Reasonable Expectations Doctrine – ERISA Defenses – Part 3

“Reasonable expectations” doctrine is a viable defense for ERISA protected health plans, and your should apply it to all subrogation provisions in ERISA SPD’s. Specifically, said section provides:

(l) For both pension and welfare benefit plans, a statement clearly identifying circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery (e.g., by exercise of subrogation or reimbursement rights) of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits required by paragraphs (j) and (k) of this section. (emphasis supplied)

The significance of the “reasonable expectations” doctrine is that it requires all exclusions or limitations to coverage to be “conspicuous, plain and clear.” See Saltarelli v. Bob Baker Grp. Med. Trust, 35 F.3d 382, 387 (9th Cir. 1994). Since the subrogation provision in the Union plan is not where it is required to be, it is fatally inconspicuous. The Ninth Circuit has extended reasonable expectations to all insured ERISA plans. Saltarelli, supra. On three occasions, it has addressed whether reasonable expectations applies to self-funded ERISA plans. The Ninth Circuit held that it applied in the first case, that it did not apply in the second case and in the third case (Scharff, supra) assumed, without deciding, that it applied. In none of these cases did the courts recognize (or even address) the reasonable expectations language in the above CFR. When a court does examine the sub (l) language closely, I submit that it will likely hold that the CFR does adopt the doctrine of reasonable expectations.

Based on the above law, you can use the following language in your ERISA letter when negotiating your injured clients ERISA protected health plan after you achieved settlement of the underlying injury case: 

"The problem with the fact that the plan’s SPD fails to comply with the above CFR’s governing drafting of ERISA SPD’s is that the plan members’ attention is not directed in any significant way to the subrogation reduction. Clearly, subrogation or reimbursement operates as an exception or elimination of the primary promises of the policy summarized at page 29. For instance, the member’s annual out of pocket maximum is only $1,000 yet the plan is currently attempting to recover an amount 333 times greater than that maximum. This is precisely what the above CFR’s were designed to prevent."

Use the "reasonable expectations doctrine" to help in your ERISA negotiations!!!

Mark C. Blane is a San Diego Personal Injury Attorney, and the managing lawyer of the Law Offices of Mark C. Blane, a San Diego, California Personal Injury Law Firm dedicated to representing families of people injured in personal injury accidents including car accidents, slip and falls, dog bites, product defects, and the like. If you or a loved one has been killed or injured in an accident in San Diego, or Southern California, due to the negligence of another, please order your free copy of Mr. Blane's book, The 10 Secrets You Need To Know About Your Injury Case, BEFORE You Call A Lawyer. It is full of helpful information that will help you protect your legal rights and it normally sells for $16.95.  However, it is free to all California residents, or those injured in an California accident.