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Public Justice Wins Legal Fight against Insurer's Attempt to Seize Benefits from Injury Victim; Ninth Circuit Rejects Insurer's Windfall
June 20, 2012
For a second time, a federal appeals court has ruled that an employer-based insurance plan is not entitled to full reimbursement of medical claims by an injured beneficiary who recovered only a fraction of damages from the person who caused the injury.
In its June 20 ruling in CGI v. Rose, the Ninth Circuit Court of Appeals also flatly rejected the insurer's attempt to sue the attorney who represented an injured woman in her case against a third party. Last November, the Third Circuit similarly blocked a plan's attempt to obtain 100 percent reimbursement.
More than 170 million employees nationwide are covered by Employee Retirement Income Security Act (ERISA) plans, so the rulings have far-ranging implications
"The Ninth Circuit's decision agrees entirely with -- and builds on -- our previous victory, making it clear that these plans should not be allowed to have their cake and eat it too," said lead counsel Matt Wessler of Public Justice, who was also lead counsel in U.S. Airways v. McCutchen before the Third Circuit.
"Allowing insurers to seize medical expenses from injury victims who have only recovered a fraction of their total damages is deeply unfair. This is yet another landmark victory for employee rights and against insurer greed," Wessler said.
The Rose case involved Rhonda Rose of Duvall, Wash., an employee of CGI Technologies who was seriously injured in a car accident with a drunk driver in 2003. The insurance policy she had through her job paid nearly $32,000 in medical benefits. Rose hired an attorney to help her recover damages from the driver who caused the accident and was awarded a small amount of compensation.
Despite the small recovery, the insurer demanded full repayment of the amount it had paid in medical expenses.
In denying the insurer's claim against Rose, the Court held that "parties may not by contract deprive [a court] of its power to act as a court in equity." In a concurring opinion, Circuit Judge Schroeder observed that it would be "manifestly unfair" to allow the plan to recoup 100 percent of its medical expenses. Such a result, Judge Shroeder observed, would "leav[e] the beneficiary vastly undercompensated for her actual damages" and "unjustly enrich" the ERISA plan, which had been paid premiums for the expenses it was now seeking to recoup.
The trial court will now determine how much relief would be fair under the circumstances.
The decision is an important victory in Public Justice's ongoing battle against a nationwide campaign by insurance plans to strip injured employees of their tort recoveries.
Along with lead Public Justice attorneys Matt Wessler and Leslie Brueckner, Public Justice's litigation team in the Rose case includes Paul Stritmatter and Mike Withey of Seattle, Caitlin Palacios of Washington D.C., and Michael Nelson of Seattle, who represented Ms. Rose in her underlying lawsuit against the driver who caused the accident. It was Nelson's law firm, Nelson Langer Engle, PLLC that CGI unsuccessfully sued.