Magazine article HRMagazine

Court Upholds Health Plan's Contract Language

Magazine article HRMagazine

Court Upholds Health Plan's Contract Language

Article excerpt

The U.S. Supreme Court ruled in US Airways Inc. v. McCutchen that the Employee Retirement Income Security Act (ERISA) does not authorize courts to rewrite the contractual language of an employer's health plan.

The court's 5-4 decision on April 16 highlights the need for a carefully written plan document that clearly states whether recovered damages after an accident, including attorney fees, should be reimbursed to the plan.

US Airways' health plan paid $66,866 for treatment of James McCutchen after a car accident. He sued the driver who caused the accident, settling for $10,000. McCutchen received another $100,000 through his underinsured motorist coverage. That coverage allows a driver to receive damages for an injury caused by an underinsured, negligent driver. But after paying the attorney fees and expenses, he netted less than $66,000.

US Airways sought reimbursement for the recovered damages. McCutchen did not pay the airline. As administrator of the ERISA benefits plan, the airline sued him.

McCutchen claimed it would be unfair to reimburse his employer in full when he was not fully compensated for his injuries, including pain and suffering. US Airways did not cover any of his attorney fees and expenses. …

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