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Opinion analysis: Justices reaffirm limitations on ERISA plan’s right to recover medical-reimbursement costs

This morning brought us a strong candidate for this year’s award for “case that breaks the least new ground.” To the surprise of few, the Court disposed of Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan with a wholly pedestrian opinion that treated the case as almost entirely governed by the Court’s existing case law for the Employee Retirement Income Security Act of 1974 (ERISA).

This case involves a commonplace fact situation: a driver, with health insurance from an ERISA plan, is injured in an automobile accident. Later, the insured driver successfully sues the other driver and recovers for the injuries he suffered in the accident. As the Court puts it, the “terms of those plans often include a subrogation clause requiring a participant to reimburse the plan if the participant later recovers money from the third party for his injuries.” It will astonish all but the most jaded ERISA lawyers to know this is the fourth time the Court has considered the ability of plans to recover such payments under such clauses.

In the first of the earlier cases, Great-West Life & Annuity Insurance Co. v. Knudson, the Court held that ERISA would not allow the plan to sue the insured for a money judgment, at least when the driver did not have the funds in question (because they had gone directly to his attorneys). The money judgment was a “legal” remedy; the Court has long held that the relevant provision of ERISA (Section 502(a)(3)) permits only “equitable” relief. In the second and third cases, Sereboff v. Mid Atlantic Medical Services and US Airways, Inc. v. McCutchen, the Court held that the plans could reach settlement funds that had been segregated in a separate account; the remedy against that specified fund was an “equitable” lien and thus permitted.

The key fact in this case is that the money did reach the driver but it has been largely spent. The plan sought a money judgment against the driver, arguing that an equitable lien attached (under Sereboff and US Airways) when the money reached him. Writing for all but Justice Ruth Bader Ginsburg, Justice Clarence Thomas’s opinion for the Court rejected the plan’s argument out of hand. As he explained (omitting quotation marks and citations), “[e]quitable remedies are, as a general rule, directed against some specific thing . . . rather . . . than a right to recover a sum of money generally out of the defendant’s assets.” A suit for damages is the paradigmatic legal remedy.

Because petitioner Robert Montanile had spent the money, there was no longer a fund against which an equitable lien could be enforced. Accordingly, the plan’s action failed. As the discussion above suggests, the Court’s opinion broke no new ground. After summarizing the three cases and what they had said about equitable remedies, the Court explained that none of the various avenues the plan had suggested for reaching the funds was a “typical” equitable remedy; thus, none were available under ERISA. The Court’s opinion concluded with a brief passage emphasizing that the statute’s general purpose to enhance the solvency of plans could not overcome the specific boundaries of ERISA’s detailed remedial scheme.

Perhaps the most interesting thing about the Court’s disposition is that the vote was eight to one. Justice Ruth Bader Ginsburg dissented, arguing (as she had in Great-West) that the underlying legal/equitable distinction is itself a mistake – a view that I am partial to – as I argued (and lost) the principal predecessor to Great-West. The decision in Great-West was five to four, with Justices John Paul Stevens, David Souter, and Stephen Breyer joining Ginsburg’s dissent. Stevens and Souter have left the Court, but this time even Breyer went along with the majority’s narrow understanding of the ERISA remedies. If ERISA plans want broader remedies, they will have to take their complaints to Congress. The courts are not going to help them.

PLAIN LANGUAGE: An insurance company paid Montanile’s medical expenses when he was in an accident. Later, Montanile sued the other driver and recovered money for his medical expenses. The insurance company wanted Montanile to give it the money for the medical expenses the insurance company had paid. But Montanile spent the money instead. The issue in this case is whether the insurance company can sue Montanile to get back the money. The Court says that the insurance company cannot sue Montanile once he has spent the money.

Recommended Citation: Ronald Mann, Opinion analysis: Justices reaffirm limitations on ERISA plan’s right to recover medical-reimbursement costs, SCOTUSblog (Jan. 20, 2016, 9:47 PM),