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U.S. Supreme Court to Take On Dispute Involving ERISA’s Equitable Limitation

The U.S. Supreme Court recently agreed to review whether a provision of ERISA allows the operator of a plan to seek reimbursement from a plan participant who receives a personal injury settlement. The Court has looked at the issue before and will examine the issue again during its next term.

The case the Court will look at comes from the U.S. Court of Appeals for the Third Circuit. The Third Circuit decided in November 2011 that a health plan’s attempt to obtain reimbursement from a plan participant’s personal injury settlement was not allowed under ERISA because it would be inequitable or more plainly, unfair. The Third Circuit’s decision created a split in the current law on the issue, and the U.S. Supreme Court will review the case to settle the split in the law.

The facts of the case involve a U.S. Airways employee who was seriously injured in a car accident. The 51-year-old man was seriously injured when another driver lost control of her car and struck the man’s car. Because of the car crash, a truck traveling behind the 51-year-old slammed into his car. The U.S. Airways employee only survived the accident because of emergency surgery, and since the surgery underwent multiple back surgeries. The man still suffers from related pain and is “functionally disabled.”

U.S. Airways through its ERISA benefits plan paid the 51-year-old employee $66,866 to cover his medical expenses. The employee also sued the driver that caused the accident and received a settlement of $10,000, and the man and his wife received $100,000 in underinsured motorist coverage. However, because of fees and expenses the 51-year-old’s net recovery from the lawsuit was $66,000.

Upon learning that the employee received a settlement, U.S. Airways demanded to be reimbursed for the plan’s $66,866. The 51-year-old refused to reimburse the airline, and U.S. Airways sued. The employee argued that it is unfair for U.S. Airways to be reimbursed when the company made no contribution to the cost of the private settlement and therefore would be unjustly enriched if the company were allowed to recover if he was not given an amount for the cost of the private lawsuit.

Source: Courthouse News Service, “Supreme Court to Wade into ERISA Dispute,” Dan McCue, June 25, 2012

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