A federal district court in Pennsylvania denied a large part of US Airways’ attempted recovery from the estate of plan participant James McCutchen, citing inconsistencies between the company’s plan document and summary plan description.
If a plan’s official plan document states that its language trumps that of the SPD, the plan should not assert rights in the SPD that are not backed up in the official plan document, the ruling illustrates. The district court was hearing the case on remand from a 2013 decision of the U.S. Supreme Court.
The US Airways SPD contained more detailed rights of recovery than its official plan document. As a result, the court shifted to the narrower rights of recovery found in the plan document, and accordingly reduced the plan’s claim on the plan participant (US Airways, Inc. v. McCutchen, 2016 WL 1156778 (W.D. Pa., March 16, 2016)).
McCutchen’s estate was trying to stop US Airways’ recovery because the rights the plan sought to enforce were found in the SPD only, but not spelled out in the official plan document. The court agreed and limited the plan’s recovery to $10,000.
Note: McCutchen was injured in a car accident in which the other driver was at fault. The plan paid out $66,865 for McCutchen’s care; McCutchen obtained a $100,000 payment from his own underinsured motorist policy, and a $10,000 tort settlement from the other driver. The plan sought full recovery of benefits it paid.
SPD Recovery Rights Exceeded Plan Document’s
The US Airways plan document contained a right of subrogation, but its SPD contained more, namely: (1) more detailed reimbursement language; and (2) words entitling the company to reimbursement from the participant’s insurance company — both of which were absent in the plan document.
The SPD language relied on by US Airways would have entitled it to all money it paid out in benefits, because it allowed the plan to draw from McCutchen’s $100,000 insurance company payment. But that right was not asserted in the official plan document, only in the SPD.
Effect of Supreme Court’s Ruling
The Supreme Court based its ruling on the SPD provisions alone, because the case had been litigated in the lower courts based solely on the SPD. In U.S. Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013), the Supreme Court discussed the discrepancy, but it put aside the question for a separate ruling.
The Supreme Court did not rule that McCutchen’s estate had waived the issue, according to the U.S. District Court for Western Pennsylvania. On the contrary, the High Court acknowledged that SPDs are meant to “communicate with beneficiaries about the plan but … do not themselves constitute the terms of the plan,” the district court stated.
Rather, the High Court ruled based on the SPD because: (1) all parties in the case had been arguing from the SPD language; and (2) invocation of the “SPD-plan document harmony” issue came too late.
Other US Airways Arguments Addressed
US Airways said the defendants waived the issue, because they never:
- requested a copy of the plan document;
- moved to extend the discovery deadline to request it;
- asserted Plaintiff’s discovery responses were insufficient; nor
- claimed they needed a copy of the plan document in order to defend the litigation.
However, the district court found that McCutchen’s estate actually had requested all copies of the plan, as well as the SPD, that included changes regarding the plan’s right of subrogation and reimbursement.
The district court noted that the SPD itself said if any difference existed between it and the official plan document, precedence would go to the official plan document. The SPD also said the SPD “should not be considered a substitute” for the plan document.
US Airways had argued that case law allows companies to incorporate an SPD into the official plan document. However, the district court found no specific language incorporating or integrating the US Airways’ SPD into its plan document.
As a result, the district court shifted to the narrower rights of recovery found in the plan document; in other words, US Airways was given access to McCutchen’s $10,000 recovery from the other driver, but not to the $100,000 McCutchen received from his insurance company.
Furthermore, the claim, in accord with the 2013 Supreme Court ruling, is subject to the common-fund doctrine, allowing McCutchen to deduct attorney’s fees and court expenses involved in obtaining the recovery.