On January 9, 2002, the U.S. Supreme Court handed down an important
ERISA subrogation decision (Great-West Life & Annuity Insurance
Co. v. Knudson) that affects all consumers.
In
Knudson, the respondent, Janette Knudson, was injured in
a car accident and her health insurance (through her husband's employer)
paid $411,157 of her medical expenses. The Knudsons filed a state
products liability action against Hyundai and negotiated a $650,000
settlement. The settlement allocated $256,745 to a special needs
trust to provide care for Janette (who is quadriplegic as a result
of the accident); $373,426 to attorney's fees and costs; $5,000
to reimburse the California Medicaid program; and $13,828 to pay
past medical expenses.
The
day before the hearing scheduled for judicial approval of the settlement,
Great-West tried to remove the case to federal district court. The
district court concluded that Great-West was not a defendant and
could not remove the case. It remanded to state court, which approved
the settlement.
Great-West
never cashed the check it received from this settlement. Instead,
it filed an action under Section 502(a)(3) of ERISA seeking to enforce
the reimbursement provision of the plan, which would require the
Knudsons to pay the plan $411,157 of the settlement.
The district court granted the Knudsons summary judgment, holding
that the terms of the Plan limited its rights of reimbursement to
the $13,828 approved by the state court. The Ninth Circuit affirmed
on different ground, holding that judicially decreed reimbursement
for payments made to a beneficiary of an insurance plan by a third
party is not "equitable relief" authorized by ERISA.
The
Supreme Court agreed, holding that the legal relief sought to Great-West
to enforce a contractual obligation to pay money was not authorized
by ERISA. Scalia wrote the opinion and was joined by Rehnquist,
O'Connor, Kennedy and Thomas.
In this decision, Scalia reminds that Congress did not intend to
authorize remedies it forgot to expressly incorporate into the statute.
Section 502(a)(3) allows a plan to obtain equitable relief -- which
means something less than all relief. Further, a claim for money
due and owing under a contract is an action at law, not equity.
Likewise, an injunction to compel payment of money past due under
a contract or specific performance of a past due monetary obligation
was not typically available in equity. Restitution sought by Great-West
is not equitable (the imposition of a constructive trust or equitable
on particular property) but legal (the imposition of personal liability
for the benefits that they provide to Mrs. Knudson.) and therefore
not authorized under the ERISA statute.
