My Articles
THE IMPORTANCE OF THE SUPREME COURT’S DECISION IN METLIFE VS. GLENN
The issue of discretionary authority when administering an ERISA plan and the deference federal courts must show to such discretion, has been the new hot topic in ERISA law. The Supreme Court first stated in Firestone Tire and Rubber Co. v. Bruch that health plan administrators are due deference when asserting discretionary authority administering a plan. Federal courts could only overturn administrator benefit determinations if they find that the administrator has abused its discretion, which is an arbitrary and capricious standard of review.
While many have tried to chip away at the deference shown to administrators over the past twenty years, few have succeeded in overcoming the ultra-deferential standard of review. As a result, plan administrators have rarely had their decisions overturned, so long as those decisions have some evidence to substantiate them, and are thus not arbitrary or capricious. One basis for questioning administrative decisions that has been raised repeatedly over the past two decades relates to administrators with conflicts of interest - a personal stake in how the claims are processed.
In MetLife Insurance Co. v. Glenn, 2008 U.S. LEXIS 5030 (U.S. June 19, 2008) the questions that flow from the conflict of interest issue were addressed by the Supreme Court. The Court began by asking what constitutes a conflict and is such a conflict created when the same company both administers and funds a benefit plan, and when such a conflict does exist how is it to be factored into a court’s review of an administrator’s denial of benefits? Download full article
PLAN CONSISTANCY
Spring 2008
As we all know, plan documents have become very complex in recent years. That’s because many benefit plans provide multiple programs such as medical, group-term life insurance, short and long term disability benefits, prescription, dental, vision, and others.
Plans can summarize all programs in a single SPD that can run to hundreds of pages or use a wrap document establishing provisions applicable to all plans and incorporating booklets prepared by TPAs.
If drafting is kept up-to-date and done carefully, nothing will go wrong. Problems arise if the SPD omits important provisions that are included in another document. Two recent cases came to different conclusions on the impact of such modifications on the rights of plans to recover benefits paid from settlements. Download full article
THE INFAMOUS SUBROGATION AGREEMENT
November/ December 2007
The questions that I keep asking myself as a subrogation attorney would probably cause most claim administrators to give me strange looks, but tell me, what are signed subrogation agreements and what do they actually accomplish in the long run?
My work comes to a screeching halt when I encounter claims that are suspended or denied due to a lack of signed subrogation agreements. A layman would imagine that these agreements must be very important to hold up the entire claims payment process. Perhaps these agreements are the basis for the Plan’s right to reimbursement, and without them, the Plan does not have a right to reimbursement?
The answer seems like a simple one. A signed subrogation agreement between the Plan and the covered person is a contract, isn’t it? Attorneys love to get everything in writing and nothing gets a lawyer’s lips smacking like a signed contract. Yet, the Plan Document itself is also a contract. Courts have unanimously held that the summary plan document (SPD) controls the terms by which the Plan is administered, including its right to subrogation and reimbursement. If the SPD contradicts the signed subrogation agreement, either the SPD will control and consequently the agreement is ignored, or both the SPD and agreement are void. The bottom line is that you cannot create new rights for the Plan that did not already exist in the SPD.
Recently, the United States District Court for the Eastern District of Texas presided over a case involving a plan’s denial of claims due to an absence of signed subrogation agreement. Don Burgett, Et. Al. v. MEBA Medical and Benefits Plan, 2007 U.S. Dist. LEXIS 70934, (September 25, 2007). The court determined that the Plan’s reliance on a signed subrogation agreement was not supported by the SPD and not grounds for denial. Download full article
SUBROGATION PROVISIONS - LOOK AT THEM ONCE IN A WHILE
September/ October 2007
It seems like every week I work on an extremely promising subrogation file with a chance to recover 100% of the plan’s money only to feel disgusted after reviewing the subrogation and reimbursement provision in the plan document. Why do so many plans make it so difficult for me to recover their money? Why not include the latest and best recovery rights to ensure that plan assets are protected? Maybe it is because people just do not care about subrogation. That must be why every subrogation provision is located around page 75 in the plan document!
There is a lack of subrogation knowledge in the self-funded industry. Too many administrators believe that subrogation is an irrevocable right, but that just is not the case. To protect a plan’s assets, you have to have strong and clear reimbursement provisions ensuring the plan’s ability to recover funds under state and Federal law.
In my experiences, I have found a common scenario regarding a plan’s extreme interest in subrogation. The only time that a plan wants to arrange a conference call with their lawyers, brokers, administrators, and friends is when there are hundreds of thousands of dollars in claims paid by the plan and everyone involved wants me to recover 100% of the money. When I explain that their subrogation provision has not been updated since 1985 and that the attorney for the patient has requested a copy of the plan document in writing, they begin to ask for new, updated language. The problem is that the plan provisions at the time of the accident, or at least when the claims were paid, is the language that will be in effect. New language that I had recently drafted cannot be applied after the fact. Faced with this scenario, I explain that the chance to recover 100% in this particular large dollar case may be gone. We need to have plan administrators recognize the importance of subrogation provisions, not only after experiencing a large bill that cannot be recouped, but right now, so that we can ensure proper plan rights for the future. Download full article
ANOTHER NAIL BITER
July/ August 2007
Every subrogation attorney believed 2007 would be a pretty quiet year on the Federal Appellate and Supreme Court front following the historic Sereboff decision in 2006. Well, I guess the Courts have the same passion for subrogation as I do because the cases keep on coming!
On June 18, 2007, the United States Supreme Court granted writ of certiorari to hear the Fourth Circuit case of James LaRue v. DeWolff, Boberg & Associates, Inc., et al., 75 U.S.L.W. 3677. The Supreme Court’s ruling will once again affect the application of ERISA and equitable reimbursement rights for self-funded ERISA plans. The Plaintiff LaRue alleged a breach of fiduciary duty in that the administrator had failed to implement the investment strategy LaRue had selected for his employee retirement account, resulting in a depletion of his plan assets of approximately $150,000.
LaRue sought appropriate “make whole” and other equitable relief in Federal Court, pursuant to ERISA, and both the District Court and Court of Appeals determined that the remedy he sought fell outside the scope of “equitable relief” as defined by § 1132(a)(3) of ERISA. The Courts held that money damages were the classic form of legal relief, absent from the list of equitable remedies available under § 1132(a)(3). The Plaintiff could not recover under an equitable restitution theory since he did not allege that funds owed to him were in defendants’ possession but instead that the funds never materialized. Download full article
GREAT, WE WON IN SEREBOFF - NOW WHAT?
June/ August 2006
May 15, 2006 will go down as a historic day for the self-insured industry. As many of you have heard or read, the Supreme Court of the United States handed down a unanimous decision in Joel Sereboff vs. Mid-Atlantic Medical Services, Inc. This case is a resounding victory for self-insured ERISA plans and medical stop loss carriers because it allows entities to enforce subrogation recoveries and to seek relief in the Federal Court system.
The Supreme Court followed its 2002 decision in Great-West Life & Annuity Insurance Company v. Knudson and held that if the settlement funds are controlled by the plan participant and the participant is a party to the recovery action, then an ERISA plan can seek federal relief to enforce the terms of their plan. The potential disaster from a negative decision in Sereboff for subrogation recoveries nationwide has been overcome! I won’t lie - I was sweating for a few months there, particularly while sitting and listening to the oral arguments at the Supreme Court.
The Sereboff case clarified and answered many questions that were left after the Knudson decision, and places restrictions on plan participants who take settlement money, refuse to repay the benefit plan and then spend the settlement funds. The key is that as long as settlement funds are not dispersed, we have a great chance to recover money across the country. While this is a very favorable decision, the battle for successful subrogation recoveries will not end - your attention to subrogation activities must actually increase in order to have a positive end result for your plans. Counsel for plan participants will still seek to frustrate recoveries, and they are already developing new arguments and objections to returning money that rightfully belongs to the plans and stop loss carriers. Download full article
THE LATEST ON SUBROGATION RIGHTS
March/ April 2006
Some potentially great news has arrived offering protection to self-funded ERISA plan subrogation and reimbursement rights under the Pension Protection Act of 2005.
The much discussed Supreme Court decision in Great-West Life Insurance & Annuity Company v. Knudson has led to a split among the federal circuits as to whether an ERISA plan can subrogate or seek reimbursement. The Sixth and Ninth Circuit appear reluctant to allow subrogation or reimbursement, while other circuits, such as the Fourth, Fifth, Seventh, and Tenth, have held that a plan’s subrogation action can be equitable. For this reason, the Supreme Court has decided to hear arguments in the Fourth Circuit Mid Atl. Med. Servs., LLC v. Sereboff case on March 28, 2006 with a decision likely by July 2006. Download full article
WHERE IS THE SUBRO PROVISION?
Winter 2006
In the exciting life of a subrogation attorney - don’t laugh, it really can be - there are many situations where I take a quick glance at a case and smile knowing that as long as I have good subrogation and reimbursement rights, then my health insurance client will be reimbursed in full. But just like watching my favorite team blow a lead in the final minutes of a game, I become devastated after reviewing the plan document.
Time and time again, I have extremely promising subrogation files with great potential to recover 100% of plan funds only to feel dejected after reading the plan document. Why do my clients have to make it so difficult? Why not have proper language to ensure plan assets are protected? As we all know, subrogation provisions are in the back pages of the plan document, usually around page 70. I often wonder if anyone notices the language other than me. I think to myself “did the broker see this, how about the service representative for the plan, the general counsel for the plan didn’t notice that this language…well, doesn’t smell too good?” Well, my friends that is the life of a subro specialist - there is just no love.
As we all have seen, plan documents are often not updated for years. I am currently working on a large dollar subro file involving a car accident in May 2005 and while reviewing the plan document, I realized that it had last been updated in 1999. Let me just say that the subro provisions aren’t up to par with the current legal requirements. Sometimes I have to go through each page of the entire document twice to believe it, but no subrogation provision exists at all. That’s right - the Plan never actually thought of having language inserted to protect its ability to recoup valuable plan assets. Download full article
RECOGNIZING SUBROGATION
Spetember/ October 2004
Over the past several years the once strong subrogation rights under ERISA have been victimized by court sponsored erosion. Across the country, Federal courts have begun to poke holes in ERISA subrogation to the point where it is now incumbent upon plan administrators to recognize that ERISA is not the protector of subrogation it once was. Health plans must now act to protect subrogation rights in the face of bad case law, weak plan language and creative arguments from plaintiffs’ attorneys.
Most readers of this article need to pay special attention to the Ninth Circuit of the Federal Court as many of your plan members and clients reside in states of this circuit. The Ninth Circuit has had a long history of anti-subrogation decisions. Since the early 1990s this Circuit has attempted to limit a plan’s ability to obtain subrogation recoveries. The events beginning in early 2002 are no exception. Download full article