Supreme Court Considers Rights of Injured Employees

AARP is supporting an injured employee’s position before the U.S. Supreme Court, where he argues that a health insurance plan cannot recover more from him than he received in a personal injury lawsuit.

Background

Mr. McCutchen has a health insurance plan administered and self-insured by his employer, U.S. Airways. McCutchen was in a car accident that he survived only as a result of emergency surgery; after months of physical therapy and a hip replacement, he was left functionally disabled. The Plan paid $66,866 in medical expenses on his behalf.

McCutchen sued the driver of the car who had caused the action, and recovered the maximum of $110,000 from two policy amounts, including under-insured motorist coverage. After paying 40 percent in attorney’s fees, his net recovery came out to less than $66,000.

The Plan included a broad recoupment provision granting the Plan reimbursement rights in the event it paid benefits on behalf of a plan participant and the participant obtained a third-party recovery, and specifically stated that it had no obligation to pay any attorneys’ fee or expenses incurred in the recovery. The Plan demanded full reimbursement of $66,866 from McCutchen’s $110,000 tort/insurance settlement. McCutchen and his attorneys refused to reimburse the Plan, asserting that it would not be equitable for the Plan to recoup the full amount of its lien without paying its fair share of attorney’s fees and costs, particularly when the settlement amount did not make McCutchen whole for all of his damages suffered in the collision. McCutchen pointed out that the federal Employee Retirement Income Security Act (or ERISA, the main federal law governing employee benefits), as well as various longstanding legal principles, rendered the Plan’s position inequitable.

A trial court ruled in favor of the Plan, but was reversed by the U.S. Court of Appeals for the 3rd Circuit. The matter is now being considered by the U.S. Supreme Court.

AARP Foundation Litigation attorneys filed AARP’s brief, joined by the National Employment Lawyers Association. The brief points out that common law principles prohibit health care plans from requiring participants to reach into their own pockets to reimburse health costs. If a plan does not pay its fair share of attorneys’ fees they will be less likely to recovery any amounts because participants will be less inclined to bring valid lawsuits against wrongdoers who injured them.

What’s at Stake

The outcome of this case is important because it will determine whether ERISA’s requirement of appropriate equitable relief will simply work to the benefit of plan fiduciaries or whether it will work to promote the larger objective of ERISA of protecting employee pensions and benefits. The standard set out by the 3rd Circuit strikes a balance to ensure that neither fiduciaries nor beneficiaries see a windfall, and the plan is administered in a fair and equitable manner to ensure that participants can receive medical benefits.

Case Status

U.S. Airways v. McCutchen is before the U.S. Supreme Court.