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Supreme Court: insurer cannot recover 'nontraceable' settlement funds under ERISA

[JURIST] The US Supreme Court [official website] ruled [opinion, PDF] Wednesday that an insurer cannot recover equitable relief under the Employee Retirement Income Security Act (ERISA) [official website] for settlement funds a participant has already spent. The court found that nontraceable assets are not recoverable under 502(a)(3). This decision overturned the order from the US Court of Appeals for the Eleventh Circuit [official website] for Robert Montanile to pay over $120,000 back to his health benefit plan, to be taken from his general assets, after he was awarded a settlement for his 2008 automobile accident. The insurer seeking equitable relief delayed their suit [Lexology report] for over six months following Montanile receiving the settlement funds.

ERISA [JURIST backgrounder] has been the frequent subject of Supreme Court litigation since its passage in 1974. In September 2013 the US Department of Labor issued guidance [JURIST report] stating that the terms "spouse" and "marriage" in Title I of ERISA should be read to include same-sex couples who were legally married in any US state or jurisdiction that recognizes same-sex marriages. In April 2013 the Supreme Court ruled [JURIST report] that the terms of a contract in a health benefit plan should not be overturned through the application of equitable principles under Section 502(a)(3). The ruling was meant to have the impact of reinforcing the viability of employee health plans and thwarting a landslide of ERISA legislation.

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