ERISA-Eighth Circuit Holds That A Subrogation Provision, Contained In The SPD, Is Enforceable

The case of National Elevator Inc. Health Benefit Plan v. Moore, No.14-4048 (6th Cir. Aug. 25, 2015) involved a subrogation claim, which arose from a dispute involving the Health Benefits Plan (the “Plan”) established by the Board of Trustees of the National Elevator Industry (the “NEI Board”) under ERISA. The NEI Board, acting as the fiduciary and administrator of the Plan, sued Kyle Moore and the law firm Goodson & Company, Ltd. (collectively, “Moore”), seeking reimbursement for medical expenses that the Plan paid on Moore’s behalf, following Moore’s successful settlement of a negligence action filed against the entities responsible for injuries he suffered in an accident. In response, Moore contended that the terms of the Plan did not provide for reimbursement and filed a counterclaim alleging that the Board had violated its fiduciary duty by misrepresenting the terms of the Plan. The district court granted summary judgment against Moore, and Moore appeals.

In analyzing the case, the Eighth Circuit Court of Appeals (the “Court”) said that the district court correctly decided that the summary plan description (the “SPD”) containing the subrogation provision set out the binding terms of the Plan and that the plain language of the provision required reimbursement. Thus, the Court affirmed the district court’s decision.
In so affirming the decision, the Court’s findings included the following about the subrogation provision and its inclusion in the SPD. First, the Court found that the SPD-the only document in the record containing a subrogation provision–is a binding plan document that sets out enforceable terms. The SPD itself constitutes a welfare benefits plan, which is provided for in a governing trust agreement. There is no other plan document (aside from the trust agreement). The Supreme Court’s decision in Amara does not change this result.

Second, the Court noted that the subrogation provision states:

“Amounts that have been recovered by a covered person from another party are assets of the Plan by virtue of the Plan’s subrogation interest and are not distributable to any person or entity . . . . However, amounts recovered by such covered person from another party in excess of benefits paid by the Plan are the separate property of such covered person (emphasis added).”

The Court said that the reimbursement of amounts recovered by Moore, sought by the Plan, are not amounts in excess of benefits paid by the Plan, and therefore are assets of the Plan. Finally, the subrogation provision may be applied, even though (as here) the settling third-party has not actually been determined, either through judicial finding or admission, to be liable for the participant’s injuries.

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