Now that you know there is an issue you can’t ignore, you have to determine if the disability and/or group health carrier or plan has a legal right to reimbursement or subrogation and, if so, how that impacts the case.

The starting point is the ERISA plan and not the Summary Plan Description (SPD). The SPD is just a summary and is not legally controlling unless it is incorporated into the plan.

Remember that under ERISA, there is no general right of subrogation or reimbursement. The right to recover must be in the plan (Cigna v. Amara, 131 S.Ct, 1866 [2011]).

If there is no right to reimbursement or subrogation in the plan, too bad, so sad. So, what does the plan say?

What is Subrogation?

Subrogation is a common contractual term that gives the disability or group health carrier or plan the right to legally pursue a third party that caused your client’s loss.  As workers’ compensation attorneys, we are all familiar with the workers’ compensation carrier’s right to stand in the shoes of the injured worker and pursue the third part who caused the injury. It is the same in the context of a disability or group health policy or plan. 

However, the workers’ compensation carrier, the disability carrier or plan, and the group health carrier or plan, all might have the right to subrogation. That would be quite a party! Much like a workers’ compensation carrier, the plan should exercise its right to subrogation.  Do you want to invite the plan to the party or not?

What is Reimbursement?    

Reimbursement gives the disability or group health carrier or plan the contractual right to be repaid for benefits they paid from the proceeds of any personal injury claim and/or workers’ compensation claim.

This is where we often find ourselves if the injured client was involved in a motor vehicle accident in the course and scope of employment or has any type of third-party claim as a result of negligence, including malpractice. We might find ourselves in a situation where the claim was denied and the injured employee used their group health coverage to get treatment.

If the plan has a reimbursement provision, the first question you must answer is, “What is considered other income in the plan that triggers the right to reimbursement?” Is it the payment of Temporary Total Disability, Temporary Partial Disability, Impairment Benefits, permanent total benefits, rehabilitation benefits, past medical, future medical, attendant care or even attorney fees?

The answer will impact what your client might net in disability or workers’ compensation benefits, how to structure a settlement, or even whether you can afford to take the case. 

What does the group health plan say about its right to reimbursement? Each type of plan may say something completely different and that will, once again, impact what you can or want to do in the case.   

The second question is whether the plan has sufficient language that allows the plan to recover.  In ERISA cases, the make-whole doctrine generally applies unless the plan specifically rejects the make-whole doctrine. The plan language must be clear and unambiguous.

Many group health plans specifically reject the make whole doctrine in clear and unambiguous plan language.

On the other hand, disability plans are more ambiguous about the make whole doctrine but can be very specific about what portion or portions of a workers’ compensation settlement give rise to an overpayment and a claim for reimbursement. 

Once again, you should read the plan language closely, including language about whether the plan’s right to reimbursement includes any money paid for attorney fees and costs.  You might be surprised to learn that only monies for lost wages are considered other income subject to reimbursement, which will impact how you allocate workers’ compensation settlement monies.

A great case law guide for answering this question is found in Popowski v. Parrott, 461 F.3d 1367, 1369 (11th Cir. 2006). The plaintiff was covered under two different plans and only one was found to have sufficient language to allow for a plan recovery. The other did not have sufficient language so that plan had no right of  recovery.

The plan language must identify a specific fund out of which a recovery can be paid so it is important for you to track the plan language and use Popowski as the framework for your analysis.  

There is one more twist! When speaking with your client or the plan, be sure to ask if the client signed a reimbursement or subrogation agreement. That can change the entire analysis!

Don’t make crucial mistakes that can result in a malpractice claim.

Whats next?

The U.S. Supreme Court provided us with a strategy to craft a successful settlement of a workers’ compensation case when you are confronted with a disability or group health plan that won’t discuss with you a resolution of reimbursement issues. Don’t miss the final article in this series.  

If your client has a short- or long-term disability policy, call our office at 727-894-3188 for a policy review.

Nancy L. Cavey, Esq. Cavey 727-894-3188

Nancy L. Cavey is a nationwide ERISA disability attorney with over 40 years of experience helping disabled individuals obtain the disability benefits they deserve. Throughout her career, she has dedicated herself to representing clients in complex disability claims, including ERISA Disability Claims, and Long-Term Disability Claims.