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United States Supreme Court Decision: US Airways Inc. v. McCutchen


April 2013

Most group health plans state that if a plan pays benefits to a participant who has suffered from an injury caused by a third party, the plan may seek reimbursement from the participant if the participant later recovers money from the third party. However, the participant will likely incur attorneys’ fees in pursuing a monetary recovery from the third party. In US Airways, the Supreme Court considered the question of whether and when the plan’s ultimate recovery from the participant should be reduced by the amount the participant paid in attorneys’ fees. The Supreme Court noted that the plan’s terms are key, and that equitable defenses cannot override plan terms if the plan provides a right to reimbursement. Therefore, the plan was entitled to at least some recovery from the participant. However, US Airways’ plan was silent as to the allocation of attorneys’ fees. Therefore, the Supreme Court permitted the participant to use the “common fund doctrine” as a defense to providing full reimbursement to the plan. Under the common fund doctrine, a lawyer who recovers a sum of money (or “fund”) for the benefit of others beyond his client (such as a benefit plan) is entitled to reasonable attorney’s fees from the fund as a whole. Therefore, where the plan is silent, the doctrine will allow plan participants to reduce their total reimbursement to the plan based on a portion of their attorneys’ fees. 

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