516-228-8766 schaum@schaumlaw.com

September, 2024

To: ALL INTERESTED PARTIES

Insurance companies have long sought to claw back deemed overpayments to beneficiaries.  To this end, an interesting case, reported in the Law Journal, was recently ruled upon in the Southern District of New York.

The fact pattern was as follows; an acclaimed artist, who required extensive in-home care over several years, – was insured under a plan governed by Employee Retirement Income Security Act, (ERISA), administered by Cigna.

The issue arose after a Cigna post-payment-audit for claims paid over a three-year period, (2015-2017).  In 2018, Cigna notified the beneficiary that it had improperly paid over $350,000.00, for services that were not reimbursable, AND would not pay any future claims.  The beneficiary was not successful in his appeal to the denial of services. 

The patient passed in 2021, and the Estate sued the Plan, (Cigna), for $680,000 worth of claims the Estate asserted were wrongfully denied.  The Plan countersued the Estate for the $350,000.00 previously claimed as an overpayment of benefits.

The Estate claimed that Cigna did not properly submit their legal claim under the rules of ERISA, as the claim would have to be for equitable relief, (“for a certain act”), rather than legal relief, (“compensation”). 

Under ERISA, a plan fiduciary must seek relief that is equitable in nature, (identifying the ‘particular thing’ being sued upon), rather than merely seeking to impose personal liability on a participant to recover a general sum of money out of a participant’s assets.

The legal issue to be determined was whether a Plan fiduciary could have an equitable claim when the funds at issue were not segregated, (the ERISA “particular fund” requirement). 

An example of this application could apply if the funds in dispute were held by a third-party payor or specific subrogation clause.  In the present matter, this threshold was not met. 

The Court found that Cigna “merely sought to impose personal liability on a plan participant and to recover a sum of money from the participant’s ‘general’ assets.”  Result: the Cigna counterclaim was dismissed, and the remaining claim was settled in July.

The Estate averted the prospective claw-back but it begs the question, would Cigna have pursued the counterclaim against the Estate, (and the $350,000.00 exposure), if the initial action was not filed by the Estate?

Respectfully submitted,

Schaum Law