An employer’s health plan paid the medical bills of an employee who was involved in a car accident. When the employee sued a third party for damages, the company plan sought reimbursement of the medical expenses from that judgment. The issue in this case is whether the employee is bound by the contract language in the company health care plan or whether a court can rewrite that language under equitable principles of law. The original plan terms gave absolute right of full reimbursement of those expenses to the plan. This issue -- whether a court can revise the terms of a health benefits contract –is critical to keeping employer health care costs under control. The Third Circuit’s decision in this case departs from similar cases in several other federal appeals courts.
On 4/16/13, the Court unanimously ruled that the health plan's clear contract terms govern, and the employee must pay back the conmpany's health plan. However, because the plan did not clearly specify how to handle the employee's attorney's fees, a 5-4 majority applied the "common-fund doctrine" as the best indication of the parties' intent, making the plan share the cost of the attorney needed to recover for the injuries to the employee. This is a victory for enforcing the terms of employee benefit plans according to the intentions of the parties.