Clearing Claims: Negotiate ERISA Liens Before Finalizing Settlement
Congratulations. You've reached a settlement in your client's personal injury case ... almost. Have you considered all of the liens on the settlement amount? While many liens can be negotiated to smaller amounts, other liens are far more difficult to shrink.
Liens brought under the Employee Retirement Income Security Act of 1974 (ERISA) can be quite difficult to reduce under federal law. If you don't take these liens seriously, your client could end up with little to no recovery, even when the initial settlement sounded promising. Before finalizing that settlement agreement, here are a few tips to tackle ERISA nightmares.
Audit the Bills
Fifty-seven dollars for a Tylenol. Yep, that's normal. But the thirty-seven duplicate entries aren't.
Though it may be a pain, and though every amount charged on a medical bill may seem exorbitant, it is important to review the bills to ensure that there aren't duplicate entries or astronomical overbilling. If you are uncertain whether an amount is excessive (in the loose sense of the word), ask a more experienced colleague if the amount charged is standard for your geographical area.
Check the Contract, ERISA Plan Language
For the lien claimant, having their plan classified as an ERISA plan is especially beneficial, as they stand in a superior position to HMOs and PPOs when attempting to recover the full value of their claim. Ensure that the plan language supports their classification and check whether the common law equitable defenses of make-whole and common fund are excluded.
The make-whole doctrine provides that your client should be made whole before other parties, such as the insurance company. The common fund rule reduces the lien proportionately to cover attorney's fees. (If you charge 30 percent contingency, the lien will be reduced by 30 percent as well.)
Equitable Remedies, Circuit Splits
Last year, the Ninth Circuit, in CGI Technologies and Solutions v. Rose, held that the equitable defenses of the make-whole doctrine and the common fund rule applied to liens asserted by self-funded ERISA plans, even when the plan's plain language excludes these defenses. In so holding, they joined the Third Circuit.
On the other hand, a number of other circuits, including the Eleventh, Eighth, Seventh, and Tenth Circuits, have held that the plain language of the contract controls.
If the language of the ERISA plan expressly excludes make-whole and common fund defenses, and you are in one of the latter circuits, it may still be worth appealing to the other party's common sense. For them, taking a bit less now may be a better option than killing the proposed settlement and risking a worse outcome down the line.
For a more lengthy and authoritative look at ERISA liens, check out our Tips for Negotiating Liens in Personal Injury Cases, part of our series on lien negotiation written by our own recovering litigator, Anne O'Donnel.
- Clearing Claims: Tips for Medical Pay Reimbursement Claims (FindLaw's Strategist Blog)
- Clearing Claims: Negotiating Hospital Liens in P.I. Cases (FindLaw's Strategist Blog)
- Negotiating a Lien Claim? Download Our Free Mini Guide (FindLaw's Strategist Blog)
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.