Offset of Future Claims: Wave of the Future?

Even before the Knudson and Sereboff cases, a Plan's subrogation provision was very important. The absence of certain subsections left a plan open to many lien reduction arguments. The two toughest arguments to defeat, without the right wording, were reductions under the Made Whole and Common Fund (attorney s fees) doctrines. On the other hand, clear and unambiguous rejection of those doctrines often saved the day and assured higher recoveries.

When the U.S. Supreme Court decided Knudson in 2002, the Made Whole and Common Fund arguments became the least of a Plan s worries. These decisions called into question whether a Plan had any right at all! Fortunately, the 2006 Sereboff decision helped, but now the environment is more contentious than ever mainly because of low liability limits having nothing to do with the law. So, it is now even more important that a Plan contain the strongest plan language imaginable.

One increasingly common subsection of a Plan s subrogation provision is the right to offset future claims against any moneys received, but not reimbursed, by a plan member for accident or injury related claims. Offset wording exerts great leverage by forcing plan members to carefully consider their (and their attorney's) efforts in defeating a plan's lien because it potentially jeopardizes their coverage for future claims, accident related or not.

The right to offset should be considered by every self-funded plan that pursues subrogation and/or reimbursement recoveries. It is now as important as addressing Made Whole and Common Fund.