Great-West Life & Annuity Insurance Company v. Knudso

Facts

Knudson (D) was rendered quadriplegic by a car accident. D was covered by the Health and Welfare Plan for Employees and Dependents of Earth Systems, Inc. (Plan). The Plan covered $411,157.11 of Janette's medical expenses, of which all except $75,000 was paid by Great-West Life & Annuity Insurance Co.(P) pursuant to a 'stop-loss' insurance agreement with the Plan. The Plan includes a reimbursement provision that is the basis for the present lawsuit. The Plan shall have 'the right to recover from the [beneficiary] any payment for benefits' paid by the Plan that the beneficiary is entitled to recover from a third party. The Plan has 'a first lien upon any recovery, whether by settlement, judgment or otherwise,' that the beneficiary receives from the third party, not to exceed 'the amount of benefits paid [by the Plan] ... [or] the amount received by the [beneficiary] for such medical treatment ... .' If the beneficiary recovers from a third party and fails to reimburse the Plan, 'then he will be personally liable to [the Plan] ... up to the amount of the first lien.' Pursuant to an agreement between the Plan, it 'assign[ed] to P all of its rights to make, litigate, negotiate, settle, compromise, release or waive' any claim under the reimbursement provision. P filed a tort action in California state court seeking to recover from Hyundai Motor Company, the manufacturer of the car they were riding in at the time of the accident, and other alleged tortfeasors. The parties negotiated a $650,000 settlement, a notice of which was mailed to P. This allocated $256,745.30 to a Special Needs Trust under Cal. Prob. Code Ann. §3611 reimburse the California Medicaid program (Medi-Cal); and $13,828.70 (the portion of the settlement attributable to past medical expenses) to satisfy P's claim under the reimbursement provision of the Plan. The day before the hearing scheduled for judicial approval of the settlement, P, calling itself a defendant and asserting that the state-court action involved federal claims related to ERISA, filed in the United States District Court for the Central District of California a notice of removal pursuant to 28 U. S. C. §1441 (1994 ed.). That court concluded that P was not a defendant and could not remove the case, and therefore remanded to the state court, which approved the settlement. The state court's order provided that the defendants would pay the settlement amount allocated to the Special Needs Trust directly to the trust, and the remaining amounts to respondents' attorney, who, in turn, would tender checks to Medi-Cal and P. P never cashed the check. P filed this action in the same federal court seeking injunctive and declaratory relief under §502(a)(3) to enforce the reimbursement provision of the Plan by requiring D to pay the Plan $411,157.11 of any proceeds recovered from third parties. The District Court granted summary judgment to D. It held that the language of the Plan limited its right of reimbursement to the amount received by respondents from third parties for past medical treatment, an amount that the state court determined was $13,828.70. The United States Court of Appeals for the Ninth Circuit affirmed. It held that judicially decreed reimbursement for payments made to a beneficiary of an insurance plan by a third party is not equitable relief and is therefore not authorized by §502(a)(3). The Supreme Court granted certiorari.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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