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Sereboff v. Mid Atlantic: Will ERISA plan get reimbursement from plan participants
March 25, 2006 by Ross Runkel at LawMemo
Where I come from an insurance company should get reimbursed when its pay-out gets replaced by a judgment from a third-party tortfeasor. But that's because I don't write statutes that distinguish between equitable relief and legal relief. Congress did just that in ERISA, so we have a split among the circuits on this.
The US Supreme Court will figure it all out in Sereboff v. Mid Atlantic Medical Services, which will be argued on March 28, 2006. Go here for briefs and the lower court opinion.
An ERISA Plan paid about $75,000 to two participants (the Sereboffs) to cover medical expenses connected to accident-related injuries. The Sereboffs recovered $750,000 in a settlement with a third-party tortfeasor, and placed those funds into an investment account. The Plan then sued the Sereboffs to get reimbursed for the benefits it had paid. The Plan sued under ERISA Section 502(a)(3) which allows a Plan to recover "other equitable relief."
The Sereboffs argued that the Plan could not recover because it was seeking "legal" rather than "equitable" relief, citing Great-West Life v. Knudson, 534 US 204 (2002). The Knudson facts were similar except that under the terms of the settlement the proceeds went into a trust for the medical care of one of the Knudsons.
The 4th Circuit held that the Plan was seeking "equitable" relief within the meaning of Great-West Life v. Knudson, and allowed the suit to go forward. The US Supreme Court will be reviewing the 4th Circuit decision.
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