One particularly interesting U.S. Supreme Court illustrates some of the complexities of ERISA subrogation. In the case of Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan. In this case, a drunk driver collided with Montanile, causing $120,000 in medical bills to be paid from an employee benefit plan. He later obtained a policy limits settlement of $500,000. Upon settlement, the subrogated insurer pointed to two provisions in the contract for insurance that entitled them to recovery

The insurer did not object or otherwise respond, thus, the funds were disbursed to Montanile. The insurer later sued Montanile six months after disbursement. Montanile then claimed the money had been spent and was thus unavailable to the insurer. The insurer countered that the funds were payable from his personal assets. The Trial Court granted summary judgment to the health insurer originally. The 11th Circuit Court of Appeals affirmed. However, the U.S. Supreme Court reversed both decisions, noting that the ERISA statute authorizes plans to bring civil suits “to obtain appropriate equitable relief … to enforce … the terms of the plan.” The Court reasoned that an equitable lien attaches only to “specifically identifiable funds” and not the defendant’s general assets. The Court held that, to the extent that Montanile had already dissipated the funds by spending the money, the ERISA plan was unable to enforce it’s lien against.

Remember that Federal Law preempts any State Law governing ERISA plans if the plan is Self Funded (i.e. the employer provides the capital and pays all health care expenses with its own money). This is to avoid a patchwork set of regulations.  However, keep in mind that State’s – by operation of the savings clause – are permitted to regulate such plans indirectly through regulation of the insurer itself, as well and the insurance contracts. Also, if a plan pays insurance premiums and the insurer pays the health care expenses, Federal Law does not preempt State Law on the question of ERISA reimbursement to subrogation. 

You must consider whether an employer provided plan is self-funded or insured, as the answer can be outcome determinative when considering subrogation interests. In investigating this issue, the first stop should be publicly available information.  The most front facing document for this is known as IRS Form 5500. On page 1 of this form, you will want to look at section 9(a) and 9(b). If you find that the plan is funded by either a trust, or the general assets of the sponsor, without reference to an insurance policy, you can reasonably assume it is self funded. Take some time to verify this information is current and accurate, as plans may change over time. Also consider whether the funding arrangement would withstand judicial scrutiny if you find it to be unfavorable to your position. A plan will remain self-funded even if it employs an insurance company to act as the plan administrator. 

In Ohio this distinction matters quite a bit. This is due to O.R.C. §2323.44, which states in relevant portion: If less than the full value of the tort action is recovered for comparative negligence, diminishment due to a party’s liability under sections 2307.22 to 2307.28 of the Revised Code, or by reason of the collectability of the full value of the claim for injury, death, or loss to person resulting from limited liability insurance or any other cause, the subrogee’s or other person’s or entity’s claim shall be diminished in the same proportion as the injured party’s interest is diminished.

You can use the Federal Law to gain valuable information about an ERISA plan in advance of litigation, and set traps for the inattentive. If dealing with a third party administrator (i.e. Rawlings), the administrator is under a legal duty to disclose all documentation related to the plan. Thus, sending a letter via certified mail is prudent. This letter should request: The Summary Plan Description

• The Actual Plan or Contract
• The Latest Summary Annual Report
• The Latest Terminal Report
• The Bargaining Agreement
• The Trust Agreement
• Evidence your client was provided with the Summary Plan Description
• IRS Form 5500

Many times, the administrator may lack this information. In such cases, it is prudent to send a statutory request pursuant to 1024(b)(4) 29 USC via certified mail. If this request is ignored, it can open up the plan to a variety of sanctions. Well before resolving the case, upon a formal request via certified mail, the plan has ten days to provide a detailed list of medical benefits provided by the plan related to the personal injury matter. If the plan does not follow the statute to the letter, it can lose it’s right to reimbursement – so pay close attention to strict adherence.