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Right of Reimbursement Provision Found Only in SPD Enforceable if Not in Conflict with Other Plan Documents

Right of Reimbursement Provision Found Only in SPD Enforceable if Not in Conflict with Other Plan Documents

Board of Trustees of the National Elevator Industry Health Benefit Plan v. Montanile, 2014 WL 6657049 (11th Cir. Nov. 25, 2014)

ERISA and Life Insurance News
(January 16, 2015)

Montanile was a participant in an ERISA-governed health benefits plan established under a collective bargaining agreement for members of the International Union of Elevator Constructors.  Documents relating to the plan included (1) a trust agreement, which established the plan, (2) a bargaining agreement, which provided that the board of trustees had discretion to increase or decrease benefits, and (3) a summary plan description, which established the benefits available to plan participants and beneficiaries.

In 2008, Montanile was injured in a car accident involving a drunk driver.  The plan paid his medical expenses of more than $121,000.  Montanile later sued the other driver and obtained a $500,000 settlement.  From the settlement, he paid his lawyer $200,000 as a contingency fee and $63,700 to reimburse expenses.

After Montanile accepted the settlement, the board of trustees, as fiduciary for the plan, sought to be reimbursed from the settlement proceeds for the medical expenses paid by the plan on Montanile's behalf.  The board relied on the summary plan description, which provided:

The Plan has the right to recover benefits advanced by the Plan to a covered person for expenses or losses caused by another party …

Amounts that have been recovered by a covered person from another party are assets of  the Plan by virtue of the Plan's subrogation interest and are not distributable to any person or entity without the Plan's written release of its subrogation interest …

When attempts to negotiate a settlement failed, the board sued Montanile to enforce the plan's reimbursement provision. The summary plan description was the only document that set forth the plan's rights to subrogation and reimbursement from amounts recovered by a plan participant from another party.  The trust agreement and the bargaining agreement contained no similar provisions.

Montanile argued that the plan did not have a right of reimbursement because the summary plan description was not a "governing plan document."  Rather, he contended, only the trust agreement and the bargaining agreement were "governing plan documents," and they did not create any right of subrogation or reimbursement that could be enforced by the plan.

The federal district court rejected that argument and held that the summary plan description was an enforceable, governing plan document required by ERISA, and that reimbursement was a remedy available to the plan as "appropriate equitable relief" under 29 U.S.C. § 1132(a)(3).

On appeal, the Eleventh Circuit noted that section 1132(a)(3)(B) authorizes plan fiduciaries to seek "appropriate equitable relief … to enforce … the terms of the plan."  The statute "does not specify where the 'terms of the plan' must be found," the court said, although it requires that every employee benefit plan must be "established and maintained pursuant to a written instrument," citing 29 U.S.C. § 1102(a)(1).  ERISA also mandates that a "summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries."  Id.

Montanile argued that the summary plan description could not be a governing plan document in view of CIGNA Corp. v. Amara, 131 S. Ct.  1866 (2011), in which the Supreme Court stated that the requirement "that participants and beneficiaries be advised of their rights and obligations 'under the plan,' suggests that the information about the plan provided [in a summary plan description] is not itself part of the plan."  Id. at 1877 (emphasis in original).

The Eleventh Circuit rejected that argument, stating that "Amara only precludes courts from enforcing summary plan descriptions … where the terms of that summary conflict with the terms specified in other, governing plan documents.  However, the Amara Court had no occasion to consider whether the terms of a summary plan description are enforceable where it is the only document that 'specif[ies] the basis on which payments are made to and from the plan, as required by § 1102(b)."

Here, the reimbursement provision in the summary plan description did not create a conflict with any other plan documents.  "The terms specified in that summary plan description are enforceable, pursuant to § 1132(a)(3)," the court said, "because (1) no other document lays out the rights and obligations of plan participants and (2) the Trust Agreement contemplated the rights and obligations would be set forth in a separate document."

Consequently, the court held that the plan's board of trustees could enforce the reimbursement provision and could recover from the settlement funds that Montanile obtained from the drunk driver the amounts paid on his behalf under the plan.

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H. Sanders Carter
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Andrea K. Cataland
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Kenton J. Coppage
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