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Keywords

settlementtortdamagesfiduciarytrustequitable reliefconstructive trust
settlementfiduciarytrustrespondentequitable reliefconstructive trust

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Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612, 74 USLW 4240, 37 Employee Benefits Cas. 1929, 06 Cal. Daily Op. Serv. 3940, 2006 Daily Journal D.A.R. 5765, Pens. Plan Guide (CCH) P 23995V, 19 Fla. L. Weekly Fed. S 190

Facts

Marlene and Joel Sereboff were beneficiaries of a health insurance plan administered by Mid Atlantic Medical Services, Inc. The plan included an 'Acts of Third Parties' provision requiring beneficiaries to reimburse the plan for medical expenses paid if they recovered damages from third parties. After the Sereboffs were injured in an automobile accident, the plan paid their medical expenses. They later settled a tort action against third parties for $750,000 but did not reimburse Mid Atlantic for the $74,869.37 in medical expenses it had paid. Mid Atlantic filed suit under ERISA to recover this amount.

Petitioner Sereboffs are beneficiaries under a health insurance plan administered by respondent Mid Atlantic and covered by the Employee Retirement Income Security Act of 1974 (ERISA). The plan provides for payment of covered medical expenses and has an 'Acts of Third Parties' provision. This provision requires a beneficiary who is injured as a result of an act or omission of a third party to reimburse Mid Atlantic for benefits it pays on account of those injuries, if the beneficiary recovers for those injuries from the third party.

Issue

Whether a fiduciary under ERISA can seek equitable relief to recover medical expenses from a beneficiary's settlement with third parties when the plan includes a provision for reimbursement.

In this case we consider again the circumstances in which a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) may sue a beneficiary for reimbursement of medical expenses paid by the ERISA plan, when the beneficiary has recovered for its injuries from a third party.

Rule

Under § 502(a)(3) of ERISA, a fiduciary may bring a civil action to obtain appropriate equitable relief to enforce the terms of the plan.

A fiduciary may bring a civil action under § 502(a)(3) of ERISA 'to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.'

Analysis

The Court analyzed whether the relief sought by Mid Atlantic was equitable. It determined that the plan's 'Acts of Third Parties' provision created a specific fund to which Mid Atlantic was entitled, allowing it to impose a constructive trust or equitable lien on the identified portion of the Sereboffs' settlement. The Court distinguished this case from previous rulings where the funds were not in the beneficiary's possession, confirming that Mid Atlantic's claim was indeed equitable.

The Court analyzed whether the relief sought by Mid Atlantic was equitable. It determined that the plan's 'Acts of Third Parties' provision created a specific fund to which Mid Atlantic was entitled, allowing it to impose a constructive trust or equitable lien on the identified portion of the Sereboffs' settlement.

Conclusion

The Supreme Court affirmed the lower court's decision, holding that Mid Atlantic's action sought equitable relief under ERISA, allowing it to recover the medical expenses from the Sereboffs' settlement.

The Supreme Court affirmed the lower court's decision, holding that Mid Atlantic's action sought equitable relief under ERISA, allowing it to recover the medical expenses from the Sereboffs' settlement.

Who won?

Mid Atlantic Medical Services, Inc. prevailed in the case because the Supreme Court found that its claim for reimbursement was equitable under ERISA, allowing it to recover the medical expenses paid on behalf of the Sereboffs.

Mid Atlantic Medical Services, Inc. prevailed in the case because the Supreme Court found that its claim for reimbursement was equitable under ERISA, allowing it to recover the medical expenses paid on behalf of the Sereboffs.

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