16 April 2013

Law in Plain English: U.S. Airways, Inc. v. McCutchen

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

McCutchen was a U.S. Airways employee injured in a car accident. The company's health plan paid nearly $67,000 in medical expenses from his injuries. McCutchen then sued the driver who caused the accident and received about $66,000 ($10,000 from the other driver's insurance and $100,000 from his own insurance, minus attorney's fees). U.S. Airways then sought reimbursement of the $67,000 they had paid in medical expenses, citing language in the company's health plan that required reimbursement under those circumstances. McCutchen refused to pay and U.S. Airways sued under the Employee Retirement Income Security Act (ERISA), which allows U.S. Airways to "obtain other appropriate equitable relief" in accordance with their health plan. The District Court ruled in favor of U.S. Airways, but the Third Circuit reversed, finding that fully reimbursing U.S. Airways would be inappropriate and inequitable (since U.S. Airways would be receiving more than they paid out; and since they hadn't contributed to the cost of obtaining the third party recovery). The question before the Court was whether ERISA authorized courts to use equitable principles to rewrite the health plan's contractual language and refuse to order participants like McCutchen to reimburse their plan for benefits paid, even where the plan’s terms gave it an absolute right to full reimbursement. In a 5-4 decision, the Supreme Court ruled that equitable principles cannot overrule the clear terms of the plan. However, the Court also ruled that equitable rules could help in understanding some ambiguity reimbursement provision. As a result, U.S. Airways could recover for medical bills, but not for attorney's fees. The four dissenters agreed that U.S. Airways should have been able to recover, but would have reversed the Third Circuit and allowed the full reimbursement. The practical impact of this decision is that employers will be able to get reimbursed for expenses paid out for injured employers (potentially to include attorney's fees), but only when those terms are clearly expressed.
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