McWilliams v. Geisinger Health Plan
542 F.Supp.3d 283
M.D. Penn.2021Background
- Plaintiffs Lori Freitas and Kaylee McWilliams were insured by Geisinger Health Plan and received $61,525.59 in medical benefits after separate 2017 third‑party tort injuries.
- The Plan’s written subrogation clause (three sentences) referenced subrogation against third parties but contained no express reimbursement provision requiring members to repay the Plan from their settlements.
- Plaintiffs settled their tort claims (allegedly without compensation for medical benefits). SCIOinspire (administrator) then sent letters demanding reimbursement; Plaintiffs paid some amounts under protest and sued.
- Plaintiffs filed a putative class action on May 21, 2020 seeking recovery under ERISA § 502(a)(1)(B) and multiple breach‑of‑fiduciary claims under § 502(a)(3). Defendants moved to dismiss under Rule 12(b)(6).
- Defendants argued the Plan’s subrogation clause unambiguously authorized reimbursement (and/or equitable reimbursement applies when a member prejudices subrogation rights) and that default equitable doctrines (made‑whole, common‑fund) did not limit recovery.
- The court denied the motion to dismiss: it held the subrogation clause is ambiguous, rejected Defendants’ textual and ‘‘prejudice’’ theories, declined to adopt a new federal common‑law reimbursement rule on these facts, and held made‑whole/common‑fund doctrines apply as defaults.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Plan’s subrogation clause unambiguously authorizes reimbursement from beneficiaries (§502(a)(1)(B)) | Subrogation and reimbursement are distinct; Plan has no express reimbursement term so Plan may not demand repayment | The subrogation language and the term "subrogation" incorporate equitable principles and thus unambiguously permit reimbursement | The clause is ambiguous; Plan does not unambiguously create a contractual reimbursement right, so dismissal denied |
| Whether equitable federal common law should create a reimbursement remedy when a member prejudices subrogation rights | Plaintiffs: no federal common‑law reimbursement absent plan text; relief must flow from plan terms or clearly adopted federal rule | Defendants rely on a line of authority (e.g., Williams) to argue courts may create an equitable reimbursement right when subrogation is prejudiced | Court declined to adopt a new federal common‑law rule here; Williams is unpersuasive and dismissal was inappropriate because facts on prejudice were insufficient |
| Whether made‑whole and common‑fund doctrines limit Plan recovery | Plaintiffs: default equitable doctrines apply unless plan expressly abrogates them | Defendants: Plan is unambiguous and precludes application of those default doctrines; Plaintiffs failed to plead them properly | Court held made‑whole and common‑fund are federal common‑law default rules that apply because the Plan does not expressly abrogate them |
| Whether plaintiffs’ §502(a)(3) fiduciary claims are duplicative of §502(a)(1)(B) and subject to dismissal | Plaintiffs may plead §502(a)(3) claims in the alternative; dismissal premature at motion‑to‑dismiss stage | Defendants: Varity bars simultaneous §502(a)(3) claims when §502(a)(1) provides adequate relief; therefore fiduciary counts should be dismissed | Court adopted the Second Circuit approach: it refused to dismiss fiduciary claims now as premature because availability of adequate §502(a)(1) relief was not yet resolved |
Key Cases Cited
- U.S. Airways, Inc. v. McCutchen, 569 U.S. 88 (2013) (federal common‑law default equitable rules (e.g., common‑fund) aid plan interpretation; plan language controls and can abrogate defaults)
- Montanile v. Board of Trustees, 577 U.S. 136 (2016) (equitable tracing limits post‑settlement recovery; discusses limits on §502(a)(3) equitable remedies)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (§502(a)(3) is a catchall equitable remedy but should yield where Congress provided adequate relief elsewhere)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (de novo review applies unless plan grants administrator discretionary authority to interpret benefits)
- CIGNA Corp. v. Amara, 563 U.S. 421 (2011) (distinguishes availability of equitable remedies and stresses primacy of plan text for benefits adjudication)
- Provident Life & Accident Ins. Co. v. Williams, 858 F. Supp. 907 (W.D. Ark. 1994) (case relied on by defendants that created an equitable reimbursement rule under federal common law; court here found it unpersuasive)