Reimbursement and Subrogation Advice for Attorneys

Reimbursement and Subrogation Advice for Personal Injury and Consumer Attorneys

Your innocent client has suffered a catastrophic injury. Unfortunately, the wrongdoer is not adequately insured. Your client's ERISA governed healthcare plan has paid medical bills that exceed the insurance coverage. You have probably heard about a Supreme Court case called Sereboff v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869 (2006). Have you heard about a 2007 Eighth Circuit Court of Appeals called Administrative Committee of the Wal-Mart Stores, Inc. Associates' Health and Welfare Plan v. Shank?

Mrs. Shank worked at Wal-Mart Stores, Inc. She was catastrophically injured in a motor vehicle collision and eventually adjudicated an incompetent. Wal-Mart provided medical coverage through the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan which paid her medical expenses. She filed a lawsuit against the responsible parties and eventually settled her claims against the parties for $700,000.00. After deductions were made for attorneys’ fees and expenses, the remaining proceeds, approximately $417,477.00, were placed directly into a court-created special needs trust which was established for the sole purpose of providing for her future needs.

Three years later, the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan sued Mrs. Shank and the Trustee of the special needs trust “for recovery of sums paid by the Wal-Mart Stores, Inc. Associates Health and Welfare Plan for medical services paid.” The United States District Court for the Eastern District of Missouri entered summary judgment in favor of Wal-Mart on August 31, 2006, and imposed a constructive trust on the settlement proceeds currently held in the Deborah J. Shank Irrevocable Trust in an amount not to exceed $469,216.00. On August 31, 2007, the Eighth Circuit affirmed the District Court order.

Neither the District Court nor the Eighth Circuit addressed the important question of whether it is both “equitable” and “appropriate” under ERISA to require a catastrophically injured individual to reimburse an ERISA plan from a special needs trust established solely for her future medical care. In Sereboff v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869 (2006) the Supreme Court elected not to address this specific issue. Was the result fair to Mrs. Shank? To the taxpayers in her state that are likely to absorb the cost of her future medical care? The answer is obvious. Shank remains the law until the Supreme Court decides differently. You need to be prepared to assist your client.

UPDATE - April 2008. The good news. After the Supreme Court denied a petition for cert., filed by Mrs. Shank, Wal-Mart elected not to pursue collection against Mrs. Shank. A rash of negative publicity seems to have changed Wal-Mart's tactics in the end.

UPDATE - January 2010. Other ERISA governed plans have become more aggressive than ever in trying to make recoveries. The law remains in flux. The out-come is still determined by the exact plan language. Reading the plan documents with extreme care is the only way to determine if the plan truly has a right to reimbursement. 

You need to determine at the outset of your representation whether the healthcare plan contains enforceable subrogation or reimbursement language that entitles it to full recovery before your client receives a dollar and whether you will be paid for your efforts. If you do not, and wait until you have either settled the claim with the culpable party, or obtained a judgment against the responsible party, you may find out that all of the money that you have recovered will be paid to the healthcare plan.

Contact Our Boston Lawyer, Jonathan M. Feigenbaum, Esquire

We offer free initial consultations. For assistance with subrogation and reimbursement strategies and litigation, contact Jonathan M. Feigenbaum, Esquire, in Boston, Massachusetts. We can be reached by phone at 617-367-8787.