498 U.S. 52 (1990), 89-1048, FMC Corporation v. Holliday

Docket Nº:No. 89-1048
Citation:498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356, 59 U.S.L.W. 4009
Party Name:FMC Corporation v. Holliday
Case Date:November 27, 1990
Court:United States Supreme Court

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498 U.S. 52 (1990)

111 S.Ct. 403, 112 L.Ed.2d 356, 59 U.S.L.W. 4009

FMC Corporation



No. 89-1048

United States Supreme Court

Nov. 27, 1990

Argued Oct. 2, 1990




After petitioner FMC Corporation's self-funded health care plan (Plan) paid a portion of respondent's medical expenses resulting from an automobile accident, FMC informed respondent that it would seek reimbursement under the Plan's subrogation provision from any recovery she realized in her Pennsylvania negligence action against the driver of the vehicle in which she was injured. Respondent obtained a declaratory judgment in Federal District Court that § 1720 of Pennsylvania's Motor Vehicle Financial Responsibility Law -- which precludes reimbursement from a claimant's tort recovery for benefit payments by a program, group contract, or other arrangement -- prohibits FMC's exercise of subrogation rights. The Court of Appeals affirmed, holding that the Employee Retirement Income Security Act of 1974 (ERISA), which applies to employee welfare benefit plans such as FMC's, does not preempt § 1720.

Held: ERISA preempts the application of § 1720 to FMC's Plan.

(a) ERISA's preemption clause broadly establishes as an area of exclusive federal concern the subject of every state law that "relate[s] to" a covered employee benefit plan. Although the statute's saving clause returns to the States the power to enforce those state laws that "regulat[e] insurance," the deemer clause provides that a covered plan shall not be "deemed to be an insurance company or other insurer . . . or to be engaged in the business of insurance" for purposes of state laws "purporting to regulate" insurance companies or insurance contracts. Pp. 56-58.

(b) Section 1720 "relate[s] to" an employee benefit plan within the meaning of ERISA's preemption provision, since it has both a "connection with" and a "reference to" such a plan. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97. Moreover, although there is no dispute that § [111 S.Ct. 405] 1720 "regulates insurance," ERISA's deemer clause demonstrates Congress' clear intent to exclude from the reach of the saving clause self-funded ERISA plans by relieving them from state laws "purporting to regulate insurance." Thus, such plans are exempt from state regulation insofar as it "relates to" them. State laws directed toward such plans are preempted because they relate to an employee benefit plan but are not "saved" because they do not regulate insurance.

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State laws that directly regulate insurance are "saved," but do not reach self-funded plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purposes of such laws. On the other hand, plans that are insured are subject to indirect state insurance regulation insofar as state laws "purporting to regulate insurance" apply to the plans' insurers and the insurers' insurance contracts. This reading of the deemer clause is consistent with Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 735, n. 14, 747, and is respectful of the presumption that Congress does not intend to preempt areas of traditional state regulation, see Jones v. Rath Packing Co., 430 U.S. 519, 525, including regulation of the "business of insurance," see Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. at 742-744. Narrower readings of the deemer clause -- which would interpret the clause to except from the saving clause only state insurance regulations that are pretexts for impinging on core ERISA concerns or to preclude States from deeming plans to be insurers only for purposes of state laws that apply to insurance as a business, such as laws relating to licensing and capitalization requirements -- are unsupported by ERISA's language, and would be fraught with administrative difficulties, necessitating definition of core ERISA concerns and of what constitutes business activity and thereby undermining Congress' expressed desire to avoid endless litigation over the validity of state action and requiring plans to expend funds in such litigation. Pp. 58-65.

885 F.2d 79 (CA3 1989), vacated and remanded.

O'CONNOR, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, MARSHALL, BLACKMUN, SCALIA, and KENNEDY, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 65. SOUTER, J., took no part in the consideration or decision of the case.

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O'CONNOR, J., lead opinion

Justice O'CONNOR delivered the opinion of the Court.

This case calls upon the Court to decide whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., preempts a Pennsylvania law precluding employee welfare benefit plans from exercising subrogation rights on a claimant's tort recovery.


Petitioner, FMC Corporation (FMC), operates the FMC Salaried Health Care Plan (Plan), an employee welfare benefit plan within the meaning of ERISA, § 3(1), 29 U.S.C. § 1002(1), that provides health benefits to FMC employees and their dependents. The Plan is self-funded; it does not purchase an insurance policy from any insurance company in order to satisfy its obligations to its participants. Among its provisions is a subrogation clause under which a Plan member agrees to reimburse the Plan for benefits [111 S.Ct. 406] paid if the member recovers on a claim in a liability action against a third party.

Respondent, Cynthia Ann Holliday, is the daughter of FMC employee and Plan member Gerald Holliday. In 1987,

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she was seriously injured in an automobile accident. The Plan paid a portion of her medical expenses. Gerald Holliday brought a negligence action on behalf of his daughter in Pennsylvania state court against the driver of the automobile in which she was injured. The parties settled the claim. While the action was pending, FMC notified the Hollidays that it would seek reimbursement for the amounts it had paid for respondent's medical expenses. The Hollidays replied that they would not reimburse the Plan, asserting that § 1720 of Pennsylvania's Motor Vehicle Financial Responsibility Law, 75 Pa.Cons.Stat. § 1720 (1987), precludes subrogation by FMC. Section 1720 states that

[i]n actions arising out of the maintenance or use of a motor vehicle, there shall be no right of subrogation or reimbursement from a claimant's tort recovery with respect to . . . benefits . . . payable under section 1719.[1]

Section 1719 refers to benefit payments by "[a]ny program, group contract or other arrangement."[2]

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Respondent, proceeding in diversity, then sought and received a declaratory judgment in Federal District Court that § 1720 prohibits FMC's exercise of subrogation rights on Holliday's claim against the driver. The United States Court of Appeals for the Third Circuit affirmed. 885 F.2d 79 (1989). The court held that § 1720, unless preempted, bars FMC from enforcing its contractual subrogation provision. According to the court, ERISA preempts § 1720 if ERISA's "deemer clause," § 514(b)(2)(B), 29 U.S.C. § 1144(b)(2)(B), exempts the Plan from state subrogation laws. The Court of Appeals, citing Northern Group Services, Inc. v. Auto Owners Ins. Co., 833 F.2d 85, 91-94 (CA6 1987), cert. denied, 486 U.S. 1017 (1988), determined that "the deemer clause [was] meant mainly to reach back-door attempts by states to regulate core ERISA concerns in the guise of insurance regulation." 885 F.2d at 86. Pointing out that the parties had not suggested that the Pennsylvania antisubrogation law addressed "a core type of ERISA matter which Congress sought to protect by the preemption provision," id. at 90, the court concluded that the Pennsylvania law is not preempted. The Third Circuit's holding conflicts with decisions of other Circuit Courts that have construed ERISA's deemer clause to protect self-funded plans from all state insurance regulation. See, e.g., Baxter v. Lynn, 886 F.2d 182, 186 (CA8 1989); Reilly v. Blue Cross and Blue Shield United of Wisconsin, 846 F.2d 416, 425-426 (CA7), [111 S.Ct. 407] cert. denied, 488 U.S. 856 (1988). We granted certiorari to resolve this conflict. 493 U.S. 1068 (1990), and now reverse.


In determining whether federal law preempts a state statute, we look to congressional intent.

"Preemption may be either express or implied, and `is compelled whether Congress'

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command is explicitly stated in the statute's language or implicitly contained in its structure and purpose."

Shaw v. Delta Air Lines Inc., 463 U.S. 85, 95 (1983) (quoting Fidelity Federal Savings & Loan Assn. v. De la Cuesta, 458 U.S. 141, 152-153 (1982), in turn quoting Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977)); see also Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-843 (1984) ("If the intent of Congress is clear, that is the end of the matter; for the court . . . must give effect to the unambiguously expressed intent of Congress" (footnote omitted)). We

begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.

Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194 (1985). Three provisions of ERISA speak expressly to the question of preemption:

Except as provided in subsection (b) of this section [the saving clause], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.

§ 514(a), as set forth in 29 U.S.C. § 1144(a) (preemption clause).

Except as provided in subparagraph (B)...

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