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Mondress Monaco Parr Lockwood PLLC
Mondress Monaco Parr Lockwood PLLC

Subrogation Developments: U.S. Airways v McCutchen Supreme Court Holds that ERISA Plan Terms Trump Equitable Doctrines

Many ERISA health plans will advance payment of a participant's accident-related claims if the participant agrees to reimburse the plan out of any third-party settlement (for example, car insurance proceeds). Federal courts have generally supported a plan's right to demand full reimbursement if plan terms preclude application of equitable doctrines that would require the plan pay a share of the participant's attorney's fees (such as the "common fund" doctrine) or that would otherwise limit the plan's recovery (such the "make whole" doctrine or principles of unjust enrichment). However, in the last few years, the Third and Ninth Circuit Courts of Appeals allowed consideration of equitable doctrines even if disclaimed by plan terms.[1]

The U.S. Supreme Court agreed to review the Third Circuit's decision – U.S. Airways v. McCutchen – and issued its decision in April 2013.[2] The Court disagreed with the approach taken by the Third and Ninth Circuits, holding that the terms of an ERISA plan override any contrary equitable doctrines. The Court noted that an ERISA plan document is an agreement between the plan and the participant, and equitable doctrines should not be used to rewrite that agreement. However, the Court clarified that if plan terms are silent on a particular issue – for example, allocation of attorney's fees – equitable doctrines should be used to fill the "gap."

Not Intended As Legal Advice.


[1] See US Airways, Inc. v. McCutchen, 633 F.3d 671 (3d Cir. 2011) and CGI Technologies and Solutions, Inc. v. Rose, 683 F.3d 1113 (9th Cir. 2012). In McCutchen, the Third Circuit decided that the ERISA plan would be unjustly enriched if it were fully reimbursed for accident-related claims paid, as the claims paid exceeded the participant's net recovery and the plan had not contributed toward the cost of obtaining the recovery. (See our February 2012 Bulletin for details.) In Rose, the Ninth Circuit held that equitable doctrines should be considered even if disclaimed by plan terms, but did not opine on whether the plan in question was entitled to full reimbursement.

[2] U.S. Airways, Inc. v. McCutchen, 2013 WL 1567371 (Sup. Ct. 2013). A copy of the Supreme Court's opinion is available at: http://www.supremecourt.gov/opinions/12pdf/11-1285_i4dk.pdf.