Last week’s Eighth Circuit decision in Vercellino v. Optum Insight, Inc., No. 20-3524, 2022 U.S. App. LEXIS 3912 (8th Cir Feb. 14, 2022), keeps the ERISA punches flowing against already-injured plaintiffs.
There, the Eighth Circuit affirmed the granting of summary judgment in favor of the plan where:
- Plaintiff was a minor when injured, but waited to attaining majority to bring suit;
- Plaintiff never sued for medical expenses;
- Any claim for medical expenses was time-barred;
- The plan’s subrogation claim was time-barred;
- There was evidence that at least some of the medical expenses were paid by a stop-loss insurance plan; and
- As of yet, there had been no recovery on the plaintiff’s underlying claim against the tortfeasor.
In Vercellino, the plaintiff was a minor when he was injured in an ATV accident in 2013. The plan paid out nearly $600,000 in medical expenses. The plaintiff did not bring suit against the tortfeasor until he had reached the age of majority, some six years after the accident, and, in that action, he only sought general damages.
Plaintiff also filed a separate declaratory judgment action to declare that the ERISA plan would have no right of reimbursement for a number of reasons, including:
- Evidence suggested that at least a portion of the expenses were paid by a stop-loss insurance plan and, therefore, the plan language did not completely preempt state law insurance reimbursement limitations;
- While the applicable statute of limitations was still running, the plaintiff was never the real party in interest with a legal right to claim the medical expenses, since he was an infant at the time that they were incurred;
- The health plan took no action to pursue their subrogation claim for medical expenses before the statute of limitations allowing them to do so expired; and
- The plan breached its fiduciary duty to the plaintiff by not warning him that it would seek reimbursement for recovery of its medical expenses, even though the plan had failed to seek subrogation.
The Eighth Circuit’s decision to dismiss those arguments made a clear distinction between the plan’s right to subrogation and the plan’s right to reimbursement. The Court of Appeals agreed with the district court’s granting of summary judgment in favor of the plan, which had completely ignored the statute of limitations argument based on preemption, and implicitly suggested that there would be no statute of limitations on the right of reimbursement is such is unambiguously set forth in the plan document. The district court specifically held:
As discussed above, “ERISA preempts any state law that would otherwise override the subrogation provision in a self-insured plan.” Waller, 120 F.3d at 139-40. Thus, the plan’s provision allowing Defendants to be reimbursed governs their ability to recover, not any state statute of limitations.
Vercellino v. Optum Insight, No. 4:19-CV-3048, 2020 U.S. Dist. LEXIS 205952, at *18 (D. Neb. Nov. 4, 2020).
On appeal, the Eighth Circuit ruled:
And under the plan, the Insurer is entitled to reimbursement regardless of whether Vercellino’s recovery comes after the statute of limitations has run on any claim the Insurer might have pursued itself or whether the recovery is specifically identified as medical expense damages. Thus, the plain language of the plan is dispositive of Vercellino’s argument on this point. See, e.g., Admin. Comm. of Wal-Mart Stores, Inc. Assocs.’ Health & Welfare Plan v. Shank, 500 F.3d 834, 838 (8th Cir. 2007).
Vercellino, 2022 U.S. App. LEXIS 3912, at *6.
Addressing the laches-framed argument, the Eighth Circuit wrote:
Next, Vercellino argues that the Insurer waived its right to seek reimbursement from his recovery by failing to exercise its subrogation rights to recover medical expenses during the statutory period. He points to Janssen v. Minneapolis Auto Dealers Benefit Fund, 447 F.3d 1109 (8th Cir. 2006), for the proposition that an insurer cannot seek reimbursement from a minor’s recovery after it has failed to pursue its subrogation rights and a claim for medical expenses would be time-barred. But Vercellino’s reliance on Janssen is misplaced. The plan in Janssen contained only a subrogation right specific to medical expenses and did not include an independent right to reimbursement. See id. at 1114. This plan, in contrast, contains a distinct reimbursement right that is expressly not limited to settlements for medical expenses. Vercellino offers no credible basis for the court to read into the plan a requirement that the Insurer either pursue its subrogation rights within the statute of limitations or waive its right to seek reimbursement thereafter. We are bound to enforce the plan according to its plain language.
Id. at *7.
One can only speculate that perhaps the Eighth Circuit’s decision, with regard to the failure to pursue the subrogation right, might have been different when applied to the reimbursement claim if a settlement had already been secured long ago, and six-years-and-one day had passed with the plan taking no action on its reimbursement claim. Judging from the history of the Eighth Circuit, I doubt it. Hopefully, the damage and fallout from this decision will remain contained within the Eighth Circuit.