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No Matter the Remedy – No Language, No Luck!

By: Christopher Aguiar, Esq.

Recently, the 9th Circuit, a jurisdiction that has historically not been kind to benefit plans engaging in third party recovery activity, issued a decision that gives life to benefit plans whose participants shirk their obligations to reimburse their benefit plans from settlements they obtain in third-party liability cases.

In Mull v. Motion Picture Industry Health Plan (“the Plan”), the plan participant suffered significant injuries in an automobile accident in 2010 after the driver of a vehicle in which she was a passenger drove off a 20-foot embankment. Initially the Plan denied the claims due to the third-party liability, but ultimately agreed to pay the claims after Mull agreed to sign what is commonly referred to as a “signed subro” – an acknowledgment of the Plan’s right to recovery from any settlement Mull may receive.

The Plan ended up paying over $147,000.00 in benefits, and Mull received a settlement of $100,000.00, but proceeded to refuse to reimburse the Plan in full in accordance with the terms of the Plan.

Left with very little choice, the Plan then began denying the benefits of everyone in the family to recoup the funds.

Ultimately, the Court ruled that the Plan could offset the benefits of everyone on the Plan as an alternative, self-help, extra judicial remedy to what is allowed under ERISA § 502(a)(3).

So, not only did the Court allow a remedy even though the settlement funds had been disbursed by Mull, but it also allowed that remedy to be enforced against other members of the family who never received or had control over the settlement funds arising from Mull’s injuries.

As surprising as this may all seem, given the previous precedent regarding the exclusivity of Plan remedies, this outcome was made possible largely due to the plan terms that applied to this case. Virtually every single case ultimately rests on the same basic premise: a remedy is only available to a benefit plan to the extent that such remedy is established within the terms of the plan. With Mull, the 9th Circuit has confirmed a plan’s ability to enforce other reimbursement mechanisms outside of ERISA’s equitable remedy under 502(a)(3).

Make no mistake, however …. if your language is lacking, so too will your remedies!

Call us today if you’re wondering whether your language is sufficient to enforce an offset remedy in the same way the Motion Picture Industry Health Plan enforced it against Mull.