Alaska Personal Injury Lawyer
Call Us Today 866-985-4224

Recent ERISA Ruling Affects Reimbursement Allowances

James McCutchen was injured in a car accident where the other driver was at fault. McCutchen’s ERISA plan paid $66,865 for his care. In addition, McCutchen received a $100,000 payment from his own underinsured motorist policy, as well as a $10,000 tort settlement from the other driver. His ERISA plan from US Airways sought full recovery of the $66,000 in benefits it had paid out.

US Airways argued that their Summary Plan Description (SPD) and Plan Details allowed them to collect the full amount that they had paid out without having any of the attorney’s fees deducted from their reimbursement.

The case made it all the way to the Supreme Court, which┬ánoted that the Plan was entitled to collect reimbursement, but that the “common-fund” doctrine could be taken into account when determining the final amount.

Common-fund doctrine allows attorney’s fees and expenses to be deducted from payments to third parties as they should not be allowed to collect money without contributing to the expense of receiving the recovery.

The Supreme Court allowed that the common fund doctrine could be disallowed with explicit plan language. The Supreme Court then sent the case back down to the Pennsylvania trial court.

The trial court decided that because the SPD and the full Plan details differed, the full plan took precedence as was stated in the SPD. The trial court determined that the language did not clearly abrogate the common-fund from the recovery, therefore, common fund expenses could be deducted from the recoverable amount.

In addition, the court ruled that according to the full plan details, only a portion of the $10,000 third party payment could be used to reimburse the Plan.

As a consequence of this ruling, ERISA and other Plans will want to make certain that the language of the SPD matches the language and terms set forth in their full plan details. Also, any plans that want to abrogate common-fund doctrine from reimbursement amounts, they must do so explicitly with clear language.

Plan recipients should be sure to check the details of their plan and understand the different provisions of their coverage. Consulting with a personal injury lawyer can help ensure that the terms of coverage are followed properly and fairly.