Travis Schurhammer was badly hurt in a snow-mobile accident. An employee welfare benefit plan (“the Plan”) took care of Mr. Schurhammer’s significant medical bills (over $150,000). But the Rochester-based law firm of O’Brien & Wolf took on Mr. Schurhammer’s personal injury case against other third-parties (two insurers) on a contingent fee basis and got a gross recovery of $800,000 for Mr. Schurhammer.
Does it seem right that the Plan should be reimbursed every penny that it paid for Mr. Schurhammer’s care out of Mr. Schurhammer’s recovery without paying a penny for O’Brien & Wolf‘s work? To be clear, if the Plan does not pay any share of Mr. Schurhammer’s legal fees and costs, Mr. Schurhammer, the badly injured personal injury plaintiff, effectively pays for all of the law firm’s legal fees and costs out of his own pocket. In fact, there are cases in which the injured plaintiffs end up with no recovery (or even “in the red” – a “negative recovery”) because the Plan is paid off first and then the contingent fee law firm.
To whom does this make sense?
This makes no sense to anyone except, of course, the health insurance plans, which, under the current law, seems to obtain a 100% recovery of their health care cost obligations at a cost of $0.00.
However, according to O’Brien & Wolf, one Illinois law firm:
found the key that unlocks the health insurer’s vaults, and in 2015 prevailed in that state’s Supreme Court, forcing an ERISA plan to pay them one-third of the amount that firm recovered on behalf of that plan. Schremp, Kelly, Napp & Darr, Ltd. v. The Carpenters’ Health and Welfare Trust Fund, 35 N.E.3d 988 (Il. App. 2015).
O’Brien & Wolf’s case is one of first impression in Minnesota and the states covered by the U.S. Court of Appeals for the Eighth Circuit (Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota). U.S. District Court Judge Susan R. Nelson (D. Minn.) will have to decide whether the Illinois law firm’s vault key works here.[As for the subject line of the post, some of you but not all of you will recognize a variation on Dire Straits’ lyrics….]