Health Administration Responsibility Project
Preemption of state tort claims

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FLASH!
12/24/98 - The decision in Pappas, though from a state supreme court, may presage a liberalization of preemption of state negligence claims.
BIGGER FLASH!!
6/19/00 - The Pappas decision was vacated by the US Supreme Court, and remanded for new hearing in light of Pegram v. Herdrich, the decision which essentially destroyed the fiduciary duty of plans towards members!


BIGGER FLASH YET


4/3/01 - The PA Supreme Court reaffirmed it's original decision on remand! (This is like a slow-motion tennis match! ) But only a few days before, the 3d Circuit (where PA is) reached the opposite conclusion in the very similar case of Pryzbowski v. U.S. Healthcare

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• "[ERISA] supersede[s] any and all state laws insofar as they may now or hereafter RELATE TO any employee benefit plan described in [ 4(a) of ERISA ] and not exempt under 29 USC 1003(b) [ERISA 4(b)].
  Erisa 514(a).
• Preemption is Waived if not raised as affirmative defense
  Hughes
• General Tort Laws are preempted, even for an Insured Plan
  Pilot Life v. Dedeaux, 481 US 44 (1987)
  • HOWEVER see Sharon Arkin's very persuasive argument for liability of insured plans.
• ERISA provides no relief, and preempts any state relief for damages due to improper or negligent processing of claims.
  Mass. Mut. v. Russell
• However, the 9th Circuit has allowed state claims for Invasion of Privacy for improper spying on a disability insurance recipient.
  Dishman v. UNUM, 5/8/2001
• No preemption if complaint doesn't affect plan benefit structure or administration, nor bind administrators to particular choices, nor preclude uniform administrative practice.
  NY BC/BS v. Travelers, 115 S.Ct. 1671 (1995)
• Denial of Benefits IS preempted - no recovery for harm

  Pilot Life v. Dedeaux, 481 US 44 (1987)

  Spain v. Aetna, (9th Circ.)1991

  State Wrongful Death claim is Preempted. Plaintiff may recover ONLY the entitled benefits NO pain & suffering or loss of income . The denied benefit is worthless at time of suit. So plaintiff usually recovers NOTHING.

  Corcoran v. United Health Care

  Malpractice claim against UR company is preempted

• Equitable remedies are allowed, but we have not seen the more effective ones awarded. Especially in egregious cases, it might be worthwhile to ask for them, for example:
  • Restitution of all premiums paid.
  • Disgorgement of bonuses paid to utilization reviewers for denial of claims.
  • Disgorgement of the cost of the denied course of treatment by which the HMO has been unjustly enriched by, for example, causing the patient's premature death.
  Mertens v. Hewitt may appear to have ruled out monetary damages, but it is clearly distinguishable from denial of benefits claims, as there was no unjust enrichment.
  In Bast v. Prudential the 9th Circuit rejected the above arguments.
• Quality of Medical Care is NOT pre-empted by ERISA

  National Elevator

  ERISA does not preempt "'laws of general application --not specifically targeting ERISA plans-- that involve traditional areas of state regulation and do not affect relations among the principal ERISA entities." ---------------

  "As long as a state law does not affect the structure, the administration, or the type of benefits provided by an ERISA plan, the mere fact that the [law] has some economic impact on the plan does not require that the [law] be invalidated." ---------------

  "Ultimately, if there is no effect on the relations among the principal ERISA entities--the employer, the plan, the plan fiduciaries, and the beneficiaries--there is no preemption." ---------------

  That a plan is potentially liable for a judgment "is not enough to relate the action to the plan."

  Dukes (3d circuit)

  "Quality control of...health care benefits...is a field traditionally occupied by state regulation, and we interpret the silence of Congress as...intent that it remain such."

• Vicarious liability is probably NOT preempted
  • Only one Circuit Court has ruled.

    Pacificare of OK v. Burrage

    upheld vicarious liability for med mal and for loss of consortium/wrongful death, & Ostensible Agency

    Relevant Law Review Abstract

  • District Courts agreeing:

    Jackson v. Roseman, 878 F.Supp. 820, 826 (D. Md. 1995)

    Haas v. Group Health Plan, Inc., 875 F. Supp. 544, 548 (S.D. Ill. 1994)

    "[W]hen an HMO plan elects to directly provide medical services or leads a participant to reasonably believe that it has, rather than simply arranging and paying for treatment, a vicarious liability medical practice claim based on substandard treatment by an agent of the HMO is not preempted."

    Dearmas v. Av-Med, Inc., 865 F. Supp. 816, 818 (S.D. Fla. 1994)

    Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 186-88 (E.D. Pa. 1994)

    Burke v. Smithkline Bio-Science Labs., 858 F. Supp. 1181, 1184 (M.D. Fla. 1994)

    Paterno v. Albuerne, 855 F. Supp. 1263, 1263-64 (S.D. Fla. 1994)

    Smith v. HMO Great Lakes, 852 F. Supp. 669, 671-72 (N.D. Ill. 1994)

    Elsesser v. Hospital of Philadelphia College of Osteopathic Medicine, 802 F. Supp. 1286, 1290 (E.D. Pa. 1992)

    Vicarious liability allowed because unrelated to HMO's plan obligations. Claim for denial of benefits preempted.

    Independence HMO, Inc. v. Smith, 733 F. Supp. 983, 988 (E.D. Pa. 1990)

  • District Courts disagreeing & preempting:

    Pomeroy v. Johns Hopkins Medical Servs., Inc., 868 F. Supp. 110, 113-14 (D. Md. 1994)

    Visconti v. U.S. Health Care, 857 F. Supp. 1097, 1102-05 (E.D. Pa. 1994)

    Dukes v. U.S. Health Care Sys. of Pa., Inc., 848 F. Supp. 39, 42-43 (E.D. Pa. 1994)

    Nealy v. U.S. Healthcare HMO, 844 F. Supp. 966, 972-73 (S.D.N.Y. 1994)

    A ... claim against an HMO alleging negligent or fraudulent administration of the plan is preempted by ERISA.

    Ricci v. Gooberman, 840 F. Supp. 316, 317 (D.N.J. 1993)

• An Awful Example of how hard it is to fight these problems.
• Secretary of Labor's Briefs opposing such preemption.