A recent decision by the U.S. Court of Appeals for the Sixth Circuit (Patterson v. United HealthCare Ins. Co., No. 22-3167, 2023 WL 4882436 (6th Cir. Aug. 1, 2023)) illustrates the importance of clearly describing key plan terms in the plan document and summary plan description.  Incomplete documentation or disclosure can nullify rights of the plan and its sponsor.

Patterson involved a medical plan’s right to be reimbursed for medical expenses paid by the plan in the event the plan participant recovers funds from a responsible third party.  A plan participant was injured in a traffic accident and his plan covered his medical costs.  When the participant later recovered damages from the person who caused the accident, the plan’s insurer asserted its right to be reimbursed.  The insurer pointed to language in the plan’s summary plan description that gave the plan a right to be reimbursed out of the participant’s recovery.  The parties eventually settled for $25,000.

A few months later, the participant’s wife was injured in a second traffic accident.  Again, the plan paid the injured wife’s medical expenses and the insurer sought reimbursement out of any recovery from the other driver.  This time, the participant’s wife was able to establish that although the plan’s right of recovery was described in the summary plan description, it was not described in the formal plan document.  Consequently, the plan’s insurer was not entitled to reimbursement from the participant’s wife.

Based on his wife’s experience, the participant then sued the plan’s insurer to get back his $25,000.  The insurer refused based on technical arguments under ERISA’s enforcement provisions.  The district court dismissed the case, but the Sixth Circuit reversed, concluding that ERISA gave the participant a right to seek recovery of his $25,000.

Proskauer’s Perspective 

Although ERISA generally allows medical plans (and plan sponsors) to recover benefit payments when the recipient recovers damages from a third party, the plan’s rights must be detailed in both the plan document and summary plan description.  Any ambiguity or lack of detail could be fatal to the plan’s case.  The Patterson case is a good reminder of the importance of having documents that are thorough, clear, and carefully drafted.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Seth Safra Seth Safra

Seth J. Safra is chair of Proskauer’s Employee Benefits & Executive Compensation Group. Described by clients as “extremely knowledgeable, practical, and strategic,” Seth advises clients on compensation and benefit programs.

Seth’s experience covers a broad range of retirement plan designs, from traditional defined…

Seth J. Safra is chair of Proskauer’s Employee Benefits & Executive Compensation Group. Described by clients as “extremely knowledgeable, practical, and strategic,” Seth advises clients on compensation and benefit programs.

Seth’s experience covers a broad range of retirement plan designs, from traditional defined benefit to cash balance and floor-offset arrangements, ESOPs and 401(k) plans—often coordinating qualified and non-qualified arrangements. He also advises tax-exempt and governmental employers on 403(b) and 457 arrangements, as well as innovative new plan designs; and he advises on ERISA compliance for investments.

On the health and welfare side, Seth helps employers provide benefits that are cost-effective and competitive. He advises on plan design, including consumer-driven health plans with HSAs, retiree medical, fringe benefits, and severance programs, ERISA preemption, and tax and other compliance issues, such as nondiscrimination and cafeteria plan rules.

Seth also advises for-profit and non-profit employers, compensation committees, and boards on executive employment, deferred compensation, change in control, and equity and other incentive arrangements. In addition, he advises on compensation and benefits in corporate transactions.

Seth represents clients before the Department of Labor, IRS and other government agencies.

Seth has been recognized by Chambers USA, The Legal 500, Best Lawyers, Law360, Human Resource Executive, Lawdragon and Super Lawyers.