Pension Protection Act Blog

One set of facts, two plan documents involved = two different outcomes.

While redrafting a cafeteria plan document to update the language in the plan, the Eleventh Circuit’s decision in Popowski v. Parrott, No. 05-10235 (Aug. 24, 2006), popped back up as a reminder to carefully consider the reimbursement language in the plan document.

Popowski caught my attention because of the court’s discussion of the plan language in the two different plans when determining whether dismissal was proper in two separate cases consolidated for decision. Parrott was a participant covered by the United Distributors, Inc. Employee Health Benefit Plan (”United”) when she had an accident. The United plan paid $152,889.65 in medical expenses on her behalf in connection with the accident. The Carillos were involved in an accident and the Mohawk Carpet Corporation Health and Welfare Benefits Plan (”Mohawk”) paid $126,364.73 in medical expenses on their behalf in connection with the accident. Both Parrott and the Carillos received settlement payments arising from the accidents, and both plans sought enforcement of the subrogation and reimbursement provisions in the respective plan documents to recover the medical expenses paid by the plans on behalf of the participants.

The district court dismissed both cases for lack of subject matter jurisdiction, as well as denied other requested relief, based on a determination that none of the claims involved “appropriate equitable relief” as required to state a claim under Section 502(a)(3) of ERISA, 29 U.S.C. section 1132(a)(3). The 11th Circuit, in applying the U.S. Supreme Court’s decision in Sereboff v. Mid-Atlantic Medical Services, Inc., 547 U.S. ___, 126 S. Ct. 1869 (2006) on the scope of “appropriate equitable relief” provided by section 1132(a)(3), found that the district court erred in dismissing the claims involving the United plan and found that the district court did not err in dismissing the claims involving the Mohawk plan. The difference between the two findings - one upholding dismissal and one reversing dismissal - was in the plan language.

The court stated that the language in the United plan claims a lien “on any amount recovered by the Covered Person whether or not designated as payment for medical expenses”. The plan further clarifies that “the Covered Person … must repay to the Plan the benefits paid on his or her behalf out of the recovery made from the third party or insurer”. The court found the plan language essentially identical to the plan language in Sereboff as it specified both the fund (recovery from the third party or insurer) out of which reimbursement is due to the plan and the portion due the plan (benefits paid by the plan on behalf of the defendant). Because the court found that the plan language sought not to impose personal liability on Parrott but to restore particular funds or property to the plan which were in Parrott’s possession, the 11th Circuit determined dismissal was not proper, and reversed the district court’s decision.

The court determined that dismissal of the claims of the Mohawk plan was proper, and affirmed the district court’s decision. The court stated that the subrogation and reimbursement provision in the Mohawk plan, unlike the United Plan, claims a right to reimbursement “in full, and in first priority, for any medical expenses paid by the Plan relating to the injury or illness,” but does not specify that reimbursement is made out of any particular fund, as distinct from the beneficiary’s general assets. The court draws the distinction that the plan language makes receipt of “a settlement, judgment, or other payment relating to the accident injury or illness” a trigger for the general reimbursement obligation. By requiring reimbursement “in full”, the plan language fails to limit recovery to a specific portion of a particular fund. For this reason, the court concluded that the Mohawk plan failed to meet the requirements outlined by the U.S. Supreme Court in Sereboff for asserting an equitable lien for the purposes of 29 U.S.C. section 1123(a)(3) because the plan language failed to specify that recovery come from any identifiable fund or to limit that recovery to any portion thereof.

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