Your first question Don is very interesting. The answer illustrates the gulf between what is legally possible and what works in the real world. It is legal for an employer to put language in its ERISA plan saying that the plan will not pay any medical expenses until and unless the employee pursues and recovers any available tort claims against a third party. But, as a practical matter, withholding payment of benefits until an employee recovers money from a negligent or intentional wrongdoer would be unworkable. These types of personal injury claims can take years to resolve. If an employer put this type of language in its ERISA plan, the value of getting employer sponsored medical benefits for injuries caused by a tortfeasor would be nil. About the furthest I’ve seen ERISA plan sponsors go down this road is to put language in their plan documents that makes it a precondition to payment of benefits for the employee to agree in writing, after the accident occurs, that any recovery will first be used to reimburse the ERISA plan. Obtaining the consent of the employee that the Plan can directly pursue the employee’s claim against a negligent third party is likewise problematic. The value of such a claim is, in large part, dependent on the human element of injury and loss above and beyond the monetary damage the plan has in the form of medical expenses. Your second question relates to what is often referred to as the “collateral source” rule. The rule differs from state to state as to whether judges or juries are allowed to consider the existence of “collateral” sources of payments of a portion of the losses caused by a negligent third party. You can make arguments on either side of that issue. Don, thanks for your thoughtful comments and questions!
by Brian S. King November 17, 2008 at 01:47 PM
Brian: Thanks for providing your thoughts. My initial reaction is that negotiating with Wal-Mart before pursuing the personal injury proceeds is a great idea. Is it legal for Wal-Mart, then, not to pay the health claim without the consent of the Shanks to pursue a personal injury claim? Also, am I correct in assuming that the subrogation provision cannot be part of the calculation of the personal injury award? In other words, simply adding the subrogation proceeds to the personal injury award, in a separate calculation? Don Levit
by Don Levit November 17, 2008 at 01:47 PM
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