Marietta Injury Lawyer Blog
Although lawsuits arising from car accidents are usually dealt with under state law, there are questions of federal law that may arise from any settlement or judgment received by a victim. For example, if the victim received benefits from his or her employer-sponsored health insurance following an accident, the insurer may be entitled to enforce a lien against the proceeds from any personal injury lawsuit. The United States Supreme Court recently addressed the related question of how far an insurer may go to enforce such a lien.
Montanile v. Board of Trustees of Nat. Elevator Industry Health Benefit Plan
This case originated in Florida. In 2008, a drunk driver ran a stop sign and hit another vehicle. The victim suffered serious injuries that required extensive medical care. The victim had health insurance through an employer-sponsored plan governed by federal law. Altogether, the insurer paid over $120,000 for the victim’s medical care following the accident.
The victim then filed a personal injury lawsuit in Florida state court against the drunk driver and served his own automobile insurance carrier to claim uninsured motorist benefits. This resulted in a $500,000 settlement. After paying legal fees and court costs, approximately $240,000 from the settlement remained in an escrow account maintained by the victim’s personal injury attorney.
A disagreement arose between the victim and his health insurer over whether the latter was entitled to reimbursement from the remaining $240,000 in settlement funds. The attorney eventually distributed the funds to the client. Six months later, the insurer filed a claim in federal district court seeking an “equitable lien upon any settlement funds” in the victim’s “actual or constructive possession.”
The victim told the federal court that he had already spent most of the settlement funds and there was “no specific, identifiable fund separate from his general assets against which the [insurer’s] equitable lien could be enforced.” The district court rejected that defense and held the insurer could enforce its lien against the victim’s other personal (or general) assets. The 11th U.S. Circuit Court of Appeals, which oversees federal trial courts in Florida and Georgia, affirmed the judge’s decision in a 2014 opinion.
But the Supreme Court disagreed. By a vote of 8-1, the justices said an insurer may not enforce an equitable lien against an insured person’s general assets in cases such as these. Justice Clarence Thomas, writing for the Court, noted the insurer could have filed its lien before the attorney distributed the settlement funds to the victim. Having failed to do so, Justice Thomas said, it is beyond the scope of the federal courts to grant “equitable relief” in this case. The insurer’s lien “must be enforced against a specifically identified fund in the defendant’s possession.” If the victim has already dissipated (spent) that fund, than the insurer is out of luck. However, because there is evidence the victim still retains some of the original settlement funds, the Supreme Court returned the case to the Florida trial court for additional proceedings.