plan entitled to full reimbursement despite make whole rule

Plan Entitled to Full Reimbursement Despite Participant's Make Whole Argument, but Silence on Attorney's Fees Reduces Reimbursement by Pro Rata Share

The Massachusetts District Court ruled that the Harvard Pilgrim Health Care Plan ("Plan") was entitled to full reimbursement of $102,874 paid in medical benefits and dismissed the participant's argument that the make whole rule applied. In Harris v. Harvard Pilgrim Health Care, 20 F. Supp. 2d 143, 1998 U.S. Dist. LEXIS 14065 (Aug. 7, 1998), the court followed the reasoning of the 5th, 7th and 8th Circuits which rejects the make whole rule as the default rule when a plan is silent regarding the rule's application.

Michael Harris ("Harris"), the plan participant, was injured in a motorcycle accident when he struck a roadway detour, and the Plan paid $102, 874 for Harris's medical treatment. Harris settled his claim against the contracting company that had constructed the detour for $737,500 and the Plan placed a $130,000 lien on the settlement. Harris sued in state court claiming that the make whole rule should reduce the amount of the lien. Harvard removed the case to federal district court and moved for summary judgment on the bases that the make whole rule should not apply because it was not mentioned in the plan and that the state's subrogation law and the Plan's subrogation terms entitled the Plan to full reimbursement.

The court agreed with the Plan's argument, stating that the decision against application of the make whole rule, "better promotes the policies of ERISA to ensure that a member is not reimbursed twice for medical services, and that plan benefits available to sister employees are not depleted." Id. at 151, 1998 U.S. Dist. LEXIS at 23-24. The court continued, "[t]he 'make whole' doctrine is . . . an impractical solution in the area of personal injury settlements." Id. The court also found that the subrogation terms in the Plan permitted the Plan "to receive the full costs of benefits provided, even though it does not contain an express rejection of the 'make whole' doctrine. Id. at 152, 1998 U.S. Dist. LEXIS at 27.

However, the lack of Plan language regarding the award of attorney's fees reduced the Plan's entitlement by a pro-rata share of reasonable attorney's fees. The court reasoned that the Plan was benefited by Harris' suit, and that the Plan would not have been reimbursed without the suit. Therefore, "the silence in the Plan with respect to attorney's fees [permitted] the beneficiary to reduce the Plan's recovery by a pro rata amount of reasonable attorney's fees." Id. at 153, 1998 U.S. Dist. LEXIS at 29-30.

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