Suit by Group Medical Plan Was Time Barred Employment Contract Dispute

In the case of Blood Systems, Inc. v. Roesler, a federal district court in Arizona determined that a lawsuit filed under an employer’s group medical insurance plan against an employee was subject to Arizona’s one-year statute of limitations for claims involving “employment contract” disputes, instead of the state’s six-year statute of limitations for written contracts. The group plan’s suit sought reimbursement against an employee – a participant under the plan – for medical care benefits previously paid on her behalf after the employee recovered a settlement against a third party in a personal injury suit.

Background and procedural history

In 2009, the employee was seriously injured in a motorcycle accident. At the time of the accident, the employee and her husband were covered under a group medical insurance plan provided by the employer. The plan provider paid approximately $50,000 for the employee’s medical care.

The employee and her husband retained legal counsel to represent them on a personal injury claim against the other driver involved in the motorcycle crash. In 2009, the claim was settled against the other driver for $100,000. The employee and her spouse ultimately recovered $66,573.17 as their share of the settlement, after deducting attorney’s fees and other costs.

In 2011, the employer and the medical insurance plan provider filed a lawsuit against the employee and her husband and the law firm that had represented them in the personal injury case, seeking recovery of the sums the medical insurance plan paid for the employee’s medical care. A subrogation clause in the group medical plan gave the plan provider a right to reimbursement for the medical benefits it had paid for a plan participant’s care out of the proceeds of a judgment or settlement recovered by the participant in a personal injury claim against a responsible third party.

The court ruled in favor of the law firm, without a jury, deciding that a claim for subrogation and reimbursement would need to be asserted against the employee and her husband, not against their attorneys. The employee and her spouse asserted various legal defenses to the suit, including a claim that the suit was not timely filed under the statute of limitations.

The district court’s decision

The district court agreed that the suit was barred by the statute of limitations. The group insurance plan was an “employee welfare benefit plan” covered under ERISA, the Employee Retirement Income Security Act of 1974. This federal law did not specify a particular statute of limitations, so federal courts apply the most similar state statute of limitations.

The court determined that Arizona’s one-year limitations period for claims relating to “employment contract” disputes applied in this case, rather than a general six-year limitations period for written contracts. Under the group insurance plan, the employer agreed to provide additional compensation in the form of medical insurance benefits in exchange for the employee’s continued employment, the court said.

Contact an attorney

The drafting and review of business contracts, such as agreements relating to noncompetition, non-solicitation or non-disclosure of confidential information by officers or employees, compensation, severance packages, and other employment matters, contracts involving independent contractors or consultants, or for the purchase and sale of business assets, and operating agreements pertaining to shareholders, partnerships and limited liability companies, typically present complex legal matters. Private individuals and owners or operators of businesses should seek the advice and assistance of an attorney who is knowledgeable and experienced in this field.

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