Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Sept. 23 — A federal judge is calling on a higher power to resolve the muddied legal waters that arise when injured individuals, their attorneys and their health insurers fight over the same pot of money ( UnitedHealth Grp. Inc. v. MacElree Harvey, Ltd. , 2016 BL 313014, E.D. Pa., No. 2:16-cv-01026, 9/21/16 ).
This convoluted question frequently arises when a health insurer pays for medical treatment after an individual’s car accident, and the individual later hires an attorney to sue the at-fault driver for damages. On Sept. 21, a Pennsylvania federal judge asked the U.S. Court of Appeals for the Third Circuit to determine whether UnitedHealth Group Inc. can insulate itself from lawsuits for legal fees by a plan participant’s attorney by including a provision in its health plan requiring full reimbursement of benefits in the event of a third-party settlement.
In August, the judge refused to dismiss UnitedHealth’s lawsuit against law firm MacElree Harvey, which had sued the health-care company in state court. MacElree claimed that under Pennsylvania’s common fund doctrine, UnitedHealth had to chip in for the legal fees expended when the law firm obtained a $150,000 recovery on behalf of a UnitedHealth-insured woman who was injured in a car accident.
UnitedHealth paid nearly $50,000 toward the woman’s medical expenses following the accident under the woman’s Employee Retirement Income Security Act-governed health plan. The insurer then received full reimbursement from the settlements attained by MacElree, and it refused to contribute toward the law firm’s fees, citing a plan provision requiring that it be fully reimbursed for all benefits paid in situations like this.
In a Sept. 21 decision, Judge C. Darnell Jones II of the U.S. District Court for the Eastern District of Pennsylvania said that additional clarity was needed on the complicated questions surrounding this dispute.
Jones certified the following question to the U.S. Court of Appeals for the Third Circuit: “Whether the terms of an ERISA Plan requiring a plan participant to reimburse the Plan in full without reduction for attorney’s fees preempts or supersedes a claim brought by a third party attorney against the Plan for unjust enrichment under the common fund doctrine where the Plan has been reimbursed in full by the plan beneficiary.”
Although these disputes are complex and fact-intensive, they arise with some frequency. In July, a federal judge ruled that Southwest Airlines Co.'s health plan didn’t have to chip in for a plan participant’s attorneys’ fees because of a plan provision giving the airline first priority over third-party settlements. A similar dispute went to the U.S. Supreme Court in 2013, leading to a ruling emphasizing that allocation of legal fees will depend on the terms of the relevant ERISA-governed plan.
Littler Mendelson PC represents UnitedHealth. MacElree represents itself.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
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Text of the decision is at http://www.bloomberglaw.com/public/document/UnitedHealth_Grp_Inc_v_MacElree_Harvey_Ltd_No_161026_2016_BL_3130.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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