The U.S. Court of Appeals for the Second Circuit has ruled that New York’s anti-subrogation statute, N.Y. Gen. Oblig. Law § 5-335(a), applies both to “offsets” for prospective benefit payments and to reimbursements for prior benefit disbursements.  In so holding, the Second Circuit ruled that a Plan’s choice-of-law provisions may not be dispositive of which jurisdiction’s anti-subrogation statute will apply to govern disbursement and/or recovery of that Plan’s assets.

The case, Arnone v. Aetna Life Ins. Co., 860 F.3d 97 (2d Cir. 2017), arose after the plaintiff-appellant, Salvatore Arnone, a New York resident, was injured while working in New York at the site of a customer of his employer.   Arnone filed for, and received, disability benefits through an ERISA-governed plan (“Plan”) insured and administered by Aetna.  Arnone also commenced a personal injury action in New York state court against his employer’s customer.  Arnone eventually settled the personal injury suit for a lump-sum payment.
Continue Reading Second Circuit Clarifies New York Anti-Subrogation Law Prohibits Offsets For Settlements; Declares Plan’s Choice-of-Law Provisions May Not Govern Offset And Subrogation Rights

There is a lot about ERISA litigation that is hard to understand, but perhaps the most opaque issue is subrogation, which is the law governing when and how plans can recover benefits from participants. It seems that the Supreme Court is constantly changing the rules (while denying that it’s changing the rules), based on its interpretation of old treatises written about procedure in courts that don’t exist anymore.
Continue Reading Another SCOTUS subrogation decision, and another deep dive into equity treatises

Bd. of Trustees v. Moore, 800 F.3d 214 (6th Cir. 2015), considered whether a summary plan description (SPD) that was the only document containing a subrogation provision was a binding plan document. The Board of Trustees of the National Elevator Industry (NEI Board) established a health benefits plan, pursuant to two relevant documents. The first was a Trust Agreement between the NEI Board and participating elevator companies, which provided for the establishment and funding of a health benefit plan. The Trust Agreement did not, however, contain any details of a health plan. The NEI Board never created a plan document, but did create an SPD, which details the terms of the plan, and contains a subrogation provision. The Plan’s director of health claims administration testified that the SPD constituted both the plan and the summary of that plan.
Continue Reading SPD can be governing plan document when there is no actual plan

In Humana Health Plan, Inc. v. Nguyen, 785 F.3d 1023 (5th Cir. 2015), Humana entered into a Plan Management Agreement (“PMA”) with the API Enterprises Employee Benefits Plan. The PMA stated that API had the right to make all discretionary decisions about the plan’s administration and management. The PMA authorized Humana to provide “subrogation/recovery services” to the plan.
Continue Reading Plan Manager Was Not a Fiduciary For Purposes of Subrogation Claim Standing

In Central States, Southeast & Southwest Areas Health & Welfare Fund v. Gerber Life Ins. Co., 771 F.3d 150 (2d Cir 2014), the Second Circuit joined the Fifth Circuit in ruling that an ERISA health plan generally has no equitable remedy against another insurer in a coordination of benefits dispute.
Continue Reading Coordination-of-Benefits Claim Is Not Equitable

In a post from last year, I reported on how the Fifth Circuit had issued a decision In ACS Recovery Servs., Inc. v. Griffin, 676 F.3d 512, 514 (5th Cir. 2012), in which it held that an ERISA plan beneficiary and his lawyer had created a perfect settlement structure in which no one ever had enough possession or control over the substantial settlement proceeds to support an equitable remedy.

The Fifth Circuit decided that the shell game issue was “enbancworthy” and, in a May 7, 2013 decision, reversed the panel’s decision.
Continue Reading Fifth Circuit Ends “Texas Shell Game,” Holding that Plan Has an Equitable Remedy for Reimbursement

Disputes over what equitable remedies are “appropriate” under ERISA continue to percolate up to the Supreme Court. In its most-recent decision on the issue, US Airways, Inc. v. McCutchen (April 16, 2013), the Court held that an equitable doctrine cannot supersede the terms of an ERISA plan.

The dispute involved a relatively routine claim over a relatively small amount of money. McCutchen was injured in a car accident with a drunk driver. US Airways, through its self-funded health plan, paid McCutchen $66,866 in medical expenses related to that accident. McCutchen hired a lawyer to pursue claims arising out of the accident; though his total alleged damages exceeded $1 million, he settled for $110,000. His attorneys took a 40% contingency fee, leaving McCutchen with $66,000. US Airways sought recovery of the $66,866 it had paid, pursuant to a provision in the health plan requiring McCutchen to reimburse US Airways “for amounts paid for claims out of any moneys recovered from [a] third party.” McCutchen refused the indemnification demand, but his attorneys put $41,500 of hiss money in escrow pending resolution of the dispute. That sum represented US Airways’ full claim less a proportionate share of the attorneys’ fees.

US Airways filed suit under ERISA, seeking “appropriate equitable relief” to enforce the plan’s reimbursement provision.

In the Supreme Court, McCutchen agreed that US Airways had an equitable lien by agreement over his recovery, but the question was whether the lien was subject to one or more equitable defenses that might reduce, or eliminate, its recovery.

Continue Reading US Airways v. McCutchen: Supreme Court Revisits, Again, the Scope of Equitable Remedies

In Treas., Trustees of Drury Industries, Inc. Health Care Plan and Trust v. Goding, 692 F.3d 888 (8th Cir. 2012), Goding, a plan participant, received benefits under Drury’s health care plan after an accident; the Plan contained an express subrogation agreement. During the course of Goding’s litigation to collect damages for the accident, his attorneys repeatedly acknowledged the Plan’s subrogation rights. Goding settled his lawsuit, and his attorneys initially held in escrow funds necessary to reimburse the Plan, but then disbursed them to Goding. The Plan was unable to obtain reimbursement from Goding after he declared bankruptcy. The Plan then sued Goding’s attorneys, asserting various theories, including equitable lien, restitution and constructive trust.
Continue Reading Participant’s Attorneys Are Not Responsible For Subrogation Unless They Specifically Agree

An ERISA Plan Administrator’s subrogation rights are not the easiest thing in the world to determine. I’m not talking about the situation where the plan is making current payments to the beneficiary and wants to offset some prior liability or overpayment. That’s easy.

What is complicated is when the plan has made a full payment, and then seeks to recover some of that payment from the beneficiary. This usually happens when the beneficiary receives a settlement or judgment for the accident that resulted in the payment of plan benefits.

The Supreme Court has ruled, for reasons obscured by the dense mists of ancient equity, that a plan administrator can recover from a beneficiary who has “possession” of a pot of money that was obtained by reason of the injury that gave rise to the plan benefit. But a plan administrator cannot recover from a beneficiary who does not have “possession.

This led to the recent case of ACS Recovery Services, Inc. v. Griffin, 2012 WL 1071216 (5th Cir. Apr. 2, 2012), in the plan futilely picked shell after shell, only to find no money under any of them.


Continue Reading The Texas Shell Game – A Subrogation Story