Time Limitation In Welfare Benefit Plan Strictly Enforced

In general, if a group insurance benefits plan pays benefits such as medical bills or disability benefits related to an event caused by another “third party”, such as an automobile accident, the plan has the right to recoup their payment from the claimant’s collection of money (“recovery”) from the “third party.” This often stymies the rights of the sick, ill and disabled because after reimbursing the bills paid by the plan, there may be little left for their pain and suffering and permanent injuries or loss of income.

The United States Supreme Court recognizes these rights and how “a health-plan administrator . . . may enforce such a reimbursement provision [in a benefits plan] by filing suit under § 502(a)(3) of ERISA.” US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1542 (2013).

An interesting case was decided recently in Indiana that brought to light a provision in a plan that I had not seen before. In Smith v. Walmart Stores, Inc. Assocs. Health & Welfare Plan, 2014 U.S. Dist. LEXIS 143716 (S.D. Ind. Oct. 9, 2014), the Plan sought reimbursement for the benefits Smith had received. Walmart’s plan had a clause that if notified that the claimant had become totally disabled, within the first year they would waive their right for reimbursement. Smith had twelve months after being notified of the reimbursement claim, to seek a waiver of the reimbursement due to “total disability.”

Smith failed to seek a waiver of the reimbursement within the 12 months and the court found his late notice of total disability to the Plan Administrator to be untimely.

The court upheld the one year deadline imposed by the plan, relying on Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604, 611 (2013).

This decision highlights that lawyers handling personal injury cases should become aware of the provisions of the plans paying benefits in case there is a clause that enables the reimbursement provision to be waived! We welcome the opportunity to assist individuals covered under welfare benefit plans to sort out the best methodology to optimize your recovery of benefits unfettered by offsets. Contact us at Bonny G. Rafel, LLC for a consultation to ensure that your ERISA rights are protected.