Philadelphia Federal Judge Rejects Erisa Plan’s Grab for Catastrohically Injured Child’s Settlement

Thanks to alert reader Shannon Duffy at American Lawyer Media for calling to my attention a recent federal district court ruling in Philadelphia.

In Mills v. London Grove Township, a toddler had a serious serious head injury resulting in cerebral palsy.  Liability carriers agreed to pay their grossly inadequate policy limits. After fees and expenses a total of $357,170.21 was available for a special needs trust for the child. However, the insurance company that paid medical benefits under the father’s employer’s ERISA plan demanded that it be reimbursed $123,690.12 from the child’s recovery.  The court analyzed the ERISA claim under Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) and Sereboff v. Mid Atlantic Medical Serv., Inc., 547 U.S. (2006). The court concluded, in part, as follows:

The net effect of the two cited Supreme Court opinions,as applied to the present case, is, in my view, as follows: the parties to this litigation have a right to settle their differences, and have done so. The only question before this court is whether the proposed settlement is fair to the minor. I conclude that it is. Nothing in the ERISA plan confers upon ACS Recovery Services a right to control the conduct of this litigation; it has no right to object to the proposed settlement.

. . .

In the unusual circumstances of this case, I conclude that it is appropriate to require the dotting of all i’s and the crossing of all t’s. ACS Recovery Services paid the medical benefits without first obtaining a written reimbursement agreement, as contemplated by the Plan. Assuming that its right to assert a lien was not fatally impaired by that omission, its lien would not come into existence until the Plan beneficiary (the plaintiff-husband-employee) received funds reimbursing the medical expenses in question. That has not yet occurred, and, if the proposed compromise settlement is effectuated in all its
terms, will not occur.

ACS Recovery Services’ belated request for injunctive relief seeks to enjoin the transfer of funds to the “special needs trust.” Since the adult plaintiffs will not receive any of the funds in question, they are not proposing to transfer any
funds to the special needs trust. ACS Recovery Services has not sought injunctive relief from anyone else.

Ordinarily, a court would be reluctant to rely upon the technicalities discussed above. In this case, however, the equities seem to favor such an approach. The damages suffered by the minor-plaintiff are astronomical, and life-long. In the final analysis, the real dispute generated by ACS’s opposition is between ACS and the taxpayers who, in the future, will be called upon to bear the minor’s medical expenses. ACS was paid premiums for its coverage; the taxpayers have not been.

This opinion was written by Senior Judge John Fullam, age 85, who was appointed by President Johnson in 1966.  It is good to have some wise older judges who remain productive and are able to see past the corporate heartlessness that seems to predominate in some quarters these days.

The Shigley Law Firm  represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states (recently including Alabama, Nevada and Florida) subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks.