For years, The Phia Group has argued that requisite signed subrogation agreements are a mistake. Often, plan documents include language which states that if a third party may potentially be responsible for charges, the Plan will not process these charges without a signed subrogation agreement from the plan member.

Often, a Plan will state that as a condition to any payment by the Plan, the plan member must execute a “Subrogation and Reimbursement Agreement” before any medical or other benefits will be paid. They often then go on to say that if the Plan pays any medical or other benefits before these papers are signed, the Plan is still entitled to Subrogation and Reimbursement.

What purpose do these signed agreements serve, if the Plan can assert the same right to subrogation and reimbursement without them?

In our experience, obtaining such an agreement from every covered person where the Plan may be entitled to reimbursement is an impossible task. When the language states that the Plan will ONLY pay claims where there is a right to reimbursement and/or subrogation AFTER it receives a signed agreement, it is stating (in other words) that if the Plan pays claims without a signed agreement, those claims must not be recoverable through subrogation. By requiring a signed agreement to have claims paid, the Plan actually weakens its rights.

In the district court case of Mills v. London Grove Township, the Court held that the Plan member’s failure to sign a reimbursement agreement foreclosed the Plan from later seeking reimbursement against the member for claims it paid without said agreement. This was based on the fact that the plan document stated that claims subject to subrogation would only be paid after a signed agreement was executed.

Without a signed agreement, no claims subject to subrogation would be paid. Thus, the Court held, if claims were paid without a signed agreement, they cannot be subject to subrogation. The Plan language itself implied that reimbursable claims are defined by their non-payment without a signed agreement. If a claim is payable without an agreement, it must be non-reimbursable.

Signed “subrogation agreements” are also a bad idea since if their terms differ from the Plan Document, they may be held to be null and void. Furthermore, if you attempt to enforce a signed subrogation agreement, you would do so by filing a breach of contract action in State Court. One of the benefits of self-funding and ERISA is your ability to stay out of State Court.

The Phia Group satisfies desires for signed documents by providing a form signed by the Plan Member acknowledging the terms of the Plan Document, and agreeing to hold funds in trust until the Plan’s right to reimbursement is satisfied.

To learn more about The Phia Group’s answer to the signed agreement dilemma please contact our legal team. To set up an appointment, please call 888-986-0080 and speak to Cindy Monfils at extension 155. Ms. Monfils can be reached by email as well at cmonfils@phiagroup.com.

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This entry was posted by Adam V. Russo on Wednesday, March 4th, 2009 at 12:18 pm and is filed under Never Events. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.