ERISA Plan Document Subrogation Clause
Last updated: August 27, 2026
Importance of Plan Document Language
The Supreme Court in U.S. Airways v. McCutchen (2013) held that ERISA plan terms control subrogation and reimbursement rights. This means the plan document's language determines the scope of the plan's recovery rights and whether equitable defenses apply. Clear, specific language may enforce the plan's recovery; ambiguous or missing language limits it.
| Plan Language | Effect on Subrogation | Participant's Rights |
|---|---|---|
| No subrogation provision | Plan cannot enforce subrogation | Participant keeps full settlement |
| Subrogation mentioned but vague | Equitable defenses may apply | Participant may invoke made whole or common fund doctrine |
| Clear subrogation with rejection of defenses | Plan recovers full claim | Participant must reimburse plan; equitable defenses do not apply |
Key Elements of Subrogation Clauses
ERISA plan documents may include the following elements:
- Subrogation and Reimbursement Rights: Clearly state that the plan has both subrogation (right to pursue third party directly) and reimbursement (right to recover from participant's settlement) rights.
- Rejection of Equitable Defenses: Explicitly reject the made whole doctrine, common fund doctrine, and any other equitable defenses that could reduce the plan's recovery.
- Constructive Trust or Lien: State that settlement proceeds are held in trust for the plan's benefit or that the plan has an equitable lien on those proceeds.
Consequences of Ambiguous Language
If the plan document does not clearly reject equitable defenses, participants may invoke those defenses to reduce the plan's recovery. In McCutchen, the Court allowed the participant to invoke the common fund doctrine because the plan document did not explicitly reject it. This resulted in the plan's recovery being reduced by a proportional share of attorney fees.
| Ambiguity | Result | Impact on Plan |
|---|---|---|
| Silent on made whole doctrine | Participant may invoke doctrine | Plan cannot recover until participant is made whole |
| Silent on common fund doctrine | Participant may invoke doctrine | Plan shares proportionally in attorney fees and costs |
| Silent on priority | Other liens may have priority | Plan may recover only after hospital liens and other claims are paid |
Pre-McCutchen Plans
Plans drafted before McCutchen (2013) may not include clear language rejecting equitable defenses.
Can a plan enforce subrogation if the plan document is silent or ambiguous?
If the plan document does not mention subrogation, the plan cannot enforce it. If the plan document is ambiguous, courts may apply equitable defenses such as the made whole and common fund doctrines to reduce the plan's recovery. The Supreme Court in McCutchen held that plan terms control, so clarity is essential.