Federal Courts Split on Critical ERISA Subrogation Issue
There is a conflict among the federal circuit courts concerning the rights of ERISA plans to sue their plan participants for subrogation or reimbursement. This issue typically arises when an ERISA health plan pays medical bills for an injured participant. If the participant recovers from a third-party tortfeasor, the plan often seeks to recover the amount of its claimed subrogation or reimbursement interest from the participant.
It is now clear, in light of the U.S. Supreme Court's holding in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), that ERISA plans may sue plan participants for equitable relief but not legal relief. The distinction arises from the wording of the ERISA statute itself (see 29 U.S.C. § 1132(a)(3)). Thus, the basic question is whether a suit filed by an ERISA plan to recover a claimed subrogation or reimbursement interest is equitable, or legal, in nature.
So far, in the wake of Great-West, the Ninth and Sixth Circuits hold that ERISA plans may not sue their participants, holding that the claim for subrogation or reimbursement is one for legal relief. However, the Fourth, Fifth, and Tenth Circuits adopt the contrary view. (Click on the links to read the divergent opinions from these circuits.) In the end, it is likely that the Supreme Court (or Congress) will resolve this issue.
Given the complexity of the issues and the specific facts involved, it is difficult to summarize the case holdings succinctly. I suggest that you read each opinion (starting with Great West) to gain a good understanding of the issues. These opinions can be quite useful during negotiations with ERISA plans over subrogation claims.