Collection of a Third Party

Tuesday, August 8, 2006
Contributed by: Ann Manning

In Sereboff v. Mid Atl. Med. Services, Inc., decided May 15, 2006, the Supreme Court clarified its landmark Knudson decision and resolved a split amongst the circuit courts, upholding the right of an appropriately drafted benefit plan to seek reimbursement from a plan participant if the participant's injuries were the result of the act of another person and the particpant receives a recovery from a third party.

Sereboff, however, does not make the collection of a third party recovery easy. The money must still be in a particular, identifiable fund that is in the possession of the participant. It is also important that the plan's language be precisely drafted to create an equitable lien by agreement, not merely a subrogation right. Benefit plans that want to maintain a right to seek reimbursement should have their plan language reviewed by counsel and involve counsel as soon as possible after learning of a thrd-party claim by a participant.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.