Supreme Court Rules on Reimbursement Rights by ERISA Plans

U.S. Airways, Inc. v McCutchen, ____ U.S. ____ (4/16/13) holds that in an ERISA action under §502(a)(3) by the plan administrators to obtain “appropriate equitable relief . . . to enforce . . . the terms of the plan,” the plan’s terms govern and override any doctrines designed to prevent unjust enrichment.  The plan paid $66,866 in medical expenses to McCutchen due to a car wreck.  A settlement of $110,000 was reached and McCutchen received $66,000 after attorneys’ fees were deducted.  The plan sued and demanded reimbursement of the entire $66,866 it had paid on McCutchen’s behalf.  The Supreme Court held that the plan could obtain the funds its beneficiary had promised to turn over under the terms of the plan.  However, the Court also held that while equitable rules would not trump a reimbursement provision in the ERISA plan, they may aid in properly construing it, and as to allocation of attorneys’ fees this particular plan was silent.  This plan did not address cost of recovery, so the Court applied the common fund doctrine, which governs in the absence of a contrary agreement.  The Court pointed out that without the common fund rule, the insurer would get a free ride on the beneficiary’s efforts, and the beneficiary, as in this case, could be made worse off by having procured a recovery from a third party.  This decision leave the door open for appropriate allocation of attorneys’ fees and litigation costs when an ERISA plan seeks reimbursement from its beneficiary, but it does little to benefit the injured beneficiary. 

 For the complete opinion, click here.

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