Am I obligated to notify my client's ERISA plan of settlement?



Question: We have reached a settlement of a personal injury action. We are aware of medical payments that have been made for related treatment by an ERISA qualified plan. They have not provided us with any notice of subrogation. Are we obligated to notify them, of the settlement? How safe are we to disburse the funds to the client?


Answer: Thank you for the question. There is current debate regarding the scope of an ERISA plan's claim under ERISA Section 502(a)(3) and whether claimant counsel can be held liable under ERISA. Depending upon the Federal Circuit, counsel may or may not be held liable and thus self-funded ERISA plans must be given special consideration. The difference in findings results from two different view-points: 1) Counsel is liable if it agrees to address the lien but ultimately fail to do so. Mank v. Green, 368 F. Supp. 2d 102 (D. Me. 2005); TA Loving, 723 F. Supp. 2d 837 (E.D.N.C. 2010); Drury Indus., Inc. Health Care Plan & Trust v. Goding, 692 F.3d 888 (8th Cir. 2012) VS… 2) Counsel is liable regardless of agreement or notice; equitable lien attaches to entire gross settlement (including attorney fees). Kohl's Dep't Stores v. Castelli, 2013 WL 4038723 (E.D.N.Y. Aug. 8, 2013); Longaberger Co. v. Kolt, 586 F.3d 459 (6th Cir. 2009).

You should also consider your client’s potential contractual obligation. While this consideration does not directly impact the defense or plaintiff counsel, the consideration may dictate some type of disclosure on your part. As a general matter, private health care coverage is provided in accordance with a written policy/plan. If a plan member received benefits through private coverage, that private plan or carrier group MAY have a plan or policy that requires the member to notify them of any potential claim or settlement. Failure to do so may have contractual consequences including, but not limited to, instituting legal proceedings for benefits provided, offsetting the amount of benefits provided against future claims, and terminating coverage.

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