federal judge ruled.

>US District Judge Warren Urbom of the US District Court for the Eastern District of Arkansas ruled that the committee acted unreasonably by relying on a summary plan description (SPD) that required a subrogation agreement, BNA reported.  This SPD was not a formal plan document or a valid plan amendment, Urbom ruled.

>Although Urbom ruled that plaintiff Karla Cossey was improperly denied benefits, he said a trial was still necessary to determine whether the committee’s actions amounted to an Employee Retirement Income Security Act (ERISA) fiduciary breach.

>According to court records, Cossey was injured in an automobile accident in October 2001 and was insured by Wal-Mart’s health plan on the policy of her husband who was a Wal-Mart employee. As a precondition for covering Cossey’s medical expenses, the plan’s administrative committee requested that Cossey sign a subrogation agreement promising to repay the plan if she received a money settlement from the individuals responsible for her injuries.

>Cossey refused to sign the subrogation agreement and when her medical bills went unpaid by the plan, Cossey sued in federal court, arguing an ERISA breach.

>Urbom noted that although the committee acted arbitrarily and capriciously in relying on the SPD, he would not order the committee to pay benefits to Cossey because Cossey did not demonstrate, as a matter of law, that she was entitled to benefits.

>The case is Cossey v. Associates’ Health and Welfare Plan, E.D. Ark., No. 4:02CV661 WKU, 3/15/05.