Chicago area employees with coverage under an employer-sponsored health insurance plan involved in any type of accident caused by another party often find themselves in two disputes. The first, obviously, is a personal injury dispute, be it with the other driver of an automobile, or a premises owner where an injury occurred. After the injury, naturally the person goes to the hospital, or gets subsequent medical treatment, which become part of the damages in the injury dispute. To no surprise, rather than pay the expenses out of pocket and seek recovery potentially years later, the injured parties pay the medical expenses with their own health insurance. But later, the health insurer or plan wants to be reimbursed for its own outlays for the medical expenses. Problems arise when the participant is forced to settle a case for a fraction of the actual damages due to lack of the opposing party's insurance coverage, or in how to handle attorneys' fees the injured party paid. The health insurers and plans routinely try to enforce clauses which purport to entitle the plan or insurer to full reimbursement, even if that would mean leaving the injured participant with no net recovery, or worse, in the hole after paying attorneys' fees.
This was precisely the fact pattern in McCutchen v U.S. Airways, 133 S. Ct. 1537, the facts of which were covered in a prior post here. In a surprising move, the Supreme Court held that no matter what, the plan document language must control. But if the plan is silent as to the applicability of things like how the plan and the participant will apportion attorneys' fees, then equitable principles such as the common fund doctrine fill in those gaps. Under the common fund doctrine, a recipient of the fruits of an attorneys' labor must share in the attorneys' fees. In the scenario above, if the attorney in the personal injury matter charged a one-third contingency fee, the plan would have to share in that fee from the medical expenses it recovered. The problem with the decision is that it leaves the door open for plans to start including language that would prevent these principles from applying, and quite possibly more and more plans will do just that. This could also impact disability insurance plans that contain a clause with a right to reimbursement for disability benefits from the Social Security Administration.
If you are in a dispute with your employee benefit plan about a reimbursement, speak with a knowledgeable ERISA lawyer right away.