On March 13, 2013, the Second Circuit ruled, in Thurber v. Aetna Life Ins. Co., that Section 502(a)(3) equitable relief under ERISA includes a plan’s claim for overpaid benefits. In Thurber, the plaintiff sued for a denial of benefit payments, and Aetna counter-claimed to recover disability payments which had been made to the plaintiff at the same time that the plaintiff received no-fault insurance payments. (The plan language specifically required participants to return overpayments.)
The Court’s rationale for its ruling was that the language in the plan had put the beneficiary on notice that any overpayments belonged to the plan by virtue of an equitable lien by agreement. The Court noted that the distinction between claims based in law and those sounding in equity was fine and that in close cases it would be inclined to favor judicial efficiency by allowing ERISA-insurers to bring responsive claims in ongoing federal actions, rather than forcing the parties to litigate two actions – one in federal court and one in state court.
The lesson from Thurber is that plan sponsors should revise overpayment provisions to ensure that the language clearly allows recovery for overpayments if a participant receives money from other sources, such as insurance policies.