Supreme Court to Review ERISA Subrogation / Reimbursement Rights

The United States Supreme Court will determine whether an employee benefits plan govered by ERISA is subject to equitable limitations when it demands reimbursement of benefits paid a covered employee who recovers money in personal injury and wrongful death litigation.

The case that will be reviewed is U.S. Airways, Inc. v. McCrutchen, No. 10-383 (3rd Cir. Nov. 16, 2011), ,which is discussed at length in a blog post titled "Third Circuit Says Equity Applies to Subrogation Rights Under ERISA Plan."

Here is the issue as stated in the cert petition:

Whether the Third Circuit correctly held — in conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits — that Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA) authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan’s terms give it an absolute right to full reimbursement.

Not necessarily what you would call a neutral statement of the issue, would you?  Then again, they call it "appellate advocacy" for a reason.

Unfortunately, the McCruthchen opinion does not directly address the application of the "made whole" doctrine in these cases. Why? The made-whole doctrine was not raised by McCrutchen.

Nevertheless, this is an important development in the law. Hopefully, the SCOTUS will apply some common sense and equity to these health insurance contracts. Although some insurers will behave in a responsible way, all too many of them refuse to reduce their lien even by the amount it cost the plaintiff to acquire the money for them. These insurers will need clear direction from the SCOTUS before they will behave in an equitable way.

Note: The Ninth Circuit Court of Appeals reached a similar result in CGI v. Rose, No. 11-35127 (9th Cir. June 20, 2012).  That subrogation decision was addressed in a recent post on this blog.


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