The Eleventh Circuit Court of Appeals recently ruled that, where the plain language of an employer sponsored plan so provides, the plan is entitled to full reimbursement for medical benefits that the employer paid on its employee’s behalf. In Johnson Controls, Inc. v. Flaherty, the employee, Flaherty, was injured in a bicycle accident, and subsequently recovered settlement proceeds for the injury from a third party. While the Johnson Controls, Inc. Welfare Plan requested full reimbursement pursuant to ERISA, 29 U.S.C. § 1132(a)(3), Flaherty insisted that the attorneys’ fees and costs incurred in obtaining the settlement, which amounted to $14,467.44, should be deducted from the settlement proceeds before the funds were subject to the Plan’s reimbursement claim.
The Eleventh Circuit, affirming a ruling in the District Court, found that the terms of the Plan, which are clear and unambiguous, expressly provide that when an employee receives benefits under the Plan and thereafter recovers from a third party for his injuries, the Plan “has the right to be reimbursed for such benefits in full,” and that “no portion of the [Plan]’s recovery shall be reduced by the fees or costs (including attorney’s fees) associated with any claim, lawsuit, or settlement agreement in connection with any recovery, without the express written consent of the Plan Administrator.” The court also noted that the Summary Plan Description contained very similar express language. Because the Plan and SPD terms were unambiguous, the court was compelled to enforce them as written and required Flaherty to reimburse Johnson Controls for the entire amount the Plan paid in medical expenses on Flaherty’s behalf, without deduction for attorneys’ fees and costs.