Every once and awhile, I am reminded that I am walking in a legal minefield, hoping that the document I signed adequately represents the advertised benefits and that it conveys a net benefit to me without having to resort to costly and time-consuming litigation.
An interesting Supreme Court case popped into my email box courtesy of Peter Stris of Stris & Maher LLP …
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.
We all believe that we know how insurance is supposed to work. You pay premiums to insure against the risk of some personal catastrophe. And, that the insurer pays your medical bills and that is that. Simplistic and as we are about to learn, wrong. What we tend to overlook are the terms and conditions that are buried in boilerplate legalese that seem to be part of every contract or agreement that I have ever signed.
This is one of those cases that I characterize under the category “there but for the grace of God go I.” A technical argument so profound that two high-powered lawyers will do battle before the Supreme Court of the United States to see if justice just might coincide with the law.
I had two questions about the case that were graciously answered by Dana Berkowitz of Stris & Maher LLP …
|Why wouldn’t the insurer, the Health Benefit Plan, proceed against those who caused the injury to recover costs in the same way the plaintiff, Montanile, brought a legal action against those responsible for injury?
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.
How we got here …
Essentially, it appears that the basic facts of the case are undisputed, but Montanile’s lawyers seized upon a technicality and apparently argued that the subrogation and reimbursement provisions were unenforceable as they appeared only in the summary plan description and not in the formal plan documents. It appears that the Court disagreed, in essence rulings that the terms in the summary were as enforceable as those contained in the formal plan.
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
<Source: Case: 14-11678 Date Filed: 11/25/2014 Page: 5 of 18>
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.
<Source: Case: 14-11678 Date Filed: 11/25/2014 Page: 8 and 9 of 18
Appeal from the United States District Court for the Southern District of Florida
(November 25, 2014) IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT (No. 14-11678 D.C. Docket No. 9:12-cv-80746-DLB)
Defendant-appellant Robert Montanile appeals the district court’s grant of summary judgment in the amount of $121,044.02 in favor of the plaintiff-appellee Board of Trustees of the National Elevator Industry Health Benefit Plan (the “Board”) in its lawsuit against Montanile. After an automobile accident, Montanile received a settlement from a third-party tortfeasor for injuries he suffered in the accident. After that settlement, the plaintiff Board sued Montanile for reimbursement of the medical expenses already paid on defendant Montanile’s behalf.
For all of the foregoing reasons, we affirm the district court’s grant of summary judgment in favor of the Board and denial of Montanile’s summary-judgment motion.<Source>
With the document issue apparently resolved, another argument is being placed before the Supreme Court …
14-723 MONTANILE V. BOARD OF TRUSTEES OF NEIHBP
This petition presents a single question about the meaning of an important remedial provision of the Employee Retirement and Income Security Act of 1974 ("ERISA"). Eight of the thirteen circuits have squarely and openly disagreed over the question presented. The result is
a widely acknowledged 6-2 circuit split. In a recent invitation brief, the United States acknowledged the (then) 5-2 circuit split and endorsed the minority position. Brief for the United States as Amicus Curiae, Thurber v. Aetna Life Ins. Co., 134 S.Ct. 2723 (May 6, 2014) (No. 13-130). The government recommended denial, however, solely on vehicle grounds. Id. at 15-20. The petition was denied.
The question presented by this petition is:
Does a lawsuit by an ERISA fiduciary against a participant to recover an alleged overpayment by the plan seek "equitable relief" within the meaning of ERISA section 502(a)(3), 29 U.S.C. § 1132(a)(3), if the fiduciary has not identified a particular fund that is in the participant's possession and control at the time the fiduciary asserts its claim? <Source: BRIEF FOR PETITIONER>
Whether a beneficiary of a benefit plan governed by the Employee Retirement and Income Security Act of 1974 can defeat enforcement of the plan’s valid equitable lien by agreement—after the lien attaches—by dissipating the fund subject to the lien.
<Source: BRIEF FOR RESPONDENT>
If I am reading this correctly, this appears to be an interesting case of trying to get blood out of a turnip – that is, can one’s insurer recover funds that were already spent at the time the legal action commenced. A far different question than the one posed by the the document issue.
What might happen?
With the hyper-partisan Supreme Court, one never really knows what might influence the Court. On one hand, we have the unions that overwhelmingly support the democrat party and may influence the progressive socialist democrats on the bench. And on the other hand, who knows what that hand might be doing. Perhaps, they will simply make a narrow ruling that pertains only to this case and leave the bigger issue for another day. Or, they might demand that the language of the disclosure be tweaked – a legal version of “Don’t spend a dime of any settlement until you pay your insurer and get a general release -- even though you mistakenly thought your insured was being paid to accept the total risk in return for your premium payments.”
Bottom line …
While it would be easy to say that we all should pay more attention to the terms and conditions contained in the documents we are signing, it would be an almost impossible accomplishment for most laypersons without specific legal training and knowledge of the subject-matter. Thus we need to trust those who purportedly are acting in our best interests.
The other quirky point about this case is that it appears that the union’s plan administrators are willing to throw an individual member under the proverbial bus to benefit the collective. Thus reinforcing my opinion that unions, per se, are more about self-protection than they are about helping their members.
It will be interesting to see how this case plays out and whether or not an insurer can heap additional pain, suffering, and misery on people who are already suffering.
“Nullius in verba.”-- take nobody's word for it!
“Beware of false knowledge; it is more dangerous than ignorance.”-- George Bernard Shaw
“Progressive, liberal, Socialist, Marxist, Democratic Socialist -- they are all COMMUNISTS.”
“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS "The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius “A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell “Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar “Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS
“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS
"The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius
“A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell
“Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar
“Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS