It’s like a simple set of facts on a law school exam with an answer that defies logic. And, yet, Supreme Court precedent has brought us to this illogical conclusion. Facts: Participant agrees to reimburse the plan money it has spent on his medical care. Participant sets aside money to reimburse the plan, but then spends all of the money himself before reimbursing the plan. Question: If the money cannot be traced, can the plan recover the amount it is owed from the participant’s other assets? Answer: Last week, the Supreme Court ruled in Montanile v. Bd. of Trustees of the Nat’l Elevator Indus. Health Benefit Plan that a health plan cannot enforce an equitable lien against a participant’s general assets when the participant has already spent the fund to which the lien attached.
Robert Montanile, a participant in an ERISA-health plan, was seriously injured by a drunk driver in an automobile accident and the plan paid more than $120,000 for his medical care. The plan contained a provision that required reimbursement from a participant who recovered money from a third party for medical expenses. Montanile also signed a reimbursement agreement reaffirming this obligation.
Subsequently, Montanile filed a claim against the drunk driver and received a $500,000 settlement. After settling his attorney’s fees and repayments, the participant had enough funds remaining to repay the amount due to