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ERISA Health Insurance Issues in Auto Accident Injury Matters

In 2001, auto accident injury victims received what was thought to be good news from the U.S. Supreme Court in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002). In Knudson, the Plaintiff was injured in an auto accident. Her medical bills related to injuries sustained in the auto accident were paid by her ERISA health insurance plan. Upon settlement, the settlement proceeds were paid into a special needs trust. The Plaintiff’s ERISA plan attempted to obtain reimbursement directly from the Plaintiff for the medical bills the health insurance carrier paid for treatment related to the auto accident injuries. The Knudson Court ruled that the plan had no right to reimbursement since such payments would constitute enforcement of a legal remedy, something not allowed under ERISA.

However, through Sereboff v. Mid Atlantic Medical Services, 547 U.S. 1015, 126 S.Ct. 1869 (2006) and its progeny, the Supreme Court illuminated the fact that the Court will not interpret every plan as seeking a prohibited legal remedy.  The Court will look to the plan language on a case by case basis to determine whether the plan creates an equitable remedy – specifically, whether a fund has been specifically identified by the plan language, and if so, to what part of the fund the plan will be entitled to recover reimbursement. The plan’s right to reimbursement will fail if the plan itself fails to create a lien by agreement, by “specifically identifyi[ng] a particular fund, distinct from [the plan beneficiaries’] general assets. . . and a particular share of that fund to which [the plan] was entitled.”