The U.S. Supreme Court
recently decided that equitable relief doctrines, such as the
principle of unjust enrichment, do not override the reimbursement
provisions of an ERISA-covered group health plan. The Court held,
however, that equitable doctrines can be used to interpret ambiguous
In US Airways, Inc. v.
McCutchen, a group health plan paid over $66,000 for medical
expenses incurred by a participant who was injured in a car accident.
The participant subsequently received a $110,000 settlement from
third parties. However, legal expenses reduced the participant's net recovery
to less than the amount of the medical expenses paid by the plan.
The plan contained a
provision requiring a participant to reimburse the plan for medical
expenses it paid from any monies recovered from a third party. Using
this provision, the plan sued the participant for the full amount of
medical expenses it had paid on his behalf. The participant contended
that it would be inequitable to require him to reimburse the plan in
full when he had not been fully reimbursed for his medical expenses by
the net proceeds of the settlement.
The Third Circuit Court of
Appeals held that, despite the terms of the plan, a court must apply
any relevant equitable relief doctrines and defenses. The Third
Circuit then concluded that requiring the participant to fully
reimburse the plan was not appropriate because doing so would
unjustly enrich the plan and leave the participant with less than
full payment of his medical bills. The court also determined that
equitable relief required the plan to share in the legal costs borne
by the participant in obtaining the settlement.
In a 5-4 decision, the
Supreme Court reversed the Third Circuit's decision by ruling that
the terms of an ERISA group health plan govern and that equitable
relief doctrines cannot be used to invalidate them. Specifically, the
Court held that where the terms of a group health plan provide the
plan with the right to a full reimbursement, a court cannot use
equitable relief doctrines to reduce the plan's reimbursement.
However, the Court said that
this plan document did not specify whether the plan would share in
the legal costs incurred by the participant. The Court concluded that
where a plan is silent on allocating the costs of obtaining a
third-party recovery, equitable relief doctrines provide the
appropriate default rules. Therefore, under the equitable relief
doctrine called the "common fund doctrine", the Court split
the legal costs of the settlement between the participant and the
The Court's decision in McCutchen
reaffirms the importance of having ERISA welfare plan documents and
the fact that precise plan terms supersede otherwise applicable