The recent decision in Unum Life Insurance Company of America v. O'Brien, 2004 U.S. Dist. LEXIS 20761 (M.D. Fla., Oct. 4), presents a typical scenario where a disability insurer sues an unrepresented claimant, seeking reimbursement of benefits that had been overpaid due to the receipt of a Social Security award.

Such suits are based on disability insurance policy provisions that coordinate benefits with Social Security and reduce the long-term disability payments by the amount of Social Security benefits received. The O'Brien case is identical to the situation in Unum Life Insurance Company of America v. Long, 227 F. Supp.2d 609 (N.D. Texas 2002).

Unum alleged in O'Brien that the District Court had jurisdiction under the Employee Retirement Income Security Act; alternatively, it pleaded jurisdiction under federal common law due to unjust enrichment.

The court rejected the first argument based on Mertens v. Hewitt Associates, 508 U.S. 248, 256, 124 L.Ed.2d 161, 113 S.Ct. 2063 (1993), and Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 210, 151 L.Ed.2d 635, 122 S.Ct. 708 (2002). The court explained that Knudson, in particular, precisely addressed the issues relating to Unum's claim and determined that since Unum could not identify the particular funds at issue, and because the money had already been spent on household needs, it had no claim for reimbursement under 29 U.S.C. §1132(a)(3).

However, the court adopted a different conclusion with respect to Unum's claim for unjust enrichment under federal common law. The court noted that 28 U.S.C. §1331 gives the federal courts subject-matter jurisdiction over claims arising under the Constitution, laws or treaties of the United States, which includes federal ''common law'' claims.

With respect to Unum's claimed cause of action outside of ERISA, the court noted, ''The Supreme Court has not ruled, however, on whether a claim unauthorized under section 1132(a)(3) may nevertheless be authorized under the federal common law.''

The court recognized that in Cooperative Benefit Administrators Inc. v. Ogden, 367 F.3d 323 (5th Cir. 2004), the 5th U.S. Circuit Court of Appeals ruled that a fiduciary could not seek reimbursement from a beneficiary under federal common law. Nonetheless, the court cited a pre-Knudson case from the 4th Circuit as persuasive authority for the opposite conclusion: Provident Life and Accident Insurance Co. v. Waller, 906 F.2d 985 (4th Cir. 1990); cert. denied 498 U.S. 982 (1990). The 4th Circuit characterized recognition of a federal common-law claim for unjust enrichment as fulfilling the intent of ERISA. The court also cited a variety of district court cases that reached the same conclusion based on ERISA's purpose and the need to ''fill in the interstitial gaps of ERISA by allowing a federal common-law remedy of unjust enrichment.'' Neal v. GMC, 266 F.Supp.2d 449 (W.D. N.C. 2003).

After recognizing the cause of action, the O'Brien court held that the defendant had been unjustly enriched. The elements of unjust enrichment were defined as follows: ''(1) a benefit conferred upon the defendant by the plaintiff, (2) appreciation by the defendant of such benefit, and (3) acceptance and retention of such benefit by the defendant under such circumstances that it would be inequitable for him to retain it without paying the value thereof. Hercules Inc., 814 F.Supp. at 80 (citing Henry M. Butler Inc. v. Trizec Props Inc., 524 So. 2d 710, 712 (Fla. 2d DCA 1988)) (quoted in Solomon, 996 F.Supp. at 1477).''

The court then found that there was no genuine issue of material fact — all three elements were met without question since the defendant had received the payments, he recognized by signing a reimbursement agreement that he was obliged to repay benefits if awarded Social Security, and he accepted and retained the monies that Unum had paid. Thus, the court awarded summary judgment to the insurer.

So what's the problem? This decision is wrong!

As a matter of common sense, there is little doubt that an insured who is aware of a policy provision coordinating benefits and who signs a reimbursement agreement agreeing to pay back any overpayment resulting from an award of Social Security disability benefits, should be forced to live up to that bargain.

However, Knudson squarely stands in the way of such a claim, and anyone who has dealt with claims arising under ERISA law knows that common sense and ERISA often conflict with one another — and that there is much truth to Judge William Acker's comment that ERISA stands for ''Everything Ridiculous Imagined Since Adam.'' Florence Nightingale Nursing Service v. Blue Cross & Blue Shield, 832 F.Supp. 1456, 1457 (N.D. Al. 1993). As the court recognized, as it had to based on Knudson, that any claim by Unum under the ERISA statute is foreclosed. Unum's action was not one brought in ''equity''; it was a claim in law since it sought monetary damages pursuant to a contract. That should have ended the inquiry.

The principal fault in O'Brien is that there is no basis for recognizing Unum's federal common-law claim. The Supreme Court has ruled time and again that ERISA's remedies are exclusive and do not allow for the creation of new remedies outside of the six remedial provisions in the ERISA law. Beginning with Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 147 (1985), the Supreme Court forcefully described the exclusivity of ERISA remedies and precluded the creation of any remedy not explicitly set forth in the statute. The court then reaffirmed that proposition in Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 54 (1987), where it found:

''In sum, the detailed provisions of section 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. 'The six carefully integrated civil enforcement provisions found in section 502(a) of the statute as finally enacted provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.' Russell, supra, at 146 (emphasis in original).

''The deliberate care with which ERISA's civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive.''

Subsequently, in Knudson, the court specifically addressed O'Brien's concern that a federal common-law claim for unjust enrichment fulfills the intent of the ERISA law. The Supreme Court explained:

''We need not decide these issues because, as we explained in Mertens, '[e]ven assuming that petitioners are correct about the preemption of previously available state-court actions' or the lack of other means to obtain relief, 'vague notions of a statute's ''basic purpose'' are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration.' 508 U.S., at 261, 113 S.Ct. 2063. We will not attempt to adjust the 'carefully crafted and detailed enforcement scheme' embodied in the text that Congress has adopted. Mertens, supra, at 254, 113 S.Ct. 2063. 122 S.Ct. at 718-719.''

Thus, as both the 5th Circuit in Ogden and the 6th Circuit in Qualchoice Inc. v. Rowland, 367 F.3d 638 (6th Cir. 2004), held, there is no ''common law'' claim for unjust enrichment. Knudson recognizes that Unum would retain a right of setoff against future benefits; and based on controlling Supreme Court case law, there is simply no basis for this court's ruling, although the 9th Circuit recently issued a decision that reached the same conclusion as O'Brien in Providence Health Plan v. McDowell, 2004 U.S. App. LEXIS 5476; reh. denied 2004 U.S. App. LEXIS 20923 (9th Cir., Oct. 1). Based on the dissent from the denial of rehearing in Providence, it is clear that the decision is erroneous; and it is anticipated that the Supreme Court will order the case to be reheard.

Finally, although the Supreme Court in Knudson left the door open for a possible state common-law cause of action, in Liberty Northwest Insurance\ Corp. v. Kemp, 192 Ore.App. 181, 198, 85 P.3d 871 (Ore. App. , 2004), the court made it clear that such a claim would be subject to ERISA preemption based on 29 U.S.C. §1144, which preempts all state laws that ''relate to'' employee benefit plans governed by the ERISA statute. Since a state law claim could not be asserted without reference to the policy provisions governing coordination of benefits, it is hard to see how such a claim could escape preemption.