ERISA Plan Can Disgorge Money From Attorney and Client According To 6th Circuit

The United States Court of Appeals for the 6th Circuit has issued an important opinion in an ERISA case. In Longaberger Co. v. Kolt, No. 08-4432 Nov. 16, 2009. the court held an ERISA plan could enforce its reimbursement rights against an attorney who obtained a personal injury settlement on behalf of an insured.
The attorney negotiated a $135,000 settlement on behalf of a client who was involved in an automobile accident. Only $1,000 remained in his lawyer’s trust account after disbursing $86,000 to the client, and then taking $45,000 as an attorney fee and paying other lawyers involved in the case.
The client was an insured of the plaintiff, an employee welfare benefit plan. The plaintiff sued the attorney under ERISA, seeking reimbursement for $114,000 in medical bills paid on behalf of the client.
The court held that the plan was entitled to equitable restitution pursuant to §502(a)(3) of ERISA as construed by the U.S. Supreme Court in Sereboff v. Mid Atlantic Medical Services Inc.
The court held that the fact that the attorney disregard the plans first lien and commingled the settlement funds did not defeat the claim for equitable relief, because under Sereboff, the plan was free to follow a portion of the settlement funds into the attorney’s hands.
Any attorney handling a claim in which there is or may be a claim for reimbursement from a health insurance carrier must carefully examine the plan to determine if the reimbursement language is proper and if the plan is self-insured. Failure to do so can have serious financial and legal consequences.