FMC Corp. v. Holliday, 498 U.S. 52 (1990)

Facts

  • FMC Corporation sponsored an employee welfare health plan that was self-funded and governed by ERISA.
  • A plan beneficiary (an employee’s daughter) suffered serious injuries in an automobile accident.
  • The plan paid a portion of the beneficiary’s medical expenses.
  • The beneficiary later obtained a tort recovery in a Pennsylvania negligence action.
  • FMC invoked the plan’s subrogation/reimbursement provision and sought reimbursement from the tort recovery.
  • The beneficiary relied on Pennsylvania Motor Vehicle Financial Responsibility Law § 1720, which bars reimbursement from a claimant’s tort recovery for certain benefit payments, and contended it prevented FMC’s reimbursement claim.

Issues

  1. Whether ERISA preempts Pennsylvania MVFRL § 1720 insofar as it prohibits a self-funded ERISA welfare plan from enforcing contractual subrogation/reimbursement rights against a beneficiary’s tort recovery.

Decision

  • The Supreme Court reversed the Third Circuit in a 7–1 decision.
  • The Court held that ERISA preempts the application of MVFRL § 1720 to FMC’s self-funded plan.
  • FMC’s plan could enforce its subrogation/reimbursement provision despite the state anti-subrogation statute.

Legal Principles

  • ERISA’s preemption clause supersedes state laws that “relate to” an ERISA-covered employee benefit plan, including laws with a connection to or reference to such plans.
  • State laws that regulate insurance may be saved from ERISA preemption as applied to insurance regulation generally.
  • Under ERISA’s deemer clause, a self-funded ERISA plan cannot be treated as an insurer or as engaged in the business of insurance for purposes of state laws regulating insurance.
  • As a result, state insurance laws may indirectly affect insured ERISA plans through regulation of insurers and insurance contracts, but cannot be applied to self-funded ERISA plans as state insurance regulation.

Conclusion

ERISA preempted Pennsylvania’s anti-subrogation statute as applied to a self-funded employee welfare plan, so the plan could seek reimbursement from the beneficiary’s tort recovery under its subrogation provision.