ERISA Subrogation: Statute of Limitations & Personal Injury Claim Tips
Americans paid $2,194,625 for personal health care in 2010.
In that same year, private health insurance companies spent $849 billion and recovered an estimated $1.7 billion to $2.5 billion through subrogation.
If you have filed a lawsuit against someone who injured you, and you received health benefits from a private employer, your health insurance company may have a right to a portion of your recovery through ERISA subrogation.
This page will explain what ERISA subrogation is, the subrogation process, the applicable statute of limitations, and tips on avoiding a subrogation claim.
What Is ERISA Subrogation?
After an accident caused by someone else’s negligence, you likely used your health insurance to pay for your medical bills.
Because someone else is responsible for those costs, your insurance company has the right to seek reimbursement according to the terms of your plan. If your plan contains a subrogation or reimbursement provision, your health insurance company might have ERISA subrogation rights.
Under ERISA § 502(a)(3), the insurance company can enforce the subrogation provisions in your contract by filing a claim against the negligent party as part of your lawsuit.
If you have already received a judgment and payment, the insurance company may file a reimbursement claim against you. To receive the reimbursement, they must place an ERISA lien, a type of “equitable lien,” on the specific funds from your recovery.
What Happens During ERISA Health Insurance Subrogation?
ERISA subrogation claims are worth a lot of money to an insurance company. Thus, companies often use an algorithm to search for possible subrogation opportunities. When they identify a possible claim, they begin an investigation. They will request information from you about the nature of the claim and third-party involvement.
If the investigation finds a likelihood of third-party liability and expected recovery, they will open a subrogation case. The health plan may pursue subrogation cases or hire a vendor or a third-party administrator to handle the claim.
Under ERISA, an insurance company may only obtain "appropriate equitable relief." Most often, this means that the insurance company may place an equitable lien on the funds from your recovery. The equitable lien gives the insurance company priority over those funds.
However, they may not receive a judgment against your general assets or consequential or punitive damages. A court has the discretion to order other equitable remedies, including a constructive trust, injunction, restitution, or reinstatement.
What Is the Statute of Limitations on ERISA Subrogation Rights?
There is no federal statute of limitations for reimbursement claims. Thus, a court will borrow the analogous state statute of limitations to determine the limitations period. Your insurance company’s ERISA subrogation rights come from your insurance plan.
Therefore, a reimbursement provision under § 1132(a)(3) is most closely analogous to a simple contract action. Under South Carolina’s statute of limitations (S.C. Code § 15-3-530), insurance companies have three years to file a contract claim unless your plan says otherwise.
How Can I Defend Against A Subrogation Claim?
Before devising a strategy for fighting a subrogation claim, obtain a copy of your ERISA plan documents and carefully review its language.
In 2013, the Supreme Court held that equitable defenses could not overcome the terms of an ERISA benefits plan. Therefore, your strategy should be based on the defenses available under your plan's language and the applicable law.
1. Specific-Fund Doctrine
An insurance company may place a lien only if the plan specifically identifies particular funds distinct from your general assets. Furthermore, those funds (or traceable items purchased with the funds) must remain in your possession.
Therefore, the lien is invalid if the plan is not specific and clear when establishing a priority to the funds recovered and a right to any total or partial recovery.
2. Common-Fund or Common Benefit Doctrine
The common-fund doctrine requires the insurance company to contribute to attorney fees if they make a subrogation claim. Reductions in attorney fees are almost routine in other types of liens, so many attorneys anticipate the same for ERISA liens.
The United States Supreme Court ruled that where the plan expressly states that all such expenses are recoverable, then the plan's specific terms apply. The equitable common-fund doctrine provides "the appropriate default" rule when the plan is silent on cost allocation.
3. Make-Whole Doctrine
Under this doctrine, before an insurance company can exercise its right of subrogation, the insured must be made whole. An insurer may access your recovery against a third party only if the insurance paid plus the recovery exceeds the actual damages.
There is currently a circuit split on the availability of this defense. The Fourth Circuit, which covers South Carolina, rejected this doctrine. The court reasoned that "such a rule would frustrate the purposes of ERISA by requiring plan drafters to inject legalese into plans rather than use clear, ordinary language explaining the plan's provisions."
4. Other Equitable Defenses
Over the years, the United States Supreme Court has recognized several other traditional equitable defenses. These defenses include laches, the defense of “equity will not aid in the enforcement of a forfeiture,” unclean hands, or waiver.
5. Language of the Plan
For an insurance company to claim subrogation, your insurance plan must include language that expressly authorizes a right of recovery. You most likely signed a contract when you joined your employee health plan. That contract becomes the terms of your plan.
Examine the actual language in your plan, which should state what they do and do not have the right to subrogate. They don't have the right to recover anything unless expressly stated. Courts read plan language strictly and, in many cases, can override ERISA defaults or state law.
If you’re facing ERISA subrogation, you need an experienced ERISA attorney on your side.
At the Peace Law Firm, we know ERISA laws are complicated—that’s why we’ve dedicated our practice to helping those in need understand their rights. We represent people like you, not insurance companies, employers, or group benefit plans.
Contact us today for your free consultation.