You have a long term disability claim. But now the Long Term Disability Carrier or disability “Plan” seeks to recover from you outstanding medical costs… costs your disability insurer never fully paid in the first place.
On January 16, 2011 the United States District Court sitting in Seattle will hear, for the first time, whether such a claim against a disabled insured, is allowed under Section 502(a)(3) of the Employee Retirement Income Security Act (“ERISA”). The Court will also determine whether the plan must pay its fair and proportional share of the fees and costs. These questions are unresolved in the Federal 9th Circuit and will greatly impact millions of employees covered by self-funded ERISA plans. The case is CGI technologies v. Rhonda Rose, # CV 10 298 RSM.
The most a disability insurance insurer should ever recover is the amount of medical expenses the disabled person recovered and the disability insurer in fact paid. In CGI v. Rose, Ms. Rose only recovered 21.44% of her total damages. Thus, equity requires that the insurer’s recovery be limited to 21.44% of covered medical expenses, less a proportional share of costs and attorneys’ fees.
In Sereboff v. Mid Atlantic Medical Servs., Inc., 547 U.S. 356 (2006), the U.S. Supreme Court found that an ERISA reimbursement is allowed by ERISA. 547 U.S. at 368. What Sereboff did not address is:what is the extent of the insurer’s reimbursement right from an injured beneficiary?
Long term disability insurers should not always be entitled to recover whatever relief the insurance plans says. Instead, disability insurer recovery rights should be limited to what is equitable. In no circumstances should a disability insurer be allowed to recover from a disabled person amounts the disabled person did not recover in the first place or the long term disability insurer did not fully pay for.
ERISA is widely known as pro-insurer law with respect to reimbursement rights. Write you US Senator or Congressman today to request support for a bill limiting insurer recovery to amounts the disabled person actually received and requiring the insurer to pay its prorate share of costs and attorney fees.