A group health plan sued an employee for reimbursement of benefits paid, relying on language in the SPD that gave the plan the right to be reimbursed for benefits from any judgment, settlement, or payment made because of an accident, EBIA reports. The employee argued that the SPD reimbursement provision was unenforceable because it was not part of the formal plan document.
The court sided with the employee and referred to the employer’s wrap document (a plan document that bundled together several benefits programs), which provided that the SPD would be considered part of the plan only if (1) there were no separate formal plan document; (2) the SPD described the benefits that were set forth in an insurance policy or contract; and (3) the SPD were consistent with the insurance policy or contract. The court found that the SPD’s reimbursement provision was not part of the plan because there was no evidence that there was any insurance policy or contract that included a reimbursement provision.
The court rejected the plan’s argument that the SPD had to be considered to be part of the plan because the provisions for payment of benefits were found only in the SPD. According to the court, in a situation in which an employee relies on a faulty SPD and is prejudiced by that reliance, the SPD terms will prevail, and in a situation in which a plan’s terms are more favorable to the employee, the plan terms will prevail.
The employee’s group health plan had paid more than $175,000 for her husband’s health care after an auto accident. The plan demanded reimbursement after the couple received a $1 million settlement of accident claims.
The case is Admin. Comm. of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Gamboa, 2006 U.S. Dist. LEXIS 9966 (W.D. Ark. 2006).