ERISA Repayment Clause Covered Dependent.

Byline: Derek Hawkins

7th Circuit Court of Appeals

Case Name: Central States, Southeast and Southwest Areas Health and Welfare Fund, et al., v. Shelby L. Haynes, et al.,

Case No.: 19-2589

Officials: BAUER, EASTERBROOK, and WOOD, Circuit Judges.

Focus: ERISA Repayment Clause Covered Dependent

Doctors removed Shelby Haynes's gallbladder in 2013. She was injured in the process and required additional surgery that led to more than $300,000 in medical expenses. Her father's medical-benefits plan (the Fund) paid these because Haynes was a "covered dependent". The plan includes typical subrogation and re payment clauses: on recovering anything from third parties, a covered person must reimburse the Fund. In 2017 Haynes settled a tort suit against the hospital, and others, for $1.5 million. But she and her lawyers refused to repay the Fund, which brought this action to enforce the plan's terms under 502(a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(3).

Haynes concedes that the Fund paid her medical bills but insists that she never agreed to reimburse it. She did not sign a promise to follow the plan's rules and was not a participant (as opposed to a beneficiary). The district judge disagreed with her and granted summary judgment to the Fund for the full amount of its outlay. 397 F. Supp. 3d 1149 (N.D. Ill. 2019). Along the way, the district court enjoined Haynes, Haynes's malpractice lawyer, and the lawyer's firm from dissipating the proceeds of the settlement. The Fund named each of them as a defendant to avoid ambiguity about who possessed the money. See Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 214 (2002). Haynes contends that counsel should be able to keep a share of the settlement under equitable principles. But 11.14(j) of the plan expressly forbids this approach, and "if a contract abrogates the common-fund doctrine, the insurer is not unjustly enriched by claiming the benefit of its bargain." McCutchen, 569 U.S. at 100.

Haynes also maintains that she...