ERISA Subrogation (Continued from page 12)
ance plan refuses to defer the lien letter until after Sereboff is decided, my recom- mendation is to sign the lien letter to avoid the problems in Kress. If the Su- preme Court rules in favor of the Sereboffs, the lien letter is not enforce- able under ERISA, and the health insurance plan will likely have no rem- edies to enforce the lien letter because of the complete preemption doctrine of ERISA.
Assuming that the attorney chooses to sign a lien letter, or is forced to sign the lien letter, the difficulties associated with ERISA subrogation still exist. In cases in- volving questionable liability, where the settlement proceeds and/or verdict amounts were less than the previously paid medical expenses or where the only real source of damages involves medical bills, the attorney must find ways to ad- dress the outstanding lien owed to the ERISA health insurance plan if Sereboff is decided in favor of the insurer. By sign- ing the lien letter, the attorney has at least prevented a potential malpractice claim associated with not obtaining necessary medical bills and records, as well as a po- tential cutoff of all future medical treatment.
III. THE ATTORNEY’S FEES DILEMMA AND WHEN TO DISCUSS IT WITH THE ERISA HEALTH INSURANCE PLAN
The next, unpleasant problem con-
fronting the attorney is when to discuss the issue of attorney’s fees and the fee agreement with the health insurance plan, particularly in cases with substantial medi- cal expenses and low policy limits and/or questionable liability. Unlike other sub- rogated liens, ERISA liens take priority over attorney’s fees in that the lien must be paid back before any settlement pro- ceeds are distributed, if required by the terms of the health insurer’s plan docu- ments.
The Fourth Circuit in United McGill
Corp. v. Stinnett, 154 F. 3d 168, 172-73 (1998), held that if a health insurance plan had an express provision containing a first right of reimbursement, then the attor- ney would not be compensated until the existing lien was fully satisfied. The con- sequences of such first right of reimbursement resulted in a total loss of fees when the lien exceeded the policy lim- its or judgment amount. See Paris v. Ironworkers Trust Fund Local No. 5, 44 F. Supp. 2d 747, 749 (D. Md. 2000) affd. 211 F. 3d 1265 (4th
Cir. 2000); Kress v. Food Emplrs. Labor Rels. Ass’n. 285 F. Supp. Experienced.
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2d 678 (D. Md. 2003). The attorney cannot even intelligently discuss fees with the health insurance plan without knowing what the policy limits of the wrongdoer are and the expected future medical expenses of the claimant, as well as the provisions of the plan docu- ments concerning whether or not there is a first right of reimbursement. Without this critical information, the attorney will not be in a position of knowing whether or not to continue with the case. If the health insurance plan balks at paying the attorney’s fees in the personal injury litigation where liability is question- able with high medical expenses and low policy limits, the attorney should seriously consider withdrawing from the case and advise the plan’s attorneys that they can pursue the underlying personal injury liti- gation. An attorney also cannot cavalierly agree to settle the outstanding lien and leave the claimant potentially without health insurance as the price for securing his or her own fee. The attorney could well be sued for malpractice unless the client provides a written and informed consent to proceed without future health insurance.
IV. CASE MANAGEMENT WITH THE HEALTH INSURER LOOKING OVER ONE’S SHOULDER
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Some practitioners believe that in or- der to avoid the health insurer’s lien, there is no need to discuss or use the medical bills in the underlying litigation as though the lien magically does not exist. Alterna- tively, some may also believe that by limiting the medical bills during the course of discovery or trial, they can ob- tain a jury verdict or settlement that ignores repayment of the outstanding lien. These strategies are doomed to fail. The health insurer that learns that the attor- ney is trying to avoid repayment of the medical bills may seek to intervene in the case as Great West tried to do (and al- most succeeded in doing so, including removing the case to federal court). That strategy may soon succeed after Sereboff is decided The ultimate fact finder may not be very impressed in terms of pain and suffering damages if the claimant avoids submitting medical bills or limits the bills that are submitted. The fact that the claimant receives a low verdict or no verdict and refuses to pay back the lien does not mean that the health insurer will continue to provide coverage for future
(Continued on page 16) Winter 2006
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