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Woman Ordered to Repay Employer $130,000 for Post-Accident Medical Care

While it always important for the victim of a car accident to receive compensation for medical care and other injuries, it is equally imperative to obtain such compensation in a legal and equitable manner. A car accident is not an excuse to commit fraud. The Atlanta-based U.S. 11th Circuit Court of Appeals recently addressed a case on this point.

AirTran Airways, Inc. v. Elem

This case began with a 2007 car accident. The victim sustained injuries and received medical care, which her employer initially paid for under its self-funded employee benefit plan. In accepting her employer’s medical benefits—totaling more than $130,000—she agreed to repay the company out of any proceeds she might subsequently receive from legal action against the driver of the second vehicle involved in the accident. In plain terms, the employer held a priority claim over any future legal settlement.

When the employee later spoke with the insurer for the second driver, she failed to disclose her employer’s priority claim. The second driver held a policy with a $25,000 limit. The employee, through her attorney, said this amount was insufficient, and sued the second driver. She eventually settled the case for $500,000.

The employee and her attorney then lied to the employer’s insurance company about how much they had recovered. The attorney advised the plan administrator that the employee “abandoned” her lawsuit against the second driver and settled for the $25,000 limit on his insurance policy. In fact, the attorney received separate checks for $25,000 and $475,000. The latter check was divided between the employee and the attorney, with no repayment to the employer.

Unfortunately for the attorney, he mistakenly enclosed a copy of the $475,000 check in a correspondence to the employer’s benefits administrator. The employer demanded full reimbursement of the $130,000. The employee refused, and the employer sued both the employee and her attorney.

A Georgia judge granted the employer summary judgment and ordered repayment of the $130,000, plus attorney’s fees and costs, which the defendants still refused to pay. The judge then issued a separate order to enforce the judgment and threatened to hold the employee and her attorney in contempt if they did not comply.

Eventually, the employee and her attorney repaid the employer while continuing to pursue an appeal. On September 23 of this year, the 11th Circuit upheld the trial judge’s decision. The key question on appeal was whether the court could order “equitable relief”–i.e., ordering the employee and her attorney to repay the employer—under federal law. When employers provide health benefits to their employees, they do so under a federal statute known as ERISA. It was pursuant to ERISA that the employer in this case made its priority claim on the employee’s potential settlement proceeds. The employee agreed to act as a custodian for those funds on behalf of her employer. The employee’s subsequent refusal to turn over these “specifically identifiable funds,” despite her employer’s lien, therefore justified granting equitable relief, the 11th Circuit concluded.