A new case from the United States Supreme Court, U.S. Airways v. McCutchen, Docket No. 11-1285, decided April 16, 2013, represents a small glimmer of hope on the otherwise bleak landscape for injured plan participants trying to negotiate medical liens asserted by ERISA welfare benefit health plans. ERISA applies to claimants whose medical bills are covered by employer-sponsored medical plans.
Handling personal injury cases has been growing more increasingly complex in recent years and one reason for this has been the growing efforts of those who pay medical expenses for injured plaintiffs to recover their costs from third party tortfeasors. By attempting to recover these costs, the payers of claimants’ medical expenses end up competing with injured plaintiffs for the limited settlement funds.
Health insurers have long asserted subrogation interests and prudent counsel have often been successful in reducing and sometimes eliminating these claims. Two legal arguments that have been primarily used against health insurers have been the “common fund” doctrine and the “make-whole” doctrine. The “common fund” doctrine is based on the argument that if an insurer benefits from a fund created as a result of the efforts of the injured party to recover damages from a tortfeasor, the insurer should also share in the costs incurred in creating that fund, typically attorneys’ fees and expenses. The “make-whole” doctrine is based on the principle that the injured party should be made “whole,” that is, reimbursed for all losses, including pain and suffering and lost income, as well as costs, including attorney fees, before the insurer can recover for the costs of its medical insurance by way of subrogation.