Benefits & ERISA Law

Another Walmart Health and Welfare Plan Reimbursement Decision

By Suzanne Wynn

Another Walmart Health and Welfare reimbursement decision, this time out of the 11th Circuit Court of Appeals. In Administrative Committee v. Horton, No. 07-10012 (Jan. 15, 2008), the 11th Circuit reversed the district court’s decision which had granted summary judgment to the participant, and remanded the case back to the district court for further proceedings.

The participant was a Wal-Mart employee and a participant in the Wal-Mart Stores Inc. Associates’ Health and Welfare Plan when her 14-year-old son was struck by a car and suffered permanent injuries. The plan paid $51,446.03 in medical benefits on the son’s behalf due to the accident. The participant, on behalf of her son, filed a lawsuit against the driver and received a $99,000 settlement. The settlement was divided as follows - $1,000 to the participant for her claims as custodial parent, $33,000 to attorneys fees to the son’s attorney, and $65,000 to be deposit in the local county probate court for the son’s benefit. The state probate court appointed the participant as conservator of the account, and the participant took possession of the son’s portion of the settlement and deposited it into a trust account at a local bank.

The terms of the plan were that any covered person who obtains a tort judgment or settlement must reimburse the Plan out of such funds for 100% of any benefits paid. Pursuant to those plan provisions, the plan’s administrative committee sought recovery of the $51,446.03 paid in medical benefit on the son’s behalf out of the $66,000 awarded to the participant and her son out of the $99,000 settlement. When the participant and her son refused to reimburse the plan, the plan’s administrative committee filed suit to enforce the terms of the plan.

The 11th Circuit discussed ERISA section 502(c)(3), along with the U.S. Supreme Court’s decisions in Mertens v. Hewitt, 508 U.S. 248, 113 S. Ct. 2063 (1993); Great West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708 (2002); and Sereboff v. Mid Atl. Med. Servs. Inc., ___ U.S. ___, 126 S. Ct. 1869 (2006), in addressing the question of whether a benefit plan could use ERISA section 502(a)(3) to recover a specifically identified fund in the possession of a third party, such as a trustee or conservator, by bringing a lawsuit against the third party directly. The Court determined that the fact that the funds were held by a third party did not defeat the plan’s claim to the funds. The Court stated:

Under Knudson, Sereboff, and other authorities cited above, the most important consideration is not the identity of the defendant, but rather that the settlement proceeds are still intact, and thus constitutes an identifiable res that can be restored to its rightful recipient. Had the Administrative Committee solely sued parties not in possession of the disputed funds, the claim would have failed under Knudson because it merely would have sought to impose personal liability on those parties. Instead, the Administrative Committee also sued Ms. Weber in her capacity as conservator of Joshua’s special needs trust, seeking restoration of that particular fund in which it asserts a paramount interest. Accordingly, the Administrative Committee properly seeks “other appropriate equitable relief” cognizable under section 502(a)(3), and the district court’s grant of summary judgment must be reversed.

The 11th Circuit then remanded the case back to the district court for further proceedings not inconsistent with their opinion.

Technorati Tags: Pension Protection Act, ppa, welfare plan, 502(c)(3), Wal-mart, walmart, reimbursement, tort, ERISA

Full post as published by Pension Protection Act Blog on January 16, 2008 (boomark / email).