Eighth Circuit Affirms Insurer’s Right to Reimbursement

In Vercellino v. Optum Insight, et al., the Eighth Circuit Court of Appeals examined whether the ERISA self-insured health plan and its insurer have the right to reimbursement for medical expenses paid for a participant’s injury if the participant recovered any proceeds from the party who caused the injury. The Eighth Circuit ruled in favor of the health insurer and the plan because the health plan’s ERISA plan document clearly provided for such reimbursement rights.

When Vercellino was a minor in 2013, he was injured in an accident while riding on an all-terrain vehicle (ATV) operated by his friend, Kenney. Vercellino was a covered dependent on his mother’s self-insured health plan. Ameritas was the plan sponsor of the self-funded ERISA plan, and United HealthCare was the claim administrator, which contracted with Optum to pursue recovery on behalf of itself and the plan sponsor (collectively, the insurer).

For Vercellino’s injuries from the ATV accident, the insurer paid close to $600,000 in medical expenses. The insurer did not exercise its right to seek financial recovery from Kenney or Kenney’s parents during the applicable statutory period, nor did Vercellino’s mother ever file a lawsuit to recover medical expenses from the Kenneys.

After Vercellino became an adult in 2019, he filed suit against the Kenneys seeking general damages. Additionally, he filed a separate suit seeking that the insurer would have no right of reimbursement from any proceeds recovered in his litigation against the Kenneys. In response, the insurer sought a judgment in federal district court that it would be entitled to recover up to the full amount paid for Vercellino’s medical expenses from any recovery proceeds from the Kenneys. The district court granted summary judgment to the insurer.

On appeal to the Eighth Circuit, Vercellino presented three reasons for the court to find that the insurer cannot seek reimbursement from any recovery he obtains from the Kenneys. First, he argued that he was never the “real party in interest” to recover the medical expenses paid by the insurer because he was a minor at the time of the accident. The court denied this argument by stating that the plan language expressly includes “all dependents,” including a child who is under 26 years of age and a covered dependent without distinguishing between a minor vs. adult. Therefore, as a dependent covered by the plan, Vercellino is bound by its terms.

Second, Vercellino argued that the insurer waived its right to seek reimbursement from his recovery by not exercising its right to recover medical expenses during the statutory period. In response, the court noted that the plan contains an independent right to reimbursement not limited to settlements for medical expenses (and the statute of limitations applicable to the recovery of medical expenses). Therefore, the court declined Vercellino’s argument.

Third, the court rejected Vercellino’s final claim that the insurer breached its fiduciary duty by not warning him that it would seek reimbursement from his recovery even though it did not pursue its own claims in subrogation during the statutory period. The court again rejected his claim stating that the insurer’s right to reimbursement is spelled out in the plan document in plain language, and the insurer had no duty to warn him because the plan document was available to him. The court concluded that because the plan’s language is clear, the insurer is entitled to seek reimbursement for medical expenses the insurer paid for Vercellino’s injuries from any judgement or settlement he receives in his litigation with the Kenneys.

In summary, this case exemplifies the importance of clearly written ERISA plan document terms that reflect the plan’s subrogation and reimbursement rights, and ensuring the document is available to the plan participants. Plan administrators should review those terms in their plans.

Vercellino v. Optum Insight, Inc. No. 20-3524. February 14, 2022 »