Central States Not Entitled to Reimbursement From Insurers

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Oct. 24 — A Teamsters’ health fund can’t sue insurers of schools and athletic leagues to recoup amounts for medical expenses it paid on behalf of its beneficiaries, the U.S. Court of Appeals for the Seventh Circuit ruled ( Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Am. Int’l Grp., Inc. , 2016 BL 352884, 7th Cir., No. 15-2237, 10/24/16 ).

A three-judge panel Oct. 24 affirmed a district court decision that dismissed the lawsuit brought by the Central States, Southeast and Southwest Areas Health and Welfare Fund against American International Group and other insurance companies. The lawsuit couldn’t proceed because Central States sought as a remedy money damages under a provision of the Employee Retirement Income Security Act that didn’t provide that type of relief, the appeals court said.

The opinion is the latest loss for Central States in its litigation efforts against insurers. The fund is seeking reimbursement for medical expenses it has paid on behalf of beneficiaries who are covered under both the plan and private insurers’ policies. The Seventh Circuit joined the Second, Third, Fifth, Sixth and Eighth, which have resolved “virtually identical claims” against the fund.

Central States sought to recover $343,000 from the insurers. The parties disputed the coordination-of-benefit clauses, and each side argued that the clauses made the other primarily liable for the beneficiaries’ medical expenses.

Although it ruled against Central States, the court recognized the “dilemma this outcome creates for the plan.” According to the court, if ERISA plans can’t bring equitable remedy lawsuits or state-law claims to get reimbursement from other insurers with overlapping coverage obligations, then they are left with just one way to ensure that they don’t pay claims for which insurers are primarily liable.

Under this approach, plans would refuse to provide coverage to beneficiaries who have other insurance and request a court order that the other insurer is primarily liable, the court said. This approach leaves the beneficiary “considerably worse off for having two policies,” the court said.

The opinion was issued by Judge Diane S. Sykes and joined by Judges Joel M. Flaum and Ann Claire Williams.

The Central States Law Department represented the fund. Nicolaides Fink Thorpe Michaelides Sullivan LLP represented the insurers.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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