HEALTH PLANS
CANNOT SUE TO RECOVER LIENS UNDER ERISA
GREAT-WEST LIFE V. KNUDSON
In Great-West Life & Annuity Ins. Co. v. Knudson
(2002) 02 CDOS 142, a woman was catastrophically injured in an auto
accident. Over $400,000 in hospital and medical bills were paid by an
insurer as a result of her husband’s health plan that he had through his
employment. The woman sued various parties for her injuries and obtained a
$650,000 settlement. She gave notice to the insurer that her Special Needs
Trust had allocated over $13,000 to re-pay the insurer for the over
$400,000 in plan benefits it provided and satisfy the insurer’s lien it
had on her settlement as permitted in her husband’s health plan contract.
The insurer sued the woman seeking to recover the over $400,000 in plan
benefits it provided from her $650,000 settlement through its lien.
In a long awaited decision, the United States
Supreme Court held that the health plan was regulated under ERISA and that
ERISA provided the insurer with only injunctive or equitable relief to
recover under its lien. Accordingly, the Court held that recovery of money
damages was neither injunctive nor equitable relief, even if characterized
as restitution by the insurer. Thus, the Court concluded that the insurer
could not enforce its contractual lien on the woman’s settlement to
recover the plan benefits it provided because ERISA did not provide the
insurer with that legal right.
The Court did not address the question of whether
the insurer could have intervened in the personal injury action, or
whether state law claims for breach of contract would be pre-empted by
ERISA.
This decision makes it difficult for health plans
regulated by ERISA to recover liens on personal injury settlements. Health
plans now have no alternative but to explore state law breach of contract
remedies to enforce their liens and are placed in the peculiar position of
arguing that such actions are not pre-empted by ERISA.
