Saturday, April 20, 2013

U.S. Airways v. McCutchen

     In 2007, James McCutchen was involved in a car accident that put him in the ICU. At the time, McCutchen was working for US Airways, and his health insurance from them gave him $66,866 for medical costs. In addition to that money that he received from his own insurance, he received $10,000 from the person who caused the accident and another $100,000 from the uninsured motorist coverage. After McCutchen paid his lawyers 40% contingency fees, he was left with a little under $66,000. When US Airways found out how much money McCutchen had received, they demanded to be reimbursed for the money they gave to him. So McCutchen's lawyers put $41,500 in a trust account for US Airways, but that wasn't enough so they also personally sued McCutchen for the remanding money of $25,366.
     "US Airways based their suit on Section 502(a)(3) of the Employee Retirement Security Act of 1974 ("ERISA"), which allows plan fiduciaries to sue for "appropriate equitable relief." Relying on a subrogation clause in the Plan, which required reimbursement for "any monies recovered from a third party," the trial court decided that US Airways was entitled to the entire $66,866, regardless of legal expenses. On appeal, the Court of Appeals for the Third Circuit decided that Section 502(a)(3) requires courts to provide relief in a manner that is equitable to both parties.Id.. at 679–80.  The Third Circuit determined that requiring McCutchen to reimburse the Plan fully would be inequitable because it would leave McCutchen with less than full coverage for his medical expenses while unjustly enriching US Airways, which did not exercise its subrogation rights or contribute to the cost of obtaining third-party recovery. Id. Therefore, the court ruled that McCutchen need not reimburse US Airways for the entire amount of his medical expenses and US Airways has appealed to the Supreme Court of the United States to reverse the Third Circuit’s ruling."

"The Supreme Court ruled 5-4 this week that James McCutchen, a U.S. Airways, Inc., employee does not have to pay his health plan back all of the money he recovered following a car accident."

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