In my last blog post I overviewed the opposing arguments heard by the Supreme Court in U.S. Airways v. McCutchen. On April 16, 2013 the court handed down its decision: one clearly favorable to health insurance carriers seeking reimbursement of benefits paid from tort recoveries.
Recall that the application of the “unjust enrichment” and “common fund” doctrines in reimbursement cases was before the court. A unanimous court ruled that the unjust enrichment doctrine was ineffective to reduce a carrier’s reimbursement claim. Justice Kagan’s opinion held that a health insurance carrier’s right of reimbursement arises as a matter of contract and is enforceable as the modern-day equivalent of an equitable lien by agreement.
Apart from the question of whether the unjust enrichment doctrine applied to bar or reduce the carrier’s claim, the court also answered the question of whether the “common fund” doctrine could serve to offset the carrier’s claim to the extent the tort claimant’s attorney was entitled to a contingency fee. Since the U.S. Airway’s health insurance plan did not contain language barring the application of the common fund doctrine the court held that it was applicable – McCutchen’s lien was thus proportionately reduced. This, of course, was a fact-specific result with an implicit message to carriers to add the appropriate language to avoid the “problem” in the future.
So, not only is the 800-pound gorilla not going on a diet, he is bigger and more powerful than ever. Personal injury practitioners must recognize that ERISA liens are super liens and must factor this into the intake analysis. Practitioners will need to make early contact with the health insurance carrier to persuade it that but for the tort action no recovery whatsoever may be had. At least this logic may still hold some weight.