U.S. Airways vs. McCutchen: Protecting the Rights of Injured Citizens

With the recent and ongoing debates over Obamacare, public awareness of the medical field and insurance coverage is higher than ever before. But while many question the constitutional legality of the Obama administration’s plan, no one doubts that medical costs have skyrocketed and that ordinary citizens are finding their medical costs to be a substantial hardship. Medical fees are steep enough when you are dealing with something like pneumonia or a sprained ankle, but when someone receives a debilitating injury in a car wreck or other serious accident, the costs can be literally devastating. Most people depend on their insurance companies in such cases to provide them with the money they need to pay medical costs and cover lost wages. Other times, employers will pay medical bills for their employees when the injury occurred on the job. However, in both cases, sometimes the injured party can still wind up losing a significant amount of money – hardly a fair situation when they were not responsible for the injury in the first place.

In April 2013, the U.S. Supreme Court made a significant ruling to support those who suffered from a personal injury in the case of US Airways vs. McCutchen. Four years ago, U.S. Airways employee James E. McCutchen suffered serious injuries in a car accident. Though he was not on the job at the time, U.S. Airways paid his medical bills – a total cost of $66,866. However, Mr. McCutchen and his lawyer felt that he was entitled to further compensation, so he sued the other driver and won $110,000. Under the company’s health plan policy, McCutchen was required to reimburse U.S. Airways for the money they spent on his medical bills. However, after paying his lawyer the required 40%, McCutchen was left with only $66,000, meaning that after repaying his employer, McCutchen actually lost $866. Mr. McCutchen appealed, saying that this policy was unfair and that the company should factor in his legal costs before requiring him to pay back the full $66,866. U.S. Airways sued their employee, citing the provisions of the Employment Retirement Security Income Act (ERISA), which demands “appropriate equitable relief” for employers even if they receive a small amount of money during a third-party lawsuit.

McCutchen, in turn, appealed this decision and the case eventually made its way to the Supreme Court, where the justices made a ruling partially in the man’s favor with a close vote of 5-4.  The court stated that, while ERISA does entitle an employer to compensation when their employee receives money from a third-party lawsuit, “appropriate equitable relief” is no longer appropriate when it results in a financial gain for the company and a significant loss for the injured party. In addition, they ruled that U.S. Airways’ health plan said nothing about how lawyer’s fees should be factored into the reimbursement. Because the plan is silent on the matter, they said, it should be interpreted in the injured party’s favor.

Justice Elena Kagan wrote for the majority, and is quoted in the New York Times as saying, “Third-party recoveries do not often come free: To get one, an insured must incur lawyers’ fees and expenses. Without cost sharing, the insurer free rides on its beneficiary’s efforts — taking the fruits while contributing nothing to the labor. Odder still, in some cases indeed, in this case — the beneficiary is made worse off by pursuing a third party…. In effect, he [McCutchen] would pay for the privilege of serving as U.S. Airways’ collection agent.”

According to publicjustice.net, the ruling is seen as a major victory against the exploitation of ERISA and the 2006 Supreme Court case Sereboff vs. Mid Atlantic Medical Services, the decision which allowed business to collect reimbursement after a third-party lawsuit. However, Sereboff vs. Mid Atlantic did not state how much money could be collected or whether legal fees were to be calculated when considering the amount a person won in the final settlement. Until now, companies have taken the ruling to mean that all funds that the company paid to its employer must be refunded. U.S. Airways, Inc. vs. McCutchen was the first case to challenge this practice and to rule in favor of the injured employees – a victory for the individual citizen against the power of American Big Business.

About the Author:

Attorney Julie Luhrsen has spent the better part of 20 years helping individuals as a personal injury attorney with Sarasota, Florida personal injury firm Luhrsen Law Group. She attributes her early love of helping others to her time in the Army JAG Corps where she helped individual soldiers with legal problems—a job she performed for eight years and for which she received many military awards. Personal injury law proved to be a natural progression for Mrs. Luhrsen as she transitioned from the military to private practice as an attorney helping families in the Sarasota, Bradenton, and surrounding communities seek just recompense after being injured.