United States Supreme Court has declined a plan beneficiary's request
to clarify whether a plan administrator can enforce a lien to recoup
benefit overpayments when the overpaid benefits are no longer in the
possession and control of the beneficiary at the time the plan
asserts its lien.
In Thurber v. Aetna Life Insurance Company,
the Second Circuit Court of Appeals ruled that a plan administrator
could enforce a lien under ERISA and recover overpaid benefits, even
if the overpaid benefits no longer remained in the plan participant's
possession. The participant subsequently petitioned the Supreme Court
to review the ruling to resolve a split among the circuit courts on
this issue. Currently, the First, Second, Third, Sixth and Seventh
Circuits allow fiduciaries to enforce such liens, while the Eighth
and Ninth Circuits do not.
Background. In Thurber,
the participant was enrolled in an ERISA-covered benefit plan that
provided disability benefits. After being injured in a car accident,
the participant applied for and received STD benefits for six months.
The participant also applied for LTD benefits.
plan administrator denied the participant's LTD claim, finding that
she was not disabled because she could perform the functions required
for her job. During the LTD claims review process, however, the plan
administrator discovered that the participant had been receiving
no-fault auto insurance payments, which should have been offset
against the STD benefits.
exhausting the internal appeals process to no avail, the participant
sued the plan, alleging that its denial of her LTD claim was
erroneous because it was not based on the evidence and failed to
disclose how the decision was made. In turn, the plan administrator
filed a counterclaim against the participant under ERISA, seeking to
recover what it deemed to be an overpayment of STD benefits due to
the participant's receipt of no-fault insurance payments.
Courts' Decisions. At trial, the district
court upheld the plan administrator's denial of the participant's LTD
claim but denied its recoupment of benefits claim, finding that this
type of recovery was unavailable under ERISA. The plan administrator
appealed this decision to the Second Circuit.
review, the Second Circuit reversed the trial court's decision,
finding that the plan administrator's counterclaim was permitted
under ERISA because it sought to recover specific funds in a specific
amount, as authorized by the plan. In response, the participant
petitioned the Supreme Court to review the Second Circuit's decision.
The Supreme Court, however, ultimately declined to review the matter.
of Supreme Court's Decision to Decline to Review Thurber. While the Thurber
decision comes as good news to plan fiduciaries, the Supreme Court's
decision to decline a review of the matter allows the circuit courts
to remain divided on the issue. Accordingly, plan fiduciaries must be
cognizant that their ability to recoup benefit overpayments may
depend upon the location of the case.