Federal circuit courts are torn on the question of whether an employee who is injured on the job is free to spend the benefits of a third-party lawsuit or other settlement agreement, or if he or she must use that money to reimburse their health insurance provider.
Most courts have said employees can’t spend the money and have to repay their insurers. Under the federal Employee Retirement Security Act (also known as ERISA) workers are promised that if they are hurt on the job, they will quickly be paid benefits. However, they also agree to repay whatever funds they obtain later, usually from a settlement or lawsuit.
But the U.S. Court of Appeals for the Ninth Circuit isn’t on board with this reasoning. In the 2012 ruling in Bilyeu v. Morgan Stanley Long Term Disability Plan, the insurer is unable to collect funds awarded by a third party if the beneficiary has already spent that money. The Eighth Circuit has issued similar findings, but other federal district courts have sided in favor of insurance companies.
The U.S. Supreme Court is now being asked to review the case of Montanile v. Board of Trustees of the National Elevator Industry Health Plan, from the U.S. Court of Appeals for the Eleventh Circuit.
The court is being asked to determine whether a man who was working when he sustained injuries as a result of a car accident caused by a drunk driver should have to repay $121,000 in health benefits he received after the crash. The employee received that amount through his employer’s insurance company, and then, just like so many people who are injured in traffic accidents, he sued the negligent driver.
The case was settled out-of-court before trial for $500,000. A portion of that went to legal expenses.
Keep in mind, this individual suffered serious injuries. His injuries to his neck and lower back required lumbar spinal fusion surgery as well as numerous other ongoing treatments for reduction of pain and loss of function – some of which is permanent.
These individuals are not obtaining a windfall, but receiving compensation for pain and suffering, lost wages, loss of earning capacity, permanent disability and loss of life enjoyment. The requirement to reimburse insurers for whatever damages are derived in litigation reduces an injured person’s incentive to pursue a lawsuit in the first place, which means the at-fault party goes unpunished.
Insurers accuse plaintiffs of “double dipping” by collecting both health insurance benefits and lawsuit damages. But people pay insurance premiums for the purpose of not having to cover those enormous expenses when horrible accidents occur. That’s what insurance is for.
Here, however, the Eleventh Circuit sided with the insurance company, finding the insurance policy clearly indicated it had a first-priority claim to settlement proceeds obtained by the injured plaintiff.
The U.S. Supreme Court is expected to issue its ruling later this year.
Call Fort Lauderdale Injury Attorney Richard Ansara at (954) 761-4011. Serving Broward, Miami-Dade and Palm Beach counties.
High Court Takes Up Accident-Payout Case, March 30, 2015, By Barbara Leonard, Courthouse News Service
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