United States Supreme Court To Hear Case On Recovery Of Disbursed Third-Party Settlement Funds under ERISA By An Insurance Company

Katherine Marlink headshotBy Katherine Marklink

The 9th Circuit Court of Appeals has held that under the Employee Retirement Income Security Act of 1974 (ERISA) a fiduciary can enforce an equitable lien against specifically identified funds that remain in the beneficiary’s possession; but that such a lien cannot extend to the beneficiary’s general assets when the specifically identified funds are no longer in the beneficiary’s possession. (Bilyeu v. Morgan Stanley Long Term Disability Plan (2012) 683 F.3d 1083, 1095.) In other words, while an Insurance Company can enforce an equitable lien on the settlement proceeds from a third-party tort recovery, if the injured party is no longer in possession of the funds recovered from the third-party then the lien cannot extend to the general assets of the injured party.

This view held by the 9th Circuit is a minority view only shared by the 8th Circuit. Six other circuit courts have now reached contrary conclusions generally  holding that an equitable lien could extend to general assets even if the funds have been disbursed.

Due to the split in the Circuit Courts of Appeal, the United States Supreme Court has granted a writ of certiori to hear the issue in regards to a case arising from the 11th Circuit, Montanile v. Board of Trustees Of The National Elevator Industry Health Benefit Plan, United States Case No. 14-723. Briefing is presently underway in the matter with the case set to be heard in the next Supreme Court term beginning October 2015.


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