Fighting Back Against ERISA Reimbursement Claims

An instructive case presented by Brian King at the ERISA Law blog:

From the U.S. District Court for the Western District of Missouri comes a recent noteworthy case involving the scope of ERISA preemption and the efforts of a health insurer to assert a reimbursement, a/k/a subrogation, claim. You can read the decision in Pruitt v. United Healthcare Services, Inc., here in the website library. The case provides some insights into strategies ERISA plan participants and beneficiaries can use to fend off insurers or other entities who try to interfere with personal injury recoveries . . . .

[The participant] sued UHC [the insuruer] in Missouri state court alleging that UHC was interfering with her contract and expected recovery from American Family. UHC removed the case to federal court and alleged that ERISA preempted Pruitt’s claim. If UHC succeeded in this argument, the legal terrain on which the battle between UHC and Pruitt would be fought would be much more favorable to UHC. Whether ERISA preemption existed was key. If it did not, there would be no jurisdiction for the federal court to hear the case. Pruitt argued that ERISA did not preempt her state law claim and asked the federal court to dismiss the case and remand it back to state court.

The federal court, Magistrate Judge William A. Knox, agreed with Pruitt. He ruled that whether ERISA preempted Pruitt’s state law claims had to be decided by looking at the terms of the Complaint Pruitt filed in state court. That complaint made no reference to any ERISA plan.

The outcome would have been different if there were a claim for benefits under 502(a)(1)(B).  In that scenario, there would have been complete preemption under the Supreme Court's Taylor decision.  But instead, because the plaintiff was seeking money damages for interference a the settlement agreement she made with the third-party, and there was not a similar claim available under ERISA, her state law claim was not preempted. In ERISA Travelers speak, it was because the plaintiff's claim only an indirect impact on ERISA plan administration.

This outcome seems consistent with the general movement in ERISA preemption from a field preemption approach to a conflict preemption approach.

PS