CCL Goes To Bat Again For ERISA Insureds
July 22nd, 2015In an amicus curiae brief on behalf of the American Association for Justice, CCL urged the Supreme Court to reject a broad expansion of an ERISA plan’s authority to demand that its insured repay health benefits after obtaining a tort recovery. The case is Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, Docket No. 14-723.
Robert Montanile was injured in a car crash by a drunk driver. He was a participant in the Elevator Industry multi-employer ERISA health plan, which paid his initial medical expenses of $121,044. The plan required participants and beneficiaries to reimburse the plan out of any third-party recovery, regardless of whether the victim was made whole by the tort recovery and without any plan contribution to fees owed the attorney who obtained the recovery. Montanile retained a trial lawyer who obtained a financial settlement of his claims against the other driver. He also retained an experienced ERISA attorney to reach an accommodation with the plan. When negotiations reached an impasse, the attorney released the funds, after payment of the attorneys’ fees, to the client. The plan later sued for reimbursement. By that time, however, Montanile had spent most of the funds on other bills and living expenses.
The district court found that the plan could hold Montanile personally liable to repay the entire $121,044 out of any other assets he might have. The Eleventh Circuit affirmed, agreeing with the majority of circuits that, after the participant has received a tort recovery, dissipation of the funds does not erase the contractual obligation to reimburse the plan. The Ninth Circuit has held to the contrary, as has the Eighth Circuit, in a case in which CCL successfully represented a participant’s attorney sued by an ERISA plan for reimbursement. Treasurer, Trustees of Drury Indus., Inc. Health Care Plan & Trust v. Goding, 692 F.3d 888, 896-97 (8th Cir. 2012). The Supreme Court granted certiorari to resolve the conflict.
The AAJ amicus brief, authored by CCL Senior Counsel Jeffrey R. White, urged reversal. A basic tenet of the Court’s jurisprudence is that ERISA limits fiduciaries suing for “appropriate equitable relief” to those remedies typically available from equity courts. The Court made clear in Sereboff v. Mid Atlantic Medical Services, Inc. in 2006 that a plan could impose an equitable lien by agreement on the specific fund obtained from the tortfeasor, but the legal remedy of personal liability for breach of contract was not available. The majority rule allowing reimbursement from the participant’s general assets is based on a misreading of a statement in Sereboff that a plaintiff relying on a lien by agreement need not “trace” the property back to the plaintiff. At common law, an equitable lien survived only as long as the property remained intact. If the debtor dissipated the specified fund, the creditor was left with only a legal claim for breach of contract. AAJ’s brief also anticipated the argument often advanced by ERISA administrators and insurers that reimbursement is essential to keeping premiums low. In fact, there is no indication that reimbursements are factored into ratesetting by plans. Moreover, reimbursements amount to a vanishingly small percentage of ERISA plan premiums. To the contrary, broad expansion of ERISA reimbursement will likely increase plan costs by removing the financial incentive for many injured victims to hold tortfeasors accountable.
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