Frank McCutcheon did all the right things. He had a job with U.S. Airways, and earned health insurance benefits with them. He also exercised personal responsibility in buying $100,000 worth of "Uninsured/Underinsured Motorists" coverage in the unlikely event that some irresponsible driver with low liability limits hit him.
Sure enough, the unlikely became reality, and Mr. McCutcheon was creamed by a driver with only $10,000 in liability coverage. His health plan paid his medical bills of about $66,000, and reminded him of that little subrogation clause in his plan that said: "Hey Frank, if you make any recovery or settlement, we're entitled to be reimbursed out of your settlement."
He collected the negligent driver's $10,000, and his underinsured motorists' benefits of $100,000. And then his health plan claimed reimbursement of the $66,000 it paid out of McCutcheon's $100,000 settlement.
Unfortunately for McCutcheon, his health plan was a a plan set up under The Employers' Retirement Income Security Act, known as "ERISA." Federal courts have interpreted this law to permit health plans to confiscate injured persons' injury settlements even if it leaves them without a penny. Ridiculously unfair, but unfortunately legal.
People like Mr. McCutcheon don't know about how their insurance becomes a trap door for their legal rights until they're on the receiving end of a bad collision. The only thing that would have saved McCutcheon here was if he had purchased $250,000 or even $500,000 of uninsured/underinsured motorists' (UM/UIM) coverage before his crash. For example, if his claim was worth $200,000, he would have at least had a decent recovery after his health plan took its $66,000 "cut." Purchasing the highest amounts of UM/UIM you can afford is the ONLY way you can level the playing field against the ERISA monster looking over your shoulder with its tentacles in YOUR settlement...