In Thurber v. Aetna Life Ins. Co., the key litigated issue was whether an insurer's restitution counterclaim for overpaid disability benefits under ERISA Section 502(a)(3) was for equitable relief, rather than legal.

Sharon Thurber worked at Quest Diagnostics (Quest) from 1993 until 2007, when she suffered injuries in a car accident. Following the accident, Thurber submitted a claim under Quest's ERISA-governed disability benefits plan, administered by Aetna Life Insurance Company (Aetna). Aetna approved the claim, and Thurber received short-term disability payments for six months.

In 2008, Thurber submitted a claim for long-term disability benefits, at which time she informed Aetna that she had received other income in the form of no-fault insurance payments while receiving short-term disability benefits. Under the plan, Aetna "may" reduce short or long-term disability benefits if a beneficiary received other income, including no-fault insurance payments. The plan also authorized Aetna to:

Based on information received from Thurber's doctors, Aetna denied Thurber's claim for long-term disability benefits. After Aetna twice upheld its original decision, Thurber filed a complaint with the district court, challenging Aetna's denial of benefits under ERISA Section 502(a)(1)(B). Aetna counterclaimed for equitable restitution of over $7,000 in overpaid plan benefits under ERISA Section 502(a)(3), which authorizes civil actions by beneficiaries to obtain "appropriate equitable relief" to enforce the terms of the plan and certain other ERISA rights. Aetna moved for summary judgment on both claims.

The district court granted Aetna's motion with respect to Thurber's claim, but denied and dismissed Aetna's counterclaim, holding that it lacked subject matter jurisdiction under ERISA because the counterclaim sought legal, not equitable, relief. Thurber and Aetna both appealed to the Second Circuit.

On March 13, 2013, the US Court of Appeals for the Second Circuit issued an opinion in Thurber v. Aetna Life Ins. Co., reversing the district court's judgment on Aetna's restitution claim and ordering it to enter judgment for Aetna. Analyzing the plan language and applicable precedent, the Second Circuit concluded that Aetna's claim sought equitable relief, and was therefore permitted under ERISA Section 502(a)(3).

The Second Circuit noted that the question of what constitutes "appropriate equitable relief" under ERISA Section 502(a)(3), has been addressed twice by the Supreme Court in recent years:

The Second Circuit held that the nature of Aetna's claim was equitable, because Aetna sought specific funds in a specific amount that were entrusted to Thurber. The Second Circuit acknowledged that the case differed from Sereboff in that:

However, the Second Circuit held that these distinctions did not alter its conclusion. First, the Second Circuit reasoned that there was no basis for distinguishing between third-party recoveries and benefits that become overpayments as a result of third-party recoveries, because both are particular, identifiable sums over which an insurer could assert an equitable lien authorized by its plan.

The Second Circuit also rejected Thurber's argument, which relied on Ninth Circuit precedent that Aetna was barred from seeking return of the funds because Thurber had already spent them. Adopting reasoning from the Third Circuit, the Second Circuit held that if there was an equitable lien by agreement that attached to the third-party benefits as soon as the beneficiary received them, the fact that the funds later dissipated was immaterial. Noting that Thurber had possession and control of the overpaid benefits, the Second Circuit concluded that the fact that she later spent them could not defeat Aetna's right to enforce its equitable lien.

Finally, the Second Circuit was not persuaded by the district court's reasoning that the language of Aetna's plan, which stated that an insurer "may" reduce benefits if the beneficiary received certain other funds, distinguished it from the plans in Sereboff and Cusson v. Liberty Life Assurance Co. of Boston, in which plans gave the insurer the "right" to recovery of overpayments. The Second Circuit concluded that this distinction was immaterial, stating that:

The Second Circuit reasoned that differences in language within Aetna's own plan, in which some benefits "may" be reduced while others "will" be reduced, did not alter Aetna's right to seek return of overpayments.

Determining what is "appropriate equitable relief" under ERISA Section 502(a)(3) generally requires courts to analyze technical distinctions as to whether a claim is for legal or equitable relief. In siding with the First and Third Circuits, the Second Circuit in this case adopts a rule that would appear to make it easier for insurers and others to reach specifically identified funds (such as benefits overpayments) for which they assert a lien, even where the funds have been dissipated. Of course, as the Second Circuit acknowledges, not all courts are in agreement on these issues.