Great-West Life & Annuity Insurance Co. v. Knudson

Janette Knudson (defendant) was rendered a quadriplegic by a car accident in 1992. Knudson’s husband was an employee of Earth Systems, Inc., and the couple was covered under the Health and Welfare Plan for Employees and Dependents of Earth Systems, Inc. (plan), an employee benefit plan governed by the Employee Retirement Income Security Act (ERISA). The plan covered most of Knudson’s medical costs, which were paid by Great-West Life & Annuity Insurance Company (Great-West) (plaintiff). The plan contained a reimbursement provision stating that the plan could recover any benefit payments that the beneficiary was entitled to recover from a third party. If the beneficiary recovered from a third party and failed to reimburse the plan, the beneficiary would be personally liable to the plan for the amount in question. The plan assigned its rights to legal action under the reimbursement provision to Great-West. Knudson recovered from third parties, and the settlement funds were put into a special trust fund to provide for Knudson’s medical care. Under the settlement, only a small portion of the awarded funds was designated as available for the reimbursement provision. Great-West refused the small payment and filed suit in federal district court under ERISA § 502(a)(3). Great-West sought the full amount it paid for Knudson’s medical expenses and claimed that Knudson violated the reimbursement provision by failing to pay more of her settlement to Great-West. The district court ruled in favor of Knudson, and Great-West appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed the district court. Great-West appealed to the United States Supreme Court.