personal injury claim which may exist. Unlike statutorily created liens, however, any lien which the plan may have would have to be created by the contractual lan- guage in the plan itself,4


and many health


plans do not contain subrogation provi- sions. If the plan never gives notice of a lien, then the client should be advised about the potential for a lien and given control over the decision over what course of action to take. Some clients will choose not to go looking for trouble while others will want potential liens identified and addressed. Even where the health plan does assert a lien, it is imperative that the actual contract language be obtained. If the plan language itself does not provide for a lien in the event of a personal injury claim, and many plans do not, then no lien should be honored. Additionally, the plan language may provide, for example, for a lien against “third parties” who are responsible, which would raise a very se- rious argument for the plaintiff that there is no lien against the plaintiff’s own un- insured motorist coverage. If it is determined that a health plan does have a valid lien and the plan either gives notice of it or the client wants it dealt


4


Liens generally are considered creations of equity. For example, a recent Court of Ap- peals decision contains this discussion: Subrogation is founded upon the eq- uitable powers of the court. It is in- tended to provide relief against loss and damage to a meritorious creditor who has paid the debt of another. The doctrine is a legal fiction whereby an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person. The rationale underly- ing the doctrine of subrogation is to prevent the party primarily liable on the debt from being unjustly enriched when someone pays his debt.


Riemer v. Columbia Medical Plan, Inc. (3/10/2000, Court of Appeals, No. 90, Sept. Term, 1999), slip opinion at page 8, citing Bachmann v. Glazer, 316 Md. 405, 412-13, 559 A.2d 365, 368-69 (1989)(citations ommitted). In the context of a health care plan, under which obligations are established by a contract, it would appear to be the rea- sonable position that a right of subrogation only exists if the health plan so provides. This seems to be the generally recognized ap- proach, and in fact, in the Reimer case, the HMO involved, Columbia Medical Plan, relied upon the subrogation provision con- tained in their underlying policy to support their position.


Spring 2001


with, then the plan’s representative should be contacted early and an understanding established that they will be willing to compromise their lien at least to the ex- tent of reducing it by a pro rata share of attorney’s fees and expenses. If there are serious problems in the case with regard to insurance coverage or with the issues of liability and causation, the health plan should be made aware of those problems early on and an agreement should be sought that the plan will limit itself to no more than half of the net recovery after the deduction of attorney’s fees and ex- penses. Most health plans are receptive to these types of requests. So as to avoid the chance of parallel settlement discus- sions erupting, one should not tell the health plan who the liability carrier is.


2. CJ 11-112 Courts and Judicial Proceedings sec- tion 11-112 became effective October 1, 1999 and applies to recoveries by an in- jured person on or after that date. Under CJ 11-112, all liens asserted by health plans are reduced by a proportionate share of attorney’s fees, up to a maximum of one-third. The statute provides that the health plan does not have an obligation to advise an injured person or his or her attorney about the right to a reduction of the subrogation claim as mandated by the statute. As a result, the attorney must be careful to specifically request the reduc- tion under section 11-112. It has been the writer’s experience of late that health plans will assert a lien for the full amount of what they have paid, without making any reference to section 11-112. As a matter of practice, it is wise to respond to any request to recognize a lien by referring to section 11-112 and also pointing out that additional compro- mise may well be required.


3. ERISA


Dealing with liens asserted by health plans has been complicated tremendously


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Trial Reporter 19


by the applicability of the Employee Re- tirement Income and Security Act of 1974 (ERISA), 29 USC section 1001 et seq. ERISA preempts the application of State law to self-funded employment based health plans, and this preemption applies even to a self-funded health plan that purchases stop/loss insurance coverage. FMC Corporation v. Holiday, 111 S. Ct. 403 (1990); Thompson v. Talquin Build- ing Products Co., 928 F.2d. 649 (4th Cir. 1991). Currently, most employment based health plans are self-funded plans, so ERISA will be cited frequently by health plans to argue that state law provi- sions, such as CJ 11-112, do not apply. Even with preemption of state law,


there has been disagreement among the federal circuits as to whether a health plan with ERISA preemption that is asserting a lien nevertheless must reduce its lien by a proportionate share of attorney’s fees and expenses. In our circuit, unfortu- nately, the issue has been resolved unfavorably for plaintiffs.


In United


McGill Corporation v. Stinnett, 950 F.Supp. 124 (D. Md. 1996), Judge Will- iams ruled that despite the applicability of ERISA, fairness and equity required a health plan to reduce its asserted lien by a proportionate share of attorney’s fees and expenses.


This decision, however, was


overruled by the Fourth Circuit at 154 F. 3rd 168 (1998), and United McGill Cor- poration was given a judgment in its favor for the full amount of its asserted lien. In understanding ERISA preemption,


however, it is important to realize that not all plans enjoy ERISA preemption. Straight health insurance plans that are not self-funded do not enjoy ERISA pre- emption. Also, government employees are specifically exempted from the applicabil- ity of ERISA. As a result, if a client works for any type of governmental entity, ERISA preemption arguments will not be


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