US Supreme Court to Decide Extent of Trust Fund Subrogation/Reimbursement Rights
The US Supreme Court will decide whether a participant may assert certain defenses against a health and welfare plan’s claim for reimbursement. The facts: participant James McCutchen was injured in a car accident and the US Airways’ health and welfare plan paid $66,866 for his medical expenses. The participant then recovered $110,000 from third parties. The health and welfare plan demanded reimbursement for what it had paid, but the participant refused to reimburse the plan claiming it would result in “unjust enrichment” to the plan.
A lower court concluded that requiring the participant to provide full reimbursement to the health and welfare plan was inappropriate and inequitable relief because the amount owed the plan exceeded the net amount of the participant’s third party recovery (after subtraction of attorneys’ fees and costs) and amounted to a “windfall” to the plan.
As it now stands, the Eleventh, Eighth, Seventh and Fifth Circuits have all held that strict adherence to plan terms can constitute appropriate equitable relief and consideration of equitable defenses in contradiction of the plan terms would frustrate the purpose of ERISA. In other words, these Circuits ruled in favor of health and welfare plans getting full recovery of amounts paid. But the Third and Ninth Circuits disagree. So this “split in the Circuits” will be decided by the US Supreme Court during this term.
For specific questions about these issues and their impact on your plan, please contact your Trust Fund counsel.
Author: Linda Baldwin Jones
