Sixth Circuit says health insurer need not pay its share of attorneys fees or costs
On November 16, 2009, the Sixth Circuit decided Longaberger Company v. Kolt, a dispute over an ERISA health insurance plan's demand for an injury victim's negligence recovery from the at-fault driver's insurance. Samuel Billiter was hurt in a car accident in Ohio, and his medical expenses were covered by Longaberger, a self-funded employee welfare benefit plan. Billiter sued, through his attorney Jeffrey Kolt, and recovered $135,000.00 from the negligent driver's insurers. Acting on the law as he understood it prior to the Supreme Court's recent decision in Sereboff v. Mid-Atlantic, Kolt distributed the insurance recovery without honoring the claimed Longaberger lien of $113,000.00.
Longaberger sued Kolt and Billiter, claiming that the proceeds of the third-party negligence action were held in an equitable constructive trust for "reimbursement" of the plan's medical expenses. The Sixth Circuit upheld the District Court's summary judgment for Longaberger and refused to honor Kolt's state law "charging lien" for creating the recovery. Billiter was required to pay Longaberger almost $76,000.00 of his $86,000.00 recovery and Kolt was required to turn over about $38,000.00 of his $45,000.00 fee. Chances are that if it weren't "for the honor of the thing," both men would have forsaken the lawsuit entirely, had they known that their efforts would only inure to the ERISA plan's benefit.
The outcome of this case either violates or endorses our belief that "pigs get fat and hogs get slaughtered," but we don't know which of the parties initially exhibited the pig-headedness. It would appear that a fair outcome would have involved some compromise by both parties.