Injured beneficiaries won in Supreme Court’s decision

This January 20th, the U.S. Supreme Court ruled against health insurance plans in the ratio of 8-1, which sought to recover medical expense payments from a member who had won money in court to cover his injury-related costs. Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 136 S. Ct. 65 (2016).

Petitioner Robert Montanile was a participant in a health benefits plan governed by ERISA and administered by respondent Board. The plan must provide for payment of certain medical expenses that beneficiaries or participants incur. It may, however, also demand reimbursement when a participant recovers money from a third party for medical expenses.

Montanile was severely injured by a drunk driver in December 2008, post which the plan paid at least $121,044.02 for his initial medical care. Following that, Montanile signed a reimbursement agreement reaffirming his obligations to reimburse the plan from any recovery he obtained “as a result of any legal action or settlement or otherwise”.

Thereafter, a negligence claim was filed by Montanile against the drunk driver making a claim for uninsured motorist benefits under Montanile’s car insurance, thus obtaining $500,000 in legal settlement, of which $240,000 was used to pay his attorneys.

When both, Montanile’s attorney and the plan's board of trustees failed to reach a settlement regarding reimbursement of the funds, the board sued the petitioner under the ERISA seeking to enforce an equitable lien upon his settlement funds or his property, despite Montanile’s contention of already having spent most of the settlement funds.

Later on, in order to resolve the conflict among the appeals courts, the Supreme Court eventually stepped in and reversed a ruling of the Eleventh Circuit maintaining that an ERISA fiduciary could not enforce an equitable lien against a defendant’s general assets. The court held that when a participant dissipated the whole settlement on nontraceable items, the fiduciary could not bring a suit to attach the participant’s general assets under § 502(a)(3) of the ERISA, 29 U.S.C.S. § 1132(a)(3), because the suit was not one for appropriate equitable relief. An ERISA fiduciary's § 1132(a)(3) action seeking to enforce an equitable lien by agreement against the plan participant's assets was equitable in nature where the lien attached to the settlement funds that the participant recovered in a negligence action, rather than the participant's general assets, the right to recover money was a legal remedy, and the fiduciary had sufficient notice of the settlement to have taken steps to preserve those funds.

The court further sent back the case to the Federal District Court, asking it to determine as to how much of Montanile's settlement remained when the plan sought reimbursement, in case all of it had not been spent.


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