:: ERISA Plan Subrogation Provisions Eliminate Attorneys’ Fee Claim

Johnson Controls v. Flaherty, 2011 U.S. App. LEXIS 969 (11th Cir.) (January 18, 2011) (unpublished) presents a typical subrogation scenario. The plan brought suit under 29 U.S.C. § 1132(a)(3), for medical benefits that the employee benefits plan, Johnson Controls, Inc. Welfare Plan (”the Plan”), had paid resulting from a bicycle injury. The Defendant had successfully settled a personal injury case and recovered proceeds for the injury from a third party.

The defendant and his lawyer argued that attorneys’ fees and costs incurred in obtaining the settlement — amounting to $14,467.44 — must be deducted from the settlement proceeds before the funds are subject to the Plan’s reimbursement claim.

In a short unpublished opinion, the Court disagreed, stating:

Section 6.06 of the Plan expressly provides, however, that when an employee receives benefits under the Plan and thereafter recovers for his injuries from a third party, the Plan “has the right to be reimbursed for such benefits in full,” and “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 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.” (Emphasis added). The Summary Plan Description also plainly says that the Plan “ha[s] the right to be reimbursed in full before any amounts (including attorneys’ fees) are deducted from any policy, proceeds, judgment or settlement,” and that the Plan’s “right to . . . reimbursement takes preference over any other claims against the recovery, . . . regardless of how settlement proceeds are characterized.”

Where the terms of an ERISA plan are clear and unambiguous — as they are here — we must enforce them as written. See Zurich Am. Ins. Co. v. O’Hara, 604 F.3d 1232, 1239 (11th Cir. 2010) (holding that “full reimbursement according to the terms of the Plan’s clear and unambiguous subrogation provision [wa]s necessary . . . to effectuate ERISA’s policy of preserving the integrity of written plans”). The district court correctly applied the unambiguous terms of the Plan, requiring Flaherty to reimburse Johnson Controls for the entire amount it paid in medical expenses on Flaherty’s behalf, without deduction for attorneys’ fees and costs.