ERISA Subrogation
Each one of us deals with it almost every day - subrogation or reimbursement.
Many of those plans are covered by ERISA. This post by John Wood on our ERISA blog may be of assistance to you.
We are encountering a new type of subrogation provision that essentially cuts off future benefits until a third party settlement has been exhausted in its entirety. It states: "Collections or recoveries made in excess of such incurred Blue Cross of Idaho expenses shall first be allocated to such future Blue Cross of Idaho expenses, and shall constitute a special Deductible allocated to such future benefits and services under this or any subsequent Blue Cross of Idaho Policy. Thereafter, Blue Cross of Idaho shall have no obligation to make any further payment or provide any further benefits until benefits equal to the special Deductible have been incurred, delivered and paid by the Insured."
Ouch.... Has anyone seen any litigation over the enforceability of this type of provision? Is this the next generation of subrogation issues??
I have not Robyn but my partner John Wood is the man on this stuff. I will pass this on to him and ask him to post a comment.
This is truly dangerous.
Thanks for reading.
John: Here is an argument I have been using against Erisa plans for reduction of the lien.
I maintain that as the attorney for the Plaintiff, I am not privy or party to any plan and that the provisions of said plan does not apply to me. While a plan may prevent my client from obtaining attorneys fees for successful prosecution of the Erisa lien, since I am not privy or party to the plan contract, that provision does not apply to me.
I intervene, if necessary, in the tort case before final adjudication or dismissal, in my own name and bring in the plan or carrier as defendant to my own personal action.
I make it clear in my complaint that my client is not violating the plan contract because this is my personal action, not his, and that this is a dispute between me and the plan. I, of course keep all disputed funds in trust, or if necessary, put them in the registry of the court.
My personal action prevents my client from being sued for contractual attorney's fees should I not be successful. I then argue that under the common fund doctrine I am entitled to reasonable attorneys fees.
So far it has worked so well nobody has yet even forced me before a judge.