February 10, 2016

By: Jenna K. Leslie

On January 20, 2016, the U.S. Supreme Court decided that a self-funded ERISA plan could not seek reimbursement for health insurance benefits from a participant who prevailed in a lawsuit against a third party if the settlement or award had been spent or comingled into the participant’s general assets.

In Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, Montanile was a participant of a self-funded group health plan. The plan paid Montanile’s medical expenses following a motor vehicle accident. Montanile signed a reimbursement agreement confirming his obligation to reimburse the plan from any third party recovery.

After negotiating a $500,000 settlement, the participant’s attorney attempted to contact the plan with an offer. The offer gave the plan 14 days to respond. When the plan did not respond, Montanile’s attorney released the settlement funds to him.

Six months later, the plan sued Montanile seeking repayment of their lien for the payment of medical expenses on his behalf. The plan asked the District Court to enforce an equitable lien on any settlement funds or any other property in the Montanile’s possession. Montanile argued that because the settlement funds had been spent or comingled with other assets, enforcing a lien against his general assets was not “equitable relief” which the plan could pursue.

The U.S. Supreme Court agreed, ruling that a self-funded ERISA plan could not make a claim against a participant’s general assets. The Court emphasized that the plan’s remedy was limited to equitable relief under ERISA, which does not include recovery against a participant’s general assets. The plan could only recover from identifiable settlement funds within the participant’s possession and control.

The Montanile decision is significant for employers who sponsor self-funded ERISA plans because it demonstrates the difficulty of plans to recover payments. Employers should review the language of their ERISA plans to ensure that the plans allow them to recover reimbursement of medical expenses. Employers should insist the participant sign a reimbursement agreement, which includes specific language regarding the participant’s obligation to obtain the written consent of the plan before the release of any settlement funds. In addition, the plan’s administrative staff should be trained and monitored to assure their timely response to any notice of a settlement or its distribution.

If you have questions about this material, please contact Jenna K. Leslie by email at or any other attorney with whom you have been working here at Lindner & Marsack, S.C.

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