That subrogation claim you have might be governed by ERISA, at least in some circuits…

Here’s the case of Thurber v. Aetna Life Insurance Company,  __F.3d__ (2nd Cir. March 13, 2013) (Insurer’s counterclaim for return of overpaid benefits was an equitable claim for restitution, falling under ERISA’s jurisdiction).

FACTS. Sharon Thurber broke both legs in an auto accident.  She made a disability claim under an ERISA plan insured and administered by Aetna Life Insurance Company. She informed Aetna that she had received $7,213.92 in no-fault insurance payments. Under the plan, Aetna  could reduce benefits in the amount of other income received, like no fault insurance payments. After Aetna denied her long-term disability claim, and her administrative appeal was denied, Thurber filed a lawsuit challenging the denial. Aetna counterclaimed for equitable restitution of the overpaid short term benefits in the amount of the no fault payments she received.

DISTRICT COURT HELD:

(1) Aetna’s Counterclaim was denied because it was “legal” rather than equitable, and there was no ERISA jurisdiction.

(2) The Court granted Aetna’s denial of long term disability benefits.

SECOND CIRCUIT COURT OF APPEALS— REVERSES in Part

1.   Aetna’s Counterclaim for Reimbursement is “Appropriate Equitable Relief” governed by ERISA.

  • What constitutes “appropriate equitable relief” under 29 U.S.C. §1132(a)(3) “continues to perplex courts despite efforts by the Supreme Court during the past decade to shed some light in the matter.” Op. at 8.
  • Aetna’s counterclaim was equitable in nature because it sought specific funds in a specific amount, as authorized by the plan, that had been entrusted to Thurber and had been in her possession and control. Op. at 10.
  • The court followed the analysis of  First and Third Circuits, rather than the Ninth Circuit. (The Ninth Circuit Bilyeu v. Morgan Stanley Long Term Disability Plan (2012) case held that a similar counterclaim was not equitable in nature because (a) the money being sought was not the actual third party payment, but rather the plan’s overpayment in that amount; and (b) the overpayment had been spent. Op. at 9.

2.         AFFIRMED entry of Aetna’ summary judgment on the benefits denial claim.

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Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

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