Eleventh Circuit Upholds Self-Funded Health Plan’s Equitable Lien on Member’s Medical Malpractice Settlement Proceeds

In Publix Super Markets, Inc., v. Figareau, et al., No. 20-14212, __F.App’x__, 2021 WL 2065434 (11th Cir. May 24, 2021), an action brought under ERISA § 502(a)(3), the Eleventh Circuit considered the Defendants-Appellants’, Patricia Figareau and her husband, Frantz Paul, and their legal counsel, Diez-Arguelles & Tejedor, P.A., appeal of the district court’s grant of summary judgment in favor of Paul’s employer, Publix Super Markets, Inc. (“Publix”). Publix, the plan sponsor and plan administrator of the Group Health Benefit Plan (“the Plan”), filed a complaint against Defendants for reimbursement of $88,846.39 that the Plan paid for Paul’s daughter, L.P., who suffered a brachial plexus injury during her delivery. Publix sought an equitable lien by agreement on the funds Defendants received by way of a settlement obtained by the hospital and medical group that caused L.P.’s injuries. Figareau and Paul received $95,000 from the hospital and three years later entered a structured settlement with the medical team for $750,000. The couple and L.P. deposited the proceeds in a settlement account held in trust by their attorney. The district court determined that Publix was entitled to an equitable lien by agreement based on the terms of the Plan. The Eleventh Circuit affirmed.

As recounted by the court, the Plan “may issue payments for covered medical, prescription and other health care claims incurred by a member for a covered injury or illness caused by ‘another party’ …, but the member agrees to fully reimburse the Plan if and when the member receives payment from another party in connection with such injury or illness.” The Plan grants itself a “First Priority Right of Subrogation and/or Reimbursement.” The Plan is “entitled to first and full priority reimbursement out of any recovery to the extent of the Plan’s payments” and to “a first priority equitable lien against any recovery to the extent of benefits paid,” which “supersedes any right that the member may have to be made whole.” Recovery consists of “[a]ny and all monies identified, paid or payable to the member through or from another party by way of judgment, award, settlement, … or otherwise … to compensate for any losses caused by, or in connection with, such member’s injury or illness.”

Defendants argued that although Publix was entitled to an equitable lien, it should be limited to the “reasonable value” of L.P.’s “surgical treatment.” They argued that reimbursement should be limited to the cost of the surgery necessitated by the negligence, which amounts to only $22,164. The district court rejected this argument, finding that under ERISA and the Plan’s terms, Publix was entitled to an equitable lien by agreement for the total amount of benefits paid on behalf of L.P. from the settlement proceeds and it is undisputed that the medical expenses paid by the Plan were for injuries caused by “another party.” The court found any factual dispute over what treatment was proximately caused by the negligence of L.P.’s medical team and the hospital to be immaterial to the resolution of Publix’s ERISA claim.

On de novo review, the Eleventh Circuit found that the district court had subject-matter jurisdiction to entertain the complaint since it was based on a federal question. The court also found that the district court did not err by entering summary judgment in favor of Publix. Paul and L.P. agreed to immediately reimburse the Plan out of any recovery made from another party and the Plan paid over $88,000 for L.P.’s treatment. Paul and Figareau alleged in their malpractice action that L.P.’s injuries were the direct and proximate result of the medical team’s negligence. The settlement agreement addressed all past, present, and future claims related to the injuries. The Plan was entitled to first and full priority reimbursement out of the recovery and to a first priority equitable lien against the recovery. In short, the Plan must be enforced as written.