886 F.2d 182 (8th Cir. 1989), 88-2647, Baxter By and Through Baxter v. Lynn

Docket Nº:88-2647.
Citation:886 F.2d 182
Party Name:Christopher BAXTER, a minor, By and Through his Next Friend and Mother, Sandra BAXTER and Sandra Baxter, Appellant, v. Charlene F. LYNN and Allstate Insurance Company and, Central States, Southeast and Southwest Areas Health and Welfare Fund, Appellee.
Case Date:September 22, 1989
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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886 F.2d 182 (8th Cir. 1989)

Christopher BAXTER, a minor, By and Through his Next Friend

and Mother, Sandra BAXTER and Sandra Baxter, Appellant,


Charlene F. LYNN and Allstate Insurance Company and,

Central States, Southeast and Southwest Areas Health and

Welfare Fund, Appellee.

No. 88-2647.

United States Court of Appeals, Eighth Circuit

September 22, 1989

Submitted June 13, 1989.

Rehearing and Rehearing En Banc Denied Nov. 7, 1989.

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James K. Blickhan, Kansas City, Mo., for appellant.

Anita M. D'Arcy, Chicago, Ill., for appellee.

Before BEAM, Circuit Judge, HEANEY, Senior Circuit Judge, and HANSON, [*] Senior District Judge.

HEANEY, Senior Circuit Judge.

Christopher Baxter and his mother, Sandra Baxter, appeal from an order of the district court granting summary judgment in favor of Central States, Southeast and

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Southwest Areas Health and Welfare Fund (the Fund). We affirm in part and reverse in part.


In 1985, Christopher Baxter, a passenger in his grandmother's car, was injured when the car collided with a vehicle driven by Charlene Lynn. Christopher's father, Kenneth Baxter, was a participant in an employee benefit plan regulated by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1461 (1985). Pursuant to the plan, the Fund paid medical expenses totaling $23,305 on behalf of Christopher. Lynn, the driver of the second car, did not have insurance. Christopher's grandmother, Alice Campbell, had an insurance policy issued by Allstate Insurance Company, a provision of which provided for $25,000 of coverage to the vehicle's occupants if involved in an accident with an uninsured motorist. The policy also provided for medical payments coverage of $5,000.

In 1986, the Baxters filed suit against Lynn and Allstate in state court. Allstate interpled the Fund as its plan included a clause subrogating the Fund to the Baxters' rights of recovery from third parties. Allstate did not contest its duty to pay the policy limit, deposited the $30,000 with the court and has had no further involvement in the case. In 1987, the Fund removed this case to federal court pursuant to 28 U.S.C. Sec. 1441 (1982), and sought a declaratory judgment entitling it to full satisfaction of the purported subrogation lien from the monies deposited by Allstate.

The issue in this case involves the interpretation of the Fund's subrogation provision in paragraph 17.14 of the plan. The Fund argues that this paragraph created a subrogation lien for the amount of the benefits it paid to the Baxters against the uninsured motorist policy benefits paid by Allstate. The Baxters argued that neither state common law nor the plan allows such subrogation. The district court held that common law restrictions on subrogation did not apply here as the law of ERISA preempted any state law which attempted to regulate ERISA benefit plans. It also held that the trustee's interpretation of the subrogation clause was not arbitrary or capricious and granted summary judgment in favor of the Fund.



The first issue presented is whether ERISA preempts the application of state subrogation law to this employee benefit plan. ERISA comprehensively regulates employee pension and welfare plans. Title 29 U.S.C. Sec. 1002(1) defines an employee welfare benefit plan as any fund or program through which an employer provides employees "through the purchase of insurance or otherwise" with "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment." The statute imposes participation, funding, and vesting requirements on pension plans and sets various uniform standards, including rules concerning reporting, disclosure, and fiduciary responsibilities, for both pension and welfare plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983).

Section 514(a) of ERISA preempts "any and all State laws in so far as they may now or hereafter relate to any employee benefit plan" covered by ERISA. 29 U.S.C. Sec. 1144(a). 1 The United States Supreme Court has affirmed the broad preemptive scope of ERISA and the prohibition of even indirect state action relating to self-funded employee benefit plans. See e.g., Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985); Shaw, 463 U.S. at 98-99, 103 S.Ct. at 2900-01; Alessi

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v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525, 101 S.Ct. 1895, 1907, 68 L.Ed.2d 402 (1981). The express preemption provision of ERISA is deliberately expansive, and it is designed to establish pension plan regulation as exclusively a federal concern. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987). An exception to this general preemption provision is found in 29 U.S.C. Sec. 1144(b)(2)(A). 2 This section, known as the "insurance saving clause," exempts state laws regulating insurance, banking, or securities from the preemption clause.

The Baxters argue that neither common law nor paragraph 17.14 allows subrogation against uninsured motorist benefits. The Fund asserts that state law regarding subrogation is irrelevant as ERISA preempts its application to this employee benefit plan. Thus, the issue here is whether ERISA has preempted the common law of subrogation. We agree with the...

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