Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Parallel lawsuits are under way in the federal and state courts to resolve a conflict between Pennsylvania law and federal law on the issue of whether an insurer has the right to assert a subrogation claim against an auto accident victim’s tort recovery. Both lawsuits name Aetna U.S. Healthcare as defendant and were originally filed in the Bucks County Court of Common Pleas. Aetna later removed both cases to U.S. District Court in Philadelphia. The suits, filed by attorneys Ronald J. Smolow and Michael H. Landis of Smolow & Landis in Trevose, Pa., allege that Aetna’s practice of asserting liens against the tort recoveries for the medical benefits it has provided to auto accident victims violates the Pennsylvania Motor Vehicle Financial Responsibility Law’s express prohibition against subrogation. Now, in a pair of recent decisions, one case was sent back to Bucks County, while a different judge ruled that the other case must stay on the docket of the Eastern District of Pennsylvania federal court. Although the rulings by U.S. District Judges Harvey Bartle III and Timothy J. Savage appear at first glance to be in conflict, they aren’t. In January, Savage ruled in Nott v. Aetna U.S. Healthcare that the case should be remanded to Bucks County because the federal law at issue — the Medicare Act — does not “completely pre-empt” the MVFRL. Since there were no federal claims in the case, Savage said, he was forced to “remand this case to the state court for resolution of the statutory conflict, a task it is competent to perform.” But Bartle faced a different question in Wirth v. Aetna U.S. Healthcare. Since the proposed class of plaintiffs were insured by Aetna through their employers — which was not the case in Nott — Bartle concluded that the Wirth case was governed by ERISA, which does completely pre-empt state law. The plaintiffs’ lawyers argued that the case should be remanded because the suit alleges exclusively state law causes of action. The suit seeks damages under � 1720 of MVFRL, as well as claims for breach of contract, unjust enrichment and bad faith insurance practices. Bartle determined that under the “well-pleaded complaint rule,” a suit may be removed to federal court on the basis of federal question jurisdiction only if a federal claim “appears on the face of the complaint.” Ordinarily, Bartle said, the fact that the defendant may have a defense under federal law is not sufficient to allow removal. But Bartle said the doctrine of complete pre-emption “is an exception to the well-pleaded complaint rule.” Complete pre-emption exists, Bartle said, when “Congress has so thoroughly addressed an area of law that any claim brought within its scope is removable to the federal court.” Bartle found that the U.S. Supreme Court had repeatedly held that claims falling within the scope of � 502(a)(1)(B) of ERISA are subject to complete pre-emption. Smolow and Landis argued that removal was improper because a claim under � 1720 of the MVFRL is not within the terms of � 502(a)(1)(B) because it is not actually one for “benefits due” under the terms of a plan. Instead, they argued, the claim relates directly to the amount of the class member’s tort recovery and is only “distantly related” to the health care benefits previously granted by Aetna. Bartle disagreed, saying, “While plaintiff may be correct that his claims arose as a result of his tort recovery, there is an inextricable connection between Aetna’s lien and the amount he is due under his healthcare agreement. The lien, if collected, not only reduces the net amount of his recovery from the tortfeasor but also has the effect of reducing the net amount of the benefit obtained from Aetna under the healthcare agreement.” The plaintiffs’ lawyers also argued that the MVFRL qualifies for ERISA’s “savings clause,” which creates an exemption from pre-emption for any claim under a state law which “regulates insurance, banking or securities.” The savings clause, they argued, trumps complete pre-emption. But Aetna’s lawyers — Burt M. Rublin, Raymond A. Quaglia and Paul Lantieri III of Ballard Spahr Andrews & Ingersoll — argued that even if the plaintiffs’ state law claims were preserved by the savings clause, such a finding would not defeat complete pre-emption. Instead, they argued, once complete pre-emption is demonstrated, the suit is removable, and the federal court retains jurisdiction to apply state law if the savings clause is satisfied. Bartle determined that the 3rd U.S. Circuit Court of Appeals had never addressed the question of whether ERISA’s savings clause trumps its complete pre-emption provisions. However, two recent decisions from the U.S. Supreme Court supported Aetna’s argument, Bartle said. Read together, Bartle said, the decisions in UNUM Life Insurance Co. v. Ward and Rush Prudential HMO Inc. v. Moran “support the principle that [the savings clause] does not override complete pre-emption.” In Ward, the justices affirmed a 9th U.S. Circuit Court of Appeals decision that said a California state law regulated insurance and therefore fell under ERISA’s savings clause. Bartle noted that Ward “did not question federal subject matter jurisdiction over the claim.” Likewise, Bartle said, in Rush Prudential the justices held that the Illinois HMO Act regulated insurance, but they affirmed the decision of the court of appeals below, which had exercised subject matter jurisdiction. As a result, Bartle concluded that “federal jurisdiction exists as a result of complete pre-emption if plaintiff’s claims are encompassed within the terms of Section 502(a)(1)(B) even though it may turn out that the savings clause … will require the application of state insurance law.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.