RESPONDENT: Mid Atlantic Medical Services, Inc.
LOCATION: United States Court of Appeals for the Ninth Circuit
DOCKET NO.: 05-260
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Fourth Circuit
CITATION: 547 US 356 (2006)
GRANTED: Nov 28, 2005
ARGUED: Mar 28, 2006
DECIDED: May 15, 2006
Gregory S. Coleman - argued the cause for Respondent
James A. Feldman - argued the cause for Respondent
Peter K. Stris - argued the cause for Petitioners
Facts of the case
Mr. and Mrs. Sereboff held a health insurance policy with Mid Atlantic Medical Services that was governed by the Employee Retirement Income Security Act of 1974 (ERISA). If a beneficiary is injured, Mid Atlantic pays for all covered medical expenses. However, the plan also has a provision that requires the beneficiaries to reimburse Mid Atlantic when an injury has been caused by a third party and the beneficiary receives compensation from that third party. In this case, the Sereboffs were injured in an automobile accident caused by a third party. After they settled their suit against that third party, Mid Atlantic filed suit in federal district court under section 502(a)(3) of ERISA to recover the money it had spent on medical expenses. 502(a)(3) provides that a health insurer may bring suit "to obtain ... appropriate equitable relief ... to enforce ... the terms of the plan." The Sereboff's objected, arguing that the sort of reimbursement provision at issue in this case was not "equitable" because the Sereboffs had not had the funds in their possession when they agreed to the plan. Both the district court and the Fourth Circuit Court of Appeals disagreed, siding with Mid Atlantic.
Is a health insurance plan that requires the beneficiary to reimburse the insurer for its expenses when the beneficiary recovers damages from a third party that is responsible for the injury "equitable" under section 502(a)(3) of ERISA?
Media for Sereboff v. Mid Atlantic Medical Services, Inc.Audio Transcription for Oral Argument - March 28, 2006 in Sereboff v. Mid Atlantic Medical Services, Inc.
Audio Transcription for Opinion Announcement - May 15, 2006 in Sereboff v. Mid Atlantic Medical Services, Inc.
John G. Roberts, Jr.:
I also have the opinion in No. 05-260, Sereboff versus Mid Atlantic Medical Services.
Marlene Sereboff’s employer sponsors a health-insurance plan administered by Mid Atlantic Medical Services.
Mrs. Sereboff and her husband are covered beneficiaries under this plan.
So when they were involved in a car accident and suffered injuries, the plan paid their medical expenses.
The Sereboffs later sued in state court other people who were involved in the accident and eventually received a substantial settlement.
Mid Atlantic, the insurance-plan administrator, then sued the Sereboffs in federal court, relying on a provision in the insurance plan that required beneficiaries to reimburse the plan for medical payments whenever the beneficiaries recovered for their injuries from a third party.
The Sereboffs opposed Mid Atlantic’s claim, but agreed to set aside in an investment account a portion of the state court’s settlement equal to the medical bills that Mid Atlantic had paid until the courts determined whether Mid Atlantic was entitled to recover.
Now, whether Mid Atlantic can get back what it paid the Sereboffs turns on the interpretation of the Employee Retirement and Income Security Act, or ERISA.
A provision of that law allows parties like Mid Atlantic to bring actions in federal court for, “equitable relief to enforce the terms of a plan”.
Now, that provision could be called the Legal Historians Relief Act, because it requires courts to harken back to the time of the so-called divided bench, when courts sat either as a court of equity or a court of law, depending on the nature of the suit.
We have to sort through the old cases and determine whether Mid Atlantic’s suit, had it been brought during the time of the divided bench, would have been brought in equity or at law, because ERISA allows suits only for equitable relief.
The Sereboffs argue that Mid Atlantic is just seeking damages for breach of contract, an action that would have been brought on the law side of the divided bench.
Like the District Court and the Court of Appeals, we disagree.
Mid Atlantic is claiming entitlement to a specific fund over which it has an equitable claim, that portion of the Sereboffs’ settlement recovery set aside owing to Mid Atlantic under the terms of the insurance plan.
Mid Atlantic has an equitable lien on that specific fund and, in the days of the divided bench, could have enforced that claim on the equity side of the court.
It may therefore proceed today under ERISA.
We affirm the judgment of the Court of Appeals for the 4th Circuit.
The decision is unanimous.