How Quickly it Can Be Gone: Don’t Blow a Personal Injury Recovery

By: Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

In a February 11, 2015 article from the Business Insider, Michael Kelly and Pamela Engel detail twenty one lottery winners who blew it all (see http://www.businessinsider.com/lottery-winners-who-lost-everything-2015-2?op=1). In the article, there are details regarding the myriad of ways fortunes were lost. For example, “Lara and Roger Griffiths bought their dream home… and then life fell apart.” Or worse yet, “Bud Post lost $16.2 million within a nightmarish year — his own brother put out a hit on him.” Or the all too common situation of “Sharon Tirabasssi” who “is back in the working class after winning $10 million 11 years ago.”

These stories are eerily similar to many anecdotal statistics frequently disseminated regarding personal injury victims who receive settlements. The statistic normally thrown around is that 90% of injury victims have nothing left within five years. While there are no scientific studies to back up that statistic according to some scholarly pieces written by several authors, it is undeniable that sudden wealth can have catastrophic results. Public benefits that are critical to future needs can be lost. Money can be mismanaged in a way that the injury victim winds up victimized a second time.

When a personal injury case settles there are options available to protect the settlement proceeds. The first option is to take the money in a single lump sum. Of course that presents the trap mentioned at the beginning of this article – rapid dissipation. Trying to figure out how to properly manage a large personal injury recovery can be a daunting task for not only the injury victim but also for their loved ones. There are so many ways to mismanage a fortune. In addition, needs based benefits will be lost in most instances since as little as $2,000 can cause ineligibility. This can leave the injury victim with huge medical expenses and no way to pay for them without spending the recovery for their care.

Because of the many down sides to taking a lump sum when settling a personal injury case, many injury victims are offered a structured settlement annuity. This is the second option. A structured settlement annuity is an income tax-free investment vehicle available exclusively to injury victims. There are many reasons to set up a structured settlement. First, the interest earned is income tax-free. There are no ongoing money management fees as it is self-executing. In most instances it enjoys enhanced creditor-judgment protection. It is spendthrift, meaning it can’t be dissipated quickly. The money is safe from predators and family members as well. In short, it is a protected asset with tax favored treatment. It is similar to having a job you can’t be fired from since you have a guaranteed income stream. Sound too good to be true? It isn’t without its faults. Once it is set up, it can’t be changed, accelerated or deferred. It can’t be sold (without taking a huge loss). The rates of return are conservative (think bond returns).

The third option is a settlement trust. Settlement trusts are a good alternative to taking the money in a lump sum or structuring the entire settlement. This is so because it provides spendthrift protection with liquidity and flexibility. Typically a settlement trust is created with some ongoing periodic distributions for living needs paired with a cash reserve that can be accessed for larger purchases. This allows the injury victim the best of both worlds while still offering protection of the monies from abrupt dissipation. As with structured settlements, it isn’t without faults. These trusts are typically permanent and can’t be undone. There are ongoing trust administration costs as well as tax on the interest earned.

There is a fourth option which is a combination of all of the foregoing three. Frequently, a lump sum is taken for immediate needs such as the acquisition of a house or car (perhaps both). Plus cash for other immediate needs such as paying off high interest debts or loans. The remaining funds can be split between a structured settlement annuity and a settlement trust. By pairing a tax-free structure with a trust, it provides a sound tax-advantaged financial plan for the recovery. It lowers the annual cost of trust administration as well since most trustees will only charge fees on assets held in the trust. In the end, the best plan is one that meets the needs and has enough flexibility to deal with changes in circumstances. Because taking a lump sum or just a structured settlement alone limits the options, it isn’t recommended for most personal injury settlements.

The key is finding an experienced professional settlement planner to work with. It is important to make sure that the planner has all of the different tools in his/her arsenal to properly create an all-encompassing plan. If a planner doesn’t have access to all of the financial products in the marketplace, doesn’t have the necessary professional qualifications and doesn’t ask the tough questions about needs/wants/desires, then find someone that will do so. Choose a firm that has experts on staff that can also analyze the public benefit preservation issues along with the options under the Affordable Care Act. Medicaid/Medicare eligibility, ACA coverage and liens can make for some tough issues at settlement, make sure the team includes experts that can help navigate those issues along with the financial planning issues.

Finally, plaintiff counsel should also explore options to protect their contingent legal fees. There are some great ways to invest fees on a pre-tax and tax deferred basis (see www.structuredfees.com). Attorneys can have sudden money problems too.

Contact Synergy today for more information at (877) 242-0022 or by clicking here.

Recent Liability Medicare Set Aside Case Law – No MSA Needed

B. Josh Pettingill, MBA, MS, MSCC
Vice President of MSP Compliance

The “law” as it relates to Medicare Set Asides in liability settlements is an evolving area with new developments happening quite frequently. This year there have already been several noteworthy legal decisions pertaining to the protection of Medicare’s future interest in liability settlements. Below is a discussion about a recent case with important pointers for attorneys and plaintiffs when there will be no future care.

Berry vs. Toyota

On January 10, 2015, the United States Western District Court of Louisiana released its opinion in Berry vs. Toyota Motor Sales. The court concluded there was no need to establish a Medicare set aside, given the fact that all of Mr. Berry’s treating physicians signed affidavits indicating no future accident-related treatment was going to be required. It was not surprising the court came to this conclusion given that there was already a Centers for Medicare and Medicaid Services (CMS) policy memorandum from the CMS headquarters indicating the same. Below is an excerpt from the memo:

Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

In other words, there is no need to establish a Medicare set aside if the treating physician attests in writing that no Medicare covered future treatment is needed for accident related care.

Facts of the Case:

All of Mr. Berry’s primary physicians signed affidavits indicating no future treatment was required as related to the accident.
Mr. Berry signed an affidavit indicating he was not going to treat in the future for accident related care.
The settlement was contingent upon the court ruling no MSA was needed and that both sides had adequately taken into account Medicare’s interests.

Holding:

The court held that based upon the evidence submitted no MSA was required. This was based upon the affidavits of the treating physicians which went to reasonably foreseeable future medical needs or lack thereof.

The Takeaways:

The court’s opinion was in line with the CMS policy memorandum of September 2011.
There is no special attestation form provided by CMS for treating physicians or the plaintiff to sign. All that is needed is an attestation on the physician’s letterhead indicating no future treatment is required for accident related care.
A court can recognize and affirm Medicare’s interests have been adequately taken into account by the settling parties if so desired.

All parties felt the need to get the court’s blessing that Medicare’s interests were adequately taken into account even though a policy memorandum from the CMS regional headquarters on this exact issue already existed. The plaintiff also had to sign an affidavit indicating he was not going to treat in the future for accident related care. Without knowing the exact details, we have to assume both sides were overly concerned about protecting Medicare’s interests to take such actions. Let’s revisit the CMS policy memorandum issued by CMS headquarters on September 30, 2011.

This CMS memorandum is important for a number of reasons. It is the first and only official memorandum from CMS headquarters in Baltimore to address liability Medicare set asides. It also provides a mechanism, if the case facts fit the criteria, to avoid the necessity of establishing a liability Medicare set aside. As discussed above, this memorandum provides a limited exception as the treating doctor must attest in writing that all of the treatment for the released injuries was completed at the time of settlement.

When the case facts meet the criteria, securing the attestation from the treating providers is only part of the steps toward MSP compliance. In addition, attorneys still need to educate their clients on potential future ramifications of the attestation. Specifically, if a plaintiff ever has to treat again in the future for accident related care; they can’t seek to have Medicare cover that care. This case and more importantly the memorandum, gives clear guidance to the plaintiff when there is no future accident related treatment as to how to properly document what they did to comply with the MSP.

Synergy was recently retained on a case where the plaintiff was a current Medicare beneficiary and claimed he would not need any future accident related treatment. Post settlement, the plaintiff requested the attestation from his treating physician indicating the same. However, his physician refused to attest in writing that he would never require any additional treatment related to his accident. Ultimately, the plaintiff engaged Synergy to prepare a zero allocation report as evidence that Medicare’s interests had been taken into account. After Synergy reviewed all of his medical records and prescription payouts, it was determined there was in fact a nominal amount that should be set aside. The MSA report we prepared documented that Medicare’s interests had properly been taken into account by setting aside a small amount for future care.

For those plaintiffs who are a current Medicare beneficiary and future medical care is funded by the settlement, obtaining a Medicare set aside analysis is always the best practice. There are numerous ways to deal with Medicare secondary payer compliance to ensure all parties to the settlement are protected. At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.

For all of your Medicare secondary payer compliance needs, please visit us at www.synergysettlements.com or call us at (877) 242-0022.

Liability Medicare Set Asides, Insurance Carriers and Unsubstantiated Demands

Insurance carriers are bringing up the Medicare set aside (MSA) “issue” when it comes time to draft the release more frequently. In many instances, the plaintiffs are not yet eligible for Medicare benefits, nor may they ever be entitled to receive Medicare benefits. Plaintiff attorneys need to proceed with caution with regard to the Medicare set aside release language. Inappropriate provisions in the release could constrain their client’s options relative to receiving public benefits and have adverse tax implications, which could result in a legal malpractice claim.

As a recent example, Synergy was asked to review Medicare release language. The insurance carrier insisted the plaintiff agree to language indicating he would not ever apply for social security disability benefits. Agreeing to this would impede his ability to receive disability income and eventually Medicare benefits. In another case, the insurance carrier insisted the plaintiff not only establish an MSA but also submit the MSA to the Centers for Medicare and Medicaid Services (CMS) for review and approval. The insurance carrier attempted to build these terms into the mediation agreement. This client was receiving Medicaid benefits but was never going to be eligible for Medicare since she had not earned enough working credits to qualify.

These problems are occurring because some MSA vendors, in an effort to drive business, have been convincing insurance carriers that failing to do a set aside in any case exposes them to future liability/consequences if not properly addressed. CMS has made it clear that the MSA issue is the plaintiff’s responsibility and the role of the defendant is to report current Medicare beneficiaries under Section 111* mandatory insure reporting. The reality is that the defendant has no exposure but plaintiff counsel has legal malpractice risks if they fail to properly advise the client regarding the set aside issue when they are a current Medicare beneficiary or have a reasonable expectation of becoming one within 30 months.

If you have a client who is a current Medicare beneficiary that is going to require accident related care in the future and there are funds earmarked towards future medical treatment, a Medicare set aside should be considered. However, there are numerous ways to deal with Medicare secondary payer compliance to ensure both your firm, as well as your clients are protected. At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.

*It should be noted that it is impossible for a defendant/insurance carrier to report a claim to Medicare when the plaintiff is not a current Medicare beneficiary.

– See more at: file:///Volumes/Design/Source%20Files/Synergy%20Settlement%20Services/Website%20Development/Site%20Backup%20Feb%202015/www.synergysettlements.com/blog/16719/index.html#sthash.ZM4Itxay.dpuf

Applying Collateral Source Statutes to ERISA after Wurtz

Applying Collateral Source Statutes to ERISA after Wurtz

The U.S. Court of Appeals for the 2nd Circuit rendered a major decision on July 31, 2014 holding that New York’s anti-subrogation statute is “saved” from ERISA preemption. (Wurtz v. The Rawlings Company, — F.3d—, 2014 WL 3746801). This ruling holds that neither the express preemption found in 29 U.S.C. § 1144(b)(2)(a) nor the complete preemption of 29 U.S.C. § 1132(a)(1)(B) protects the ERISA plan from New York’s anti-subrogation statute (N.Y. Gen. Oblig. Law § 5‐335).

ERISA plans are able to preempt all state laws, except if the law relates to banking, insurance or securities.

“[T]he provisions of this … chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan…”

29 U.S. Code § 1144 (a)

However,

“[N]othing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.”

29 U.S. Code § 1144 (b)(2)(a)

The New York anti-subrogation statute in question, § 5-355, specifically stated that:

“[I]t shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services … to the extent those losses … have been … reimbursed by an insurer.” Id.

And

“No person entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by an insurer and an insurer shall have no lien or right of subrogation or reimbursement” Id.

The 2^nd Circuit in New York found that this statute was “saved” under 29 U.S. Code § 1144 (b)(2)(a) as a law that “regulates insurance.” The standard used by the Court in Wurtz was established in the 2003 case Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329. That case established a two prong test.

A law “regulates insurance” under this savings clause if it (1) is “specifically directed toward entities engaged in insurance,” and (2) “substantially affect[s] the risk pooling arrangement between the insurer and the insured.” Id. at 342

In analyzing the first prong of the test the Wurtz court followed the broad rule established in the seminal ERISA case, FMC Corp. v. Holliday, 498 U.S. 52 (1990). In that case the Supreme Court found that the expansive statutory language at issue “[a]ny program, group contract or other arrangement” was more than sufficient to constitute being “specifically directed” at insurance. In fact, the Supreme Court found that even though broad language “does not merely have an impact on the insurance industry, it is aimed at it.” Id. at 61. This is a very helpful point for trial attorneys who will be seeking to apply broadly written collateral source statutes against subrogation claims being asserted by ERISA plans.

The Wurtz court reasoned that the second prong was satisfied by determining that the question of does the statute “substantially affect[] risk pooling” to be an analysis of the impact when the law applies, rather than a question of to how large a group does the statute apply.

“[T]he test is not whether the law substantially affects the whole insurance market—the test is whether the law substantially affects how risk is shared when it applies. For example, even though only a subset of insureds suffer from mental illness, the Supreme Court has held that a law requiring minimum mental health care benefits regulates insurance and is thus saved from preemption. Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 743 (1985).”

Id. at 11

This is the same analysis that First Circuit of Florida undertook when it reached its opinion in 2010. (Coleman v. Blue Cross and Blue Shield of Alabama, No. 1D10-1366, December 8, 2010). The ERISA plan in Wurtz was a fully insured plan, which means once N.Y. Gen. Oblig. Law § 5‐335 was “saved” it applied to the plan. The ability to use the Wurtz rational against self-funded ERISA plan’s, especially in states like Florida, may prove a difficult challenge.

Self-funded ERISA plan’s enjoy unparalleled recovery rights in large part due to the “deemer” clause of 29 U.S. Code § 1144 (b(2)(b). Self-funded ERISA plans are not “deemed” to be insurance and thus even “saved” insurance statutes do not bind them.

“[No self-funded] employee benefit plan … shall be deemed to be an insurance company … or to be engaged in the business of insurance … for purposes of any law of any State purporting to regulate insurance companies, insurance contracts…” Id.

Thus, most anti-subrogation laws like N.Y. Gen. Oblig. Law § 5‐335 have no ability to regulate self-funded ERISA plans. Even Florida’s 768.76 has been “saved” but found inapplicable to self-funded ERISA plans. (See, Coleman v. Blue Cross and Blue Shield of Alabama, No. 1D10-1366, December 8, 2010). Despite the fact that Florida’s collateral source statute applies to a wide range of parties it does not capture self-funded ERISA plans.

The Coleman court explained the three step process for how these self-funded plans escape 768.76 rather succinctly when they wrote:

“State laws directed toward the plans are pre-empted because they relate to an employee benefit plan but are not “saved” because they do not regulate insurance. State laws that directly regulate insurance are “saved” but do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purposes of such state laws” Id.

Despite this reasoning the Coleman court reminds the plaintiff’s bar that insofar as an ERISA plan is covered by insurance, the Plan is bound by state regulations that would apply to their insurance carrier. (See also, FMC Corp. v. Holliday, 798 U.S. 52 (1990). This language, the fact of the remand in Coleman, and the reasoning of Wurtz mandate that the wise plaintiff’s attorney verify the funding status of the ERISA plan in question. Obtaining the Master Plan Document via a proper 29 U.S.C. 1024(b)(4) request is more important than ever.

In practice the plaintiff’s attorney should attempt to have the self-funded ERISA plan realize the application of Wurtz, Coleman, and FMC to them for the portions of their payments that came from an insured plan or were reimbursed by stop-loss coverage. It is always a solid practice for Florida attorneys to send the ERISA plan a 768.76(6) notice. If the plan does not comply with 768.76(7), inform them that the portion of their claim that represents payments from an insured plan or from a self-funded plan reimbursed by stop-loss coverage has been waived under the above rationale. This should also mean that 768.76(8) will cut off the accrual of that portion of their lien at the settlement date. Additionally, if a resolution is not agreed to, an equitable distribution hearing can be requested. However, it is unlikely that self-funded ERISA plans or their recovery vendors will capitulate on this point. Despite their unwillingness to openly agree with this reasoning, it should give them sufficient pause so they will consider a reasonable compromise.

Can a Third Party Hold Settlement Funds Until Medicare Issues a Final Demand?

The Northern District of Indiana thinks it is a jury question as to whether or not the third party carrier acted reasonably in holding settlement funds until Medicare’s Final Demand had been issued (Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013)). In the subject case, the plaintiff was injured in a slip and fall, retained counsel, and was able to obtain a settlement in the amount of $20,000from the tortfeasor, who was insured by Liberty Mutual. Despite a settlement being reached, and releases executed, Liberty Mutual refused to disburse funds until the Medicare conditional payment issue had been fully resolved. The plaintiff sued Liberty Mutual for breach of the settlement contract claiming this was an unreasonable delay to which Liberty Mutual responded with a motion of summary judgment.

Liberty Mutual argues that despite having executed settlement releases on January 19, 2012, they acted reasonably by not issuing the settlement funds until December 10, 2012.

“Liberty Mutual argues that it acted reasonably in postponing release of the settlement proceeds until after receipt of Medicare’s final determination letter.

…

If the beneficiary receives a primary payment and does not reimburse Medicare within 60 days, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party. See 42 C.F.R. § 411.24.

…

Liberty Mutual asserts that, if it had paid Lucille Dolgos the agreed upon settlement amount and later learned that Medicare had already paid her, Liberty Mutual would have had to reimburse Medicare the $403.33”

Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013)

Though every party to a settlement which involves Medicare conditional payment issues can sympathize with the apprehension of Liberty Mutual, their all or nothing approach appears unreasonable. The plaintiff’s argument is a common sense one:

“whether it was reasonable for Liberty Mutual to withhold all of the $20,000 settlement payment pending confirmation from Medicare rather than paying most of the settlement payment and withholding only the $403.33 at issue”

Dolgos v. Libery Mutual Ins. Co., 2013 U.S. Dist. 129369 (N.D. Ind. September 4, 2013) (emphasis added)

The Court agreed that the question of whether the actions of Liberty Mutual were reasonable is one of material fact and should be decided by a jury. While all parties, including the plaintiff’s attorney himself, understand that liability to repay Medicare attaches to everyone who is involved in the personal injury settlement, that does not mean that the entire settlement can be or should be withheld until the Medicare conditional payment issue is fully resolved. This is an excellent ruling for the plaintiff’s bar to use in confronting what is an increasingly common practice of insurance carriers.

Lien resolution Success Story – Synergy’s reduces Medicare Final Demand by 47%, obtaining a refund of over $43,000 for the injured plaintiff

This case involved a Medicare beneficiary who was injured as a result of medical malpractice. When the plaintiff’s attorney settled the personal injury action, Medicare presented a Final Demand of approximately $91,000. The plaintiff’s attorney paid the Final Demand to avoid interest and then engaged Synergy Lien Resolution Services to appeal the amount of the Final Demand.

Synergy’s knowledge of both the Medicare Secondary Payer Act and our unrivaled experience with the Medicare appeals process allowed us to reduce the Final Demand by over 47%, securing a refund of over $43,000 for the plaintiff.

Lien Resolution Success Story – Synergy’s aggressive lien resolution tactics result in an Air Ambulance lien waived and self-funded ERISA lien reduced by 86%

This case involved a serious slip and fall accident that happened on a cruise ship while it was at sea. The plaintiff suffered significant injures, incurring medical damages in excess of $540,000. The injured plaintiff engaged a seasoned trial attorney, but due to liability issues the plaintiff only received a fraction of the case value.

Following that disappointment, the plaintiff was confronted with 2 large subrogation/reimbursement claims, each of which was larger than the total settlement.

When every solution attempted by counsel resulted with the injured plaintiff receiving no portion of the settlement funds, Synergy Lien Resolution Service was engaged. Within a relatively short span the air ambulance service, the largest of the two lienholders which had a claim for over $400,000, agreed to completely waive their claim. The self-funded ERISA plan, being represented by Rawlings & Associates with a claim in excess of $100,000 agreed to reduce their repayment demand by 86%.

Maryland Suspends Attorney for Failure to Repay Healthcare Reimbursement Claim

Failing to deal with the subrogation/reimbursement claims of health insurance carriers has proven to be a possible career ending mistake for one Maryland personal injury attorney. In the September 2013 Maryland Court of Appeals’ review of the disciplinary ruling of Attorney Grievance Commission of Maryland v. Leonard Sperling, Misc. Docket Number AG 47, the Court sanctioned an attorney who failed to properly resolve a health insurance reimbursement claim. In this case, attorney Leonard Sperling, who had been admitted to practice in Maryland for nearly 46 years, had his license suspended indefinitely, with the suspension duration lasting a minimum of six months.

Despite this being the second time Sperling was sanctioned for failing to resolve third party lien claims, the Court found no intentional malfeasance. Sperling seems to have been overtaken by changes in the practice of personal injury law as he attempted to use antiquated tactics in negotiating the interest of the health plan’s claim. These tactics might have worked a few decades ago, but they backfired in modern day personal injury practice.

For almost five years Sperling proceeded to either forestall the prosecution of the third party claim or negotiate the outstanding balance and followed principles and practices that had been common place in his previous lien negotiations, but which were now obsolete. One such example is the blanket idea that a claim for health insurance reimbursement must be reduced by attorney’s fees and costs. While this appears to be logical, the ground work required in order to obtain such a reduction requires expert understanding of today’s federal and state health insurance statutes and case law.

Health insurance companies have spent the last quarter of a century training, growing, and expanding their recovery groups and vendors. They have experts, nearly inexhaustible resources, and case law to help them prosecute their subrogation/reimbursement claims. As evidenced in the Court’s decision, the playing field has changed. Today’s plaintiff’s attorney must know that in order to significantly reduce or eliminate a health plan’s subrogation/reimbursement claim, an expert is required. At Synergy we fight these battles daily and our expertise ensures that our clients are not exposed to the aforementioned risks that have jeopardized Mr. Sterling’s legal career. Contact us today and see how we can help preserve the hard fought settlement funds you have obtained for your client, and in a manner that protects you and your firm.

ERISA Subrogation Claim Barred by One Year Statute of Limitations

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. The United States District Court for the District of Arizona issued an order in Blood Systems, Inc. v. Roesler, et. al. which both time barred the subrogation/reimbursement claim and awarded attorney’s fees against the ERISA plan. This case revolves around the approximately $50,000 in medical benefits paid by the plaintiff’s self-funded ERISA qualified health plan arising from a serious motorcycle accident.

The plaintiff hired counsel and was eventually able to recover a policy limit settlement in the amount of $100,000. The self-funded ERISA plan filed suit against the plan participant and her attorneys seeking to recover the full amount of the medical benefits provided by the plan. The attorneys sought summary judgment and the court agreed finding that the self-funded ERISA plan can only look to the plan participant for repayment. Following that, the attorneys petitioned the Court to award attorney’s fees and costs associated with defending the claim asserted against them by the self-funded ERISA plan.

Along with the motion for attorney’s fees raised by plaintiff’s counsel, a statute of limitations defense was raised by the plaintiff himself against the subrogation/reimbursement claim being asserted by the ERISA plan. It is important to this argument that:

“ERISA itself does not contain a statute of limitations applicable to Plaintiffs’ claims. Therefore, the Court must borrow ‘the most analogous state statute of imitations.’ Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Insurance, 222 F.3d 643, 646 (9th Cir. 2000). When borrowing a state statute of limitations, the task is to apply ‘the local time limitation most analogous to the case at hand.’ Lampf v. Gilberston, 501 U.S. 350, 355 (1991) (emphasis added).” Blood Systems, Inc. v. Roesler, et. al.

As ERISA is a federal law dealing with employer sponsored group welfare benefit plans, there is no perfectly analogous state level statute of limitations. However, the Court in this case well expresses the rule that is applied and the inability of the federal court to interpret a state statute of limitations.

“In other words, the issue is not which state statute of limitations is a “perfect” fit for the federal claim, but which statute of limitations is the 29 U.S.C. § 1002(1) (providing definition for ERISA-governed plans) closest fit. DelCostello v. Int’l Brotherhood of Teamsters, 462 U.S. 151, 171 (1983). And when picking the closest fit, a federal court must ‘accept[ ] the state’s interpretation of its own statutes of limitations.’ Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994) (quotation and citation omitted).” Blood Systems, Inc. v. Roesler, et. al.

Typically courts have found that the most analogous state statute of limitations is one that controls written contacts. (Barajas v. Bermudez, 43 F.3d 1251, 1258 (9th Cir. 1994); Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347, 1357 (11th Cir. 1998) ). In this Arizona case there was choice of which limitations statute to use – either the six year statute that governs general written contracts, or the one year statute that controls certain employment disputes. (See, A.R.S. § 12-548, A.R.S. § 12-541).

For the Court the question was “whether an ERISA plan should be viewed as an ‘employment contract’”. (Blood Systems, Inc. v. Roesler, et. al.). Here the Court found that:

“Under the parties’ contract, Blood Systems agreed to provide Pauline Roesler additional compensation in the form of paying for medical care in return for Pauline Roesler’s continued employment. Accordingly, … claims regarding benefits under an ERISA plan qualifies as claims under an “employment contract.” Blood Systems, Inc. v. Roesler, et. al.

In deciding to apply the one year statute of limitations contained in A.R.S. § 12-541 the Court looked to the rationale of the Eight Circuit in Adamson v. Armco, Inc., 44 F.3d 650 (8th Cir. 1995). In that case, the Eight Circuit “applied the two-year period to ‘all damages arising out of the employment relationship[]’”. This court also looked to the Third Circuit who decided in Syed v. Hercules Inc., 214 F.3d 155 (3d Cir. 2000) that the appropriate statute of limitations was the one year statute. In that case the Delaware one year statute of limitations controlled “claim[s] of wages, salary, or overtime for work, labor or personal services performed, . . . or for any other benefits arising from such work, labor or personal services performed.” (Blood Systems, Inc. v. Roesler, et. al.).

Though this is certainly very good news for the plaintiff it should be noted, as with other aspects of ERISA subrogation, plan language controls. The District Court for Arizona expresses this principle clearly, and relies on previous Ninth Circuit holdings which state “[I]f [the self-funded ERISA plan] believe a one-year limitations period is too short, they likely can contract around it.” Wang Laboratories, Inc. v. Kagan, 990 F.2d 1126 (9th Cir. 1993) (enforcing choice of law provision in ERISA plan resulting in longer statute of limitations).

Having found that the self-funded ERISA plan’s claim for subrogation/reimbursement was time barred, the court moved onto an analysis of whether or not plaintiff’s counsel was entitled to an award of attorney’s fees.

“ERISA authorizes an award of attorney’s fees to a party who achieves ‘some degree of success on the merits.’ Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2158 (2010). Once a party achieves some success, the court should not ‘favor one side or the other’ when deciding whether to award attorneys’ fees. Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 408 (9^th Cir. 1997).” Blood Systems, Inc. v. Roesler, et. al.

The Court employed a five part test to determine whether an award of fees is appropriate:

“1. [T]he degree of Plaintiffs’ culpability or bad faith,

2. Plaintiffs’ ability to satisfy an award of fees,

3. [W]hether an award of fees would deter others from acting in similar

circumstances,

4. [W]hether [the attorneys] sought to benefit all participants and beneficiaries of an

ERISA plan or to resolve a significant legal question regarding ERISA, and

5. [T]he relative merits of the parties’ positions.”

Cline v. Industrial Maintenance Engineering & Contracting Co., 200 F.3d 1223, 1235 (9^th Cir. 2000) (quoting Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980)); Blood Systems, Inc. v. Roesler, et. al.)

In performing this analysis the court is cognizant that “no single . . . factor is necessarily decisive.” Simonia v.Glendale Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1122 (9th Cir. 2010).

In this case the District Court for Arizona found that the subrogation/reimbursement claim of the self-funded ERISA plan could have been completely satisfied from the settlement proceeds disbursed to the plaintiff, yet despite this, the ERISA plan included counsel in the repayment demand which indicated a level of culpable conduct. This along with the fact that awarding attorney’s fees would discourage this kind of behavior in the future, and the lack of merit to the ERISA plan’s claim against plaintiff’s counsel convinced the Court to award $30,700 in fees and $600.42 in costs.

This case, as well as the cases cited by this court, provides a sound basis for the wise plaintiff’s attorney to argue for a shortened statute of limitations period. Additionally, there are a myriad of cases which stand for the proposition that plaintiff’s counsel is not personally liable for repayment to the self-funded ERISA plan. If the ERISA plan or their recovery agent takes an aggressive and meritless approach as was employed here, remind them that they may become subject to a significant claim for attorney’s fees and costs.

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