How Does An ERISA Lien Affect My Personal Injury Case?

An ERISA lien in personal injury cases is complex and open to interpretation. While these plans were designed to protect employees, recovery contractors and plans have started to aggressively pursue plaintiffs that are involved in personal injury cases.

If you win your case, the plan will expect you to pay back funds spent through the plan on the plaintiff’s behalf.

There are cases when an attorney and plaintiff receive nothing from a personal injury settlement because of ERISA plans having the right to recovery. State laws work to protect an attorney and plaintiff from unjust enrichment on behalf of the plan, but federal laws often supersede state laws, particularly in self-funded plans.

US Airways, Inc v McCutchen, a case that went to the Supreme Court, provides strong protections for self-funded plans. In this case, Mr. McCutchen received nothing from US Airways. The case was remanded back to trial court and McCutchen would win his case.

The Supreme Court’s decision, however, has led to self-funded plans having very strong language in the law that gives self-funded plans the right to have 100% of their lien satisfied.

What is an ERISA Lien?

ERISA is a protection, offered to employees, to help protect them against large corporations. The standard was put in place to allow individuals access to fair and affordable healthcare plans.

The law, while it had good intentions, has since been used to avoid state laws and often hinders personal injury settlement awards on the employee’s behalf.

An ERISA lien is a way for the health plan to be reimbursed for anything it paid out when you were injured. For example, if you sustained an injury and the plan covered your required surgery, it must be refunded in the event that you recover money for your injuries.

ERISA Lien in Personal Injury Cases

Since ERISA laws are complex, recovery groups are often hired to pursue money from a plaintiff or their attorneys to refund the health insurer. In a personal injury case, the lien can eliminate the money paid to the plaintiff as a settlement.

Unjust Enrichment Claims and the Common Fund

Federal courts often favor the ERISA plan providers rather than adhere to state laws. When you hire an attorney that specializes in cases involving an ERISA lien in personal injury cases, you’re paying the attorney out of your own pocket.

Many states have laws in place that require ERISA plans to share in the attorney fees used to collect the funds.

The settlement is a direct result of the attorney’s work, so its unjust enrichment if the plan doesn’t share in the cost of the attorney fees. Federal courts have often ruled in favor of ERISA plan providers, stating that the plans are not subject to state law, nor have to pay a portion of the attorney fees.

An attorney may be able to reduce the impact of the lien, depending on the type of plan that you have.

Types of ERISA Plans

There are two types of plans available, and the type you have may dictate how an attorney approaches your case. The plans include:

• Insured plans, which are a standard employer-sponsored option where premiums are collected and paid to the insurer on behalf of the employee. These plans are, in most cases, subject to state laws.
• Self-funded plans, where the employer’s pool pays for doctor and hospital treatments. Employers fund these options and put the fund into a pool for the expenses of all employees. Self-funded plans are often not subject to state laws.

When an employer funds a plan, the plan is typically self-funded. Small companies often have insured plans because self-funded plans can be expensive and an option that large corporations pursue.

Government employees will often fall under an insured plan.

An attorney may be able to negotiate a lien on behalf of a plaintiff. The ability to negotiate the lien depends on the type of lien and the language present in the lien. While possible to negotiate an ERISA lien, it’s notoriously difficult and may not be a viable option for your plan.

The attorney will have to read through the contract and ensure that it is governed under ERISA.

In some cases, the lien doesn’t have legal standing and a claim should not have been filed. An attorney will also make sure that the lien is only subject to third-party cases, which is common in most contract language involving ERISA plans.

Working with a Personal Injury Lawyer

If your lawyer is working on a personal injury settlement and you’re worried about having to reimburse the insurance company, it’s time to call an attorney. We’ll work hard to reduce how much an ERISA lien reduces your personal injury settlement.

Contact us today to speak to an attorney about your personal injury case and ERISA concerns.