Supreme Court to Hear ERISA Case Affecting Millions of Injured Americans

The United States Supreme Court agreed to hear Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (No. 14-723), a case involving a $1 billion multi-employer plan that provides health insurance to nearly 100,000 individuals. The Court will decide whether federally regulated insurers can seize the assets of disabled and injured individuals who received disability benefits or personal injury settlements but spent those monies on everyday living expenses.

FACTS OF THE CASE 

Robert Montanile was in a car accident that resulted in severe spinal injuries. He received medical treatment which was paid for by his health plan. Montanile sued the drunk driver who caused the accident and recovered $500,000.

Unfortunately, that amount was insufficient to cover Montanile's medical bills, lost earnings, pain and suffering, and legal fees resulting from the accident. Although much of his recovery was the result of damages other than medical expenses, Montanile's health plan demanded that he personally reimburse it for the medical bills it had covered (and for which Montanile had already paid premiums). At issue is whether, under the federal law known as ERISA, Montanile must repay the plan even though he already spent the settlement proceeds on living expenses including the care of his young daughter.

STATEMENTS FROM BOTH SIDES

The case will be argued by two of the nation's most influential Supreme Court lawyers, Peter K. Stris and Neal Katyal, both of whom were recently named by Reuters as among the sixty-six most influential lawyers in the country.

The successful petition was filed by Peter K. Stris of Stris & Maher LLP in Los Angeles. Stris routinely appears before the Court, and has been involved in more than half of its ERISA cases over the past decade. "In one respect," said Stris, "this is an easy case. The Court has said that the issue is to be decided based on a particular set of historical rules. And applying those rules, the answer is clear: the insurer loses. The real question is whether the Court will remain faithful to the legal principles it has espoused."

Neal Katyal of Hogan Lovells US LLP will argue the case for the Plan. Katyal is the former Acting Solicitor General of the United States and has argued 24 cases before the Court. According to papers filed by Katyal, "both plans and beneficiaries desperately need clarification as to whether a beneficiary can evade enforcement of a plan's reimbursement provision by reneging on his promise . . . ." "A decline in reimbursement affects more than the individual beneficiaries involved in a particular case; it impacts all plan beneficiaries."

This is not the first time Stris and Katyal have crossed swords. In US Airways, Inc. v. McCutchen (No. 11-1285), an ERISA case decided by the Supreme Court in 2013, Stris also represented an injured beneficiary and Katyal the health plan.

That’s a good question. The Plan certainly had the right to proceed against the driver who caused Mr. Montanile’s injury (a common provision in insurance contracts called “subrogation”). We do not know why it chose not to do so here.

Without speculating about the Plan’s choice in this particular case, some reasons why a plan or insurance company might decline to bring suit in general include: (1) expectation of limited recovery from those who caused the injury, (2) expectation of incurring large legal fees to obtain the recovery, (3) inattention or inadvertent inaction, and/or (4) hope that the insured will bring suit anyway, and then the plan or insurance company can seek “reimbursement” without bearing its fair share of the legal fees.

Why would any attorney accept a personal injury case if they knew that another party, a third-party insurance carrier, had the legal right to any damages?

That’s a thorny question. In our experience, many insureds do not fully understand the subrogation and reimbursement provisions buried in their long, detailed, and often dense ERISA plans. And because ERISA law is quite technical, unfortunately many attorneys are not fully aware of these provisions or their implications, either.

We think that the very existence of so many lawsuits that appear to be subject to reimbursement provisions shows the gap in knowledge between plans and insurance companies, who are typically advised by sophisticated ERISA lawyers, and participants, who are typically advised by qualified personal injury lawyers who may not be familiar with the intricacies of ERISA.

The Plan’s Right of Recovery

The Plan has the right to recover benefits advanced by the Plan to a covered person for expenses or losses caused by another party. . . .

Amounts that have been recovered by a covered person from another party are assets of the Plan by virtue of the Plan’s subrogation interest and are not distributable to any person or entity without the Plan’s written release of its subrogation interest. . . .

While the NEI Summary Plan Description had this reimbursement provision, the Trust Agreement and the Bargaining Agreement did not have a similar provision

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The district court found that the NEI Summary Plan Description was an enforceable, governing plan document required by ERISA. Specifically, the district court stated that “[t]here can be no doubt that the NEI Summary Plan Description functioned as both the governing Plan document and the summary plan description mandated by ERISA.” The district court also then found that reimbursement was appropriate equitable relief under § 1132(a)(3)(B) because “[t]he settlement proceeds represent an identifiable fund to which the Plan’s lien attached and such proceeds belong ‘in good conscience’ to the Plan to the extent of the medical expenses it paid on Defendant’s behalf.” Accordingly, the district court denied Montanile’s motion for summary judgment and granted summary judgment in favor of the Board in the amount of $121,044.02, which was what the Board had paid as Montanile’s medical expenses.

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