FMC Corp. v. Holliday, 498 U.S. 52 (1990)
U.S. Supreme CourtFMC Corp. v. Holliday, 498 U.S. 52 (1990)
FMC Corporation v. Holliday
Argued Oct. 2, 1990
Decided Nov. 27, 1990
498 U.S. 52
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. 498 U. S. 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, 463 U. S. 96-97. Moreover, although there is no dispute that § 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.
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, 471 U. S. 735, n. 14, 471 U. S. 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, 430 U. S. 525, including regulation of the "business of insurance," see Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. at 471 U. S. 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. 498 U. S. 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. 498 U. S. 65. SOUTER, J., took no part in the consideration or decision of the case.