WV Court Rules ERISA Subrogation Claims Belong in Federal Court

December 18, 2008 (PLANSPONSOR.com) - The West Virginia Supreme Court of Appeals has ruled that a medical plan fiduciary or administrator has to sue in federal court to enforce the plan's subrogation rights against participants and beneficiaries.

The state’s highest court ruled that state courts do not have jurisdiction to rule on whether Employee Retirement Income Security Act (ERISA) plan fiduciaries can enforce a subrogation lien. The court decided that under ERISA’s civil enforcement provision, Section 502(e)(1), state courts do not have jurisdiction to hear claims for equitable relief brought under Section 502(a)(3).

Having made that determination, the court went on to say that the attempt by City Hospital Inc. to obtain a subrogation lien out of settlement funds that were to be paid to the minor children of one of City Hospital’s employees represented “appropriate equitable relief” under Section 502(a)(3).

The children and their father were injured in an automobile accident and the majority of their medical expenses were paid by City Hospital’s health plan. With the children set to receive an insurance settlement and a payment from a policy covering uninsured or underinsured motorists, the employer argued the children were obligated to repay the plan out of their settlement funds.

A West Virginia circuit court dismissed City Hospital’s action, finding that the court did not have jurisdiction under ERISA to decide, limit, or enforce City Hospital’s subrogation rights. The state supreme court agreed and upheld the circuit court’s dismissal of City Hospital’s action.

The opinion is available at  http://www.state.wv.us/wvsca/docs/fall08/33892.htm