Supreme Court Limits Reimbursement for Subrogation Claims 

On January 20, 2016, in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, the United States Supreme Court limited the ability of health plans to seek reimbursement from participants for medical benefits the plan paid out, but that are later recovered from third parties.

In this context, “subrogation” generally means collecting money from someone, for whom you have paid expenses, when that person recovers money from a third person. For example, subrogation arises when an insurance company which pays its insured client for injuries and losses, then sues the party that the injured person claims caused the damages to her.

In Montanile, a health and welfare plan covered more than $120,000 in medical expenses after a participant was injured by a drunk driver. The participant later sued the drunk driver and obtained a $500,000 settlement. The plan sought reimbursement from the participant from the settlement, but did not file suit until after the participant had already received and spent the settlement funds. In an 8-1 decision, the Supreme Court held that when a plan participant has spent the proceeds of a third-party settlement on non-traceable items, the plan may not seek recovery from the participant’s general assets.

The Montanile case does not mean that plans will never be able to recover from subrogation claims, but it does emphasize the need for clear Plan language addressing third party claims, diligent monitoring, and consultation with legal counsel. For more information about how your plan can be best situated to obtain reimbursement of third party claims, please contact your Trust Fund counsel.

By Kristina Zinnen | March 25, 2016

Legal Developments