ERISA provision trumps 'make whole' doctrine.

• Author: Ziemer, David

Byline: David Ziemer

Under an ERISA Plan giving the Plan power to initially determine the entitlement of Participants to Receive benefits hereunder, the plan can conclude that its subrogation provisions trump the make whole doctrine.

The ERISA Plan

Underwriters Laboratories is a self-funded insurer under the Employee Retirement Income and Security Act (ERISA). Michael W. Bruzas is an employee and plan participant.

The plan creates a pension Finance and Benefits Committee to serve as Plan Administrator, which in turns appoints a Claims Administrator who is empowered to initially determine the entitlement of Participants to receive benefits hereunder.

Under the Plan, the Committee also shall have the power to construe and interpret the Plan and to determine all questions arising under the plan. In addition, the Committee shall have the power to hear and decide appeals from determinations of the Claims Administrator as to the rights of Participants and Participating Dependents to benefits under the Plan.

Finally, the Plan includes a right of subrogation if a participant recovers from a third party.

Injury and Litigation

Bruzas, his wife, and his son, were all injured in an automobile accident caused solely by the negligence of Cipriano Quezada-Garcia. Pursuant to the ERISA Plan, Underwriters paid $16,373.89 of Michaels medical expenses.

The Bruzases sued Quezada-Garcia and American Family, Quezada-Garcias insurer. Underwriters was also named in the suit because of its potential subrogation claims.

American Family paid its coverage limits to settle the Bruzases claims. Under this settlement, Michael received $40,000 less than his actual damages.

American Family also insured Michael, and pursuant to the underinsurance provisions of that policy, paid Michael an additional $57,056.61. Despite the two settlements, Michael still was not made whole, within the meaning of Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 316 N.W.2d 348 (1982).

Under this settlement, Underwriters preserved its right to seek subrogation. American Family agreed that it would hold Michael harmless for any payments he was required to make to Underwriters. Thus, the settlement left American Family, rather than Michael, liable for any potential subrogation claims.

Underwriters and American Family then requested the court for declaratory relief, and Kenosha County Circuit Court Judge Mary Kay Wagner-Malloy held that Underwriters was entitled to subrogation.

American...