In Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan, No. 16-41032 (5th Cir. 2017), Donna Rhea was the beneficiary of an employee benefit plan organized under ERISA (the “Plan”). Rhea suffered injuries from medical malpractice. The Plan covered some of her medical expenses. After she settled the malpractice claim for more than the medical expenses paid by the Plan, the Plan sought reimbursement from Rhea.
The Plan used a single document as both its summary plan description (the “SPD”) and its written instrument. That document had a reimbursement provision. Rhea refused to reimburse the Plan, claiming that it did not have an enforceable written instrument. She sought a declaratory judgment on this matter in district court, and appeals the district court’s adverse summary judgment against her.
In reviewing the case, the Fifth Circuit Court of Appeals (the “Court”) noted that, when the Plan paid Rhea’s medical expenses, its SPD was functioning as both an SPD and a written instrument. It said that this is nothing peculiar. Plan sponsors commonly use a single document to satisfy both requirements, and courts have blessed the practice. When a plan’s sponsor does not maintain a separate written instrument, as here, the Court must look to the SPD to define the plan’s terms. Under these terms, Rhea had a pre-existing obligation to reimburse the Plan for payments it made for her medical expenses in the event she received a third-party recovery. When Rhea settled her malpractice claim, an equitable lien by agreement was created. The Plan is entitled to reimbursement.
As such, the Court affirmed the district court’s summary judgement against Rhea.