The Court of Appeals for the Third Circuit has had that equitable principles such as unjust enrichment apply to the subrogation rights of an employer under an ERISA plan.
In U.S. Airways, Inc. v. McCrutchen, No. 10-383 (3rd Cir. Nov. 16, 2011), McCrutchen was seriously injured in a car wreck. He spent several months in physical therapy and ultimately underwent a complete hip replacement. Since the accident, McCutchen, who had a history of back surgeries and associated chronic pain, has also become unable to effectively treat that pain with medication. The accident has rendered him functionally disabled. McCutchen’s Health Benefit Plan (the “Plan”), administered and self-financed by US Airways, paid medical expenses in the amount of $66,866 on his behalf.
Suit was filed on behalf of McCrutchen but a combination of multiple victims of the same wreck and limited liability insurance coverage meant that, after payment of fees and litigation-related expenses, McCrutchen’s net recovery was only $66,000. His law firm placed $41,500 in a trust account, reasoning that any lien found to be valid would have to be reduced by a proportional amount of legal costs.