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How About Some Evidence?

By: Christopher Aguiar

Despite the Supreme Court’s decision in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 577 U.S. in 2016, some benefit Plan sponsors still question the need for a robust approach to third party liability.  In Montanile, the Court stated in no uncertain terms that it would not give benefit plans a remedy if they sat on their hands and were not proactive in their efforts to recover third party settlement.  In pertinent part, the Court stated:

… The Board protests that tracking and participating in legal proceedings is hard and costly, and that settlements are often shrouded in secrecy. The facts of this case undercut that argument. The Board had sufficient notice of Montanile’s settlement to have taken various steps to preserve those funds. Most notably, when negotiations broke down and Montanile’s lawyer expressed his intent to disburse the remaining settlement funds to Montanile unless the plan objected within 14 days, the Board could have—but did not—object. Moreover, the Board could have filed suit immediately, rather than waiting half a year. …

Indeed, the Court seemed to give no deference to the Plan’s concern, i.e. it wasn’t necessarily about this case, rather it was about the burden that would be imposed on health plans if left with no remedy against a participant who takes liberties with his/her obligations and spends money that is to be held in trust on the plan’s behalf.  It should be no surprise that in all my years working on behalf of benefit plans, I can recall a handful of times where I, personally, had to step foot into a court, and virtually all of them were in jurisdictions where the law requires that the Plan be a named party to the dispute; yet in the past 6 months, I’ve had to step in front of a judge 3 times and just last week was summoned for a 4th.

It's a sign of the times.  The Court imposed a duty on Plans to be proactive in their tracking and participation in recovery and legal proceedings.  Identifying cases is the first step to recovery and if plans don’t have a good solution for it, it risks holding the bag either because it didn’t know about the recovery opportunity in the first place, or knew because the participant was forthcoming with information, but the plan didn’t have the resources and understand how to execute.

Let’s not even get started on what the Plan’s fiduciary obligations might be in these instances …




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