ERISA Plan and Recovery Costs for Subrogation

There is an important new case out of the 3rd Circuit addressing whether ERISA health insurance plan must pay its share of recovery costs associated with its subrogation claim: US Airways, Inc. v. McCutchen, __F.3d __, 2011 WL 5557411: Where ERISA claim for bills paid was $66,866 and recovery (due to limited coverage) was $110,000 and injured plan member owed 40% attorney fee, District Court erred in requiring injured plan member to pay back all of the recovery. "Appropriate equitable relief" which plan could seek meant something more than equitable relief and required the court to exercise its discretion to avoid unjust enrichment to the plan. Court says this is required by Sereboff v. Mid Atlantic Medical Servs., Inc., 547 U.S. 356, 361, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006), which had the effect of modifying the holdings in prior, contrary 3rd circuit rulings. Notes its decision is contrary to other circuits in Zurich Am. Ins. Co. v. O'Hara, 604 F.3d 1232 (11th Cir.2010); Admin. Comm. of Wal-Mart Stores, Inc. Assoc. Health & Welfare Plan v. Shank, 500 F.3d 834 (8th Cir.2007); Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot & Wansbrough, 354 F.3d 348 (5th Cir.2003); Admin. Comm. of the Wal-Mart Stores, Inc. Assocs.' Health & Welfare Plan v. Varco, 338 F.3d 680 (7th Cir.2003).

This seems to set up a conflict among the circuits for the U.S. Supreme Court to take up the question whether the ERISA plan can refuse to pay its proportionate share of recovery costs and leave the plan participant uncompensated.