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Personal Injury in Iowa: Important Recent U.S. Supreme Court Case

Ever consider the possibility you might settle a personal injury lawsuit for a significant sum and yet somehow still be left owing your employer? On April 16, 2013, the U.S. Supreme Court decided U.S. Airways, Inc. v. McCutchen, et al. and as a result, this outlandish scenario may become reality for certain Iowans. In U.S. Airways, McCutchen was injured in a motor vehicle collision caused by another driver. His employer's health plan paid $66,866 in related medical expenses. McCutchen ultimately retained attorneys to assist in recovering an estimated $1,000,000 in damages. Yet regrettably, auto insurance limits restricted his available recovery. After compensating attorneys, McCutchen was left with $66,000. Though not ideal, this recovery was acceptable until U.S. Airways demanded full reimbursement of the $66,866 paid for medical expenses. This demand was made in accordance with a federal law named the Employee Retirement Income Security Act (ERISA) which governs employer health plans and authorizes such legal actions. Unsurprisingly, McCutchen refused to pay - he would have been left owing money - and this led to litigation culminating in the Court's decision.

McCutchen argued that equitable principles of unjust enrichment prevented U.S. Airways' from recovering in full the $66,866 it paid for medical expenses. In particular, McCutchen reasoned that he was unable to recover his full damages (remember, he did not recover $1,000,000) and as a result, U.S. Airways should be similarly limited in its recovery. McCutchen also argued that the $66,866 amount should be reduced by a percentage necessary to reflect U.S. Airways' fair share of attorney fees. These two arguments reflect equitable doctrines known, respectively, as the "double recovery" doctrine and the "common-fund" doctrine. For its part, U.S. Airways argued the health plan's contract language authorized recovery of all paid benefits from any and all recovery McCutchen obtained from a third-party (i.e. negligent driver insurance, underinsurance).

In deciding the case, the Court stated "neither general principles of unjust enrichment nor specific doctrines reflecting those principles ... can override the applicable contract." In short, the Court held the specific language of the health plan will govern where its terms are plain.

Fortunately for McCutchen, the Court did proceed to state that if a plan is silent, equitable doctrines may still apply as a default (i.e. attorney fees and the common-fund doctrine). However, the opinion of the Court demonstrates the importance of understanding your employer's health plan: employers may now attempt to optimize its recovery at the expense of injured persons. This opinion further demonstrates the importance of seeking legal advice from a law firm experienced in representing individuals in personal injury matters.

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