The decision handed down today by the U.S. Supreme Court in Montanile v. Board of Trustees of National Elevator Industry Health Benefit Plan could have a great impact on health insurance plans, but also reinforces the importance of attorneys following time tested practices in cases involving ERISA law.
On December 1, 2008, a drunk driver injured Robert Montanile in a car accident. Montanile suffered injuries to his neck and lower back that required surgery and other medical care. Montanile was a covered member of the National Elevator Industry Health Benefit Plan and received $120,044.02 to cover his medical expenses from the plan. Eventually, Montanile sued the drunk driver and received a $500,000 settlement. Montanile used part of the settlement proceeds to pay his attorney and to “reimburse out-of-pocket expenses.” He spent the remainder on other “non-traceable” items.
After Montanile won the settlement, the Board of Trustees of the Plan demanded that Montanile reimburse the Plan the $120,044.02 it paid to cover Montanile’s medical expenses. The Board asserted that “the Plan had the right to be reimbursed out of the settlement proceeds” according to the terms of the plan description, which outlined the “Plan’s rights to subrogation and first-recovery reimbursement out of any amounts recovered by the Plan participants from another party.”
The parties could not reach a settlement and Montanile’s attorney said that he was going to release the $240,000 to Montanile in 14 days unless the Plan objected. No timely objection was received from the Plan. At that point the Plan sued Montanile under section 502(a)(3) of the Employee Retirement Income Security Act (ERISA) to enforce the Plan’s reimbursement provisions. ERISA governs the administration of private pension funds. Section 502(a)(3) provides that “[a] civil action may be brought . . . by . . . [a fund’s] fiduciary . . . to obtain . . . appropriate equitable relief.”
In today’s 8-1 decision, the Supreme Court reversed the lower courts and said the fund could not collect from Montanile’s general assets as he had already spent the proceeds of the lawsuit settlement.
Moral of the Story
The practical impact of the Montanile decision will be to force insurance plans to flag all payments that could be related to a claim against a third party and refuse to pay the medical provider until an agreement is reached on repayment to the plan.
For attorneys, simply following time tested practices should prevent dissipation of assets that should be used for repayment to a plan when dealing with subrogation, always make a timely demand on the plaintiff and his/her attorney, and when possible, reach an agreement with the attorney on repayment. When an agreement cannot be reached, always file a lien and notify all parties of the lien. Never allow assets to be released to the plaintiff in a case without a settlement agreement on where the proceeds will be paid.