Important ERISA Reimbursement Decision from Third Circuit

In its recent November 16, 2011 decision in the case of U.S. Airways v. McCutchen, ___ F.3d ___,  2011 WL 5557411 (3d Cir. 2011Sloviter, Fuentes, and Vanaskie, JJ.)(Opinion by Fuentes, J.), the U.S. Court of Appeals for the Third Circuit just held that an insurer is not entitled to 100 percent reimbursement of paid medical expenses when an injured employee has recovered only a fraction of his damages from a third party. 

Commentators have noted that, with this decision, the Third Circuit became the first court in the country to place clear limits on employer-based insurers' ability to recover medical expenses from injury victims.

The plaintiff in U.S. Airways v. McCutchen was a mechanic for U.S. Airways who sustained serious injuries as result of a head-on collision that allegedly left him permanently disabled.

 U.S. Airways' health  insurer paid about $67,000 for the plaintiffs medical expenses.  The plaintiff thereafter recovered only a portion of his total alleged damages from third parties, including the driver who caused the accident.  The health insurer did not make any request for repayment during the pendency of the litigation.

Then a plaintiff's attorney's nightmare came true when the health insurer turned around and sued the injured party for all of the money the health insurer had paid out for the injured party's medical treatment, i.e., the carrier sought an ERISA reimbursement.

U.S. Airways' health insurance plan relied on contract language to argue that it was entitled to all of its money regardless of how much the plaintiff had recovered from third parties.   The health insurance plan refused a request to reduce its claim by the amount of attorney's fees and costs involved.

The Third Circuit rejected the health insurer's position under equitable principles of law and remanded the case back to the Federal District Court level for a further hearing on the appropriate amount of the reimbursement in light of this decision.

The U.S. Airways v. McCutchen decision can be viewed at this link:

 http://www.ca3.uscourts.gov/opinarch/103836p.pdf


I send thanks to Attorney Scott Cooper of the Harrisburg, PA law firm of Schmidt Kramer and Attorney Stephen Seach of the Drums, PA law firm of The Law Offices of Stephen Seach for bringing  this case to my attention.