ERISA-Eighth Circuit Holds That Claims Against Insurers For Restitution, And The Imposition Of An Equitable Lien And Constructive Trust, Are Legal And May Not Be Brought Under Section 502(a)(3) of ERISA

The case of Central States, South East and South West Areas Health & Welfare Fund v. Student Assurance Services, Inc., 2015 U.S. App. LEXIS 13941 (8th Cir. 2015) involved the following situation. Central States, a multi-employer trust fund governed by ERISA, provides health and welfare benefits to participants in the teamster industry and their dependents. Columbian Life and Security Life are insurance companies that sell, among other things, medical insurance for accidents suffered by students. Student Assurance Services processed claims for policies issued by Columbian Life and Security Life. For convenience, these three entities are referred to collectively as “Student Assurance.”

Central States’s complaint identifies thirteen junior high, high school, and college student-athletes who were covered dependents under its plan. These students also were covered under policies issued by Student Assurance. After the students sustained athletic injuries, Central States paid the students’ medical expenses and sought reimbursement from Student Assurance. Student Assurance refused to pay. In total, Central States paid $137,204.88 in benefits. Central States alleges that according to the coordination of benefits provision of its plan, the student accident policies supply primary coverage for the students’ covered medical expenses. Student Assurance insists, however, that the student accident policies are excess policies, and that they are not obligated to pay until Central States has reached the maximum contribution under its plan. Central States sued, invoking federal common law and section 502(a)(3) of ERISA. The complaint includes claims for declaratory relief, restitution, and the imposition of an equitable lien and constructive trust to secure reimbursement for the benefits paid on behalf of the common insureds. Student Assurance moved to dismiss on the ground that Central States’s claims, while ostensibly seeking equitable remedies, were actually for legal relief that is unavailable under section 502(a)(3). The district court granted the motion and dismissed the complaint. Central States appeals.

In analyzing the case, the Eighth Circuit Court of Appeals (the “Court”) concluded that Central States was seeking legal relief, not equitable relief. The fund seeks compensation out of the general assets of the non-ERISA insurers, and does not assert the right to particular property in the possession of the insurers. Since it is not seeking equitable relief, the Court held that Central States cannot bring its claim under section 502(a)(3). As such, the Court affirmed the district court’s decision.

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