ERISA Subrogation and the Wrongful Death Lawsuit Ryan Woody Matthiesen, Wickert & Lehrer S.C. Nov. 1, 2009

Introduction Scenario. Member dies after a traumatic accident put him in a coma and on life support. ERISA Plan pays hospital bills. The Estate, represented by the widow, settles a claim against the driver who has a $1 million auto policy. The Estate’s attorney refuses to reimburse the Plan a dime. As the ERISA Plan what must you know to handle this claim? What steps should you take to maximize subrogation recoveries from death claims?

Development of Wrongful Death Claims Historical At common law, an injured person’s death terminated all pending and potential legal proceedings for damages. The right to sue for wrongful death is entirely statutory. England - Lord Campbell’s Act (1846) What is the Estate? Who are the Heirs?

Anatomy of the Wrongful Death Claim What is the claim for? Compensation for the loss of the relational interest between the beneficiaries and the deceased. Who can recover? Spouse; Children; Parents; Siblings of deceased, if they were a minor. Recoveries do not pass to the Estate. How are damages measured? Loss of society and companionship and the value of the deceased’s life. Both economic and non- economic. Value of Life – Life expectancy, earning capacity, education, health, relationship to beneficiary. Loss of Society – Intangible and entirely within jury’s discretion. Damages for non-economic damages are often capped by statute.

Survival Cause of Action Who can recover? A survival claim vests in the Estate of the decedent. The Estate operates through an appointed personal representative, administrator or executor. What is the claim for? Typically consists of claims for pre-death pain and suffering and economic damages like pre-death loss of earnings, and medical, hospital, and funeral expenses.

ERISA Subrogation Overview Standard Operating Procedures Plans rarely pursue actual subrogation claims against the tortfeasors. Instead, plans rely on their reimbursement claims against the member’s estate. In nearly every case the same plaintiffs’ attorney represents BOTH the Estate and the Heirs.

Typical Reimbursement Language The Plan has a first priority right of subrogation and reimbursement from any third party recovery, settlement or judgment made by the Covered Member or his or her representative. The Plan requires that you or your covered dependents cooperate with the Plan’s right to pursue subrogation and/or reimbursement.

ERISA Preemption Overview ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” within the scope of ERISA. 29 U.S.C. §1144(a). A state law relates to an ERISA plan “if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983). Preemption is expansive. Egelhoff v. Egelhoff, 532 U.S. 141 (2001). Preemption must also be limited. Egelhoff at 146.

Cases Where Preemption Not Found Liberty Corp. v. NCNB Nat’l Bank of S.C., 984 F.2d 1382 (4th Cir. 1993). NC Wrongful Death statute limited Estate’s claim for medical bills to $1,500 out of a $1,500,000 settlement. Majority finds no ERISA preemption. Dissent finds Wrongful Death statute preempted. Caterpillar v. Wilhelm, 08-cv-2020 (C.D. Ill. Sept. 29, 2009) (Judge McKaskey) Court approved settlements worth $500,000 of which $499,500 was allocated to the wrongful death and $500 allocated to the estate’s claims. Illinois Wrongful Death Statute not preempted. Court tells Plan it should have intervened.

Cases Where Preemption Was Found McInnis v. Provident Life & Acc. Ins. Co., 21 F.3d 586 (4th Cir. 1994). Plan had NOT yet paid any benefits. NC Wrongful Death Statute that prohibited estate from repaying anymore than $1,500 in medical and funeral expenses was preempted. Thomas v. Administrative Committee, 210 F.Supp.2d 1296 (M.D. Fla. 2002). Plan removed state court motion for equitable distribution. Court found that wrongful death settlement allocation motion was completely preempted. Estate of Allen v. Wal-Mart Stores, 196 F.Supp.2d 780 (E.D. Ark. 2002). Administrative Review – Court found Plan’s decision that the wrongful death recovery related to the plan was not arbitrary

Other Relevant Cases DelRossi v. Defendant V, 789 N.Y.S.2d 816 (NY. Sup. 2004). Wife was not a “legal representative” of the Estate. Wife settled only the wrongful death claims. Sheet Metal Workers Local 27 Health & Welfare Fund v. Estate of Keith Beenick, 08-CV-346 (D. N.J. Dec. 9, 2008). Court found lack of privity between parents and ERISA plan. Administrative Committee v. Gamboa, 2007 WL 2021966 (W.D. Ark. 2007). Covered person waived his right to any of the state court settlement proceeds .

Pending Cases Diamond Crystal Brands v. Wallace, 07-cv-3172 (N.D. Ga.) (Judge Camp). Is Georgia’s Wrongful Death statute preempted? Is the ERISA plan bound by the plaintiffs’ unilateral state court settlement allocation?

Lessons Learned Preemption is a secondary question. Separate statutes present problems Joint statutes will be preempted. Allocation between the Estate and the Heirs is the critical question. Cooperation from the Estate’s representative is required.

Allocation, Allocation, Allocation What Can We Do To Ensure Proper Allocation? 1. Plan Language 2. Reimbursement Agreements from the Estate’s Representative. 3. Subrogation/Intervention 4. Preemptive Federal Actions for Declaratory or Injunctive Relief Seeking Specific Performance by the Estate. 5. Force an ethical conflict between the Estate’s interest and the Wrongful Death claimants’ interests.

Closing and Questions Wrongful Death cases present complex legal questions. You cannot sit on these cases. Important decisions must be made early. Whether to pay claim or deny benefits. Whether to subrogate and/or intervene. Resting on your reimbursement rights and relying on ERISA preemption is not recommended.