Federal Appeals Court Upholds ERISA Subrogation Rights
The Eleventh Circuit Court of Appeals has held that a plan’s insurer could, pursuant to the plan’s subrogation clause, recover more than $250,000 from a participant where it paid for the participant’s medical expenses.
Zurich American Ins. Co. v. O’Hara, No. 08-16875, 2010 WL 1641369 (11th Cir. Apr. 26, 2010), concerned an ERISA action for reimbursement for medical expenses that a plan had paid on defendant’s behalf after defendant was injured in a car accident. The court of appeals affirmed summary judgment for plaintiff, on the grounds that 1) the plan’s reimbursement and subrogation provision, which stated that “the Plan may collect from [a] covered person the proceeds of any full or partial recovery” he obtained from a third-party tortfeasor, “regardless of whether [the] covered person has been fully compensated or made whole,” was clearly sufficient to disclaim any “make-whole” limitation on plaintiff’s right to reimbursement; and 2) the reimbursement plaintiff sought was not a premium or contribution on the basis of any health status-related factor to be paid out of defendant’s general assets, and instead plaintiff sought to recover specific and identifiable funds, advanced to cover defendant’s accident-related medical expenses, that were being held in trust by defendant’s attorneys.
The court explained that the “make-whole” rule – which limits the insured’s liability to his carrier for only the excess received in settlement over the total amount of his loss — applies only where the plan is silent as to the plan’s subrogation rights.