By Cory Bilton.
The preemptive effect of an ERISA benefit plan’s contract language continues to be a hot judicial topic. Although ERISA covers the broad rights and duties of employer sponsored benefit plans and employee beneficiaries, personal injury attorneys are largely concerned only with the narrow issue of the plan’s subrogation and reimbursement rights against injured plaintiffs. Many states limit the subrogation or reimbursement rights of health insurance plans. When a state limits a benefit plan’s right to recover, ERISA plan administrators’ argue that the plan language itself preempts any state law limitations. If the plan’s language preempts state law, the plan gets repaid. If state law is not preempted, the injured person repays less, or sometimes avoids repayment at all.
A couple days ago the Second Circuit issued an opinion, Wurtz v. Rawlings, holding that the plaintiff’s state law claims were neither expressly nor completely preempted by ERISA. A New York statute (§ 5-335) states that health insurers are not permitted to subrogate against a liable third-party or seek reimbursement for medical expenses from an injured person (Virginia has a similar “anti-subrogation” law). Despite this law, ERISA plans in New York were still seeking subrogation or reimbursement, by claiming the plan language preempted the New York anti-subrogation law. The ERISA plans at issue here were insured ERISA plans, which may still be regulated by state laws that are intended to regulate insurance (as opposed to self-funded ERISA plans, the language of which preempts even state laws that regulate insurance). But when the trial judge faced the plan administrator’s motion to dismiss, he held that the plaintiff’s claims were both expressly preempted and completely preempted by ERISA and thus dismissed the claim.