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Supreme Court Decision Update - Sereboff v. Mid Atlantic Medical Services, Inc.

supreme1.jpgThe last of today’s four Supreme Court decisions is Sereboff v. Mid Atlantic Medical Services, Inc. (PDF of the opinion), which focuses on a fight between a couple and their insurance company, and whether the insurance company properly sued the couple under ERISA.

QuizLaw Analysis: While we’re not usually ones to take the side of the insurance companies, it seems that the plaintiffs in this case were just looking to take the insurance company for a ride and not live up to the terms of their agreement. So we’re ok with the Supremes unanimously siding with Big Health. This time.

The Sereboff’s had health insurance with Mid Atlantic, through Mrs. Sereboff’s employer. Their health plan included a provision which says that when the Sereboff’s are sick or injured because of a third party, and where they receive benefits from that third party, they are required to reimburse Mid Atlantic for any benefits it had previously paid. This came into play after the Sereboff’s got into a car accident. They filed a claim with Mid Atlantic, and Mid Atlantic paid their medical expenses. They then sued various third parties for damages suffered from the accident, and eventually settled for $750,000. Mid Atlantic then sued the Sereboff’s, who refused to give any money back to the insurance company, for almost $75,000 (the amount of benefits Mid Atlantic had covered). Mid Atlantic brought its suit under the Employee Retirement Income Security Act of 1974 (ERISA), based on the “third party” provision of the insurance plan. The District Court ruled in Mid Atlantic’s favor, and the Fourth Circuit Court of Appeals affirmed that ruling, although it noted that there was a split between the Courts of Appeal as to whether a specific section of ERISA (section 502(a)(3)) allowed for recovery by an insurance company in a case like this.

This is the issue that the Supremes cover in this decision - that is, they want to end the split between the Courts of Appeals and settle the issue once and for all.

In a unanimous decision, Chief Justice Roberts begins by noting that section 502(a)(3) of ERISA authorizes fiduciaries, like Mid Atlantic to seek and obtain equitable relief in order to enforce a covered plan. So the question in this case is whether Mid Atlantic was seeking “equitable” relief. Roberts reasons that Mid Atlantic was seeking equitable relief because this case is similar to other equitable situations. In essence, the Sereboff’s, in entering into a contract with Mid Atlantic, agreed to convey money specifically received from third parties (as opposed to money sitting in their general assets) to Mid Atlantic. This agreement essentially gives Mid Atlantic a lien on the $75,000 it’s after, and the enforcement of that lien is equitable relief. So the Sereboff’s have to cough up the $75,000.