This article has been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, February 2009 issue, @2009 by Steven J. Bruzonsky, Esq.
ERISA LIENS KEY POINTS
(Please see my prior "Liens Corner" articles on ERISA liens and ER 1.15: July/August 2006 re the Sereboff U.S. Supreme Court decision; a three part ERISA lien primer series June, July/August, and September 2007 issues; and a three part ER 1.15 series February, March and May 2008 .)
Following are KEY POINTS for you to consider as you handle ERISA healthplan lien claims in your personal injury practice:
1. If the ERISA healthplan self-pays actual medical benefits (paying administration fee to health insurance/administrator to administer), then there is strong caselaw support that Federal law pre-empts Arizona anti-subrogation caselaw.
2. Only the ERISA Plan Administrator (not the Subrogation company or health insurer) is subject to the $110 per day penalty for late production, after thirty days, of requested Plan documents. Always request plan documents from Plan Administrator, even if you also request plan documents from subrogation company or health insurer.
3. Once you are on notice of an ERISA healthplan lien claim, obtain the complete Form 5500 with all attached schedules. Schedule A pertains to insurance . Schedule C pertains to non-insurance payments made by the plan (including self-paying of medical benefits). Even if a plan self-pays medical benefits, the plan will almost always also purchase some insurance (life, disability, etc.). Form 5500s and attachments schedules are often not filled out correctly. Just because the Form 5500s and attachments may be interpreted or read to indicate that traditional health insurance pays the medical benefits, this understanding may not be correct. DO NOT assume the Form 5500s and attachments are accurate. Always obtain the Administration Contract, because if the plan retains an Administrator/Health Insurer to administer the Plan, but the Plan self-pays the medical benefits, the Administration Contract will state this (and that only administration fees are paid to the Administrator/Health Insurer). If your review of the Form 5500s and attachments suggests that traditional premium based health insurance pays the medical benefits, then be sure to argue this with the subrogation company.
4. If Plan Administrator produces documents late, argue this penalty should be offset from the amount of lien claimed.
5. ER 1.15:
As the attorney, you must determine if ER 1.15 ethically requires that you protect an ERISA healthplan lien claim, even if no such lien claim has yet to be made. There are two schools of thought among competent, well versed personal injury attorneys regarding this: (1) The Sereboff decision is interpreted that whenever an employer healthplan is involved, the attorney is deemed a trustee of the ERISA plan and must protect its interest, which includes notifying the plan even though the plan has been paying bills and the plan hasn't sent an accident questionnaire or claimed any lien. (2) ER 1.15 requires "actual notice" of the lien claim. If you or your client have received a claim of lien or perhaps an accident questionnaire inquiring concerning a potential lien claim, then the "actual notice" of ER 1.15 is met.
You will need to research and determine how you want to handle this for your own personal injury practice.
Remember that if you notify a healthplan that their insured is pursuing an injury claim, that generally the healthplan or subrogation company will claim a lien. And my experience is that not all ERISA healthplans include subrogation language in their SPD and some ERISA healthplans still purchase traditional premium based health insurance. Once you notify the healthplan (if they haven't sent your client or your firm an accident questionnaire or claim of lien), the plan may well claim a lien regardless of the legal merits.
If you decide to follow the #2 above approach, and you/your client haven't received any accident questionnaire or claim of lien by settlement time, then I recommend that you have your client sign a specific settlement authorization which discusses: (1) Why you do not have an ER 1.15 responsibility to inform the ERISA plan concerning the accident injury settlement/claim.
(2) Giving your client the option of instructing you to hold funds in Trust, contact the ERISA plan, and negotiate the lien claim, even though in your opinion ER 1.15 doesn't require this.
(3) Explaining that if your client instructs you not to contact the ERISA plan, and to distribute settlement funds promptly without regard to the ERISA plan's potential lien claim, that you will follow this instruction; but that there is the possibility that an ERISA lien claim could arise in the future, and that although your firm will handle this at no additional charge, that the client would be responsible for paying any such negotiated lien
Keep in mind that if you unilaterally request plan documents, prior to you/your client receiving an accident questionnaire or claim of lien, and if your review indicates that the plan may self-pay medical benefits and that plan provisions provide for subrogation or lien, then you gain ER 1.15 "actual knowledge", in which case you will be precluded from the #2 above approach.