“What are the medicals?”
This is often the first question we hear from defense counsel in our personal injury cases. Before litigating a case most defense lawyers will attempt to estimate their client’s exposure to damages. Of all the different types of damages – lost wages, property damage, pain and suffering – medical expenses are often the easiest to quantify and the most substantial. Because of this, the “value” of a personal injury case is based in large part on the total medical bills incurred by the injured party.
However, very few people actually pay the entirety of their medical expenses out of their own pocket. Most buy insurance, which pays their medical bills if they get sick or injured. What many people don’t know is that health insurers sometimes expect to be repaid.
Certain health insurers are subject to a federal statute, called ERISA, which regulates health plans. If an ERISA plan meets certain conditions, an insurer may write provisions into its contract that requires insureds to reimburse the plan for treatment expenses if the insured obtains a verdict or settlement in a personal injury case. It is therefore an important part of every personal injury case to determine the extent to which ERISA applies, and whether any applicable reimbursement provision is properly drafted.
The US Supreme Court has held that a properly drafted equitable reimbursement provision allows insurance companies to enforce a lien against a personal injury plaintiff’s recovery. Consider the result in the 2013 case U.S. Airways, Inc. v. McCutchen. There, the Court held that a plan can require a successful personal injury plaintiff to reimburse his or her medical plan for all treatment expenses without deducting for attorney’s fees, costs, or a reduced settlement value. The lower court in McCutchen had required an injured driver to repay $67,000 to his health plan even though his net recovery was only $66,000. The plaintiff took all the risk, did all the work, and had to turn over all of his recovery – and then some – to his health insurer.
The Supreme Court recently decided another ERISA reimbursement case, and this one is a much better result for plaintiffs. In Montanile v. Board of Trustees, the Court held that an ERISA plan’s equitable right to reimbursement does not extend to the general assets of its insured. This means, essentially, that an insurance company may only obtain reimbursement out of the specifically identifiable or traceable proceeds of a personal injury action. Once the insured obtains and spends settlement or judgment proceeds, the insurer is out of luck. This decision is causing concern throughout the insurance industry and may lead to many plans departing from the hardline negotiation tactics often used in ERISA reimbursement cases.
As personal injury plaintiffs lawyers we strive not only to obtain the best settlement or judgment possible for our clients, but also to make sure that the proceeds are protected and accessible. We fight for our clients, not for their insurance companies. The Montanile decision gives us another negotiation tool to continue our successful track record of eliminating or substantially reducing reimbursement claims.
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